Universal Music Group N.V.
(a public company (naamloze vennootschap) incorporated under the laws of the Netherlands with its statutory
seat in Amsterdam, the Netherlands and its registered address in Hilversum, the Netherlands)
Admission to listing and trading of all ordinary shares on Euronext Amsterdam
This prospectus (this Prospectus) has been prepared in connection with the Distribution (as defined
below) and the first admission to listing and trading (the Admission) of all of the ordinary shares (the Shares) in
the share capital of Universal Music Group B.V. (to be converted to a public company (naamloze vennootschap)
incorporated under the laws of the Netherlands prior to the Admission) (the Company) on Euronext Amsterdam,a regulated market operated by Euronext Amsterdam N.V. (Euronext Amsterdam).
The shareholders of Universal Music Group, Inc. (UMGI) and Universal International Music B.V.
(UIM), Vivendi SE (Vivendi), Concerto Investment B.V. (Concerto) and Scherzo Investment B.V. (Scherzo)(Concerto and Scherzo hereafter collectively referred to as the Tencent-led Consortium and together with
Vivendi, the Restructuring Shareholders) contributed their shares held in UMGI and UIM, representing all of
the issued capital of both UMGI and UIM, to the Company in exchange for newly issued shares in the Company,
as a consequence whereof the Company became the sole holding company of the Group (as defined below) (theRestructure). The Restructure was completed on February 26, 2021.
Capitalized terms used but not otherwise defined in this Prospectus are defined in Section 17 (Definitionsand Glossary).
Vivendi shall make a distribution in kind of the majority of the issued and outstanding shares that it holds
in the share capital of the Company (the Distribution). On September 23, 2021 (the Distribution Date), Vivendi
shall distribute up to 60% of the Shares to the Vivendi Shareholders (as defined in this Prospectus) pursuant to
the Distribution (the Distribution Shares). Each Vivendi Shareholder will receive one (1) Share for each one (1)share which it holds in Vivendi on September 22, 2021 (the Distribution Record Date) as part of the Distribution(the Allocation Ratio), subject to adjustment of the Allocation Ratio (the Adjustment of the Allocation Ratio).
Approval of the Distribution by the Vivendi Shareholders was obtained at the annual general meeting of Vivendi
Shareholders held on June 22, 2021 (the Vivendi AGM).
The Distribution Shares will constitute up to 60% of the issued and outstanding Shares of the Company
upon the Distribution Date. Following the Distribution: (i) Vivendi will hold such number of Shares, representing
approximately 10% of the issued and outstanding share capital of the Company; (ii) Concerto will hold such
number of Shares, representing 10% of the issued and outstanding share capital of the Company; (iii) Scherzo willhold such number of Shares, representing 10% of the issued and outstanding share capital of the Company; (iv)Pershing Square Holdings, Ltd., Pershing Square L.P., Pershing Square International Ltd. and PS VII Master, L.P.
(together, the Pershing Entities) will hold such number of Shares, representing 10% of the issued and outstanding
share capital of the Company and (v) it is expected that the Bolloré Entities will hold such number of Shares,
representing 18% of the issued and outstanding share capital of the Company.
Investing in the Shares involves substantial risks and uncertainties. An investor is exposed to the risk
to lose all or part of his or her investment. Before any investment in the Shares, an investor must readthis entire document and in particular Section 1 (Risk Factors).
Prior to the Admission, there has been no public market for the Shares. Application has been made to list
all of the Shares under the symbol “UMG” on Euronext Amsterdam. Trading in the Shares on an “as-if-and-whendelivered” basis on Euronext Amsterdam is expected to start on or about September 21, 2021 (the First TradingDate). BNP Paribas, Crédit Agricole Corporate and Investment Bank, Morgan Stanley, Natixis and Société
Générale are acting as joint financial advisors (in such and any other capacity, the Lead Financial Advisors).
Banque Hottinguer, Messier et Associés, CIC, Rothschild, Bank of America, ING, Intesa Sanpaolo S.p.A., Lazard,

Mizuho Securities and Banco Santander are acting as financial co-advisors (in such and any other capacity, theFinancial Co-Advisors). Bank of China and Goldman Sachs Bank Europe SE are acting as other financial advisors(in such and any other capacity, the Other Financial Advisors and, together with the Lead Financial Advisors andthe Financial Co-Advisors, the Lead Equity Capital Markets Advisors). The Lead Equity Capital Markets
Advisors and the Listing and Paying Agent (as defined herein) are acting exclusively for the Company and/or
Vivendi and no one else in connection with the Admission and Distribution. They will not regard any other person(whether or not a recipient of this document) as their respective clients in relation to the Admission andDistribution and will not be responsible to anyone other than the Company and Vivendi for providing theprotections afforded to their respective clients nor for giving advice in relation to the Admission and Distribution
or any transaction or arrangement referred to herein. The Lead Equity Capital Markets Advisors are acting only
in respect of the Admission and Distribution.
Allotment, delivery and settlement of the Distribution Shares (Settlement) to the Vivendi Shareholders
is expected to take place on or about September 23, 2021 through the book-entry systems of Euroclear France.
For more information on the Distribution, see Section 14 (The Distribution).
This Prospectus constitutes a prospectus for the purposes of Article 3 of Regulation (EU) 2017/1129 (theProspectus Regulation) and has been prepared in accordance with the Prospectus Regulation. This Prospectus
has been approved by the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële
Markten, the AFM), as competent authority under the Prospectus Regulation. The AFM only approves thisProspectus as meeting the standards of completeness, comprehensibility and consistency imposed by the
Prospectus Regulation. Such approval should not be considered as an endorsement of the Company that is or thequality of the securities that are the subject of this Prospectus. Investors should make their own assessment as tothe suitability of investing in the Shares.
Prospectus dated September 14, 2021
Lead Financial Advisors
BNP Paribas

Crédit Agricole CIB

NatixisMorgan Stanley
Société Générale

Financial Co-Advisors
Banque Hottinguer
Rothschild
Intesa Sanpaolo S.p.A.
Mizuho Securities

Messier et AssociésBank of America

CIC
ING
LazardBanco Santander

Other Financial Advisors
Bank of China

Goldman Sachs Bank Europe SE

CONTENTS(A)

Summary of the Prospectus ...................................................................................................... 1

1. Risk Factors ....................................................................................................................................... 8
2. Important Information ...................................................................................................................... 27
3. Forward-Looking Statements........................................................................................................... 33
4. Reasons for the Distribution and Use of Proceeds ........................................................................... 35
5. Dividend Policy ............................................................................................................................... 36
6. Capitalisation and Indebtedness ....................................................................................................... 38
7. Selected Financial Information ........................................................................................................ 41
8. Operating and Financial Review ...................................................................................................... 49
9. UMG Profit Forecast........................................................................................................................ 75
10. Industry Overview ......................................................................................................................... 79
11. Business Description ...................................................................................................................... 91
12. Board and Employees .................................................................................................................. 114
13. Description of Share Capital and Corporate Governance ............................................................ 143
14. The Distribution ........................................................................................................................... 159
15. Taxation ....................................................................................................................................... 163
16. General Information on the Company ......................................................................................... 167
17. Definitions and Glossary.............................................................................................................. 176
18. Historical Financial Information .................................................................................................. 183

-i-

(A)

SUMMARY OF THE PROSPECTUS

INTRODUCTION AND WARNINGS
Warning. The summary has been prepared in accordance with Article 7 of Regulation (EU) 2017/1129 and should
be read as an introduction to the prospectus (the Prospectus) prepared in connection with the Distribution (as defined
below) and the first admission to listing and trading (the Admission) of all of the ordinary shares (the Shares) in theshare capital of Universal Music Group B.V. (to be converted to a public company (naamloze vennootschap)
incorporated under the laws of the Netherlands prior to the Admission) (the Company) on Euronext Amsterdam, aregulated market operated by Euronext Amsterdam N.V. (Euronext Amsterdam).
The shareholders of Universal Music Group, Inc (UMGI) and Universal International Music B.V. (UIM), Vivendi
SE (Vivendi), Concerto Investment B.V. (Concerto) and Scherzo Investment B.V. (Scherzo) (Concerto and Scherzo
hereafter collectively referred to as the Tencent-led Consortium and together with Vivendi, the Restructuring
Shareholders) contributed their shares held in UMGI and UIM, representing all of the issued capital of both UMGIand UIM, to the Company in exchange for newly issued shares in the Company, as a consequence whereof theCompany became the sole holding company of the Group (the Restructure). The Restructure was completed on
February 26, 2021. Vivendi shall make a distribution in kind of the majority of the issued and outstanding shares that
it holds in the share capital of the Company (the Distribution). On September 23, 2021 (the Distribution Date),
Vivendi shall distribute up to 60% of the Shares to the Vivendi Shareholders (as defined in this Prospectus) pursuant
to the Distribution (the Distribution Shares).
Any decision to invest in the Shares should be based on a consideration of the Prospectus as a whole by any potential
investor. Any potential investor could lose all or part of its invested capital. Where a claim relating to the information
contained in the Prospectus is brought before a court, the plaintiff investor might, under national law, have to bear
the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those
persons who have tabled the summary, including any translation thereof, but only where the summary is misleading,inaccurate or inconsistent when read together with the other parts of the Prospectus or where it does not provide,
when read together with the other parts of the Prospectus, key information in order to aid investors when considering
whether to invest in the Shares.
The Prospectus was approved on September 14, 2021 by the Netherlands Authority for the Financial Markets(Stichting Autoriteit Financiële Markten, the AFM), as competent authority under Regulation (EU) 2017/1129, with
its head office at Vijzelgracht 50 1017 HS, Amsterdam, and telephone number: +31(0)20-797 2000.
KEY INFORMATION ON THE ISSUER
Who is the issuer of the securities?
Domicile and legal form. The Company is a private company with limited liability (besloten vennootschap met
beperkte aansprakelijkheid) with the name Universal Music Group B.V. The commercial name is “Universal Music”.
In accordance with applicable law, the Company has undertaken to convert to a public company (naamloze
vennootschap) prior to the Admission. The Company’s statutory seat is in Hilversum, the Netherlands (and will, upon
the conversion of the Company to a public company (naamloze vennootschap) be in Amsterdam, the Netherlands).
The registered office address of the Company is ‘s-Gravelandseweg 80, 1217 EW Hilversum, the Netherlands. The
telephone number of the Company is +31 (0) 88 62 61 500. The Company is registered with the trade register of the
Chamber of Commerce of the Netherlands (Kamer van Koophandel) under number 81106661. Its legal entity
identifier is 724500GJBUL3D9TW9Y18.
Principal Activities. The Company is the holding company of the Universal Music Group (together with theCompany, UMG or the Group). UMG is a driving force in the global music industry, with revenues of €7.2 billion
in the year ended December 31, 2019 and €7.4 billion in the year ended December 31, 2020. UMG, operating in morethan 60 territories, is home to the greatest local and international artists, spanning all genres and generations including
ABBA, Louis Armstrong, The Beatles, The Beach Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi,
Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti,
Queen, The Rolling Stones, Frank Sinatra, U2, Amy Winehouse and Stevie Wonder, as well as many of the biggest
artists today, such as J Balvin, Justin Bieber, Luke Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish,
Eminem, Selena Gomez, Ariana Grande, Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone,
Shawn Mendes, Kacey Musgraves, Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie
Underwood, Keith Urban and The Weeknd. UMG has three main operating businesses: recorded music, music
publishing and merchandising. The recorded music business is dedicated to the discovery and development of artists,
marketing and promoting their music across a wide array of formats and platforms. UMG is also expanding into otherareas such as live events, livestreaming, sponsorship, film and television and podcasts. The music publishing businessdiscovers and develops songwriters and owns and administers the copyright for musical compositions used inrecordings, public performances and related uses, such as films, television programs and advertisements. The
merchandising business produces and sells artist-branded and other branded products. These products are marketed-1-through multiple sales channels, including fashion retail, concert touring and retail stores and direct-to-consumer
online sales. UMG’s activities also extend to other areas, such as brand rights management.
Major Shareholders. As at the date of the Prospectus, Vivendi, the Bolloré Entities, the Tencent-led Consortium and
the Pershing Entities (together, the Existing Shareholders) beneficially hold 100% of the Company’s issued ordinary
share capital. The following table sets forth the shareholders of the Company which, to the Company’s knowledge
as of September 8, 2021 and based on the number of shares and voting rights comprising the share capital of Vivendi
published on September 1, 2021, will directly or indirectly have a notifiable interest in the Company’s capital andvoting rights within the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht) (DFSA) (i)immediately prior to the Distribution (as defined below) and (ii) immediately following the Distribution.

Vivendi(1) ...........................
Concerto(2) ..........................
Scherzo(2) ...........................
Pershing Entities jointly(3) ..
Bolloré Entities jointly(4)(5) .
Société Générale(6)Shares to be owned immediately
prior to the Distribution

Shares to be owned immediately
following the Distribution

Amount1,269,268,713
181,324,116
181,324,116
181,324,115
100
0Amountc. 183,582,493
181,324,116
181,324,116
181,324,115
326,507,033
59,556,315

%
70%
10%
10%
10%
0%
0%

%
c.10.12% (7)
10%
10%
10%
18.01%
3.28%(1) Vivendi’s shares have been listed on Euronext Paris since 1995. No shareholder is controlling Vivendi within the meaning of article L.233-

(2)
(3)
(4)

(5)
(6)

(7)

3 of the French commercial code. Vivendi’s major shareholder is Bolloré Group (through the Bolloré Entities, Vincent Bolloré and Cyrille
Bolloré), representing jointly 29.46% of the share capital, 29.73% of the theoretical voting rights and 30.34% of the exercisable voting rights
of Vivendi as of August 31, 2021, representing an indirect interest of 20.62% in the Shares of the Company.
Concerto LLC indirectly controls Concerto and Scherzo.
Pershing Entities refers collectively to entities advised by, or affiliated with, Pershing Square Capital Management, L.P. William A. Ackman
controls Pershing Square Capital Management, L.P.
Bolloré Entities collectively refers to Compagnie de Cornouaille and Compagnie de l’Odet. For more information, see Section 12.11.
Compagnie de Cornouaille is controlled by Compagnie de l’Odet, itself controlled by Sofibol, which is controlled at the highest level by
Bolloré Participations SE. Bolloré Participations SE is controlled by Vincent Bolloré, who holds, directly and indirectly 92.55% of the sharecapital, 72.20% of the theoretical voting rights and 93.60% of the exercisable voting rights of Compagnie de l’Odet.
This percentage only reflects the shares held by the Bolloré Entities and does not take into account the Vivendi shares directly held by M.
Vincent Bolloré and M. Cyrille Bolloré, which represent together less than 0.01% of the total share capital and voting rights of Vivendi.
On August 24, 2021, the French Autorité des Marchés Financiers reported that, on August 19, 2021, Société Générale had crossed thethreshold of 5% of the share capital and voting rights of Vivendi. On September 7, 2021, Vivendi was informed by Société Générale that,on September 2 and September 6, 2021, it had crossed the statutory threshold of 5.5% of the share capital and voting rights of Vivendi andthat it held 59,556,315 shares in Vivendi, representing 5.37% of the share capital and 5.21% of the voting rights of Vivendi as of August 31,
2021, representing an indirect interest of 3.76% in the Shares of the Company .
These figures include an estimate of the number of Shares to be transferred by Vivendi to the relevant Corporate Executives pursuant to anaward by Vivendi to a limited number of senior managers of UMG, including certain of the Corporate Executives. The number of Shares tobe transferred to the relevant Corporate Executive will only be determinable closer to the date of listing and may vary depending upon the
expected trading price of the Shares, and the number of shares will be reduced to cover any required local payroll and income withholding,and market capitalization of the Company. For more information, see Section 12.6.

Key executive directors. Sir Lucian Grainge CBE is the Chairman and Chief Executive Officer of the Company, andVincent Vallejo is the Deputy Chief Executive Officer of the Company.
Independent auditors. Ernst & Young et Autres (EY), an independent registered public audit firm with its address at
Tour First, TSA 14444, 92037 Paris-La Défense Cedex, France. The auditors signing the auditor's reports on behalfof Ernst & Young et Autres are members of the Compagnie régionale des Commissaires aux Comptes de Versailles
et du Centre. Deloitte & Associés (Deloitte), an independent registered public audit firm with its address at 6, placede la Pyramide, 92908 Paris-la Défense Cedex, France. The auditors signing the auditor's reports on behalf of Deloitte& Associés are members of the Compagnie régionale des Commissaires aux Comptes de Versailles et du Centre.
What is the key financial information regarding the issuer?
With regard to the financial information as at and for the financial years ended December 31, 2018, 2019 and 2020
presented in the Prospectus, references to Universal Music Group, UMG or the Group refer to UMGI and UIMcollectively, and each of their respective subsidiaries, unless otherwise indicated. The Prospectus includes the
combined financial statements of Universal Music Group as at and for the years ended December 31, 2018, 2019 and2020 (together, the Combined Financial Statements) and the unaudited consolidated condensed interim financial
statements for the Company as at and for the six-month period ended June 30, 2021 (the Interim Financial
Statements and, together with the Combined Financial Statements the UMG Financial Statements). There are no
qualifications in the auditors’ report on the Combined Financial Statements, and no qualifications in the auditors’
review report on the Interim Financial Statements included in the Prospectus. The Joint Auditors’ report includes on-2-the Combined Financial Statements the following emphasis of matter paragraph, titled “Emphasis of matter”: We
draw attention to the Note "Basis of preparation of the Combined Financial Statements", in Section "Accounting
conventions used when preparing the Combined Financial Statements". Our opinion is not modified in respect of thismatter. This ‘Emphasis of matter” has been noted by the Joint Auditors in view of the fact that combined financial
statements are less common than consolidated financial statements and, taking into account that they compriseaccounts of two different companies (as opposed to an aggregate consolidated position of a parent company and its
subsidiaries as is the case for consolidated accounts) are more complex than consolidated financial statements.
Therefore, the Joint Auditors deemed it necessary and helpful to include an emphasis of matter paragraph in their
Report on the Combined Financial Statements to draw readers’ attention to the basis of preparation of these accounts,
which basis is described in the relevant notes to the Combined Financials Statements.
Summary combined / consolidated statements of profit or loss

Revenues ........................................................................
Cost of revenues ..............................................................
Selling, general and administrative expenses ..................
Restructuring charges ......................................................
Impairment losses on intangible assets acquired throughbusiness combinations .....................................................
Income from equity affiliates - operational .....................
Earnings before interest and income taxes (EBIT).....
Interest.............................................................................
Income from investments ................................................
Other financial income ....................................................
Other financial charges....................................................

Year ended December 31
2020
2019
2018
Audited(€ millions)
7,432
7,159
6,023
(3,917)(3,818)(3,110)(2,265)(2,276)(2,062)6 months ended June
30
2021
2020
Unaudited
3,831(2,047)(1,090)3,459(1,820)(1,104)

(20)
-

(24)
-

(29)
-

(9)
-

(8)
-

Earnings before provision for income taxes ................
Provision for income taxes ..............................................
Earnings from continuing operations ..........................
Earnings from discontinued operations ...........................
Earnings .........................................................................

(9)
1,221
(15)
603
(28)
560
1,781
(412)
1,369
1,369

(2)
1,039
14
174
(57)
131
1,170
(195)
975
975

(1)
821
27
1
333
(29)
332
1,153
(251)
902
902

(1)
684
(9)
105
(183)
(87)
597
(144)
453
453

(11)
516
(6)
453
(13)
434
950
(214)
736
736

of which
Earnings attributable to shareowners .........................
Non-controlling interests .................................................

1,366
3

972
3

897
5

452
1

735
1

Summary combined / consolidated statements of financial position2020

Non-current assets ......................
Current assets .............................
Total assets................................
Total equity ...............................
Non-current liabilities ................
Current liabilities........................
Total liabilities ..........................
TOTAL EQUITY AND
LIABILITIES ...........................

As at December 31
2019
Audited

2018

8,000
2,987
10,987
1,432

6,055
2,775
8,830
2,984

(€ millions)
4,749
3,248
7,997
3,077

4,830
4,725
9,555

1,713
4,133
5,846

1,138
3,782
4,920

10,987

8,830

7,997

-3-

As at June 30
2021
2020
Unaudited
7,808
2,865
10,673
1,487

6,849
2,748
9,597
1,253

2,308
6,878

9,186

4,114
4,230
8,344

10,6739,597

Summary combined / consolidated statements of cash flows
Year ended December 31
2020

2019
Audited

6 months ended June 30

2018

2021

2020
Unaudited(€ millions)
Net cash provided by operating activities..........
Net cash provided by/(used for) investing
activities ............................................................
Net cash provided by/(used for) financing
activities ............................................................

(3)

685

747

309

76

(46)

(129)

(111)

29

(37)

217

(1,076)(2,387)

(584)

85

(35)

(8)

(19)

6

(20)

133

(528)

(1,770)

(240)

104

At beginning of the period.................................

1,008

1,536

3,306

1,141

1,008

At end of the period...........................................

1,141

1,008

1,536

901

1,112

672
815

1,260
672

3,059
1,260

815
146

672
695

336
326

276
336

247
276

326
755

336
417

Foreign currency translation adjustments ofcontinuing operations ........................................
Change in cash and cash equivalents andshareowners loans ...........................................
Cash and cash equivalents and shareowners
loans..................................................................

of which Shareowners loans
At beginning of the period.................................
At end of the period...........................................
of which Cash and cash equivalent
At beginning of the period.................................
At end of the period...........................................

Other Key Financial Information
KPIs. The table below sets out the Group’s key performance indicators (KPIs), which the Group monitors
to track the financial and operating performance of its business. Certain of these KPIs are not defined in theInternational Financial Reporting Standards issued by the International Accounting Standards Board and as endorsedby the EU (IFRS).
6 months ended
Year ended December 31
June 30
2021
2020
2020
2019
2018
AuditedUnaudited(€ millions, unless otherwise indicated)
EBITA(1) ....................................
EBITA margin(2) .......................
EBITDA(3) .................................
EBITDA margin(4) ....................
(1)

(2)
(3)

(4)

1,329
17.9%
1,487

1,124
15.7%
1,267

902
15.0%
979

753
19.7%
822

567
16.4%
649

20.0%

17.7%

16.3%

21.5%

18.8%

To calculate EBITA, the accounting impact of the following items is excluded from the income from EBIT: (i) the amortization of intangible
assets acquired through business combinations as well as other rights catalogs acquired; (ii) impairment losses on goodwill, other intangibles
acquired through business combinations and other rights catalogs acquired; and (iii) other income and charges related to transactions withshareowners (except when directly recognized in equity).
EBITA margin represents EBITA as a percentage of revenues. EBITA margin is unaudited.
To calculate EBITDA, the accounting impact of the following items is excluded from the income from EBIT: (i) the depreciation of tangible,
intangible and right of use assets; (ii) gains/(losses) on the sale of tangible, intangible and right of use assets; (iii) the amortization of
intangible assets acquired through business combinations as well as other rights catalogs acquired; (iv) impairment losses on goodwill, otherintangibles acquired through business combinations and other rights catalogs acquired; (v) income from equity affiliates having similar
operating activities; and (vi) restructuring charges, and other non-recurring items.
EBITDA margin represents EBITDA as a percentage of revenues. EBITDA margin is unaudited.

-4-What are the key risks that are specific to the issuer?
Any investment in the Shares is associated with risks. Prior to any investment decision, it is important to carefully
analyse the risk factors considered relevant to the future development of the Group and the Shares. The below are
the key risks relating to the Company that, alone or in combination with other events or circumstances, could have amaterial adverse effect on the Group’s business, financial condition, results of operations and prospects. In making
the selection, the Group has considered circumstances such as the probability of the risk materialising on the basis of
the current state of affairs, the potential impact which the materialisation of the risk could have on the Group’sbusiness, financial condition, results of operations and prospects, and the attention that management would, on thebasis of current expectations, have to devote to these risks if they were to materialise: UMG may be unable to compete successfully in the highly competitive industry and markets in which it
operates and UMG’s business may be adversely affected if UMG fails to identify, attract, sign and retain
successful recording artists and songwriters or by the absence of superstar releases.
 If streaming and subscription adoption or revenue fail to grow or grow less rapidly than UMG anticipates,
UMG’s business may be adversely affected.
 UMG relies on digital service providers for the online distribution and marketing of its music on the basisof contractual terms that are subject to change.
 UMG’s results of operations may be adversely affected if it is unable to compete successfully in the evolving
markets in which it operates or is unable to execute its business strategy.
 Technological advancements are rapidly changing the marketplace in which UMG competes and the natureof UMG’s competition.
 UMG operates in many jurisdictions around the world and therefore, is subject to a variety of trends,
developments and limitations in those jurisdictions, which could affect it adversely.
 UMG’s ability to operate effectively could be impaired if it fails to attract and retain its executive officers
and other key personnel.
 The success of UMG’s business is dependent on the existence and maintenance of its intellectual property
rights and challenges in obtaining, maintaining, protecting and enforcing UMG’s intellectual property rights
and involvement in intellectual property litigation could adversely affect its business, operating results andfinancial condition.
 Piracy continues to adversely impact UMG’s business and content protection is a key focus of UMG’sbusiness.
 UMG’s business is subject to a variety of European, US and other supranational or domestic laws, rules,
policies and other obligations regarding data protection.
 A significant portion of UMG’s revenues are subject to regulation either by government entities or by local
third-party collecting societies throughout the world and rates on other income streams may be set bygovernmental proceedings or be subject to legislative intervention, which may limit its profitability.
 Changes in laws and regulations, including those relating to intellectual property rights, may have an adverse
effect on UMG’s business.
KEY INFORMATION ON THE SECURITIESWhat are the main features of the securities?
Type, class and ISIN. The Shares are ordinary shares, created under and in accordance with the laws of theNetherlands, with a nominal value of €10.00 each in the share capital of the Company. Application has been made tolist all of the Shares under the ticker symbol “UMG” on Euronext Amsterdam under ISIN Code NL0015000IY2.
Currency, denomination, par value and number of securities. The Shares are denominated in and will trade in euro.
Immediately prior to the Distribution, the authorized share capital of the Company shall amount to €27,000,000,000,
divided into 2,700,000,000 Shares with a nominal value of €10.00 each. The issued share capital of the Company
immediately prior to the Distribution is expected to amount to €18,132,411,600, divided into 1,813,241,160 Shareswith a nominal value of €10.00 each.
Rights attached to the Shares. Shortly prior to Admission, the articles of association of the Company will be amended
and fully restated. Reference to the Articles of Association hereafter will be to the Company’s articles of association
as they will read after such amendment and restatement. Each Share confers its holder the right to cast one vote at
the Company’s general meeting, being the corporate body or, where the context so requires, the physical meeting(the General Meeting). There are no restrictions on voting rights. The Shares carry dividend rights.
Rank of securities in the issuer’s capital structure in the event of insolvency. The Shares do not carry any rights in
respect to capital to participate in a distribution (including on a winding-up) other than those that exist as a matter oflaw. The Shares, which includes the Distribution Shares, will rank pari passu in all respects.
Restrictions on the free transferability of the securities. There are no restrictions on the transferability of the Sharesin the Articles of Association or under Dutch law. However, the offering of Shares to persons located or resident in,-5-

or who are citizens of, or who have a registered address in certain countries, and the transfer of Shares into certain
jurisdictions, may be subject to specific regulations or restrictions.
Dividend or pay-out policy. The Company plans, as from the Admission, to annually declare and pay dividends toall holders of the Shares on a pro rata basis in two semi-annual instalments, in the aggregate amount of no less than
50% of the Company’s net profits realized during the relevant financial year, subject to agreed non-cash items. The
Company intends to pay an interim dividend in the fourth quarter of each financial year, after the publication of thehalf-year figures of the Company, and a final dividend in the second quarter of the following financial year, to be
paid following approval of the Company’s financial statements at its annual General Meeting.
On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all Shareholders
by way of an interim dividend distribution at the charge of the Company’s current profits in the current financial yearthat started on January 1, 2021, provided that in the event that after adoption of the annual accounts for the financial
year of the Company that started on January 1, 2021, the Company’s profits shall appear to be less than the amountof such interim dividend distribution, the balance shall be deemed to have been a distribution from the Company’s
freely distributable reserves. With regard to such distribution: (i) the ex-dividend date will be October 25, 2021; (ii)the record date will be October 26, 2021; and (iii) the payment date will be October 28, 2021.
Where will the securities be traded?
Application has been made for the admission to listing and trading of all of the Shares (Admission) under the symbol“UMG” on Euronext Amsterdam. Trading on an “as-if-and-when-delivered” basis in the Shares on Euronext
Amsterdam is expected to commence at 9.00 (Central European Time (CET)) on or around September 21, 2021 (theFirst Trading Date). Prior to being admitted to trading on Euronext Amsterdam, there has been no public trading
market for the Shares.
What are the key risks that are specific to the securities?
The key risks relating to the Distribution and the Shares are:

The Existing Shareholders will continue to hold a significant minority stake in the Company and may haveconflicts of interest with other Shareholders.
An active trading market on Euronext Amsterdam may not develop.
The Company may issue additional Shares or other equity securities without Shareholder approval, which
would dilute Shareholder ownership interests and may depress the market price of the Shares.

KEY INFORMATION ON THE ADMISSION TO TRADING ON A REGULATED MARKET
Under which conditions and timetable can I invest in this security?
Timetable. Subject to acceleration or extension of the timetable by the Company and Vivendi for, or withdrawal of,
the Admission and the Distribution, the timetable below lists the expected key days for the Admission and theDistribution:
Event
Distribution
Resolution of Vivendi’s management board to distribute an exceptional interim
dividend in kindEuronext Amsterdam notice announcing the Reference Price for the Shares
Distribution ex-Date in respect of Distribution of Distribution Shares
Admission
Commencement of trading under the ticker symbol "UMG" on an "if-and-whendelivered" (conditional upon delivery) basis
Distribution Record Date in respect of Distribution of Distribution Shares
Payment of the Distribution (delivery and book-entry of the Distribution Shares
allocated pursuant to the Distribution)
Distribution Settlement

Time (CET) and date
September 14, 2021
September 20, 2021
September 21, 2021
September 21, 2021
September 21, 2021
September 22, 2021
September 23, 2021
September 23, 2021

The Company and Vivendi reserve the right to adjust the dates, times and periods given in the timetable and throughout theProspectus.

Lead Equity Capital Markets Advisors. BNP Paribas, Crédit Agricole Corporate and Investment Bank, Morgan
Stanley, Natixis and Société Générale are acting as lead financial advisors (in such and any other capacity, the Lead
Financial Advisors). Banque Hottinguer, Messier et Associés, CIC, Rothschild, Bank of America, ING, Intesa
Sanpaolo S.p.A., Lazard, Mizuho Securities and Banco Santander are acting as financial co-advisors (in such andany other capacity, the Financial Co-Advisors). Bank of China and Goldman Sachs Bank Europe SE are acting asother financial advisors (in such and any other capacity, the Other Financial Advisors and, together with the Lead

-6-

Financial Advisors and the Financial Co-Advisors, the Lead Equity Capital Markets Advisors). The Lead Equity
Capital Markets Advisors are acting only in respect of the Admission and Distribution.
Distribution Allocation Ratio. Subject to adjustment of the Allocation Ratio (the Adjustment of the Allocation
Ratio), each Vivendi Shareholder will receive one (1) Share for each one (1) share which it holds in Vivendi on
September 22, 2021 (the Distribution Record Date) as part of the Distribution (the Allocation Ratio).
Distribution Delivery. Subject to acceleration or extension of the timetable for the Distribution, the Distribution is
expected to be implemented and settled on September 23, 2021 (the Distribution Date) through the book entry
facilities of Euroclear France in accordance with Euroclear France’s normal procedures applicable to equity securities(the Distribution Settlement).
Listing and Paying Agent. BNP Paribas is the Listing Agent and BNP Paribas Securities Services is the Paying and
Settlement Agent with respect to the Shares on Euronext.
Dilution. There shall be no dilution of the shareholdings of the Existing Shareholders pursuant to the Distribution,
however, the shareholding of Vivendi will be reduced from 70% to approximately 10% as a result of the Distribution.
Estimated expenses related to the Admission: The maximum amount of expenses to be paid in relation to the
Admission and Distribution cannot precisely be estimated as of the date of this Prospectus, however, the maximum
amount expenses will in any case remain limited to a maximum of 0.5% of the total amount of the Distribution.
Estimated expenses charged to the investors. No expenses or fees will be charged by the Company or Vivendi toVivendi Shareholders in relation to the Admission and the Distribution. However, the beneficiaries of the Distribution
would be required to pay, as appropriate, to their authorized financial intermediary or to Vivendi, through the Listing
and Paying Agent, the social withholdings and/or the non-final withholding tax or the withholding tax payable inrespect of the Distribution.
Why is this prospectus being produced?
Reasons for the Admission. Prior to the date of the Prospectus, financial analysts highlighted that Vivendi’s stock
market price per share was approximately 10% to 30% lower than the sum of all of Vivendi’s businesses divided by
its number of shares. For a number of years, Vivendi’s leading institutional shareholders have been seeking a spinoff from or a distribution of UMG by Vivendi to reduce such conglomerate discount and to allow for a valuation of
UMG, and for UMG to further develop, on a stand-alone basis. The transactions resulting in 20% of the share capitalof UMG now being held by the Tencent-led Consortium led Vivendi’s management board to conclude that the time
was ripe for a distribution of up to 60% of UMG’s share capital to the Vivendi Shareholders, which resulted inVivendi’s pursuance of the Distribution. Whilst the Company will not receive any proceeds from the Admission, it
believes that the Admission is well aligned to the Company’s continued growth ambitions and will help to maximise
shareholder value over time, including by addressing the conglomerate discount highlighted by financial analysts inrelation to Vivendi’s stock market price per share. In addition, the Company and Vivendi believe that the Admissionis also a significant step and presents a new opportunity to the Company which will allow it to broaden artist
opportunities and enrich experiences for music fans, further promoting a thriving music and entertainment industry
and further solidifying UMG’s position as an industry leader. The Admission is expected to further increase theCompany’s profile with the music and entertainment industry, investors, business partners and customers, brandrecognition and credibility. The Admission is also expected to provide additional financial flexibility and diversity
through access to capital markets.
Net proceeds. No proceeds shall be raised pursuant to Admission and the Distribution.
Most material conflicts of interest pertaining to the Admission and the Distribution. Certain of the Lead Equity
Capital Markets Advisors and/or their affiliates are, or have been, engaged and may in the future engage incommercial banking, investment banking and financial advisory (including in the context of the Admission andDistribution) and ancillary activities in the ordinary course of their business with the Group and/or Vivendi, other
Existing Shareholders or any parties related to or competing with any of them, in respect of which they have received,
and may in the future receive, customary fees and commissions. In particular, some of the Lead Equity CapitalMarkets Advisors and/or their affiliates have taken an active part or takes an active part to Vivendi and UMG’sfinancing (see for example a description of the syndicated bank credit facility mentioned in Section 16.5.3 (Facilities
Agreement)) and are long-standing partners to Vivendi. Additionally, the Lead Equity Capital Markets Advisors
may, in the ordinary course of their business, and in the future, effect transactions for their own account or the accountof customers, and make or hold a broad array of investments and actively trade debt and equity securities (or related
derivative securities) and financial instruments on behalf of themselves or their customers. Such investments andsecurities activities may involve long or short positions in the Company’s and/or Vivendi’s securities. As a result of
acting in the capacities described above, the Lead Equity Capital Markets Advisors and their affiliates may haveinterests that may not be aligned, or could potentially conflict, with the interests of investors in the Shares or with theinterests of the Company or the Group.

-7-1. RISK FACTORS
Any investment in the Shares is subject to a number of risks. Investors should carefully consider the risk
factors included below, UMG’s business and the industry in which it operates, together with all other information
contained in this Prospectus.
The occurrence of any of the events or circumstances described in these risk factors, individually or
together with other circumstances, may have a significant negative impact on the Group’s business, financial
condition, results of operations and prospects. The price of the Shares could decline and an investor might losepart or all of its investment upon the occurrence of any such event.
All of these risk factors and events are contingencies that may or may not occur. The Group may face anumber of these risks described below simultaneously and some risks described below may be interdependent
where indicated with a cross-reference. Although the most material risk factors have been presented first withineach category, the order in which the remaining risks are presented is not necessarily an indication of thelikelihood of the risks actually materializing, of the potential significance of the risks or of the scope of any
potential negative impact to the Group’s business, financial condition, results of operations and prospects. While
the risk factors below have been divided into categories, some risk factors could belong in more than one category
and prospective investors should carefully consider all of the risk factors set out in this section.
The below is what the Company believes are the material risks and uncertainties concerning the Group’sbusiness and industry, and the Shares that, alone or in combination with other events or circumstances, could
have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.
In making the selection, the Group has considered circumstances such as the probability of the risk materializingon the basis of the current state of affairs, the potential impact which the materialization of the risk could haveon the Group’s business, financial condition, results of operations and prospects, and the attention thatmanagement would, on the basis of current expectations, have to devote to these risks if they were to materialize:
Although the Company believes that the risks and uncertainties described below are the material risks anduncertainties concerning the Group’s business and industry, and the Shares, they are not the only risks anduncertainties relating to the Group and the Shares. Other risks, events, facts or circumstances not presently known
to the Group, or that the Group currently deems to be immaterial could, individually or cumulatively, prove to beimportant and may have a significant negative impact on the Group’s business, financial condition, results ofoperations and prospects and the price of the Shares may decline and investors could lose all or part of theirinvestment.
Any investment in the Shares is associated with risks. Prior to any investment decision, it is important tocarefully analyze the risk factors considered relevant to the future development of the Group and the Shares.
Prospective investors should carefully read and review the entire Prospectus and should form their own views
before making an investment decision with respect to any Shares. Furthermore, before making an investment
decision with respect to any Shares, prospective investors should consult their own professional adviser andcarefully review the risks associated with an investment in the Shares and consider such an investment decisionin light of their personal circumstances.
1.1

Risks Related to UMG’s Business and Industry

1.1.1

UMG may be unable to compete successfully in the highly competitive industry and markets in which
it operates and UMG’s business may be adversely affected if UMG fails to identify, attract, sign andretain successful recording artists and songwriters or by the absence of superstar releases.

The industry in which UMG operates is highly competitive, influenced by consumer preferences andrapidly evolving. UMG’s competitive position is dependent on identifying, attracting, signing and retaining
recording artists who are or will become commercially successful, who have long-term potential, whose music is
well received, whose subsequent music is demanded by consumers and whose music will continue to generatesales as part of its catalog for years to come. Competition among record companies for such talent is intense.
UMG is also dependent on signing and retaining songwriters who are capable of writing songs that will be thepopular hits of today and the classics of tomorrow. For example, in 2020, UMG’s artists took four of the year’s
top five spots in the Spotify global charts (Drake, J. Balvin, Juice WRLD and The Weeknd), released the number
one song of the year (Blinding Lights by The Weeknd) and took two spots in the top three album rankings (After
Hours by The Weeknd and Hollywood’s Bleeding by Post Malone). UMG’s competitive position is dependent on
its continuing ability to attract and develop such recording artists and songwriters whose work can achieve a highdegree of popularity and thereafter, continue to create music and songs to retain, engage and expand their fan
base. With regard to development of recording artists and songwriters, UMG believes that traditional, high-touch,-8-

full-service label deals with its portfolio of world-renowned labels, provide the most long-term value to an artist
and greatly increase the commercial success, consumer base and longevity potential for artists at every stage of
their careers. These deals provide for the full suite of professional expertise and global resources of a major label,including a comprehensive approach to content creation, organic artist development, timing, marketing,promotion, financial investment, and forward planning.
UMG’s recorded music business is to a large extent dependent on technological developments in orderto remain competitive, including access to, selection and viability of new technologies, and UMG’s recorded
music business is subject to potential pressure from competitors as a result of technological developments
modifying the nature of UMG’s competition. If UMG is unable to remain competitive as a result of technologicaldevelopments, this could have a material adverse effect on UMG’s business, prospects, financial condition andresults of operations. See Section 1.1.5 (Technological advancements are rapidly changing the marketplace inwhich UMG competes and the nature of UMG’s competition).
UMG’s business may be adversely affected if it is unable to sign successful recording artists orsongwriters. Signing, retaining and successfully developing artists is highly competitive, requires substantial
human and capital resources, and can be dependent on consumer preferences that are rapidly and continuously
changing. UMG uses external sources of data provided by streaming platforms or other external providers.
Limitations to access of such data could adversely impact UMG’s capability of identifying future talents andtherefore negatively affect its business. While UMG is required to devote significant time and investment to these
activities, the returns on these activities are influenced by a number of factors, including factors outside of thecontrol of UMG, and are uncertain at the time of investment. To the extent that the expected returns from these
activities fail to materialize or are not in line with expectations, this may negatively impact UMG’s operating andfinancial performance and prospects.
UMG’s competitors may become more successful at signing, marketing and promoting recording artists,
for example if UMG’s competitors increase the amounts they spend to discover, or to market and promote,recording artists and songwriters or reduce the prices of their music in an effort to expand market share, which
may adversely impact UMG’s business, financial condition, results of operations and prospects.
UMG’s business, prospects, financial condition and results of operations may be adversely affected if it
is unable to identify, attract, sign and retain such recording artists and songwriters on terms that are economically
viable to it. UMG’s financial results may also be affected by the absence of superstar recording artist releases
during a particular period via a negative impact on physical sales, download volumes and UMG’s share of digitalplatform subscription streaming revenues, which may result in a decrease in UMG’s revenues from these income
streams and an adverse impact on UMG’s business, financial condition, results of operations and prospects.
1.1.2

If streaming and subscription adoption or revenue fail to grow or grow less rapidly than UMG
anticipates, UMG’s business may be adversely affected.

Revenues from subscription music services are important to UMG because they offset declines in
downloads and physical sales and represent a growing area of UMG’s recorded music business. According to the
IFPI Global Music Report 2021 issued by the International Federation of the Phonographic Industry (IFPI), an
organization that represents the interests of the recording industry worldwide, subscription music services and adsupported streaming revenues accounted for approximately 62.1% of global recorded music revenues in 2020,
approximately a 19.9% increase as compared to 2019. In 2020, UMG generated €3,833 million of revenue fromsubscription music services and ad-supported streaming, as compared to €3,325 million in 2019. There can be noassurance that this growth pattern will persist or that digital revenue will continue to grow at a rate sufficient tooffset and exceed declines in downloads and physical sales. Consumption formats in the music industry aresusceptible to technological advancements and changing consumer preferences around how music is accessed, as
illustrated in recent years by the global decline in revenue derived from downloads and CD sales. See Section
1.1.5 (Technological advancements are rapidly changing the marketplace in which UMG competes and the natureof UMG’s competition). These, and other factors, may in the future negatively impact subscription and adsupported streaming, for example where newer formats become more popular with consumers. Additionally,
technology around streaming manipulation, fraud and hacking is becoming increasingly refined and subscription
streaming services are particularly vulnerable which could undermine consumer confidence and cause revenueloss.
If UMG’s subscription or streaming revenue fails to grow, grows less rapidly than it has over the past
several years or declines, UMG’s recorded music business may experience reduced levels of revenue andoperating income. Additionally, slower growth in streaming adoption or revenue is also likely to have a negative
impact on UMG’s music publishing business, which generates a significant portion of its revenue from sales and-9-other uses of recorded music. Both of these may adversely impact UMG’s business, prospects, financial condition
and results of operations.
1.1.3

UMG relies on digital service providers for the online distribution and marketing of its music on thebasis of contractual terms that are subject to change.

UMG derives an increasing portion of its revenues from the distribution of music through digital
distribution channels and partners with several hundred music services around the world and, in 2020, the top 50
music services accounted for 95% of UMG’s digital revenue for 2020. In 2020, 65% of UMG’s overall revenue
was derived from digital channels.
UMG currently enters into relatively short-term agreements with digital music streaming services. Therecan be no assurance that UMG will be able to renew or enter into new agreements with any digital music service.
The terms of these agreements, including the rates that UMG receives pursuant to them and the basis forcalculation of those rates, may change as a result of changes in the industry or changes in the law, or for otherreasons. Decreases in rates or changes to other terms of agreements with digital music streaming services could
adversely impact UMG’s business, prospects, financial condition and results of operations.
UMG’s music is also promoted by the digital music services on playlists curated by such services orgenerated from their algorithms (or a combination of both). Any unfavorable changes made by such service
providers to their algorithms or to the terms on which they market or promote UMG’s music could adversely
affect UMG’s business, prospects, financial condition and results of operations.
1.1.4

UMG’s results of operations may be adversely affected if it is unable to compete successfully in the
evolving markets in which it operates or is unable to execute its business strategy.

UMG expects to increase revenues and cash flow through a business strategy which requires it to, among
other things, continue to maximize the long-term value of its music by expanding the licensing partners withwhich UMG works and diversifying its revenue streams by partnering with an increasing array of new businesses
that benefit from the use of music content to engage consumers. UMG’s strategy includes efforts to grow revenues
from new digital platforms, including fitness and video games, and through business arrangements with nontraditional partners, including social media platforms. For example, in 2017, UMG became the first major musiccompany to sign a deal with Facebook. UMG has the largest portfolio of fitness technology agreements of any
music company, including with Peloton and Apple’s Fitness+, and in 2021, licensed its catalog to Equinox Media,
LLC’s Variis digital fitness app. The success of these initiatives relies on adequate third-party support and requires
UMG to accurately forecast and keep up with technological developments and consumer preferences relating toplatforms and may require UMG to implement new business models or adapt to new distribution platforms. If
UMG is unable to implement its strategy successfully or properly react to changes in consumer preference, its
financial condition, results of operations and cash flows could be adversely affected.
1.1.5

Technological advancements are rapidly changing the marketplace in which UMG competes and thenature of UMG’s competition.

The industries in which UMG operates are subject to rapid and significant changes in technology and arecharacterized by the frequent introduction of new products and services and use of technology in new ways, as
demonstrated by the resulting global increase in streaming revenues over the past five years, coupled with aconverse decline in downloads and CD sales. Technological advancements are also modifying the nature of
UMG’s competition and bringing new challenges. The uses of technology are constantly evolving, and it may not
be possible to foresee the ways in which technology could be used in, and to disrupt, the music industry, forexample through the use of artificial intelligence and non-fungible tokens. Technological advancements may also
be used to manipulate and adversely impact the reach of UMG’s digital content to its consumers and, as mentioned
above, technology around streaming manipulation, fraud and hacking is becoming increasingly advanced.
Adapting to, and competing with, rapid technological advancements requires substantial investment oftime and resources; however, such investment does not guarantee UMG’s success in developing, implementing,transitioning to, competing with, utilizing or defending against new technology. Any failure by UMG to accurately
anticipate customers’ changing needs and emerging technological trends could significantly harm UMG’scompetitive positioning and results of operations. If UMG is not successful in adapting to or competing andkeeping up with new technology, UMG’s business, prospects, financial condition and results of operations could
be adversely affected.

-10-In addition, UMG’s competitors may in the future be able to innovate or adjust faster than UMG can,and new technologies may increase competitive pressure by enabling UMG’s competitors to offer superior
services or be more attractive to artists and songwriters. Such developments could make UMG’s value proposition
less compelling, which could have a material adverse effect on UMG’s business, prospects, financial condition
and results of operations.
1.1.6

UMG operates in many jurisdictions around the world and therefore is subject to a variety of trends,
developments and limitations in those jurisdictions, which could affect it adversely.

UMG has offices engaged in recorded music, music publishing, merchandising and audiovisual content
in more than 60 territories around the world. UMG’s local presences have become increasingly important as the
popularity of music originating from a country’s own language and culture is very significant, and more countries
around the world have developed legitimate business models to monetize music. In addition, UMG’s businessmodel is increasingly focused on developing business in new high-growth music markets. For example, in 2020,
UMG strengthened its global presence through new activities and key partnerships in Israel, Morocco, Vietnam,
Senegal, Cameroon, Nigeria, Italy, India, Indonesia, Thailand and South Korea. However, if UMG’s music does
not continue to have appeal in various countries, UMG’s results of operations could be adversely impacted andits investments in new jurisdictions could fail to generate returns for UMG in line with expectations. Additionally,
UMG may not be successful in identifying and signing the most promising artists in these markets, which may
negatively impact UMG’s competitive position in these geographies, its prospects and its ability to generate
returns in these markets.
In countries in which the Group currently conducts, or may in the future conduct, its businesses, theGroup’s operations, growth strategy and development may be negatively impacted as a result of less developed
digital, internet and mobile network infrastructure. The Group’s success, particularly streaming revenues, dependon the continued development and use of internet by consumers to access music as well as increasing high-speed
internet and smart-phone penetration. If internet access or smart phone penetration in these markets develops
slower than expected, or is stalled, the Group’s growth strategy could be adversely affected.
Further, depending on the customs and norms in various markets, UMG’s presence in and generation ofrevenues from other countries may require UMG to accept longer accounts receivable settlement cycles and may
subject UMG to difficulties in collecting its accounts receivables. UMG is also subject to restrictions on
repatriation of capital in several jurisdictions in which it operates. For more information, see Section 1.3.6 (Export
and import control laws and regulations, tariffs and trade barriers could have an adverse effect on UMG’sbusiness) below. Additionally, as a result of its global presence, UMG is subject to challenges in the global
economic environment, as a result of political instability in jurisdictions where it is present as well as recessionary
trends, inflation and instability in the financial markets in jurisdictions where it is present.
Any failure of UMG to adequately respond to the needs of its operations in various jurisdictions, its
inability to appeal to consumers in various countries or the restrictions on UMG’s business due to customs, norms
and policies in various jurisdictions may adversely impact UMG’s business, prospects, financial condition andresults of operations.
1.1.7

UMG faces competition for the attention of its consumers given the constantly evolving entertainment
options that are available.

A significant portion of UMG’s revenue comes from the production and distribution of audio andaudiovisual recordings. The success of UMG’s content depends primarily upon its acceptance by the public andon consumer tastes and preferences, which change over time and are difficult to predict. The market for theseproducts is highly competitive and competing products are often released into the marketplace at the same time.
To remain competitive, UMG constantly seeks new platforms to engage different demographics of consumers
around the world. The commercial success of audio and audiovisual recordings depends on several variablefactors, including the quality and acceptance of competing offerings released into the marketplace at or near thesame time, the availability of alternative forms of entertainment and leisure time activities and general economic
conditions and other tangible and intangible factors, all of which can change quickly and in unforeseeable ways.
The recorded music business faces competition for consumer attention from other forms of entertainment
and leisure activities, such as cable and satellite television, on-demand television, motion pictures, podcasts andvideo games and user-generated content in physical and digital formats. UMG may face competition in the futurefrom the development of any number of new forms of entertainment and leisure activities. Although new platforms
and means of entertainment provide opportunities for UMG to engage its customers, such initiatives may not be-11-successful or offset constantly changing consumer preferences or cycling preferences between different forms ofentertainment.
If UMG’s recorded music business unsuccessfully competes against other existing or new forms ofentertainment and leisure activities, or produces and distributes audio and audiovisual recordings without broad
consumer appeal, that may adversely impact UMG’s business, prospects, financial condition and results ofoperations.
1.1.8

In addition to competition from traditional music industry players, new entrants into the musicindustry, artists choosing not to sign with labels and the evolving role of intermediaries may increase
competition and impact UMG’s ability to sign artists.

UMG faces competition from traditional music industry players as well as new entrants, including
investment funds whose investment thesis includes making acquisitions of collections of musical compositions,or “catalog acquisitions”. UMG’s competitors may launch aggressive promotional campaigns and other marketing
activities, or they may pay higher than market rates to attract new talent and increase their market share. In
response, in order to stay competitive, UMG may be required to make additional investments and incur significant
additional expenditures. If UMG is unable to compete successfully in the changing competitive landscape, UMG
may lose market share, worsen its business prospects and financial condition and its results of operations may bematerially and adversely affected.
In addition, changing business practices, particularly due to the emergence of new technologies andaccess to a global network of consumers, has and could further result in artists choosing to make content available
to consumers directly without being affiliated with a label or an intermediary, or could result in music services
playing some of the roles that UMG has traditionally played. In this regard, UMG also competes with certain of
the music distribution platforms who distribute the works of artists and songwriters without the involvement oflabels or intermediaries.
These and other changes in the market could also result in modifications to the ways in which UMG
contracts with its artists and to the revenue generated from those relationships. It is not possible to predict all theways in which the music industry could change, and UMG may not be able to effectively adapt to all of thesechanges and become less competitive. As a result, changing business practices and disintermediation could havean adverse impact on UMG’s business, prospects, financial condition and results of operations.
1.1.9

UMG’s ability to operate effectively could be impaired if it fails to attract and retain its executive
officers and other key personnel.

UMG’s success depends, in part, upon the continuing contributions of its executive officers and key
operational and creative personnel, led by its Chairman and Chief Executive Officer, Sir Lucian Grainge. These
executive officers and key personnel possess significant experience within the music industry and their establishedpersonal connections and relationships in the music industry are important to the Group’s operations. UMG
competes with other music and entertainment companies, record labels, digital service providers, technology
companies and other companies for top talent, including executive officers and other key personnel.
If the Group were to unexpectedly lose a member of the Group’s key management, its business, financial
condition, results of operations and prospects could be materially adversely affected. Although all of UMG’s
executive officers have employment agreements with UMG, UMG cannot guarantee that key personnel, including
executive officers, will remain in UMG’s employment or that it will be able to attract and retain qualified
personnel in the future, at a reasonable cost, to replace any departing key personnel, which may disrupt its businessand operations and could adversely impact UMG’s business, prospects, financial condition and results ofoperations.
1.1.10

Where UMG acquires, combines with or invests in other businesses or joint ventures, UMG will facerisks inherent in such transactions.

UMG has in the past completed and, as part of its business strategy, will continue, from time to time, toconsider strategic transactions, which could involve acquisitions, combinations or dispositions of businesses orassets, or strategic alliances or joint ventures with companies engaged in music entertainment, entertainment,
investing or other businesses. For example, in March 2019, UMG acquired the remaining rights in Ingrooves
Music Group (Ingrooves), a global music distribution company that provides marketing and rights management
services for independent labels and artists. Ingrooves subsequently acquired a leading South African independent
distributor, based on chart performance, Electromode, allowing UMG to enhance its digital, distribution and-12-marketing services footprint across the continent and in December 2018, UMG acquired 100% of the share capitalin Epic Rights, thereby further expanding UMG’s merchandising business. However, there can be no assurance
that UMG will continue to be able to identify and invest in suitable operations or assets. In addition, any suchinvestment could be material, be difficult to implement, disrupt its business or change its business profile, focus
or strategy significantly.
UMG may not be successful in addressing any risks or problems encountered in connection with any
strategic transactions. UMG cannot assure that if it makes any future acquisitions, investments, strategic alliancesor joint ventures or enters into any business combination that they will be completed in a timely manner, or at all,that they will be structured or financed in a way that will enhance its creditworthiness or that they will meet its
strategic objectives or otherwise be successful. In addition, if any new business in which UMG invests or which
it attempts to develop does not progress as planned, it may not recover the funds and resources it has expended,and this could have a negative impact on its business, prospects, financial condition and results of operations.
Additionally, UMG has made investments into joint ventures with third parties in certain jurisdictions
and it may in the future enter into additional such joint ventures as a means of conducting its business in various
jurisdictions.
While UMG seeks to ensure that it has appropriate control when entering into joint ventures, in the future
UMG may not be able to fully control the operations and the assets of its joint ventures as other investors in the
joint venture may have or require certain rights under the terms of the joint venture, and therefore, UMG may not
be able to unilaterally make significant decisions or take timely actions with respect to its joint ventures. UMG’s
inability to take decisive unilateral action in respect to its joint ventures could have a material adverse impact on
its business, prospects, financial condition and results of operations.
1.1.11

UMG has engaged in substantial restructuring and re-organization activities in the past and may needto implement further restructurings and re-organizations in the future and its restructuring and reorganization efforts may not be successful or generate expected cost savings.

UMG’s business has been, and may continue to be, impacted by significant ongoing changes in theentertainment industry. In response, it has sought, and will continue to actively seek, to adapt its operations andcost structure to the changing economics of the industry. For example, while physical sales are still significant insome markets, music consumption has shifted from an ownership model, whereby consumers purchase vinyl orCDs, to an access model that includes subscription and ad-supported streaming formats. UMG has shifted andcontinues to shift resources from its physical sales channels to efforts focused on digital channels, emerging
technologies and other new revenue streams, and it continues its efforts to reduce overhead and manage its variable
and fixed-cost structure. UMG now has entered into agreements and partnerships with every major digital music
service launched in the last decade, including Amazon, Apple, Spotify, YouTube and many others and was oneof the earliest supporters of digital streaming and subscription services, all of which required substantial internal
restructuring activities in order to adapt to the shift from a focus on physical channels to a focus on digitalchannels.
UMG may be required to implement further restructuring activities, make additions or other changes to
its management or workforce based on other cost reduction measures or changes in the markets and industry inwhich it competes, including the evolving skill sets required from its employees. UMG’s inability to structure its
operations based on evolving market conditions could impact its business. Restructuring activities can also create
unanticipated consequences and negative impacts on its business, and UMG cannot be certain that any ongoingor future restructuring efforts will be successful or generate expected cost savings. If UMG were to unsuccessfully
implement restructuring and re-organization plans, that could adversely impact UMG’s business, prospects,
financial condition and results of operations.
1.1.12

Unfavorable currency exchange rate fluctuations could adversely affect UMG’s results of operations.

A significant portion of UMG’s assets, liabilities, revenues and costs are denominated in currencies otherthan Euros, in particular US Dollars. To prepare its UMG Financial Statements, UMG must translate those assets,
liabilities, revenues and expenses into Euros from such currencies at then-applicable exchange rates.
Consequently, increases and decreases in the value of the Euro as compared to such other currencies will affectthe amount of these items in its UMG Financial Statements, even if their value has not changed in their original
currency. These translations could result in significant changes to its results of operations from period to period.
In addition, exchange rate fluctuations could cause its expenses to increase as a percentage of net sales, affecting
its profitability and cash flows.

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From time to time, UMG enters into foreign exchange contracts to hedge the risk of unfavorable foreign
currency exchange rate movements. However, these hedging strategies may not fully eliminate the exchange raterisk and currency volatility to which it is exposed. While UMG seeks to hedge currency transaction risks byoffsetting opposing cash flows (natural hedging) and uses derivative hedges, UMG’s efforts to do so may not be
successful or opportunities to do so may not be readily available and such risks may have a material adverse effecton UMG’s business, prospects, financial condition and results of operations.
1.1.13

UMG’s results of operations, cash flows and financial condition have been and may continue to be
adversely impacted by the COVID-19 pandemic or the state of the global economy as a whole.

Certain of the measures taken by regional and national governments, including, stay-at-home orders andlimitations on indoor and outdoor gatherings have negatively affected UMG’s business. For example, the extended
pause over live concert tours adversely impacted UMG’s sale of tour merchandise which resulted in a decline inrevenue from UMG’s merchandising business in 2020. UMG’s merchandising segment has, in 2020 compared to2019, decreased by 40.3%. UMG’s merchandising segment relies on vendors outside of the United States andtherefore, faces risks inherent in purchasing from foreign suppliers, including the COVID-19 pandemic on the
supply chain. The limitations on live concert touring have also adversely impacted music publishing performancerevenues. The stay-at-home orders also resulted in the cessation of or significant delay in the production of motion
pictures and television programs, which negatively affected licensing revenue in UMG’s recorded music businessand synchronization revenue in its music publishing business. It has been widely reported that early in the COVID19 pandemic, advertisers temporarily reduced their advertising spend. This resulted in a corresponding initialdecline in ad-supported streaming revenue in UMG’s recorded music business and, to a lesser extent, recorded
music licensing revenue and music publishing synchronization, performance and mechanical ad-supported
streaming revenue. UMG’s physical sales rely in part on distribution and retailing of CDs or vinyl through major
retail chains and local shops. Shops closures and stay at home orders negatively affected physical sales of music
through major retail chains and local shops, and any future measures, whether globally or in specific countries,
may continue to have a negative effect on these sales channels.
Notwithstanding recent developments with respect to vaccines for COVID-19, given the global scale,severity and duration of the COVID-19 pandemic, its trajectory is difficult to predict. The COVID-19 pandemic
is expected to continue to materially and adversely affect the global economy, creating risk around the timing andcollectability of UMG’s accounts receivable and possibly leading to a decline in consumer discretionary spending
which, in turn, could have a negative impact on UMG’s results of operations, cash flows and financial condition.
Stay-at-home and shelter-in-place orders, business closures, travel restrictions, supply chain disruptions,employee illness or quarantines, and other extended periods of interruption to its business have resulted and could
continue to result in disruptions to UMG’s operations. Any worsening of the COVID-19 pandemic, ineffectivenessof the vaccination efforts or the spread of any new variants of the coronavirus could result in additional material
adverse impact on its business, financial condition, results of operations and prospects. To the extent the COVID19 pandemic adversely affects UMG’s business, prospects, results of operations, cash flows or financial condition,
it may also have the effect of heightening other risks described in this Section 1.
A significant portion of UMG’s revenues relies on consumers spending discretionary funds on leisureactivities, such as music subscriptions, CDs, vinyl albums and artist merchandise. The state of the economy as awhole, inflation, deflation, political uncertainty, the availability of consumer credit, taxation, unemployment andthe impact of the COVID-19 pandemic are all factors that relate to the prevailing macroeconomic conditions andaffect UMG’s business. Economic growth and consumer confidence are important for UMG’s growth andstrategy. In 2020, UMG’s merchandising revenues were down 39.6% at constant currency and perimeter compared
to 2019 due to the impact of the COVID-19 pandemic on both touring and retail activity, which cut off access for
consumers to purchase these products at their usual retail points. As such, UMG’s eCommerce business grewsignificantly in 2020, but could not fully offset the loss of touring and retail merchandise sales. UMG was able tofurther offset the negative impact of the COVID-19 pandemic with a significant increase in subscription andstreaming revenues. UMG also generated some incremental revenue from its work on more than 100 live
performances by artists worldwide that streamed on more than a dozen platforms. However, any decrease in global
economic growth or slowdown in certain fast-growing markets could negatively affect the Group’s results ofoperations going forward.
In the event that the COVID-19 pandemic and its related effects continue on an extended basis globally,
UMG would continue to look for ways to evolve and develop its business in an effort to off-set the associatednegative effects and avoid a material negative impact to its business. However, in view of the fact that the COVID19 pandemic had a direct impact on UMG’s business and certain of its revenue sources, UMG still considers thisrisk factor to be a material item.

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1.2

Risks Related to Intellectual Property, Data Security and Information Technology

1.2.1

The success of UMG’s business is dependent on the existence and maintenance of its intellectual
property rights and challenges in obtaining, maintaining, protecting and enforcing UMG’s
intellectual property rights and involvement in intellectual property litigation could adversely affectits business, operating results and financial condition.

The success of UMG’s business depends on its ability to obtain, maintain, protect and enforce its
trademarks, copyrights and other intellectual property rights around the world. UMG’s intellectual property rights,
as well as its ability to enforce its intellectual property rights depend on the laws and regulations of the many
jurisdictions in which it conducts business, which are not consistent across jurisdictions. In order to obtain,
maintain, protect and enforce its intellectual property rights, UMG takes a variety of measures, including, if
necessary, litigation or proceedings before governmental authorities and administrative bodies. For example, on
July 31, 2018, a complaint for copyright infringement was filed by UMG Recordings, Inc. and Universal Music
Publishing Group (UMPG) (along with the other major labels and publishers including Sony Music Entertainment
and Warner Music Group) against, amongst others, Cox Communications, an Internet access and service provider,for knowingly inducing and supporting copyright infringement by its customers. UMG also has a content
protection unit tasked with leading and coordinating take downs of content that infringes its intellectual property
rights.
However, these measures can be expensive and time-consuming and, in some instances, can beineffective such that, despite such measures, third parties may be able to obtain and use UMG’s intellectual
property without its permission, and there is no guarantee that UMG will be able to successfully obtain, protect,maintain or enforce its intellectual property rights in every instance. The inability to obtain, maintain, protect orenforce its intellectual property rights could harm UMG’s brand or brand recognition and adversely affect its
business, prospects, financial condition and results of operations.
In addition, if UMG is alleged to have infringed, misappropriated or otherwise violated the intellectual
property rights of a third party (even where such claims are without merit), any litigation to defend the claim could
be costly and would divert the time and resources of management, regardless of the merits of the claim and whether
the claim is settled out of court or determined in its favor. There can be no assurance that UMG would prevail in
any such litigation. If UMG were to lose a litigation relating to intellectual property, in addition to the potential
reputational damage, it could be forced to pay monetary damages, to obtain a license, or to cease using certain
intellectual property or technologies. For example, on February 5, 2019, a class action lawsuit was filed against
UMG Recordings, Inc. on behalf of a putative class of all recording artists who have to date requested thetermination of alleged transfers of US copyright to UMG pursuant to Section 203 of the Copyright Act, whichallows, under certain conditions, an author who has contractually transferred the US copyright rights to his or her
work to a third party to terminate such grant after 35 years. While a class has not been certified in this case, and
UMG believes it has valid defenses to the claims, the complainant seeks to have the court recognize the purported
termination of certain alleged grants by the artists involved in the litigation and also alleges copyright
infringement, alleging that UMG continued to use certain recordings after the purported termination dates. To theextent that UMG is unable to successfully defend these claims, amongst other things, it may face damages claims
from the relevant artists.
Additionally, artists signed by UMG may seek to challenge and dispute the scope of intellectual property
rights under their contracts entered into with UMG, including potential disputes as to the application and effect oftechnological developments and new formats to access music. In this regard, see Section 1.3.3 (UMG is and could
become involved in a number of lawsuits, which could negatively affect UMG’s results of operations, financial
condition and reputation).
Any of the foregoing may cause UMG to suffer economic loss and reputational damage, which would
adversely affect UMG’s business, prospects, financial condition and results of operations.
1.2.2

Piracy continues to adversely impact UMG’s business and content protection is a key focus of UMG’sbusiness.

Technological advances and the conversion of music into digital formats have made it easy to create,transmit and “share” high-quality unauthorized copies of music in a manner that does not provide an economic
return for UMG. This includes “stream-ripping” to access UMG’s music illegally through the internet, whether
by download or streaming (including by illegal “stream-ripping”). In a 2021 IFPI survey of 43,000 internet users
aged 16 to 64 across 21 countries, 40% admitted using illegal stream-ripping services, the leading form of musicpiracy. Organized industrial piracy may also lead to decreased revenues. The impact of piracy on legitimate music-15-

revenues and subscriptions is hard to quantify, but UMG believes that illegal file sharing and other forms ofunauthorized activity, including stream manipulation, have a substantial negative impact on music revenues. If
UMG is not entirely successful in its content protection efforts, whether as a result of challenges in obtaining
appropriate relief via the judicial process or challenges in its efforts to lobby governments to enact and enforce
stronger legal penalties for copyright infringement or a failure to develop effective means of protecting andenforcing its intellectual property rights, its business, prospects, financial condition and results of operations may
suffer.
1.2.3

UMG’s business is subject to a variety of European, US and other supranational and domestic laws,
rules, policies and other obligations regarding data protection.

UMG is subject to laws, regulations, rules, and other obligations governing privacy, data protection,
direct marketing, and cybersecurity in jurisdictions around the world. These laws impose restrictions on the way
UMG and its counterparties may collect, use, retain, secure, disclose, and transfer personal information. Theselaws may shape, for example, how UMG engages in eCommerce transactions or other transactions with
consumers; how it operates its online properties; how UMG engages in direct and behavioral advertising, email
marketing, mobile marketing, and social media activities; and UMG’s internal operations in areas such as
employment and how it transfers data among its subsidiaries. Further, UMG makes statements about its use anddisclosure of personal information through its privacy policies, information on its websites and press statements.
UMG may also have contractual obligations regarding the use of personal information with its counterparties.
Privacy, data protection, direct marketing, and cybersecurity are the subject of intense media, political,
and regulatory scrutiny. Several jurisdictions in which UMG is active have recently passed laws in these areas,
and other jurisdictions are considering imposing additional restrictions. These laws, and the ways in whichauthorities interpret and enforce them, continue to develop and may be inconsistent from jurisdiction tojurisdiction. Complying with emerging and changing requirements may cause UMG to incur substantial costs,
change its business practices, modify its product and service offerings, and forego other business opportunities.
For example, UMG is subject to extensive European regulations on privacy, information security anddata protection, the main and most relevant of which relate to the collection, protection and use of personal andbusiness data, consumer credit data and other information and the provision of credit ratings, including Regulation(EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the freemovement of such data (the General Data Protection Regulation) (the GDPR), the Directive 2002/58/EC of theEuropean Parliament and of the Council of July 12, 2002 concerning the processing of personal data and theprotection of privacy in the electronic communications sector (Directive on privacy and electronic
communications) and national laws implementing each of them. Additionally, UMG is subject to the UK GDPR
(the retained EU law version of the GDPR) and the United Kingdom’s Data Protection Act 2018. The GDPR,
which has applied since May 25, 2018, is directly applicable in all member states of the European Economic Area(the Member States). The GDPR has increased both the number, and restrictive nature, of the obligations bindingon the UMG for the collection, storage and processing of personal data. In particular, the GDPR establishes atiered approach to penalties for breach, which enables the relevant authorities to impose fines for some
infringements of up to €20 million, or 4% of annual worldwide turnover.
In the United States, UMG is subject to overlapping federal and state laws governing privacy, dataprotection and security. For example, state data breach notification laws or consumer protection laws generally
mandate the rules that must be followed in the event of the unauthorized disclosure of personal information. Oneof the most significant state privacy laws, the California Consumer Privacy Act, as amended by the California
Privacy Rights Act, establishes actionable rights for stipulated parties relating to data handled by covered entities
such as UMG, as well as obligations on covered entities relating to privacy disclosures, data handling, and more.
The Commonwealth of Virginia has a similar law coming into force at the start of 2023, and other states may befollowing suit. Moreover, UMG is also subject to regulatory authorities, such as the Federal Trade Commission(FTC), and self-regulatory requirements, such as the Payment Card Industry Data Security Standard (PCI DSS).
The FTC is authorized to enforce prohibitions on “unfair or deceptive acts or practices,” to include a company’s
violations of its own privacy policies or commitments, or security or privacy practices that the FTC deems
fundamentally “unfair”. The PCI DSS are a set of payment-related data security requirements the violation ofwhich can result in fines or restrictions on the ability to process transactions. Generally distinct from state privacy
laws, some state laws also impose separate requirements regarding the handling of payment card information.
Noncompliance, or even allegations of noncompliance, with these laws or UMG’s public statements orcontracts in these areas, could lead government entities, supervisory authorities or private actors to instituteinvestigations into or proceedings against UMG. These investigations or proceedings may entail legal costs and-16-

reputational harm, and if defense of such proceedings is unsuccessful even in part, UMG may face significant
penalties, liability, or ongoing monitoring or audit requirements.
Additionally, any perceived or actual failure by UMG, including its third-party service providers, toprotect confidential data or any material non-compliance with privacy or data protection or other consumer
protection laws could cause customers to lose trust in UMG, reduce UMG’s ability to attract and retain customers,
artists and other business relationships and counterparties and result in litigation or other actions being brought
against UMG. Lastly, if third parties that UMG works with, such as UMG’s suppliers, violate applicable laws or
UMG’s policies, such violations may also put the information in UMG’s database at risk and could in turn havean adverse impact on UMG’s business, prospects, financial condition and results of operations.
1.2.4

UMG’s operations are dependent on its information technology and information systems, and any
disruption to the Group’s IT system or failures in the Group’s IT systems could adversely impact theGroup’s operations.

The integrity, reliability and operational performance of UMG’s information technology (IT)infrastructure and technology network are critical to its operations. UMG relies upon the capacity, reliability, andsecurity of its IT hardware and software infrastructure and its ability to expand and update this infrastructure in
response to changing needs.
Certain elements of the IT systems infrastructure on which UMG depends are outsourced to third parties.
The services and functions provided by these third parties are critical to the Group’s business and include (but are
not limited to) storage, data processing and network.
The availability of UMG’s IT platforms and other services may be interrupted by damage or disruption
to the Group’s or the Group’s third-party service providers’ IT systems, which may be caused by, for example
hardware or software defects, human error, unauthorized access, fire, power loss, natural hazards, the impact of
war and terrorism, disasters or similarly disruptive events, as well as planned upgrades and improvements which
may be subject to developmental delay or fail to be effective. Additionally, UMG may be subject to cyber-attacks,
including phishing, malware, and ransomware. While no such attack has had a material adverse effect on its
business in the past, there can be no assurance with regard to potential future attacks and UMG’s systems may bevulnerable to damage from such attacks.
While UMG has in place business continuity procedures, there can be no assurance that these will befully successful in preventing all disruptions to the availability of UMG’s IT platforms or other services. To theextent the Group outsources its business continuity or disaster recovery operations, it is at risk of the vendor’sunresponsiveness in the event of breakdowns in the Group’s systems, which could cause delays in recovering
service.
Furthermore, performance issues, system interruptions or other failures in the Group’s IT systems could
expose the Group to potential liability to pay damages as well as reputational harm, additional operating expenses
to remediate the IT failures and exposure to other losses or other liabilities, all of which could have a material
adverse effect on the Group’s business, financial condition and results of operations.
In addition, UMG receives certain personal information about its customers and potential customers, andit also receives personal information concerning its employees, artists and vendors. In addition, UMG maintains
sensitive confidential business information of itself and, in some cases, counterparties. It also holds intellectual
property rights including rights in music recordings and compositions, and further including not-yet-released
music. Further, UMG relies on its computer systems and those of service providers for its operations. No computer
system is immune from attacks or other incidents, and UMG’s system may be vulnerable to, or may have sufferedunknown, security breaches by computer hackers and others that attempt to penetrate or otherwise defeat the
security measures that it has in place. A compromise of its security systems that results in the loss or exposure ofconfidential information, including not-yet-released music or personal information, and that compromises theintegrity of UMG’s information, causes UMG’s systems to operate in a way that UMG does not intend or affects
the availability of such systems or information for use, may lead to operational disruptions and significant
expenditures to address the incident. In addition, any vulnerabilities found in UMG’s systems, the loss ofcompetitively sensitive information, theft of funds, reputational harm, litigation and investigations, legal expenses,
liability, penalties, or the imposition of ongoing monitoring or audit requirements may also lead to operational
disruptions and/or significant expenditures. Any of the foregoing may adversely impact UMG’s business,
prospects, financial condition and results of operations.

-17-While UMG maintains what it considers to be an appropriate level of insurance against some of theserisks, UMG’s insurance coverage may not cover all of the costs and liabilities it incurs as the result of any suchinterruptions or failures of its IT systems, and if its business continuity and/or disaster recovery plans do noteffectively and timely resolve issues resulting from a cyber-attack, UMG may suffer material adverse effects on
its business.
1.2.5

UMG faces a potential loss of certain catalog titles to the extent that those recording artists have aright to recapture recordings under the US Copyright Act.

The US Copyright Act of 1976, as amended (the US Copyright Act), provides authors (or their heirs) aright to terminate transfers of US copyrights (i.e., licenses or assignments of rights in their copyrighted works) in
certain circumstances. This right does not apply to works that are “works made for hire.” Since the enactment of
the Sound Recordings Act of 1971, which first accorded federal copyright protection for sound recordings in theUS, the vast majority of UMG’s agreements with recording artists provide that such recording artists renderservices under a work-made-for-hire relationship. A termination right exists under the US Copyright Act fortransfers of US rights in musical compositions that similarly are not “works made for hire.” If any of UMG’scommercially available sound recordings created after February 15, 1972 were determined not to be “works madefor hire,” then the recording artists (or their heirs) could have the right to terminate the US federal copyright rights
they granted to it, generally during a five-year period starting at the end of 35 years from the date of release of arecording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording,
generally during a five-year period starting at the end of 56 years from the date of copyright). For example, on
February 5, 2019, a purported class action lawsuit was filed against UMG Recordings, Inc. on behalf of a putativeclass of all recording artists who had requested the termination of certain alleged grants of US copyrights to UMG
pursuant to Section 203 of the US Copyright Act. See Section 11.14 (Litigation).
Any right of artists to terminate the copyright rights granted to UMG may adversely impact UMG’sbusiness, prospects, financial condition and results of operations.
1.3

Legal, Regulatory and Tax Risks

1.3.1

A significant portion of UMG’s revenues are subject to regulation either by government entities or by
local third-party collecting societies throughout the world and rates on other income streams may be
set by governmental proceedings or be subject to legislative intervention, which may limit its
profitability.

Mechanical royalties and performance royalties (on both physical and digital sales) are two of the main
sources of income to UMG’s music publishing business, accounting for under 13% of UMG’s revenue in 2020,and mechanical royalties are an expense for its recorded music business, accounting for 1.1% of UMG’s revenue
in 2020. In the United States, mechanical royalty rates are set every five years pursuant to an administrative
process under the US Copyright Act, unless rates are determined through industry negotiations, and performanceroyalty rates are determined by negotiations with performing rights organizations, which in the US include
American Society of Composers, Authors and Publishers, (ASCAP), Broadcast Music, Inc. (BMI) and the Societyof European Stage Authors and Composers (SESAC). ASCAP and BMI are subject to a consent decree ratesetting process if negotiations are unsuccessful. The Antitrust Division of the Department of Justice (the DOJ)
has previously reviewed UMG’s consent decrees with ASCAP and BMI and, while in January 2021, the DOJ
announced that it would take no further action to modify or terminate such decrees, there is no guarantee that the
DOJ will not choose to review such decrees in the future. Changes to the mechanical royalty rate, the performanceroyalty rates or consent decrees governing the US performing rights organizations could potentially impact the
profitability of UMG’s music publishing business.
Outside of the United States, mechanical and performance royalty rates are typically negotiated on anindustry-wide basis (or for multi-territorial online licensing, on a repertoire-specific basis but still necessarily inpartnership with collecting societies as rights holders) and may be subject to mandatory collecting regimes. In
most territories outside the United States, mechanical royalties are based on a percentage of wholesale prices forphysical product and based on a percentage of consumer prices for digital formats. The mechanical andperformance royalty rates set pursuant to such processes may adversely affect UMG by limiting its ability toincrease the profitability of its music publishing and/or recorded music businesses.
The performance royalty rates received by UMG’s recorded music business in the United States forwebcasting and satellite radio are set every five years by an administrative process under the US Copyright Act
unless rates are determined through industry negotiations. In most jurisdictions outside the United States, UMG’srecorded music business receives payment for the public performance and broadcast of its sound recordings via-18-

collecting societies, with rates generally set by industry agreement or rate setting tribunal. In certain jurisdictions,
governments either have, are proposing or face certain pressure to introduce legislation which may introduce
and/or extend mandatory collective licensing and direct remuneration claims for certain rights, such as (but notlimited to) the introduction of an additional remuneration right for performers for the so-called “making available”
of sound recordings on digital services.
As revenues continue to shift from physical to diversified distribution channels, it is important that UMG
receives fair value for all of the uses of its intellectual property as its business model now depends upon multiple
revenue streams from multiple sources. To the extent that the rates set for recorded music and music publishingincome sources through collecting societies or legally prescribed rate-setting processes are set at levels which are
not favorable or economically viable for UMG, this could have an adverse impact on its business, prospects,
financial condition and results of operations.
1.3.2

Changes in laws and regulations, including those relating to intellectual property rights, may have an
adverse effect on UMG’s business.

UMG’s intellectual property rights, particularly copyrights, are very important to UMG’s business.
UMG’s business is subject to a variety of laws and regulations in jurisdictions around the world, including thoserelating to intellectual property, content regulation, user privacy, data protection and consumer protection, among
others. In addition, various governments currently have under consideration, and may in the future adopt, newlaws, regulations and policies regarding a wide variety of matters that could directly or indirectly affect UMG’sbusiness and operations, the ownership of UMG’s content assets or UMG’s ability to maintain, protect or enforce
its intellectual property rights. For example, the UK Parliamentary Select Committee on Digital, Culture, Mediaand Sport issued its advisory report on July 15, 2021, as part of an inquiry to examine “what economic impact
music streaming is having on artists, record labels and the sustainability of the wider music industry”. The report
recommended to the UK government a number of actions to regulate music companies, including on issues related
to artist and songwriter compensation, which could hinder or add cost to the companies’ operations. UMG’sbusiness is also impacted by laws and regulations of the various jurisdictions in which UMG, or its partners,
operate, including quotas, tax regimes, currency restrictions and data protection regimes.
UMG could also be adversely affected by new laws and regulations, by the threat that additional laws or
regulations may be forthcoming and by changes in existing laws or changes in interpretation of existing laws bycourts and regulators. For example, legislation has been introduced in California that would amend California
Labor Code Section 2855 (Section 2855) such that UMG’s ability to recover damages from artists that fail todeliver on their contractually promised recordings after more than seven years may be hindered. Changes in thearea of copyright law, in particular, could directly or indirectly affect UMG’s operations, the ownership of UMG’scontent assets or UMG’s ability to maintain, protect or enforce its intellectual property rights.
Litigation and proceedings before governmental authorities, whether or not UMG is involved in suchproceedings, may serve as precedents that adversely impact UMG’s operations, ownership of content assets or
intellectual property rights. UMG could incur substantial costs to comply with new or modified laws andregulations or substantial penalties or other liabilities if it fails to comply. UMG could also be required by suchlaws to change or limit certain of its business practices, which could impact its ability to generate revenues.
Furthermore, laws in various jurisdictions differ from each other in significant respects, and theenforcement of such laws can be inconsistent and unpredictable. This could impact UMG’s ability to operate its
business in various jurisdictions and undertake activities that UMG believes is beneficial to its business. For
example, the European Union (EU) adopted the Directive on Copyright in the Digital Single Market (theCopyright Directive) to modernize EU copyright rules. The Copyright Directive includes a number of relevant
provisions, including Article 17, which clarifies the EU copyright safe harbor requiring Online Content Sharing
Service Providers (OCSSPs or online platforms that host user-generated content) to employ “effective andproportionate” measures to prevent unauthorized use of copyrighted materials. The EU’s Member States must
implement the Copyright Directive via enactment of domestic legislation. While some Member States (such as
France, the Netherlands, Hungary, Denmark and Malta) are implementing the Copyright Directive’s Article 17
faithfully to the legislative intent, other Member States are considering (and, in the case of Germany, have
implemented) legislation that differs significantly from the Copyright Directive in letter and spirit – and which
would not only undo the benefit of Article 17 but also potentially disrupt existing licensing models.
Any of the foregoing may adversely impact UMG’s business, prospects, financial condition and resultsof operations.

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1.3.3

UMG is and could become involved in a number of lawsuits, which could negatively affect UMG’sresults of operations, financial condition and reputation.

UMG is and could become involved in a number of lawsuits, disputes or investigations initiated byconsumers, business partners, competitors, artists, governmental entities, tax authorities and third parties. Suchlawsuits, disputes or investigations may relate to, inter alia, copyright infringement, contractual disputes,
employment disputes, antitrust and tax disputes. For example, on February 5, 2019, a purported class action
lawsuit was filed against UMG Recordings, Inc. on behalf of a putative class of all recording artists who had
requested the termination of certain alleged grants of US copyrights to UMG pursuant to Section 203 of the US
Copyright Act. See Section 11.14 (Litigation).
In some of these cases, if UMG fails to negotiate amicable settlement, it may be ordered to pay damages
or financial penalties. UMG recognizes a provision each time a risk is identified, is likely to materialize and iseither quantifiable or can be estimated with reasonable accuracy. In addition to the legal proceedings which UMG
is currently involved in, it could become involved in litigation in the future that could have an adverse impact on
UMG’s business, prospects, financial condition and results of operations.
1.3.4

Changes in tax laws or challenges to the Group’s tax position could adversely affect the Group’s
results of operations and financial condition.

Given the footprint of the Group’s operations globally, the Group is subject to complex tax laws andregulations in the various countries where it operates. It is subject to taxation in, and to the tax laws and regulationsof, multiple jurisdictions as a result of the international scope of its operations and its corporate structure. Adverse
developments in applicable tax laws or regulations, or any change in the position by the relevant authorities
regarding the application, administration or interpretation of any applicable tax laws or regulations, could subject
the Group to additional or increased tax payments, and in turn have a material adverse effect on the Group’sbusiness, financial condition and results of operations. In this regard, the fast-paced development of the global
digital economy has led, and may lead, to public authorities adapting, or considering to adapt, tax regimes
applicable to the Group, which could further subject the Group to changes in tax legislation in the countries where
it operates. Given the international nature of the Group’s operations, the Group is particularly impacted by changes
to regulations relating to transfer pricing and withholding tax on the repatriation of funds.
In addition, the Group often relies on generally available interpretations of applicable tax laws andregulations including interpretations made by the relevant tax authorities and courts of law. There cannot becertainty that the relevant tax authorities or courts agree with the Group’s interpretation of these laws or, as thecase may be, that such tax authorities or courts do not depart from the generally available interpretations ofapplicable tax laws and regulations on which the Group often relies. If the Group’s tax positions are challenged
by relevant tax authorities, the potential imposition of additional or increased taxes could require the Group to pay
taxes that the Group currently does not collect or pay or increase the costs of the Group’s services to track andcollect such taxes, which could in turn increase the Group’s costs of operations or the Group’s effective tax rateand have a negative effect on the Group’s business, financial condition and results of operations.
1.3.5

The Group may be subject to scrutiny under antitrust and competition laws

UMG may be subject to scrutiny in the countries and regions where it operates by various governmentand regulatory agencies such as the Antitrust Division of the DOJ, the European Commission, under US and EU
law and regulation, and other foreign laws and regulations, including antitrust and competition laws. These andother government agencies, entities and individuals have jurisdiction to consider whether UMG’s businesspractices violate applicable antitrust or competition laws of the countries and regions in which UMG operates.
UMG’s licensing agreements, including with streaming services, satellite radio, and web-based services may besubject to regulatory scrutiny and might be the subject of regulatory action or antitrust litigation.
In this regard, in August 2019, UMG received a notice of investigation from State Administration forMarket Regulation (SAMR), the enforcement arm of the Chinese Government in charge of investigating market
competition, monopolies and intellectual property, stating that it was opening an anti-monopoly investigation intomusic licensing in the territory. An adverse finding against UMG could result in financial penalties as well asother measures, which may materially and adversely affect UMG’s business, financial condition, results ofoperations and prospects in China.
Any such actions, claims or investigations, even if without foundation, may be very expensive to defend
or respond to, involve negative publicity and substantial diversion of management time and effort, and could result
in reputational harm, significant judgments against the Group, or require the Group to change its business-20-

practices, which may materially and adversely affect its business, financial condition, results of operations andprospects.
1.3.6

Export and import control laws and regulations, tariffs and trade barriers could have an adverse effecton UMG’s business.

UMG has offices in more than 60 territories around the world and exports music and merchandise fromcountry to country. UMG’s exports not only include physical exports, such as vinyl, CDs and merchandise,including apparel, but also digital trade and is subject to a variety of export control and import laws and regulations
and trade and tariff regulations. Compliance with export control and import laws and regulations may create delaysin the introduction of UMG’s music and merchandise in international markets, resulting in a loss of opportunities
and increase costs due to import and export duties and tariffs.
Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws,
sanctions and regulations, or change in the countries, governments, persons or technologies targeted by such laws
and regulations, could also result in decreased ability to export UMG’s music and merchandise to consumers. Any
limitation on UMG’s ability to export its music or merchandise could materially adversely affect its business,
prospects, financial position and results of operations.
1.3.7

Exposure to United Kingdom political developments, including the effect of its withdrawal from theEuropean Union, could be costly and difficult to comply with and could seriously harm UMG’sbusiness.

UMG has operations in the United Kingdom involved in identifying, signing and retaining recording
artists. The United Kingdom’s withdrawal from the European Union has created significant uncertainty about thelong-term future relationship between the United Kingdom and the European Union. It has also had, and may inthe future have, a material adverse effect on global economic conditions and the stability of global financial
markets and could reduce global market liquidity and restrict the ability of market participants to operate infinancial markets in the United Kingdom or Europe. Lack of clarity about the future relationship between the
United Kingdom and the European Union, and the laws and regulations that may apply, including with respect toaspects of laws and regulations which were not covered by the EU-UK Trade and Cooperation Agreement, could
adversely affect UMG’s business, prospects, financial condition and results of operations.
1.4

Risks related to the Distribution and Admission

1.4.1

The combined post- Distribution value of UMG and Vivendi Shares may not equal or exceed theaggregate pre- Distribution value of Vivendi Shares.

After the Distribution, Vivendi Shares will continue to be traded on Euronext Paris. The Shares will be
traded under the symbol “UMG” on Euronext Amsterdam. The Company has no current plans to apply for listingon any additional stock exchanges. As a result of the Distribution, Vivendi expects the trading prices of Vivendi
Shares at market open on September 21, 2021 to be lower than the trading prices at market close on September
20, 2021, because the trading prices will no longer reflect the value of the UMG Shares which will commence
trading on Euronext Amsterdam as of such date on an if-and-when-delivered basis. There can be no assurance
that the aggregate market value of the Vivendi Shares and the Shares following the Distribution will be higher
than, equal to, or lower than the market value of Vivendi Shares if the Distribution did not occur. This means, forexample, that the combined trading prices of one Vivendi Share and one Share after Euronext Paris opens on theFirst Trading Date may be higher than, equal to, or less than the trading price of one Vivendi Share up to
September 20, 2021. In addition, following the close of business on September 21, 2021, but before thecommencement of trading on September 22, 2021, Vivendi Shares will reflect an ownership interest solely inVivendi and will not include the right to receive any Shares in the Distribution, but may not yet accurately reflect
the value of such Vivendi Shares excluding the Shares.
1.4.2

UMG may not achieve some or all of the expected benefits of the Admission, and the Admission andDistribution may adversely affect its business.

UMG may not be able to achieve the full strategic and financial benefits expected to result from the
Admission, or such benefits may be delayed or not occur at all. The Admission is expected to provide the following
benefits, among others:enhanced strategic and management focus;

-21-



distinct investment identity;more efficient allocation of capital; anddirect access to capital markets; and alignment of incentives with performance objectives.

The Company may not achieve these and other anticipated benefits for a variety of reasons, including,among others:the execution of the Admission and Distribution may distract from other strategic initiatives;

following the Admission and Distribution, UMG may be more susceptible to market
fluctuations and other adverse events than if it had remained a part of the Vivendi Group;the costs associated with being an independent publicly listed company; andthe other actions required to separate UMG’s from the Vivendi Group could disrupt operations.

Additionally, as a separate public company, UMG will be a smaller and less diversified group than theVivendi Group, and there is a possibility it may not have access to financial and other resources comparable tothose available to the Vivendi Group prior to the Distribution. UMG cannot predict the effect that the Admission
and Distribution will have on its relationship with partners, employees or other stakeholders, including its
relationship with recording artists and songwriters. Furthermore, as a less diversified group, UMG may be more
likely to be negatively impacted by changes in global market conditions, regulatory reforms, and other industry
factors, which could have a material adverse effect on its business, prospects, financial condition, and results ofoperations. If UMG is unable to achieve some or all of the benefits expected to result from the Admission andDistribution, or if such benefits are delayed, its business, prospects, financial condition and results of operations
could be adversely affected.
1.4.3

UMG’s accounting and other management systems and resources may not be adequately prepared tomeet the financial reporting and other requirements to which the Company will be subject following
the Admission and Distribution.

UMG’s financial results were previously included within the consolidated results of Vivendi, and UMG’sreporting and control systems were appropriate for those of a subsidiary of a public company. Additionally, as a
Dutch company with ordinary shares listed on Euronext Amsterdam, the Company will be required to comply
with the reporting requirements of Directive 2004/109/EC (as amended by Directive 2013/50/EU) as transposed
into Dutch law, including the preparation of annual and half yearly financial statements in accordance with IFRS.
The Company will also be subject to the ongoing disclosure requirements of Regulation (EU) No 596/2014 of theEuropean Parliament and the Council (the Market Abuse Regulation). These and other obligations will placesignificant demands on UMG’s management, administrative and operational resources, including accounting andinformation technology resources, which it had previously not been required to meet independently.
To comply with these requirements, UMG is, and may be, required to upgrade its systems, including
computer hardware infrastructure, implement additional financial and management controls, reporting systems
and procedures and hire additional accounting, finance and information technology staff. To the extent that the
upgrades made by UMG to its financial and management controls, reporting systems, information technology andprocedures in a timely and effective fashion are not successful, UMG’s ability to comply with its financial
reporting requirements and other rules that apply to reporting companies could be impaired. In addition to thepotential reputation damage, any failure to achieve and maintain effective internal controls could have a material
adverse effect on UMG’s business, prospects, financial condition and results of operations.
1.4.4

The transitional services Vivendi has agreed to provide UMG may not be sufficient for its needs. In
addition, UMG may fail to have necessary systems and services in place when certain of the Transition
and Services Agreement expires.

In connection with the Admission and Distribution, UMG intends to enter into a transition and services
agreement (the Transition and Services Agreement) with Vivendi. See Section 13.3 (Major Shareholders) andSection 12.14 (Related Party Transactions and Agreements). The Transition and Services Agreement will provide
for the performance of key business services by the Vivendi Group for UMG’s benefit for a period of time after
the completion of the Admission and Distribution, including in relation to treasury related services andapplications. These services may not be sufficient to meet UMG’s needs and the terms of such services may not-22-be equal to or better than the terms UMG may have received from unaffiliated third parties, including its ability
to obtain redress.
UMG will rely on the Vivendi Group to satisfy its obligations under the Transition and Services
Agreement. If the Vivendi Group is unable to satisfy its obligations under the Transition and Services Agreement,
UMG could incur operational difficulties or losses. If UMG does not have in place its own systems and services,or if UMG does not have agreements with other providers of these services once the Transition and Services
Agreement expires, it may not be able to operate its business effectively and this may have an adverse effect on
its business, financial condition, and results of operations. In addition, after the Transition and Services Agreement
expires, UMG may not be able to obtain these services at as favorable prices or on as favorable terms as they wereobtained under the Transition and Services Agreement.
1.5

Risks Related to the Shares

1.5.1

The Existing Shareholders will continue to hold a significant minority stake in the Company and may
have conflicts of interest with other Shareholders.

Upon the implementation of the Distribution, Vivendi will own Shares representing c.10% of theCompany’s issued and outstanding Shares, Concerto will own Shares representing 10% of the Company’s issued
and outstanding Shares, Scherzo will own Shares representing 10% the Company’s issued and outstanding Shares,
the Pershing Entities will own Shares, representing 10% of the Company’s issued and outstanding Shares and it
is expected that the Bolloré Entities will own Shares representing 18% of the Company’s issued and outstanding
Shares.
In addition, the Bolloré Entities and the Restructuring Shareholders have entered into an agreement inrespect of inter alia the appointment of Non-Executive Directors and the Dividend Policy of the Company, dated
September 8, 2021 (the Relationship Agreement), which the Company signed for acknowledgement andagreement with certain provisions. Under the Relationship Agreement, the Tencent-led Consortium has the rightto maintain up to two Non-Executive Directors on the Board until the annual General Meeting to be held in 2024,
subject to it holding a certain minimum interest.
Furthermore, the Bolloré Entities and the Restructuring Shareholders have agreed upon the dividend
policy as set out in Section 5 (Dividend Policy) (the Dividend Policy) and to comply with the Dividend Policy as
further set out in the Relationship Agreement.
For the purposes of forming and exercising, to the extent possible, a common view and vote on the itemson the agenda of any General Meeting in connection with the subjects included in and obligations of the Parties
under the Relationship Agreement in relation to the Dividend Policy and maintaining two Non-Executive
Directors designated by the Tencent-led Consortium, the Bolloré Entities and the Restructuring Shareholders will,
as from the Admission, consult with each other prior to each General Meeting.
For more information see Section 12.11 (Relationship Agreement).
In light of the above, the Existing Shareholders may, individually or collectively, exert a substantial
influence on actions requiring a Shareholder vote, potentially in a manner that is not supported by other
Shareholders. If one or more Existing Shareholders purchases any additional Shares in the public market or in
privately negotiated transactions following the closing of the Distribution, their shareholding and influence on the
Company’s affairs would increase.
Specifically, the significant ownership of the Existing Shareholders may, individually or collectively: (i)delay or deter a change of control of the Company (including deterring a third party from making a takeover offer
for the Company); (ii) deprive Shareholders of an opportunity to receive a premium for their Shares as part of asale of the Company; or (iii) affect the liquidity of the Shares, each of which could have a material adverse effecton the trading volume and market price of the Shares. This could be the case if investors determine that the stock
is not as attractive due to high concentration of ownership and degree of influence by the Existing Shareholders,
as a result of which demand for the Shares may be reduced.
1.5.2

An active trading market on Euronext Amsterdam may not develop.

Until trading on Euronext Amsterdam commences on an “as-if-and-when-delivered” basis, which is
expected on September 21, 2021, but is subject to acceleration, extension and Settlement taking place, there is no
public trading market for the Shares. UMG can give no assurance that an active trading market for the Shares willdevelop after the Distribution or, if it does develop, that it will be sustained or liquid, in particular given that the-23-free float will be approximately 42% of the issued ordinary share capital of the Company following theimplementation of the Distribution. If such a market fails to develop or is not sustained, the liquidity and trading
price of the Shares could be adversely affected, as well as increase their price volatility. Even if such market
develops or is sustained, the market price for the Shares may fall below the Reference Price, perhaps substantially.
As a result of fluctuations in the market price of the Shares, investors may not be able to sell their Shares at or
above the Reference Price, or at all.
1.5.3

The Company may issue additional Shares or other equity securities without Shareholder approval,
which would dilute Shareholder ownership interests and may depress the market price of the Shares.

After Admission, 1,813,241,160 Shares will be issued and outstanding. Subject to Dutch law the Articles
of Association will authorize the Company to issue Shares and rights relating to the Shares for such considerationand on such terms and conditions as established by the Board in its sole discretion, whether in connection with
future acquisitions or otherwise. Shareholders would receive advance notice of any issuance of additional Sharesor other equity through regulatory filings. Any Shares issued, could dilute the percentage ownership held by the
Shareholders.
The Company’s issuance of additional Shares or other equity securities of equal or senior rank would
have the following effects:

1.5.4



the Company’s existing Shareholders’ proportionate ownership interest in the Company will
decrease;

the amount of cash available per Share, including for payment of dividends in the future, may
decrease;

the relative voting strength of each previously outstanding Share may be diminished; andthe market price of Shares may decline.

Future offerings of debt or equity securities by the Company may adversely affect the market price of
the Shares.

In the future, the Company may attempt to obtain financing or to further increase its capital resources by
issuing additional Shares or offering debt or other equity securities, including commercial paper, medium-term
notes, senior or subordinated notes, debt securities convertible into equity or preferred shares. Future acquisitions
could require substantial additional capital in excess of cash from operations. The Company may obtain the capitalrequired for acquisitions through a combination of additional issuances of equity, corporate indebtedness and/or
cash from operations.
Issuing additional Shares or other equity securities or securities convertible into equity may dilute theeconomic and voting rights of existing Shareholders or reduce the market price of the Shares or both. Upon
liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to otherborrowings would receive a distribution of the Company’s available assets prior to the holders of the Shares. Debt
securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain
events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could
have a preference with respect to liquidating distributions or a preference with respect to dividend payments that
could limit the Company’s ability to pay dividends to the holders of the Shares. The Company’s decision to issue
securities in any future offering will depend on market conditions and other factors beyond the Company’s control,
which may adversely affect the amount, timing and nature of the Company’s future offerings.
1.5.5

Risks relating to future sales or transfers of the Company’s shares by shareholders.

Following completion of the Distribution, the Restructuring Shareholders and the Pershing Entities will
beneficially own approximately 40% of the issued ordinary share capital of the Company in aggregate.
Additionally, it is expected that the Bolloré Entities will beneficially own 18% of the issued and outstanding sharecapital of the Company after the Distribution. The Existing Shareholders will not be subject to lock-up
arrangements post the Distribution.
The issue or sale of a substantial number of Shares by the Group, the Existing Shareholders or the
Directors in the public market, or the perception that these sales may occur, may depress the market price of the
Shares. Furthermore, a sale of Shares by any Director could be perceived as a lack of confidence in the-24-performance and prospects of the Group and could cause the market price of the Shares to decline. In addition,
any such sales could impair the Group’s ability to raise capital through the issuance of equity securities in the
future.
1.5.6

Shareholders in the US and other jurisdictions outside of the Netherlands may not be able toparticipate in future equity offerings.

The securities laws of certain jurisdictions outside the EU may, however, restrict UMG’s ability to allow
participation by Shareholders in future offerings. In particular, Shareholder residents in the US may not be entitled
to exercise their rights with respect to future equity offerings of the Company, unless either the Shares and anyother securities that are offered and sold are registered under the US Securities Act, or the Shares and such othersecurities are offered pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the US Securities Act. UMG cannot assure prospective investors that any exemption from suchoverseas securities law requirements would be available to enable Shareholder residents in the US or other nonEU Shareholders to exercise their pre-emption rights or, if available, that UMG will utilise any such exemption.
1.5.7

Overseas shareholders may be subject to exchange rate risk.

The Shares are priced in euros and will be quoted and traded in the euro currency. In addition, any
dividends the Group may pay will be declared and paid in euro denominations. Accordingly, investor residents
outside the Eurozone are subject to risks arising from adverse movements in the value of the respective investor’sreference currency against the euro, as well as additional transaction costs in converting the euro into the respective
investor’s reference currency, which may materially reduce the value of the Shares, as well as that of any dividends
paid. Investors whose reference currency is a currency other than the euro are therefore urged to consult theirfinancial advisers.
1.5.8

The market price of the Shares may be volatile, which could cause the value of the Shares to decline.

Even if a trading market develops, the market price of the Shares may be highly volatile and could be
subject to wide fluctuations. In addition, the trading volume in the Shares may fluctuate and cause significant
price variations to occur. Securities markets worldwide experience significant price and volume fluctuations. This
market volatility, as well as general economic, market and political conditions (including as a result of the COVID19 pandemic), could reduce the market price of the Shares in spite of its operating performance. If UMG is unable
to operate as profitably as investors expect, the market price of Shares will likely decline when it becomes apparent
that the market expectations may not be realized. In addition, UMG’s results of operations could be below the
expectations of public market analysts and investors due to a number of potential factors, including variations in
UMG’s quarterly or annual results of operations; operating results of other companies in the same industry;
additions or further departures of key management personnel; changes in UMG’s earnings estimates (if provided)or failure to meet analysts’ earnings estimates; publication of research reports about UMG’s industry; litigationand government investigations, changes or proposed changes in laws or regulations or differing interpretations orenforcement thereof affecting UMG’s business; adverse market reaction to any indebtedness UMG may incur or
securities it may issue in the future; changes in market valuations of similar companies or speculation in the pressor the investment community with respect to UMG or its industry; investors shorting UMG shares; negative media
coverage; adverse announcements by UMG or others and developments affecting UMG, announcements by
UMG’s competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures orcapital commitments; actions by institutional shareholders; the possible effects of war, terrorism and otherhostilities; adverse weather conditions; changes in general conditions in the economy or the financial markets orother developments affecting the music industry; and increases in market interest rates that may lead investors in
the Shares to demand a higher yield, and in response the market price of the Shares could decrease significantly.
These broad market and industry factors may decrease the market price of the Shares, regardless of
UMG’s actual operating performance. The stock market in general has, from time to time, experienced extreme
price and volume fluctuations. In addition, in the past, following periods of volatility in the overall market and themarket price of a company’s securities, securities class-action litigation has often been instituted against suchcompanies. Such litigation, if instituted against UMG, could result in substantial costs, a material negative impact
on UMG’s liquidity, negative impact on UMG’s reputation and a diversion of UMG’s management’s attention
and resources.
1.5.9

No assurance can be given that the Company will pay or declare dividends.

There can be no assurance that the Company will pay or declare dividends in the future in accordancewith its dividend policy. The determination of the Board as to whether to resolve upon a dividend will depend-25-

upon many factors, including UMG’s future revenue, financial conditions, general economic and businessconditions, earnings, corporate strategy, the capital required by the Company’s operating subsidiaries to conduct
their business, legal requirements to which the Company is subject, and prospectus and such other factors deemed
relevant by the Board.
On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all
Shareholders by way of an interim dividend distribution at the charge of the Company’s current profits in thecurrent financial year that started on January 1, 2021, provided that in the event that after adoption of the annual
accounts for the financial year of the Company that started on January 1, 2021, the Company’s profits shall appear
to be less than the amount of such interim dividend distribution, the balance shall be deemed to have been a
distribution from the Company’s freely distributable reserves. With regard to such distribution: (i) the ex-dividend
date will be October 25, 2021; (ii) the record date will be October 26, 2021; and (iii) the payment date will be
October 28, 2021. However, there can be no assurances that the Group’s performance will allow for such interim
dividend or facilitate adherence to the dividend policy or any increase in the pay-out ratio and, in particular, theCompany’s ability to pay dividends may be impaired if any of the risks described in this section of the Prospectus
were to occur. In addition, subject to Dutch law and the Articles of Association, the Board may resolve to makean interim distribution of profits, provided that it appears from an interim statement of financial position signedby the Board that the Company’s equity does not fall below the sum of called-up and paid-in share capital andany statutory reserves.
1.5.10As UMG is organized under the laws of the Netherlands as a public company, the ability of its
Shareholders in certain countries other than the Netherlands, in particular in the US, to bring anaction against UMG may be limited under law.

It may be difficult or impossible for investors to effect service of process within the US upon such persons
or UMG or to enforce against them in US courts a judgment obtained in such courts.
In addition, there is doubt as to the enforceability, in the Netherlands, of original actions or actions for
enforcement based on the federal or state securities laws of the US or judgments of US courts, including judgments
based on the civil liability provisions of the US federal or state securities laws. The US and the Netherlands do
not currently have a treaty providing for reciprocal recognition and enforcement of judgments, other thanarbitration awards, in civil and commercial matters. A judgment rendered by a court in the US will not berecognized and enforced by the Dutch courts; however, if a person has obtained a final judgment without appeal
in such a matter rendered by a court in the US that is enforceable in the US and such person files his or her claim
with the competent Dutch court, the Dutch court will recognize and give effect to such foreign judgment insofar
as it finds that (i) the jurisdiction of the US court has been based on grounds which are internationally acceptable,(ii) proper legal procedures have been observed, (iii) the judgment does not contravene Dutch public policy and(iv) the judgment is not irreconcilable with a judgment of a Dutch court or an earlier judgment of a foreign courtthat is capable of being recognized in the Netherlands.
1.5.11

If securities or industry analysts do not publish research or reports about UMG’s business or industry,or if such analysts (if any) change their recommendations regarding the Shares adversely, the market
price and trading volumes of the Shares could decline.

The trading market for the Shares may be influenced by the research and reports that securities or industry
analysts publish about UMG’s business or industry. If securities or industry analysts do not publish or cease to
publish research or reports about UMG’s business or industry, UMG could lose visibility in the financial markets,
which could cause the market price or trading volume of the Shares to decline. Also, if one or more of the analysts
covering UMG’s business or industry recommends selling Shares, or if negative research is published on theindustry or geographic markets UMG serves, the market price of the Shares could decline.

-26-

2. IMPORTANT INFORMATION
2.1

GeneralProspective investors are expressly advised that an investment in the Shares entails certain risks and thatthey should therefore read and carefully review the content of this Prospectus, including all information
incorporated by reference in this Prospectus. A prospective investor should not invest in the Shares unless it has
the expertise (either alone or with a financial adviser) to evaluate how the Shares will perform under changing
conditions, the resulting effects on the value of the Shares and the impact this investment will have on its overall
investment portfolio. Prospective investors should also consult their own tax advisers as to the tax consequencesof the purchase, ownership and disposition of the Shares.
The validity of this Prospectus shall expire on the Settlement Date or 12 months after its approvalby the AFM on September 14, 2021, whichever occurs earlier. The obligation to supplement this Prospectusin the event of significant new factors, material mistakes or material inaccuracies shall cease to apply upon
the expiry of the validity period of this Prospectus.
This Prospectus has been approved by the AFM as competent authority under the Prospectus Regulation.
The AFM has only approved this Prospectus as meeting the standards of completeness, comprehensibility andconsistency imposed by the Prospectus Regulation. Such approval should not be considered as an endorsement of
the Company or the quality of the securities that are the subject of this Prospectus. Investors should make theirown assessment as to the suitability of investing in the securities.
The content of this Prospectus is not to be considered or interpreted as legal, financial or tax advice. This
Prospectus should not be considered as a recommendation by the Company or Vivendi, or any of their respective
affiliates or representatives that any recipient of this Prospectus should invest in the Shares. Prior to making any
decision whether to purchase Shares, prospective investors should read the whole of this Prospectus and, inparticular, Section 1 (Risk Factors), and not just rely on key information or information summarized within it.
Each prospective investor should consult his own stockbroker, bank manager, lawyer, auditor or other financial,legal or tax advisers before making any investment decision with regard to the Shares, to consider such investment
decision in light of the prospective investor’s personal circumstances, and in order to determine whether or not
such prospective investor is eligible to purchase the Shares. The Company does not undertake to update thisProspectus, unless required pursuant to Article 23 of the Prospectus Regulation, and therefore prospective
investors should not assume that the information in this Prospectus is accurate as of any date other than the dateof this Prospectus.
In making an investment decision, prospective investors must rely on their own assessment of theCompany, the Shares and the terms of the Distribution and Admission, the information contained in, orincorporated by reference into, terms of this Prospectus and any supplement to this Prospectus, should suchsupplement be published, within the meaning of Article 23 of the Prospectus Regulation, including the merits andrisks involved, and the risk factors described in this Prospectus. For the avoidance of doubt, prospective investors
may not rely on any other registration statements, prospectuses or other offer documents published by shareholdersof the Company when assessing the Company, the Shares and the terms of the Distribution and Admission. Any
acquisition of the Shares should be based on the assessments that the investor in question may deem necessary,
including the legal basis and consequences of the Distribution and Admission, and including possible tax
consequences that may apply, before deciding whether or not to invest in the Shares.
No person has been authorized to give any information or to make any representations in connection with
the Distribution and Admission, other than those contained in this Prospectus and, if given or made, suchinformation or representations must not be relied upon as having been authorized by or on behalf of the Company,
the Lead Equity Capital Markets Advisors, Vivendi, the Listing and Paying Agent or any of their respective
affiliates or representatives.
Each of the Lead Equity Capital Markets Advisors and the Listing and Paying Agent is acting exclusively
for the Company and no one else in connection with the Admission. They will not regard any other person(whether or not a recipient of this Prospectus) as their respective clients in relation to the Admission and will not
be responsible to anyone other than the Company for providing the protections afforded to their respective clientsnor for giving advice in relation to the Admission or any transaction or arrangement referred to herein.
Certain of the Lead Equity Capital Markets Advisors and/or their affiliates are, or have been, engaged
and may in the future engage in commercial banking, investment banking and financial advisory (including in thecontext of the Admission and Distribution) and ancillary activities in the ordinary course of their business with-27-

the Group and/or Vivendi, other Existing Shareholders or any parties related to or competing with any of them, inrespect of which they have received, and may in the future receive, customary fees and commissions. In particular,some of the Lead Equity Capital Markets Advisors and/or their affiliates have taken an active part or takes anactive part to Vivendi and UMG’s financing (see for example a description of the syndicated bank credit facility
mentioned in Section 16.5.3 (Facilities Agreement)) and are long-standing partners to Vivendi. Additionally, theLead Equity Capital Markets Advisors may, in the ordinary course of their business, and in the future, effecttransactions for their own account or the account of customers, and make or hold a broad array of investments andactively trade debt and equity securities (or related derivative securities) and financial instruments on behalf ofthemselves or their customers. Such investments and securities activities may involve long or short positions in
the Company’s and/or Vivendi’s securities. As a result of acting in the capacities described above, the Lead Equity
Capital Markets Advisors and their affiliates may have interests that may not be aligned, or could potentiallyconflict, with the interests of investors in the Shares or with the interests of the Company or the Group.
Each person receiving this Prospectus acknowledges that: (i) such person has not relied on the Lead
Equity Capital Markets Advisors or any person affiliated with the Lead Equity Capital Markets Advisors inconnection with any investigation of the accuracy of any information contained in this Prospectus; and (ii) it hasrelied only on the information in this Prospectus, and no person has been authorized to give any information or to
make any representation concerning the Company or the Shares (other than as contained herein and information
given by the Company’s duly authorized officers and employees in connection with investors’ examination of theCompany and the terms of the Distribution and the Admission) and, if given or made, any such other information
or representation should not be relied upon as having been authorized by the Company.
2.2

Supplements

The information in this Prospectus is current as of the date printed on the front of the cover, unlessexpressly stated otherwise. Without prejudice to the Company’s obligation to publish supplements to thisProspectus when legally required, the delivery of this Prospectus at any time after the date hereof shall not, under
any circumstances, create any implication that there has been no change in the Group’s business or affairs since
the date hereof or that the information contained in this Prospectus is correct as of any time since its date. If asignificant new factor or a material mistake or inaccuracy relating to the information included in this Prospectus
which is capable of affecting the assessment of the Shares arises or is noted between the date of this Prospectus
and Settlement, a supplement to this Prospectus will be published. The obligation to supplement this Prospectus
shall cease to apply upon the earlier of: (i) the First Trading Date; or (ii) the expiry of the validity period of thisProspectus. Any supplement to this Prospectus will be subject to approval by the AFM and will be made publicin accordance with the relevant rules under the Prospectus Regulation. The summary shall also be supplemented,
if necessary, to take into account the new information included in the supplement.
Statements contained in any such supplement (or contained in any document incorporated by reference
therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or
supersede statements contained in this Prospectus or in a document which is incorporated by reference in thisProspectus. Any supplement shall specify which statement is so modified or superseded and shall specify thatsuch statement shall, except as so modified or superseded, no longer constitute a part of this Prospectus.
2.3

Responsibility Statement

The Company accepts responsibility for the information contained in this Prospectus. The Company
declares that the information contained in this Prospectus is, to the best of its knowledge, in accordance with thefacts and makes no omission likely to affect its import.
None of the Lead Equity Capital Markets Advisors nor the Listing and Paying Agent nor any of theirrespective affiliates or respective directors, officers or employees or any other person makes any representation
or warranty, express or implied, as to, or assumes any responsibility for, the accuracy or completeness or fairnessof the information in this Prospectus or incorporated by reference herein, and nothing in this Prospectus orincorporated herein by reference is, or shall be relied upon as, a promise or representation by the Lead Equity
Capital Markets Advisors, the Listing and Paying Agent or any of their respective affiliates or respective directors,
officers or employees or any other person, whether as to the past or the future.
None of the Lead Equity Capital Markets Advisors nor the Listing and Paying Agent accepts any
responsibility whatsoever for the contents of this Prospectus or for any other statements made or purported to bemade by either itself or on its behalf in connection with UMG, the Distribution, or the Shares. Accordingly, eachof the Lead Equity Capital Markets Advisors and the Listing and Paying Agent disclaims, to the fullest extent-28-permitted by applicable law, any and all liability, whether arising in tort, contract or otherwise, which they mightotherwise be found to have in respect of this Prospectus and/or any such statement.
2.4

Notice to Prospective Investors

2.4.1

No offering is being made to any person in any jurisdiction.

This Prospectus may not be used for, or in connection with, and does not constitute, or form part of, anoffer by, or invitation by or on behalf of, the Company, Vivendi, any of the Lead Capital Markets Equity Advisors
or any representative of the Company or Vivendi or a Lead Capital Markets Advisor, to purchase any securities
or an offer to sell or issue, or the solicitation to buy securities by any person in any jurisdiction. The distributionof this Prospectus may be restricted by law in certain jurisdictions. Neither this Prospectus nor any advertisement
or any other related material may be distributed or published in any jurisdiction except under circumstances thatwill result in compliance with any applicable laws and regulations.
2.4.2

Notice to Prospective Investors in the United States

This Prospectus does not constitute an offer of securities for sale in the United States or an offer to acquireor exchange securities in the United States. The Shares may not be offered, sold, resold, delivered, distributed orotherwise transferred, directly or indirectly, in or into the United States absent registration under the US Securities
Act or an exemption therefrom. The Shares have not been approved or disapproved by the US Securities andExchange Commission (the SEC), any state securities commission in the United States or any other United States
regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the accuracy or adequacyof this Prospectus. Any representation to the contrary is a criminal offense in the United States.
2.5

Presentation of Financial Information

2.5.1

Financial information

This Prospectus includes the audited Combined Financial Statements and unaudited Interim Financial
Statements.
With regard to the financial information as at and for the financial years ended December 31, 2018, 2019and 2020 presented in the Prospectus, references to Universal Music Group, UMG or the Group refer to UMGIand UIM, collectively, and each of their respective subsidiaries, unless otherwise indicated.
The Company was incorporated on December 4, 2020 for the purpose of the Restructure and, prior to the
Restructure, conducted no operations other than activities preparatory to the Restructure. Accordingly, there is no
historical financial information for the Company for the financial years ended December 31, 2018, 2019 and 2020.
Because the Company is a holding company and UMGI and UIM conducted, and continues to conduct, allbusiness operations presented in this Prospectus over and during the financial years ended December 31, 2018,2019 and 2020, the Company is of the view that, in accordance with Article 6(1) of the Prospectus Regulation,
the combined Financial Statements of Universal Music Group as of and for the financial years ended December
31, 2018, 2019 and 2020 provide the information required to be presented with regard to the Company’s financial
years ended December 31, 2018, 2019 and 2020 so that prospective investors may make an informed investment
decision to purchase Shares. The Combined Financial Statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRS). The Combined Financial
Statements have been audited by Ernst & Young et Autres (EY) and Deloitte & Associés (Deloitte and, together
with EY, the Joint Auditors), independent auditors of Universal Music Group. The Interim Financial Statements
have been prepared in accordance with IAS 34 Interim Financial Reporting and reviewed by the Joint Auditors.
The Joint Auditors’ report on the Combined Financial Statements includes the following emphasis ofmatter paragraph:
Emphasis of matter
We draw attention to the Note "Basis of preparation of the Combined Financial Statements", in Section"Accounting conventions used when preparing the Combined Financial Statements". Our opinion is not
modified in respect of this matter.
The aforementioned note is set out in full at page F-59 of this Prospectus. This ‘Emphasis of matter” hasbeen noted by the Joint Auditors in view of the fact that combined financial statements are less common thanconsolidated financial statements and, taking into account that they comprise accounts of two different companies-29-

(as opposed to an aggregate consolidated position of a parent company and its subsidiaries as is the case forconsolidated accounts) are more complex than consolidated financial statements. Therefore, the Joint Auditors
deemed it necessary and helpful to include an emphasis of matter paragraph in their Report on the Combined
Financial Statements to draw readers’ attention to the basis of preparation of these accounts, which basis is
described in the relevant notes to the Combined Financials Statements.
The aforementioned Combined Financial Statements of Universal Music Group, the Interim Financial
Statements and the related auditors’ report are included in this Prospectus beginning on page F-1.
Financial information presented in parentheses in the tables in this Prospectus denotes the negative ofsuch number presented. In respect of financial data set out in this Prospectus, a dash (“–”) signifies that the relevant
figure is not available, while a zero (“0”) signifies that the relevant figure is available but has been rounded to
zero.
2.5.2

Non-IFRS financial information

This Prospectus contains certain financial measures that are not defined or recognized under IFRS,
including EBIT, EBITA, EBITA margin, EBITDA, EBITDA margin and Net Working Capital.
Definitions of these financial measures, along with reconciliations of the measures, as applicable, to theGroup’s historical financial information appears in Section 7 (Selected Financial Information).
These financial measures are the non-IFRS financial measures used by the Group to help evaluate growthtrends, establish budgets and assess operational performance and efficiencies. The Group believes that these nonIFRS performance measures, in addition to IFRS measures, provide an enhanced understanding of the Group’s
results and related trends, therefore increasing transparency and clarity into the core results of the business. There
are no generally accepted principles governing the calculation of these measures and the criteria upon which thesemeasures are based can vary from company to company. These measures, by themselves, do not provide a
sufficient basis to compare the Group’s performance with that of other companies and should not be considered
in isolation or as a substitute for profit or loss or any other measure as an indicator of the Group’s performance,or as an alternative to cash generated from operating activities as a measure of liquidity. Further explanation of
the relevance of each of the non-IFRS measures, a reconciliation of the non-IFRS measures to the most directlycomparable measures calculated and presented in accordance with IFRS and a discussion of their limitations is
set out in Section 7 (Selected Financial Information). The Group does not regard these non-IFRS measures as a
substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS or those
calculated using financial measures that are calculated in accordance with IFRS. The non-IFRS measures may not
be comparable to other similarly titled measures used by other companies and have limitations as analytical tools
and should not be considered in isolation or as a substitute for analysis of the Group’s results as reported under
IFRS. The non-IFRS measures have not been audited or reviewed.
2.5.3

Currency Presentation

Unless otherwise indicated, all references in this Prospectus to “€”, “euro” or “EUR” are to the currency
introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the treaty
establishing the European Community, as amended. All references to “sterling”, “pounds sterling”, “GBP”, “£”,or “pence” are to the lawful currency of the United Kingdom. All references to “$”, “US$”, “USD” or “US dollars”
are to the lawful currency of the United States.
2.5.4

Rounding

Certain data in this Prospectus, including financial, statistical, and operating information has beenrounded. As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from theactual arithmetic totals of such data. Percentages have been rounded and accordingly may not add up to 100%.
2.6

Market, Economic and Industry Data

This Prospectus contains statistics, data and other information relating to markets, market sizes, market
shares, market positions and other industry data pertaining to the Company’s business and markets. Unless thesource is otherwise stated, the market, economic and industry data in this Prospectus constitute the Company’s
estimates, using underlying data from independent third parties. The Company obtained market data used in thisProspectus from internal surveys, reports and studies, where appropriate, as well as market research, publicly
available information and industry publications (in particular by reports and publications the International
Federation of the Phonographic Industry (IFPI), Nielsen Corporation and Music & Copyright). Any such
-30-

estimations and forecasts are subject to inherent risks and uncertainties. The availability of market informationdiffers significantly between countries. In particular, actual results could be impacted by future events whichcannot be predicted or controlled, including, without limitation, changes in business strategies, the developmentof future products and services, changes in market and industry conditions, the outcome of contingencies, changes
in management, changes in law, regulations or individual countries’ policies.
The Company confirms that all third-party data contained in this Prospectus which has been sourced
from a third party, being those instances where the source has been stated, has been accurately reproduced and,so far as the Company is aware and able to ascertain from information published by such third parties, no facts
have been omitted that would render the reproduced information inaccurate or misleading.
Certain other statistical or market-related data has been estimated by management based on reliable thirdparty sources, where possible, including those referred to above or based on data generated in-house by the Group.
Although management believes its estimates regarding markets, market sizes, market shares, market positions andother industry data to be reasonable, these estimates have not been verified by any independent sources, and theCompany cannot assure prospective investors as to the accuracy of these estimates or that a third party using
different methods to assemble, analyze or compute market data would obtain the same results. Management’s
estimates are subject to risks and uncertainties and are subject to change based on various factors. The Company
does not intend, and does not assume any obligation, to update the industry or market data set forth herein, otherthan as required by Article 23 of the Prospectus Regulation.
Industry publications or reports generally state that the information they contain has been obtained fromsources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. The
Company has not independently verified and cannot give any assurance as to the accuracy or completeness ofmarket data contained in this Prospectus that were extracted or derived from these industry publications or reports.
Market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of
actual market conditions. Such statistics are based on market research, which itself is based on sampling andsubjective judgments by both the researchers and the respondents.
As a result, prospective investors should be aware that statistics, data, statements and other information
relating to markets, market sizes, market shares, market positions and other industry data in this Prospectus andestimates and assumptions based on that information are necessarily subject to a high degree of uncertainty andrisk due to the limitations described above and to a variety of other factors, including those described in Section
1 (Risk Factors) and elsewhere in this Prospectus.
2.7

Incorporated by Reference

The Articles of Association are incorporated in this Prospectus by reference and, as such, form part ofthis Prospectus.
The Articles of Association can be obtained in electronic form from the Company’s website(https://universalmusic.com/Universal_Music_Group_N.V._-_Articles_of_Association). Prospective investors
should only rely on the information that is provided in this Prospectus or incorporated by reference into thisProspectus.
No other documents or information, including the contents of the Company’s website(www.universalmusic.com) or of websites accessible from hyperlinks on that website, form part of, or areincorporated by reference into, this Prospectus. Other than the information incorporated by reference into thisProspectus, the contents of the Company’s website (www.universalmusic.com) or of websites accessible fromhyperlinks on that website have not been scrutinized or approved by the AFM.
2.8

Definitions and Glossary

Certain terms used in this Prospectus, including all capitalized terms and certain technical and otheritems, are defined and explained in Section 17 (Definitions and Glossary).
2.9

Enforceability of Judgments

The ability of Shareholders in certain countries other than the Netherlands, in particular in the UnitedStates, to bring an action against the Company may be limited under applicable law. Prior to the Distribution,
Company will be converted to a public company under the laws of the Netherlands and will have its registeredoffice in Hilversum, the Netherlands.
-31-

The majority of the Directors are resident of countries other than the United States. All or a substantial
proportion of the assets of these individuals are located outside the United States. The Group’s assets are locatedoutside the United States. As a result, it may not be possible or it may be difficult for investors to effect serviceof process within the United States upon the Group or such persons, or to enforce against them in US courts a
judgment obtained in such courts, including judgments predicated on the civil liability provisions of US federal
securities laws or the securities laws of any state or territory within the United States.
The United States and the Netherlands currently do not have a treaty providing for reciprocal recognitionand enforcement of judgments, other than arbitration awards, in civil and commercial matters. In addition, thecountries of residence of the Directors and of the Company’s employees may also not have a treaty providing forthe reciprocal recognition and enforcement of judgments. Consequently, a final judgment for payment given by acourt in the United States, whether or not predicated solely upon US securities laws, would not be enforceable in
the Netherlands. Accordingly, a final judgment for payment rendered by a court in the United States, whether or
not predicated solely upon US securities laws, will not be recognized and enforced by the Dutch courts. However,
if a person has obtained a final and conclusive judgment for the payment of money rendered by a court in the
United States which is enforceable in the United States and files his claim with the competent Dutch court, theDutch court will generally give binding effect to such foreign judgment insofar as it finds that (i) the jurisdictionof the US court has been based on a ground of jurisdiction that is generally acceptable according to international
standards, (ii) the judgment by the US court was rendered in legal proceedings that comply with the standards ofthe proper administration of justice that includes sufficient safeguards (behoorlijke rechtspleging) and (iii) the
judgment by the US court is not incompatible with a decision rendered between the same parties by a Dutch court,
or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns thesame subject and is based on the same cause, provided that the previous decision qualifies for acknowledgementin the Netherlands and except to the extent that the foreign judgment contravenes Dutch public policy (openbareorde). It is uncertain whether this practice extends to default judgments as well. Dutch courts may deny therecognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce theamount of damages granted by a US court and recognize damages only to the extent that they are necessary tocompensate actual losses or damages. Enforcement and recognition of judgments of US courts in the Netherlands
are solely governed by the provisions of the Dutch Civil Procedure Code (Wetboek van Burgerlijke
Rechtsvordering).

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3. FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute forward-looking statements. Forward-looking statements
appear in a number of places in this Prospectus, including, without limitation, under Section 8 (Operating and
Financial Review) and Section 11 (Business Description). Forward-looking statements are sometimes identified
by the use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “intend,”“may,” “plan,” “predict,” “project,” “target,” “potential,” “would,” “could,” “should,” “continue,” or the negative
thereof, other variations thereon or similar expressions. Other forward-looking statements can be identified by thecontext in which the statements are made.
Although management believes that the expectations reflected in these forward-looking statements arereasonable, such forward-looking statements are based on management’s current views and assumptions andinvolve known and unknown risks, uncertainties and other factors, many of which are outside the control of theCompany and are difficult to predict, that may cause actual results, performance, achievements or developments
to differ materially from any future results, performance, achievements or developments expressed or implied
from the forward-looking statements. Some of the factors that could cause actual results to differ materially fromthose contemplated by the forward-looking statements include, but are not limited to, those discussed in Section
1 (Risk Factors) and include, among others:

general economic, political and market conditions, market risk and investor behavior;

UMG’s ability to operate in the highly competitive industry and markets in which it operates;the impact of complex regulatory regimes;

UMG’s ability to develop, manage and protect its IT and information systems, including
outsourced IT systems;

UMG’s ability to adapt to new technology and services;

the impact of regulation in the areas of privacy, information security and data protection and
UMG’s ability to prevent unauthorized disclosure of data;

UMG’s ability to maintain compliance with anti-corruption and anti-money laundering laws
and regulations and economic sanctions programs;

the effectiveness of UMG’s risk management policies and procedures;the impact of the international expansion of UMG’s operations;

UMG’s ability to attract, integrate, manage and retain qualified personnel or key employees;

the impact of litigation, governmental or regulatory investigations and other claims;

the adequacy of UMG’s insurance coverage;

UMG’s ability to protect its intellectual property rights;

the impact of labor disputes or work stoppages;



the impact of changes in tax laws or challenges to UMG’s tax position; andthe global expansion and (continued) effects of the COVID-19 pandemic to and within a large
number of countries.

Should one or more of these risks or uncertainties materialize, or should any underlying assumptions
prove to be incorrect, the Company’s actual financial condition, cash flows or results of operations could differ
materially from what is described herein as anticipated, believed, estimated or expected. Investors are urged toread the Sections of this Prospectus entitled Section 1 (Risk Factors), Section 8 (Operating and Financial Review)
and Section 11 (Business Description) for a more complete discussion of the factors that could affect theCompany’s future performance and the industry in which it operates.

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Such forward-looking statements contained in this Prospectus speak only as of the date of this Prospectus
and are expressly qualified in their entirety by the cautionary statements included in this Prospectus. Without
prejudice to its obligations under Dutch law in relation to disclosure and on-going information, the Company andVivendi undertake no obligation to update publicly or revise any forward-looking statements, whether as a resultof new information, future events or otherwise.

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4. REASONS FOR THE DISTRIBUTION AND USE OF PROCEEDS
4.1

Reasons for the Distribution

Prior to the date of the Prospectus, financial analysts highlighted that Vivendi’s stock market price pershare was approximately 10% to 30% lower than the sum of all of Vivendi’s businesses divided by its number ofshares. For a number of years, Vivendi’s leading institutional shareholders have been seeking a spin-off from ora distribution of UMG by Vivendi to reduce such conglomerate discount and to allow for a valuation of UMG,
and for UMG to further develop, on a stand-alone basis.
The 99.98% and 99.88% positive votes, respectively, at the March 29, 2021 Vivendi’s extraordinary
shareholders meeting approving an amendment to Vivendi’s bylaws allowing a dividend to be paid in kind andJune 22, 2021 Vivendi’s annual general shareholder’s meeting approving the Distribution confirmed the highinterest from Vivendi Shareholders to have direct access to UMG’s shares and reduce such conglomerate discount.
Prior to considering a favorable response to this request, Vivendi’s management board wished to obtain a fairvalue for UMG to better serve the interests of Vivendi Shareholders and therefore support the fulfilment ofVivendi’s development plan to become a global leader in content, media and communications.
The transactions, closed in March 2020 and January 2021 respectively, which resulted in 20% of theshare capital of the Company being acquired by the Tencent-led Consortium on the basis of an enterprise valueof €30 billion for 100% of UMG led Vivendi’s management board to conclude that the time was ripe for a
distribution of up to 60% of the Company’s share capital to the Vivendi Shareholders, which resulted in Vivendi’s
pursuance of the Distribution. Such distribution aims at emphasizing the valuation of, on the one hand, UMG ona stand-alone basis and, on the other hand, Vivendi’s other subsidiaries and activities. That goal can only be fully
achieved by admitting the Distribution Shares to trading on a regulated stock market as a result of the Distribution.
Whilst the Company will not receive any proceeds from the Admission, it believes that the Admission iswell aligned to the Company’s continued growth ambitions and will help to maximize shareholder value overtime, including by addressing the aforementioned conglomerate discount highlighted by financial analysts inrelation to Vivendi’s stock market price per share. In addition, Vivendi and the Company believe that theDistribution and Admission is also a significant step for UMG and presents a new opportunity to UMG, which
will allow it to broaden artist opportunities and enrich experiences for music fans, further promoting a thrivingmusic and entertainment industry and further solidifying UMG’s position as an industry leader. The Admission is
expected to further increase the Company’s profile with the music and entertainment industry, investors, business
partners and customers, brand recognition and credibility. The Admission is also expected to provide additional
financial flexibility and diversity to UMG through access to capital markets. For illustrative purposes, based on
the recent acquisition of a 10% stake in the Company by the Pershing Entities, implemented over two tranches,the market capitalization of the Company would be approximately €33 billion on the First Trading Date.
4.2

Proceeds of the Distribution

No proceeds shall be raised pursuant to the Admission and the Distribution due to its character of a
distribution to Vivendi Shareholders.
4.3

Use of Proceeds
No proceeds shall be raised pursuant to the Admission and the Distribution.

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5. DIVIDEND POLICY
5.1

GeneralPursuant to Dutch law and the Articles of Association, the distribution of profits will take place following
the adoption of the Company’s financial statements by the General Meeting, from which the Company will
determine whether such distribution is permitted. Distribution of profits shall be made after the adoption of thefinancial statements from which it appears that the distribution is allowed. The Company may only make
distributions to the extent the Company’s equity exceeds the sum of the paid-up and called-up part of its issued
capital and the reserves which must be maintained by law. Distributions shall be made pro rata to the respective
shareholdings.
5.2

Entitlement to Dividends

All Shares, including the Distribution Shares, are equally entitled to dividends and other distributions, if
and when declared.
5.3

Dividend Policy and History

The Company plans, as from the Admission, to annually declare and pay dividends to all holders of the
Shares on a pro rata basis in two semi-annual instalments, in the aggregate amount of no less than 50% of theCompany’s net profits realized during the relevant financial year, subject to agreed non-cash items. The dividend
payments by the Company shall equal in the aggregate an amount of no less than 50% of the amount calculated
as follows:(i)

consolidated net profits of the most recent audited consolidated financial statements of
the Company as of December 31st, prepared in accordance with IFRS and certified bya firm of independent public accountants of internationally recognized standing,(ii)(a) any loss arising on any change in fair value of any intangible assets, tangible assets
or financial assets, (b) any amortization or impairment of intangible assets, (c) sharebased compensation expenses, (d) net losses related to non-consolidated companies
consolidated under the equity method deducted, (e) net losses related to minority
interest, (f) net provisions for inventories, (g) any unrealized loss related to derivative
financial instruments; and(iii)(h) any gain arising on any change in fair value of any intangible assets, tangible assets
or financial assets, (i) any unrealized gain related to derivative financial instruments,(j) income or reversal related to share based compensation, (k) net profits related to
non-consolidated companies consolidated under the equity method and (l) net profits
related to minority interest.

plus

minus

The Company intends to pay an interim dividend in the fourth quarter of each financial year, after the
publication of the half-year figures of the Company, and a final dividend in the second quarter of the following
financial year, to be paid following approval of the Company’s financial statements at its annual General Meeting.
On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all
Shareholders by way of an interim dividend distribution at the charge of the Company’s current profits in thecurrent financial year that started on January 1, 2021, provided that in the event that after adoption of the annual
accounts for the financial year of the Company that started on January 1, 2021, the Company’s profits shall appear
to be less than the amount of such interim dividend distribution, the balance shall be deemed to have been a
distribution from the Company’s freely distributable reserves. With regard to such distribution: (i) the ex-dividend
date will be October 25, 2021; (ii) the record date will be October 26, 2021; and (iii) the payment date will be
October 28, 2021.

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There can be no assurances that in any given year a dividend will be paid. The determination of the Board
as to whether to resolve upon a dividend will depend upon many factors, including UMG’s future revenue,
financial conditions, general economic and business conditions, earnings, corporate strategy, the capital requiredby the Company’s operating subsidiaries to conduct their business, legal requirements to which the Company issubject, and prospects and such other factors deemed relevant by the Board. In addition, subject to Dutch law and
the Articles of Association, the Board may resolve to make an interim distribution of profits, provided that it
appears from an interim statement of financial position signed by the Board that the Company’s equity does not
fall below the sum of called-up and paid-in share capital and any statutory reserves. There can be no assurancesthat the Group’s performance will facilitate adherence to the dividend policy or any increase in the pay-out ratio
and, in particular, the Company’s ability to pay dividends may be impaired if any of the risks described in thisProspectus were to occur (See Section 1 (Risk Factors) and Section 1 (Risk Factors), Section 1.5.9 (No assurance
can be given that the Company will pay or declare dividends)). Furthermore, the Company’s dividend policy issubject to change as the Board may revisit the Company’s dividend policy from time to time.
The Company was incorporated on December 4, 2020 and paid dividends of €422 million on April 29,
2021, which is the only dividend which it has paid since its date of incorporation.
Each of UMGI, UIM and the Company paid dividends in each of the periods covered by the Combined
Financial Statements and the Interim Financial Statements as follows:
EUR (millions)
2021
UMGI ...................................................
UIM ......................................................
UMG or the Company ..........................

5.4

2020
422

2019
283
-

2018
758
244
-

735
246

Dividend Ranking

All Shares, including the Distribution Shares, rank equally in all respects and will be eligible for any
dividend distribution that may be declared on the Shares in the future.
5.5

Manner and Time of Dividend Payments

Payment of any dividend on the Shares in cash will be made in euro. Any dividends on the Shares thatare paid to the Shareholders through Euroclear France, the French centralized securities custody andadministration system, will be credited automatically to the Shareholders’ accounts without the need for the
Shareholder to present documentation proving ownership of the Shares. The Board may set a record date fordividend and other distributions. In relation to dividend distributions, there are no restrictions under Dutch law inrespect of holders of Shares who are non-residents of the Netherlands. However, see Section 15 (Taxation) for a
discussion of certain aspects of taxation of dividends paid on the Shares.
Payment of dividends on the Shares not held through Euroclear France will be made directly to therelevant shareholder using the information contained in the Company’s shareholders’ register and records.
The date on which dividends and other distributions shall be payable shall be announced in accordancewith applicable law and published on the Company’s website. Distributions shall be payable on the date
determined by the Board.
5.6

Uncollected Dividends

Distributions which have not been claimed upon the expiry of five years and one day after the date when
they became payable will be forfeited to the Company and will be carried to the reserves.
5.7

Taxation of Dividends

Dividends paid on the Shares may be subject to withholding tax in the Netherlands. See Section 15(Taxation) for a discussion of certain aspects of taxation of dividends paid on the Shares.

-37-

6. CAPITALISATION AND INDEBTEDNESS
6.1

Capitalisation
The table below sets out the capitalization of the Group as at June 30, 2021.

Investors should read this table in conjunction with Section 7 (Selected Financial Information) andSection 8 (Operating and Financial Review).
As at June 30,
2021
Unaudited€ millions
Total current debt (including current portion of non-current debt)(1) ........................
Guaranteed...........................................................................................................
Secured .........................................................................................................................
Unguaranteed/unsecured .................................................................................................

2,917
2,914
3

Total non-current debt (excluding current portion of non-current debt)(2) ..................
Guaranteed..............................................................................................................
Secured ............................................................................................................................
Unguaranteed/unsecured .................................................................................................

1
1

Shareholder’s equity(3) ........................................................................................................
Share capital ....................................................................................................................
Legal reserve(s) ...............................................................................................................
Other reserves ..................................................................................................................

1,487
33,000(31,513)

Total ......................................................................................................

4,405

Notes
(1) Guaranteed debt consists of Vivendi borrowings (€2,368 million) and credit lines drawn by UMGI (€546 million). For
more information, see note 12 of the unaudited Interim Financial Statements.
(2) Unguaranteed/unsecured consists of bank overdrafts (€2 million) and other (€2 million). For more information, see note
12 of the unaudited Interim Financial Statements.
(3) For more information, see the Statement of Changes in Equity and Note 13 of the unaudited Interim Financial Statements.

There has been no material change in the Company’s capitalization since June 30, 2021.
6.2

Indebtedness
The table below sets out the net indebtedness of the Company.

Investors should read this table in conjunction with Section 7 (Selected Financial Information) andSection 8 (Operating and Financial Review).
As at June30, 2021
Unaudited€ millions
A. Cash .....................................................................................................................................................
454
B. Cash equivalents ................................................................................................................................
301
146
C. Other current financial assets ...............................................................................................................
D. Liquidity (A + B + C) ........................................................................................................................

-38-

901

As at June30, 2021
Unaudited€ millions
E. Current Financial debt (including debt instruments, but excluding current portion of non-current
2,917
financial debt) ...........................................................................................................................................
F. Current portion of non-current financial debt.......................................................................................
G. Current financial indebtedness (E + F) ........................................................................................... 2,917
H. Net current financial indebtedness (G - D)...................................................................................... 2,016
I. Non-current financial debt (excluding current portion and debt instruments) ................................
J. Debt instruments ................................................................................................................................
K. Non-current trade and other payables ................................................................................................

1-

L. Non-current financial indebtedness (I + J + K) ................................................................................

1

M. Total financial indebtedness (H + L) .............................................................................................. 2,017
Note: For all figures in the table above, please see note 12 of the unaudited Interim Financial Information for more information.
As of June 30, 2021, the Company has no indirect indebtedness and no contingent indebtedness.

In the context of the planned Distribution and Admission, UMG entered into a Facilities Agreement
concerning a five-year €3 billion syndicated bank credit facility, comprising: a revolving credit facility of €2billion and a term loan of €1 billion. UMG’s ability to draw on these bank credit facilities was conditional upon
its strict ring fencing from Vivendi, in particular the termination of UMG’s cash pooling agreement with Vivendi,
UMGI’s inability to draw on Vivendi’s bilateral credit facilities, and the repayment of UIM’s intra-group debt
from Vivendi. On July 7, 2021, Vivendi and UMG completely separated their cash pooling and financing
arrangements.
Since 2020, UMGI has been an additional borrower under five of Vivendi’s eight bilateral credit facilities
up to the aggregate limit of €750 million as of December 31, 2020, which was reduced to €450 million as of June30, 2021. As of June 30, 2021, three of these credit facilities were drawn by UMG for €216 million.
In addition, UMGI had its own credit facilities maturing in 2021 for an aggregate amount of $570 million(or €470 million) as of June 30, 2021, including a committed credit facility of €247 million maturing in September
2021. As of June 30, 2021, UMGI had drawn on these credit facilities for an amount of €330 million, and on July
7, 2021, it repaid and cancelled them.
The Facilities Agreement provides for: (i) a syndicated revolving bank credit facility of €2 billion(drawings made in euros for the Company and in US dollars for UMGI) for a five-year period, with two one-year
extension options, and (ii) a term loan of €1 billion maturing in October 2026. As mentioned above, the ability
for the Company to draw on these bank credit facilities was conditional upon its strict ring fencing from Vivendi.
On July 7, 2021, Vivendi and UMG completely separated their cash pooling and financing arrangements after thefollowing transactions were implemented:



the termination of Universal Music Group Treasury S.A.S.’s cash pooling agreement with
Vivendi, with Vivendi returning the deposited amount of €146 million as of June 30, 2021;



the repayment by UMGI of its drawings on Vivendi’s bilateral bank credit facilities for €216
million as of June 30, 2021; andthe repayment by UIM of its intra-group borrowing from Vivendi, for €2,368 million. Further
details in relation to this amount are provided at Section 8.9.10 (Facilities Agreement andrepayment of Vivendi Loan Agreements).

-39-

On July 7, 2021, to finance the repayment of UIM’s intra-group borrowing from Vivendi, the Company
drew on its term loan of €1 billion, as well as on the revolving credit facility for €1.24 billion. In addition, UMGI
drew on the same credit facility for $500 million (or €416 million).
For more information on the Facilities Agreement, see section 16.5.3 (Facilities Agreement).

-40-

7. SELECTED FINANCIAL INFORMATION
Prospective investors should read this Section 7 (Selected Financial Information) in conjunction with
Section 8 (Operating and Financial Review) and Section 18 (Historical Financial Information) and additional
financial information contained elsewhere in this Prospectus. Prospective investors should read the entire
Prospectus and not just rely on the information contained in this section.
The financial information set forth below is extracted or derived from, and should be read in conjunction
with, the audited Combined Financial Statements and the unaudited Interim Financial Statements. The Combined
Financial Statements have been prepared in accordance with IFRS as endorsed in the EU and the Interim
Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The Combined
Financial Statements have been audited by the Joint Auditors. The Interim Financial Statements have beenreviewed by the Joint Auditors.
Where financial information in the following tables is labelled “audited”, this means that it has been
extracted from the Combined Financial Statements. The label “unaudited” is used in the following tables toindicate financial information that was taken from the above-mentioned Interim Financial Statements.
7.1

Summary combined / consolidated statements of profit or loss
6 months ended
June 302021
2020

Year ended December 31
2020

Unaudited

2019

2018

Audited

Revenues ...............................................................
Cost of revenues ....................................................

3,831(2,047)(€ millions)
3,459
7,432
(1,820)(3,917)

Selling, general and administrative expenses ........
Restructuring charges ............................................
Impairment losses on intangible assets acquired
through business combinations ..............................
Income from equity affiliates - operational ...........
Earnings before interest and income taxes(EBIT) ...................................................................
Interest ...................................................................
Income from investments ......................................
Other financial income ..........................................
Other financial charges ..........................................

(1,090)(9)(1,104)(8)(2,265)(20)(2,276)(24)(2,062)
(29)

(1)

(11)

(9)

(2)

(1)

684
(9)
105
(183)

516
(6)
453
(13)

1,221
(15)
603
(28)

1,039
14
174
(57)

821
27
1
333
(29)

(87)

434

560

131

332

Earnings before provision for income taxes ......
Provision for income taxes ....................................

597
(144)

950
(214)

1,781
(412)

1,170
(195)

1,153
(251)

Earnings from continuing operations ................
Earnings from discontinued operations .................

453
-

736
-

1,369
-

975
-

902
-

Earnings ...............................................................
of which

453

736

1,369

975

902

Earnings attributable to shareowners ...............
Non-controlling interests .......................................

452
1

735
1

1,366
3

972
3

897
5

-41-

7,159
(3,818)

6,023(3,110)

7.2

Summary combined / consolidated statements of financial position
As at June 30
2021
2020
Unaudited

As at December 31
2020
2019
2018
Audited(€ millions)

ASSETS
Goodwill ..................................................
Non-current content assets ......................
Other intangible assets.............................
Property, plant and equipment.................
Rights-of-use relating to leases ...............
Investments in equity affiliates ................
Non-current financial assets ....................
Deferred tax assets ..................................

1,386
3,523
247
406
95
1,782
369

1,466
2,451
1
268
434
76
1,733
420

1,369
3,512
1
254
416
72
1,962
414

1,488
2,269
1
267
472
88
1,103
367

1,378
1,808
1
262
97
873
330

Non-current assets .................................

7,808

6,849

8,000

6,055

4,749

85
3
729
1,112
35
146
755
2,865
10,673

81
2
575
949
29
695
417
2,748
9,597

79
1
677
1,088
1
815
326
2,987
10,987

90
591
1,058
28
672
336
2,775
8,830

84
601
997
30
1,260
276
3,248
7,997

18,132
14,868(31,513)
452

1,253
735

1,432
1,366

2,981
972

3.074
897

-

-

-

3

3

Total equity ............................................

1,487

1,253

1,432

2,984

3,077

Non-current provisions
Long-term borrowings and otherfinancial liabilities ...................................
Shareowners borrowings .........................
Deferred tax liabilities .............................
Long-term lease liabilities .......................
Other non-current liabilities
Non-current liabilities ...........................

342
1

371
1

335
1

437
1

370
1

774
440
751

2,368
797
470
107

2,368
828
447
851

659
510
106

608
159

2,308

4,114

4,830

1,713

1,138

98
549

99
196

137
640

63
15

79
17

2,368
3,741
78

3,819
85

3,843
78

3,981
86

3,638
-

Current assets
Inventories ...............................................
Current tax receivables ............................
Current content assets..............................
Trade accounts receivable and other .......
Current financial assets ...........................
Shareowners loans ...................................
Cash and cash equivalents .......................
Current assets ........................................
TOTAL ASSETS ...................................
EQUITY AND LIABILITIESShare Capital
Additional paid-in capital
Combined retained earnings ....................
of which earnings attributable toVivendi shareowners .........................
Non-controlling interests .........................

Current provisions
Short-term borrowings and otherfinancial liabilities ...................................
Short-term borrowings with Vivendi SE
Trade accounts payable and other ...........
Short-term lease liabilities .......................

-42-

As at June 30
2021
2020
Unaudited
Current tax payables ................................
Current liabilities ..................................

44

As at December 31
2019
2018
Audited(€ millions)
31
27
(12)
48
2020

Total liabilities .......................................

6,878
9,186

4,230
8,344

4,725
9,555

4,133
5,846

3,782
4,920

TOTAL EQUITY AND LIABILITIES

10,673

9,597

10,987

8,830

7,997

7.3

Summary combined / consolidated statements of cash flows
6 months ended
June 30

Year ended December 31

2021

2020

2020

2019

Unaudited

2018

Audited(€ millions)Operating activities
EBIT ....................................................................
Adjustments1 .......................................................
Content investments, net2 ....................................
Gross cash provided by operating activities
before income tax paid ......................................
Other changes in net working capital
Net cash provided by operating activities
before income tax paid ......................................
Income tax (paid)/received, net ...........................

684
88
(173)

516
94
(352)

1,221
213
(1,517)

1,039
201
(465)

821
106
(161)

599

258

(83)

775

766

(172)

(118)

287

82

179

427

140

204

857

945

(118)

(64)

(207)

(172)

(198)

309

76

(3)

685

747

(23)

(37)

(66)

(75)

(110)

(2)
(23)
(47)

(1)
(1)
-

(4)
(2)
(3)

(50)
(13)

(12)
(12)

Investments ........................................................
Proceeds from sales of property, plant,
equipment and intangible assets ..........................
Proceeds from sales of consolidated companies,
after divested cash ...............................................
Disposal of equity affiliates .................................
Decrease in financial assets .................................

(95)

(39)

(75)

(138)

(134)

5

-

-

3

-

117
-

1
-

11
1
15

(2)
6

1
19

Divestitures ........................................................
Dividends received from equity affiliates ...........
Dividends received from unconsolidated
companies ............................................................
Net cash provided by/(used for) investing
activities ..............................................................

122

1

27

7

20

1

-

2

2

2

1

1

-

-

1

29

(37)

(46)

(129)

(111)

(422)
-

(11)

(283)
(11)

(1,002)-(981)(1,414)

Net cash provided by operating activities........
Investing activities
Capital expenditures ............................................
Purchases of consolidated companies, after
acquired cash .......................................................
Investments in equity affiliates ............................
Increase in financial assets ..................................

Financing activities
Distributions to shareowners ...............................
Other transactions with shareowners ...................
-43-

6 months ended
June 30

Year ended December 31

2021

2020

2020

2019

Unaudited

2018

Audited(€ millions)

Dividends paid by consolidated companies totheir non-controlling interests .............................

(1)

(3)

(5)

(5)

(5)

(423)

(14)

(299)

(1,007)(2,400)

-

-

-

-

(57)

(103)
(9)
(9)

149
(6)
(1)

625
(15)
(3)

2
14
(2)

46
27
(3)

(121)

142

607

14

13

(40)

(43)

(91)

(83)

-

(584)

85

217

(1,076)(2,387)

6

(20)

(35)

(8)

(19)

(240)

104

133

(528)

(1,770)

1,141
901

1,008
1,112

1,008
1,141

1,536
1,008

3,306
1,536

815
146

672
695

672
815

1,260
672

3,059
1,260

326
755

336
417

336
326

276
336

247
276

Transactions with shareowners ........................
Principal payment on short-term borrowings ......
Other changes in short-term borrowings andother financial liabilities ......................................
Interest paid, net ..................................................
Other cash items related to financial activities ....
Transactions on borrowings and otherfinancial liabilities .............................................
Repayment of lease liabilities and related
interest expenses ..................................................
Net cash provided by/(used for) financing
activities ..............................................................
Foreign currency translation adjustments ofcontinuing operations ..........................................
Change in cash and cash equivalents andshareowners loans .............................................
Cash and cash equivalents and shareowners
loans
At beginning of the period...................................
At end of the period .............................................
of which Shareowners loans
At beginning of the period...................................
At end of the period .............................................
of which Cash and cash equivalent
At beginning of the period...................................
At end of the period .............................................

Note(1) Adjustments relate to: (i) amortization and depreciation of intangible and tangible assets; (ii) change in provision, net;(iii) operational income from equity affiliates; (iv) and proceeds from sales of property, plant, equipment and intangible
assets.
(2) Content investments, net is comprised of net music content advances and catalog investments, net, which is split asfollows for the periods provided: (i) 6 months ended June 30, 2021: (a) net music content advances - €130 million; and(b) catalog investments, net - €43 million; (ii) 6 months ended June 30, 2020: (a) net music content advances - €266
million; and (b) catalog investments, net - €86 million; (iii) year ended December 31, 2020: (a) net music content advances- €588 million; and (b) catalog investments, net - €929 million; (iv) year ended December 31, 2019: (a) net music content
advances - €192 million; and (b) catalog investments, net - €273 million; and (v) year ended December 31, 2018: (a) netmusic content advances - €121 million; and (b) catalog investments, net - €40 million.

7.4

Other financial data

The Group considers the following metrics to be the non-IFRS financial measures used by the Group to
help evaluate growth trends, establish budgets and assess operational performance and efficiencies. The Group
believes that these non-IFRS performance measures, in addition to IFRS measures, provide an enhanced
understanding of the Group’s results and related trends, therefore increasing transparency and clarity into the core-44-

results of the business. The Group believes the following metrics are useful in evaluating the Group’s operating
performance:

EBITA(1)
EBITA margin(2)EBITDA(3)EBITDA margin(4)For the 6 months ended
For the year ended
June 30
December 31
2021
2020
2020
2019
2018
Unaudited
Audited(€ millions, unless otherwise indicated)
753
567
1,329
1,124
902
19.7%
16.4%
17.9%
15.7%
15.0%
822
649
1,487
1,267
979
21.5%
18.8%
20.0%
17.7%
16.3%

Notes
(1) To calculate EBITA, the accounting impact of the following items is excluded from the income from EBIT: (i) theamortization of intangible assets acquired through business combinations as well as other rights catalogs acquired; (ii)
impairment losses on goodwill, other intangibles acquired through business combinations and other rights catalogs
acquired; and (iii) other income and charges related to transactions with shareowners (except when directly recognizedin equity).
(2) EBITA margin represents EBITA as a percentage of revenues. EBITA margin is unaudited.
(3) To calculate EBITDA, the accounting impact of the following items is excluded from the income from EBIT: (i) the
depreciation of tangible, intangible and right of use assets; (ii) gains/(losses) on the sale of tangible, intangible and rightof use assets; (iii) the amortization of intangible assets acquired through business combinations as well as other rights
catalogs acquired; (iv) impairment losses on goodwill, other intangibles acquired through business combinations andother rights catalogs acquired; (v) income from equity affiliates having similar operating activities; and (vi) restructuring
charges, and other non-recurring items.
(4) EBITDA margin represents EBITDA as a percentage of revenues. EBITDA margin is unaudited.

7.5

Selected Non-IFRS Financial Measures

Certain of the KPIs tracked by UMG and certain financial measures included in this Prospectus are notdefined or recognized under IFRS, including EBITA, EBITA margin, EBITDA and EBITDA margin. Definitionsof these non-IFRS metrics, as well as reconciliations to the nearest IFRS figures, are provided below. UMG uses
these metrics, in addition to IFRS measures, to help evaluate growth trends, establish budgets and assess
operational performance and efficiencies in relation to UMG. UMG considers that these metrics, in addition to
IFRS measures, provide an enhanced understanding of the Group’s results and related trends, therefore increasingtransparency and clarity into the core results of the business of the Group. There are no generally accepted
principles governing the calculation of these measures and the criteria upon which these measures are based canvary from company to company. These measures, by themselves, do not provide a sufficient basis to compare the
UMG’s performance with that of other companies and should not be considered in isolation or as a substitute for
operating profit or loss after tax or any other measure as an indicator of operating performance, or as an alternative
to cash generated from operating activities as a measure of liquidity. UMG does not regard these non-IFRS
financial measures as a substitute for, or superior to, the equivalent measures that are calculated in accordancewith IFRS. The non-IFRS financial measures presented in this Prospectus may not be comparable to othersimilarly titled measures used by other companies and have limitations as analytical tools and should not be
considered in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS.
7.5.1

EBITA and EBITA margin

UMG defines EBITA as EBIT, excluding amortization of intangible assets, impairment losses on
intangible assets and other charges and income. UMG considers EBITA to be a relevant measure to assess theperformance of its operating segments as reported in the segment data. It enables UMG to compare the operating
performance of operating segments regardless of whether their performance is driven by the operating segment’sorganic growth or by acquisitions.
EBITA margin is calculated as EBITA as a percentage of revenues and is used by UMG as a supplemental
measure of operating performance.
7.5.2

EBITDA and EBITDA margin

UMG defines EBITDA as EBIT, excluding amortization of intangible assets, impairment losses on
intangible assets, other charges and income, restructuring charges, sale of tangible and intangible assets, right-of-45-

use – depreciation of tangible assets, depreciation and other non-recurring items. UMG considers this adjusted
EBITDA metric to be a relevant measure to compare the operating performance of operating segments regardlessof whether their performance is driven by the operating segment’s organic growth or by acquisitions, which candiffer across different companies. This metric will be referred to as “EBITDA” throughout the Prospectus for thesake of readability.
EBITDA margin is calculated as EBITDA as a percentage of revenues and is used by UMG as asupplemental measure of operating performance.
7.5.3

EBIT

UMG defines EBIT, as earnings, excluding taxes, interest, income from investments, and other financial
income or expenses. EBIT is shown on the face of the Statement of Earnings. UMG considers EBIT to be arelevant measure to assess performance of its operating activities and before any gains or losses on its equity
holdings. EBIT is further elaborated upon at Note 3 to the Combined Financial Statements page F-89 of thisProspectus.
7.5.4

Net Working Capital

UMG defines net working capital, as the sum of inventories, trade accounts and other receivables, tradeaccounts and other payables (including royalty payables) and other non-current liabilities. Net Working Capital
excludes any content investments. UMG considers Net Working Capital to be a relevant measure to assess the
movement in its working capital assets and operational efficiency. Net Working Capital is shown on the face of
the Statement of Cash Flows included in the Combined Financial Statements at pages F-9 and F-66 of thisProspectus.
7.6

Reconciliations of selected non-IFRS measures to IFRSThe following table defines and presents a reconciliation of EBIT to EBITA to EBITDA and EBITDA

margin.
6 months ended June 30,
2021

2020

Year ended December 31,

2020

2019

2018

Unaudited
Audited(€ millions, unless otherwise indicated)
Earnings before provision for income taxes....
Other financial charges .......................................
Other financial income ........................................
Income from investments ....................................
Interest ................................................................
EBIT ...................................................................
Adjustments .........................................................
Amortization of intangible assets .......................
Impairment losses on intangible assets ..............
Other charges and income ...................................

597
183
(105)
9
684

950
13
(453)
6
516

1,781
28
(603)
15
1,221

1,170
57
(174)
(14)
1,039

1,153
29
(333)
(1)
(27)
821

69
-

51
-

108
-

85
-

80
1

EBITA ................................................................
Revenues .............................................................

753

567

1,329

1,124

902

3,831

3,459

7,432

7,159

6,023

EBITA margin (%) ........................................

19.7%

16.4%

17.9%

15.7%

15.0%

EBITA
Adjustments .........................................................
Restructuring charges (a) ....................................
Sale of tangible and intangible assets ..................
Right-of-use - Depreciation of tangible assets(2) .
Depreciation ........................................................

753

567

1,329

1,124

902

9
(3)
34
32

8
1
35
28

20
1
69
59

24
64
53

29
1
46

(1)

-46-

Other non-recurring items including income
from equity affiliates ...........................................

(3)

10

9

822

649

1,487

1,267

979

3,831
21.5%

3,459
18.8%

7,432
20.0%

7,159
17.7%

6,023
16.3%

EBITDA
Revenues .............................................................
EBITDA margin (%)(3)

2

1

Notes
(1) EBITA margin is unaudited.
(2) Due to the adoption of IFRS 16 in January 2019, these measures are non-comparable for 2018 and further years.
(3) EBITDA margin is unaudited.

7.7

Non-Current and content assets by segment

The below table provides an overview of the Group’s non-current and content assets by segment, as wellas its corporate center, for the periods indicated.
6 months ended June 30
2021
2020

Year ended December 31
2020
2019
2018

(€ millions, unless otherwise indicated)(unaudited)
Recorded music
Non-current assets
Goodwill......................................................
Non-current content assets ..........................
Property, plant and equipment.....................
Right-of-use relating to leases .....................

(audited)

608
1,676
128
248

639
1,453
147
289

601
1,663
137
256

647
1,356
136
315

574
983
129
-

Content assets
Music catalogs and publishing rights ..........
Advances to artists and repertoire owners ...
of which non-current ..........................
of which current .................................
Merchandising contracts and artist services
Content assets, net .....................................

1,012
1,019
664
335
-

1,010
729
443
286
-

1,026
941
637
304
-

985
653
371
282
-

813
448
171
277
-

2,031

1,739

1,967

1,638

1,261

Current content assets, net ...........................
Non current content assets, net ....................

355
1,676

286
1,453

304
1,663

282
1,356

278
983

Music publishingNon-current assets
Goodwill......................................................
Non-current content assets ..........................
Property, plant and equipment.....................
Right-of-use relating to leases .....................

680
1,749
24
28

731
900
22
9

674
1,747
23
30

740
832
22
10

721
812
17
-

Content assets
Music catalogs and publishing rights ..........
Advances to artists and repertoire owners ...
of which non-current ..........................
of which current .................................
Merchandising contracts and artist services
Content assets, net .....................................

1,310
768
439
329
-

615
530
285
245
-

1,304
781
443
338
-

609
488
223
265
-

551
444
261
183
-

2,079

1,145

2,086

1,097

995

Current content assets, net ...........................
Non current content assets, net ....................

329
1,749

245
900

338
1,747

265
832

183
812

Merchandising
Non-current assets-47-

Goodwill......................................................
Non-current content assets ..........................
Property, plant and equipment.....................
Right-of-use relating to leases .....................

98
98
-

96
98
1

94
102
-

101
81
-

83
13
-

Content assets
Music catalogs and publishing rights ..........
Advances to artists and repertoire owners ...
of which non-current ..........................
of which current .................................
Merchandising contracts and artist services
Content assets, net .....................................

143
98
45
-

142
98
44
-

137
102
35
-

125
81
44
-

153
13
140
-

143

142

136

125

153

Current content assets, net ...........................
Non current content assets, net ....................

45
98

44
98

35
102

44
81

140
13

Corporate center
Non-current assets
Goodwill......................................................
Non-current content assets ..........................
Property, plant and equipment.....................
Right-of-use relating to leases .....................

95
130

99
135

94
130

109
147

116
-

Content assets
Music catalogs and publishing rights ..........
Advances to artists and repertoire owners ...
Merchandising contracts and artist services
Content assets, net .....................................

-

-

-

-

-

-

-

-

-

-

Current content assets, net ...........................
Non current content assets, net ....................

-

-

-

-

-

Total
Non-current assets
Goodwill......................................................
Non-current content assets ..........................
Property, plant and equipment.....................
Right-of-use relating to leases .....................

1,386
3,523
247
406

1,466
2,451
268
434

1,369
3,512
254
416

1,488
2,269
267
472

1,378
1,808
262
-

Content assets
Music catalogs and publishing rights ..........
Advances to artists and repertoire owners ...
of which non-current ..........................
of which current .................................
Merchandising contracts and artist services
Content assets, net .....................................

2,322
1,930
1,201
729
-

1,625
1,401
827
575
-

2,330
1,859
1,182
677
-

1,594
1,266
675
591
-

1,364
1,045
444
601
-

4,252

3,026

4,189

2,860

2,409

Current content assets, net ...........................
Non current content assets, net ....................

729
3,523

575
2,451

677
3,512

591
2,269

601
1,808

-48-

8. OPERATING AND FINANCIAL REVIEWThis Section 8 (Operating and Financial Review) should be read in conjunction with Section 2.5(Presentation of Financial Information), Section 7 (Selected Financial Information), Section 9 (UMG Profit
Forecast), Section 10 (Industry Overview), Section 11 (Business Description) and Section 18 (Historical
Financial Information). Prospective investors should read the entire document and not just rely on the information
set out below. Except as stated otherwise, the financial information considered in this Section 8 (Operating and
Financial Review) is extracted from the financial information set out in Section 18 (Historical Financial
Information) or from UMG’s internal financial reporting.
The following discussion of UMG’s results of operations and financial condition contains forwardlooking statements that are based on assumptions and estimates and are subject to known and unknown risks anduncertainties. Prospective investors should read Section 3 (Forward-looking Statements) for a discussion of therisks and uncertainties related to these statements. UMG’s actual results and the timing of events could differ
materially from those that are discussed or implied in these forward-looking statements. Factors that could cause
or contribute to such differences include those discussed below and elsewhere in this Prospectus, particularly
under Section 1 (Risk Factors), and Section 2.5 (Presentation of Financial Information). In addition, certain
industry issues also affect UMG’s results of operations and are described in Section 9 (UMG Profit Forecast)and Section 10 (Industry Overview). Neither UMG’s independent auditors, nor any other independentaccountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial
information contained herein, nor have they expressed any opinion or any other form of assurance on suchinformation or its achievability, and assume no responsibility for, and disclaim any association with, the forwardlooking financial information.
8.1

Overview

According to Music & Copyright, based on revenue, UMG is a world leader in music-based
entertainment, with a broad array of businesses engaged in recorded music, music publishing, merchandising andaudiovisual content through offices in more than 60 territories, covering approximately 200 markets. Featuring
the most comprehensive catalog of recordings and songs across every musical genre, UMG identifies and develops
artists and produces and distributes the most critically acclaimed and commercially successful music in the world.
Committed to artistry, innovation and entrepreneurship, UMG fosters the development of services, platforms andbusiness models in order to broaden artistic and commercial opportunities for its artists and create new experiences
for fans.
8.2

Components of UMG’s Operating Results

8.2.1

Recorded Music Operations

UMG’s recorded music business primarily consists of the discovery and development of recording artists
and the related marketing, promotion, distribution, sale and licensing of music created by such recording artists.
UMG’s activities have also extended to other areas, such as live events, sponsorship and film and television.
UMG’s roster of recording artists includes major global superstars such as J Balvin, Justin Bieber, Luke
Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish, Eminem, Selena Gomez, Ariana Grande,
Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone, Shawn Mendes, Kacey Musgraves,Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie Underwood, Keith Urban and The
Weeknd and successful local artists such as Celeste, Mabel and Stormzy in the UK, Slimane and Vitaa in France,
Capital Bra, Sarah Connor and Helene Fischer in Germany, backnumber and King & Prince in Japan, and KarolG and Sebastián Yatra in Latin America.
UMG’s catalog includes timeless performers such as ABBA, Louis Armstrong, The Beatles, The BeachBoys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton
John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The Rolling Stones, Frank Sinatra, U2,
Amy Winehouse and Stevie Wonder.
UMG’s diverse range of labels helps the business consistently cater to changing consumer trends. Its
major record labels and label groups include Capitol Music Group, Interscope Geffen A&M, Republic Records,
Island Records, Motown Records, Def Jam Recordings, Universal Music Group Nashville, Universal Music Latin
Entertainment, EMI Records and Polydor, and its classical and jazz labels are Blue Note Records, Decca, Deutsche
Grammophon and Verve Label Group.

-49-With a diverse range of labels, UMG operates offices in more than 60 territories across approximately
200 markets, where markets may be defined by a number of factors, including language and dialects – more thanany other recorded music company in the world. UMG has licensed local and global streaming platforms to help
establish legal music markets in countries that have not traditionally been major markets for recorded music sales,such as the BRIC countries (Brazil, Russia, India and China), Latin America, Africa, the Middle East, Southeast
Asia and Eastern Europe. These partnerships have led to greater investment in developing local talent and havehelped make music more accessible to fans.
UMG employs a comprehensive approach to marketing and promoting its artists, which combines global
planning and execution with a robust network of local presence around the world.
UMG’s recorded music business’ distribution operations includes entering into agreements with digitalmusic services to make its music available to users. UMG also sells its physical recorded music products througha variety of different retail and wholesale outlets including music specialty stores, general entertainment specialty
stores, supermarkets, mass merchants and discounters, independent retailers and other traditional retailers.
UMG believes existing and new digital businesses will be a significant source of growth and will provide
new opportunities to successfully monetize its assets and create new revenue streams. The proportion of digitalrevenues attributable to each distribution channel varies by region and proportions may change as the introductionof new technologies continues. As one of the world’s largest music entertainment companies, UMG believes it iswell positioned to take advantage of growth in digital distribution and emerging technologies such as social media,
digital health and fitness and gaming to maximize the value of its assets.
UMG has diversified its revenues beyond its traditional businesses by entering into expanded-rights deals
with recording artists in order to partner with such artists in other aspects of their careers. Under these agreements,
UMG provides services to and participates in recording artists’ activities outside the traditional recorded musicbusiness such as touring, merchandising and sponsorships. UMG believes that entering into expanded-rights deals
and enhancing its artist services capabilities in areas such as merchandising, VIP ticketing, fan clubs, concert
promotion and management has permitted UMG to diversify revenue streams and capitalize on other revenue
opportunities.
Recorded music revenues are derived from three main sources:

Digital: UMG enters into license agreements with digital music services to make its music andaudio-visual content available for access in digital formats (e.g., streaming and downloads).
Streaming services stream UMG’s music on an ad-supported or paid subscription basis.
Downloading services sell downloads of UMG’s music on a per-album or per-track basis. UMG
currently partners with a broad range of digital music services that are both established andemerging in the market;

Physical: UMG sells its physical recorded music products (principally CDs, vinyl, DVDs and
Blu-Ray discs) through a variety of different retail and wholesale outlets through traditional
retail distribution both in store and online, through online physical retailers and direct tocustomers through UMG online websites; andLicensing and other: UMG enters into licensing agreements to license the use of soundrecordings in combination with visual images such as in films or television programs, televisioncommercials and video games; UMG as rightsholder also receives royalties if sound recordings
are performed publicly through broadcast of music on television, radio and cable, and in public
spaces such as shops, workplaces, restaurants, bars and clubs. UMG partners with artists toprovide services to and participate in recording artists’ activities outside the traditional recorded
music business such as touring, and sponsorships. Revenues are earned for participation in
expanded rights, including sponsorship, fan clubs, artist websites, touring, concert promotion,
ticketing and artist and brand management. UMG also develops and produces music-based
audio-visual content, including music documentaries, feature films, musicals, music-based
television series and reality shows which are licensed for broadcast.

The principal costs associated with its recorded music business are as follows:

A&R costs: the costs associated with (i) paying royalties to recording artists, producers,
songwriters, third party repertoire owners, other copyright holders and trade unions; (ii) signingand developing recording artists; and (iii) creating master recordings in the studio;
-50-



Product costs: the costs to manufacture, package and distribute products to wholesale and retail
distribution outlets, as well as the costs related to its artist services business;Selling and marketing expenses: the costs associated with the promotion and marketing ofrecording artists and music, including costs to produce music videos for promotional purposes
and artist tour support; andGeneral and administrative expenses: the costs associated with general overhead, depreciation
and amortizations and other administrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years coveredby the Combined Financial Statements.
8.2.2

Music Publishing Operations

UMPG believes that it is one of the world’s largest and fastest-growing major music publishingcompanies, acquiring and administering rights to musical compositions (as opposed to recordings) and licensing
those musical compositions for use in a variety of formats. UMPG licenses musical compositions for use in soundrecordings, films, television, advertisements, video games, concerts and in other public performances. It also
licenses compositions for use in printed sheet music and song folios. UMPG owns and controls a vast catalog oforiginal music and arrangements and its focus is to offer this music for use in films, television, advertising andnew media industries. Based on its extensive administration of its catalog to the vast majority of studios, UMPG
is a leader in working with film and television studios, worldwide brands and digital service providers to effectuate
their licensing goals.
UMPG’s global publishing catalog contains close to four million owned and administered titles,
including some of the world’s most popular songs from major songwriters and artists such as ABBA, Adele, The
Beach Boys, Beastie Boys, The Bee Gees, Irving Berlin, Leonard Bernstein, Justin Bieber, Benny Blanco, Mariah
Carey, Coldplay, Neil Diamond, Dua Lipa, Bob Dylan, Billie Eilish, Eminem, Future, Billy Joel, Elton
John/Bernie Taupin, Alicia Keys, Kendrick Lamar, Dave Matthews, Pearl Jam, Post Malone, Britney Spears,
Harry Styles, Taylor Swift, Justin Timberlake, U2 and many more.
In 2020, UMPG signed partnerships with numerous songwriters and artists ranging from legendary talent
to today’s superstars and promising names: Taylor Swift, Kendrick Lamar, Megan Thee Stallion, Brandi Carlile,
Kenny Chesney, Luke Combs, Bad Bunny, Andrew Lloyd Webber, Van Halen, Louis Bell, Dave Cobb, Billy
Walsh, Lil Mosey and Rina Sawayama, among many others. The company also reached a historically significant
deal to acquire the iconic song catalog of Bob Dylan.
Music publishing revenues are derived from five main sources:

Performance: the rightsholder receives revenues if the musical composition is performed
publicly through broadcast of music on television, radio, live performance at a concert or othervenue (e.g., arena concerts and nightclubs) and in public spaces such as bars, restaurants, hotels
and retailers;

Digital: the rightsholder receives revenues with respect to musical compositions distributed
through audio and video streaming services, download services, social networks and otherdigital music services;

Mechanical: the rightsholder receives revenues with respect to musical compositions embodied
in recordings sold in any physical format or configuration such as CDs, vinyl and DVDs;

Synchronization: the rightsholder receives revenues for the right to use the musical compositionin combination with visual images such as in films or television programs, televisioncommercials and video games as well as from other uses such as in toys or novelty items andmerchandise; and

Other: the rightsholder receives revenues for use in sheet music and other uses.

-51-

The principal costs associated with UMG’s music publishing business are as follows:

A&R costs: costs associated with (i) paying royalties to songwriters, co-publishers and othercopyright holders in connection with income generated from the uses of their works and (ii)signing and developing songwriters; and

Selling and marketing, general overhead and other administrative expenses: costs associatedwith selling and marketing, general overhead, depreciation and amortization and otheradministrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years coveredby the Combined Financial Statements.
8.2.3

Merchandising

Bravado is UMG’s wholly owned, global, full-service merchandise and brand-management company
that represents the merchandising rights of new and established artists as well as longstanding and more recent
entertainment brands and properties. Bravado provides an end-to-end merchandising ecosystem including creative
design, production and distribution for its clients. It utilizes UMG’s global network to provide services including
sales, licensing, branding, marketing, eCommerce and creative resources to its clients, as well as to devise
innovative cultural and retail experiences for fans throughout the world. Bravado’s merchandise is sold globally
through various channels including in-store retailers, online retailers, direct-to-consumer, limited-edition retailexperiences and artist tours. It also licenses rights to an extensive global network of third-party licensees.
Merchandise revenues are derived from the following sources:

Touring Income: sales of physical merchandise product (usually tour specific) direct toconsumers at venues during tours;Concession Income: sales of physical merchandise product direct to consumers at concessions
within venues. Right to sell at concession is not limited to specific tours but usuallyencompasses all events at the venue;Retail: sales of physical merchandise product to wholesalers and retailers;

Licensing: fees receivable from third party licensees for the use of the Company's merchandisingrights in products sold by the licensee (or further sub-licensed); and

eCommerce / Direct to Consumer: sales of physical merchandise product through an online
DtoC channel.

The principal costs associated with UMG’s Merchandising business are as follows:

A&R costs: the costs associated with paying royalties to artists and other rights holders;

Product costs: the costs to manufacture, package and distribute products for sale at venues, towholesale and retail distribution outlets or online through DtoC channels as well as fees paid tovenues; andGeneral and administrative expenses: the costs associated with general overhead, depreciation
and amortizations and other administrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years coveredby the Combined Financial Statements.
8.3

Prospects and Outlook

As part of its business plan, the Company has established certain ambitions and targets, including thoseset out below, which it will monitor its performance against to measure operational and managerial performanceon a Group-wide level. The below financial ambitions and targets are the Company’s internal targets for revenue
growth, EBITDA and EBITDA margin. EBITDA and EBITDA margin are defined in Section 7.5 (Selected NonIFRS Financial Measures). The Group has not defined, and does not intend to define, medium -term and thesefinancial ambitions and targets should not be read as indicating that the Company is targeting such metrics for any-52-particular financial year. The Group’s actual results may vary from the targets and ambitions set out below andthose variations may be material. The Group’s ability to achieve the below financial ambitions and targets isinherently subject to significant business, economic and competitive uncertainties and contingencies, many ofwhich are beyond the control of the Company, and upon assumptions with respect to future business decisions
that are subject to change. Many of these business, economic and competitive uncertainties and contingencies aredescribed in Section 1 of this Prospectus entitled “Risk Factors”. The Company does not intend to publish revised
financial ambitions and targets to reflect events or circumstances existing or arising after the date of thisProspectus or to reflect the occurrence of unanticipated events. The financial ambitions and targets set out below
should not be regarded as a representation by the Company or any other person that the Company will achievethese ambitions and targets in any time period. Readers are cautioned not to place undue reliance on these financial
ambitions and targets.
Subject to the above and assuming anticipated market conditions and anticipated macro-economic
conditions, the Company has developed the following medium-term targets for purposes of measuring operationaland managerial performance on a Group-wide level:

Revenue compound annual growth rate in the high single digits. While the achievement of thistargeted revenue growth rate may be influenced by market and macro-economic conditions, it
is principally based on UMG’s ability to continue to successfully develop and break new artists
and market and promote established artists, the targeted release of high quality music content
by UMG’s artists and UMG’s ability to continue and expand its partnerships with digital music
services; and

EBITDA margin in the mid-twenties. This targeted EBITDA margin is principally based on
UMG’s targeted revenue growth described above, coupled with continued cost-control
measures expected to be applied by the Group.

8.4

Factors Affecting Results of Operations and Comparability

8.4.1

Consumer spending patterns and macro trends, including the impact of the COVID-19 pandemic

A significant portion of UMG’s revenues relies on consumers spending discretionary funds on leisureactivities, such as music subscriptions, CDs, vinyl albums and artist merchandise. The state of the economy as awhole, inflation, deflation, political uncertainty, the availability of consumer credit, taxation, unemployment andthe impact of the COVID-19 pandemic are all factors that relate to the prevailing macroeconomic conditions andaffect UMG’s business. Economic growth and consumer confidence are important for UMG’s growth andstrategy. In 2020, UMG’s merchandising revenues were down 39.6% at constant currency and perimeter compared
to 2019 due to the impact of the COVID-19 pandemic on both touring and retail activity, which cut off access for
consumers to purchase these products at their usual retail points. As such, UMG’s eCommerce business grewsignificantly in 2020, but could not fully offset the loss of touring and retail merchandise sales. UMG was able tofurther offset the negative impact of COVID-19 with a significant increase in subscription and streaming revenues.
UMG also generated some incremental revenue from its work on more than 100 live performances by artists
worldwide that streamed on more than a dozen platforms. However, any decrease in global economic growth or
slowdown in certain fast-growing markets could negatively affect the Group’s results of operations going forward.
8.4.2

Foreign exchange exposure

A significant portion of UMG’s assets, liabilities, revenues and costs are denominated in currencies otherthan Euros. To prepare its UMG Financial Statements, UMG must translate those assets, liabilities, revenues andexpenses into Euros from such currencies at then-applicable exchange rates. Consequently, increases anddecreases in the value of the Euro as compared to such other currencies will affect the amount of these items in
its UMG Financial Statements, even if their value has not changed in their original currency. These translations
could result in significant changes to its results of operations from period to period. In addition, exchange rate
fluctuations could cause its expenses to increase as a percentage of net sales, affecting its profitability and cash
flows.
8.4.3

Recorded music portfolio

A portion of UMG’s financial performance has depended, and will in the future depend, on its ability tosign and break new artists and consumer acceptance of new music content from both new and established artists.
However, a significant portion of UMG’s revenue each year also comes from catalog music (content older than
three years). In 2020, catalog content accounted for 54% of UMG’s recorded music digital and physical revenue,-53-while frontline revenue represented 46% of recorded music revenue. Recorded music revenues grew by 6.7% atconstant currency and perimeter thanks mainly to the growth in subscription and streaming revenues, which morethan offset the 6.0% decline in physical sales compared to 2019 and the 19.0% decline in download sales.
Recorded music best sellers for 2020 included new releases from The Weeknd, Lil Baby, Pop Smoke, BTS, Justin
Bieber, King & Prince, Taylor Swift and Juice WRLD, as well as continued sales from Billie Eilish and Post
Malone.
UMG has a global publishing catalog containing close to four million owned and administered titles,
including some of the world’s most popular songs. The success and timing of new releases may vary and futurefinancial performance may therefore not be consistent on a quarterly or annual basis.
8.4.4

Technological advancements and new trends

UMG’s financial performance has depended and will continue to depend on its ability to adapt to andincorporate technological advancements and new trends in the music industry. While physical sales are still
significant in some markets, music consumption has shifted from an ownership model, whereby consumers
purchase vinyl or CDs, to an access model that includes subscription and ad-supported streaming formats. UMG
believes that streaming has and will continue to revolutionize the experience for consumers and transform theindustry.
The growth of subscription and ad-supported streaming depends upon the growth and health of the global
music market. The emergence of subscription-based and ad-supported streaming services has also made it possiblefor UMG to monetize legal music consumption in markets that were previously dominated by piracy. UMG has
agreements and partnerships with every major digital music service launched in the last decade, including
Amazon, Apple, Spotify, YouTube and many others and was one of the earliest supporters of digital streaming
and subscription services, demonstrating its innovation and its ability to lead a transformation of the musicindustry. For example, in July 2020 UMG announced a new multi-year global licensing agreement with Spotify
and in February 2021, UMG reached a new partnership agreement with TikTok, enabling fair compensation for
UMG’s recording artists and songwriters while adding new data analysis and marketing tool features. As
technology continues to advance, UMG’s success incorporating advancements and adapting to new trends mayvary and affect its financial performance on an annual basis.
8.4.5

Acquisitions (Epic Rights and Ingrooves)

In March 2019, UMG acquired the remaining rights in Ingrooves Music Group (Ingrooves). Prior to thatdate Ingrooves was accounted for as an equity investment and accounted for under the equity method. Ingrooves
is a global music distribution company that provides marketing and rights management services for independentlabels and artists.
In December 2018, UMG acquired 100% of the share capital in Epic Rights. Epic Rights is a boutiquemerchandise and branding Company.
The results from those companies were fully consolidated from the acquisition dates.
Where comparisons between financial periods are provided at “constant perimeter” which varies from“constant currency”, this reflects the impact of significant acquisitions, including the: (i) acquisition of theremaining interest in Ingrooves Music Group by UMG in March 2019; and (ii) the acquisition of 100% of theshare capital in Epic Rights by UMG in December 2018.
8.4.6

Impact of IFRS 16

IFRS 16 (Leases) introduces a single, on balance sheet lease accounting model for lessees. IFRS 16
establishes that lessees shall recognize in the consolidated balance sheet a financial liability for the present valueof the payments to be made over the remaining life of the lease agreement and a right of use asset for the underlying
asset, which is measured based on the amount of the associated liability, to which the initial direct costs incurred
are added. Additionally, the recognition criteria for lease expenses has changed. Lease expenses are now recorded
as a depreciation charge for the lease asset and as a financial expense for the lease liability.
IFRS 16 became effective for periods beginning on or after January 1, 2019 and replaces the previous
accounting standard, IAS 17 (Leases), including related interpretations. UMG Financial Statements for 2019 and2020 give effect to the entry into force of IFRS 16. The comparative information presented for 2018 has not been
restated and therefore continues to be shown under IAS 17 ‘Leases.’-54-

The Group has applied exemptions for short-term leases and leases of low value items to exclude initial
direct costs form the measurement of the right-of-use assets at the date of initial application. The Group has chosen
to adopt the simplified modified retrospective approach to transition and will not restate comparative amounts forthe year prior to first adoption.
The Group’s lease portfolio within the scope of IFRS 16 consists of real estate leases for which UMG is
the lessee.
8.5

Adoption of New Accounting Policies

With retrospective effect as from January 1, 2019, UMG applied the accounting standard IFRS 16 –Lease without restating comparative periods in the Combined Financial Statements.
As a reminder, in 2018, UMG applied two new accounting standards:



IFRS 15 – Revenues from Contracts with Customers: in accordance with IFRS 15, as from 2017,
UMG applied this change of accounting standard to revenues; andIFRS 9 – Financial Instruments: in accordance with IFRS 9, as from 2018, UMG applied thischange of accounting standard to the 2019 Statement of Earnings and Statement ofComprehensive Income and restating its opening balance sheet as of January 1, 2018.

8.6

Key Accounting Policies

8.6.1

Revenue

Revenues from contracts with customers are recorded when performance obligations promised in thecontract are satisfied, and for an amount for which it is highly probable that a significant reversal in the amountof cumulative revenue recognized will not occur. Revenues are reported net of discounts.
UMG has made the accounting of intellectual property licensing revenues a major point of attention.
(a)Intellectual property licensing (musical works)

These licenses transfer to a customer either a right to use an entity’s intellectual property as it exists at
the point in time at which the license is granted (static license), or a right to access an entity’s intellectual property
as it exists throughout the license period (dynamic license).
Revenues are accounted for when the performance obligation promised in the contract is satisfied (static
license) or over time upon satisfaction (dynamic license), i.e., when the seller transfers the risks and rewards ofthe right to use/access the intellectual property and the customer obtains control of the use/access of that license.
Consequently, revenues from static licenses are recognized at the point in time when the license is transferred andthe customer is able to use and benefit from the license. Revenues from dynamic licenses are accounted for overtime, over the license period from the date the customer is able to use and benefit from the license.
(b)

Analysis of the Agent/Principal relationship in sales transactions involving a third party

If the nature of the entity’s undertaking is a performance obligation to provide the specified goods orservices itself, then the entity acts on its own behalf and it is “principal” in the sale transaction: it accounts forrevenue the gross amount of consideration to which it expects to be entitled in exchange for the goods or services
provided, and the commission due to the third-party as cost of revenues. If the entity arranges for a third-party toprovide the goods or services specified in the contract, then it recognizes as revenues the net amount ofconsideration to which it expects to be entitled in exchange for the goods or services provided. In the licensing ofintellectual property between UMG and digital service providers, UMG acts as principal in the vast majority of
all transactions and acts in an agent capacity in an very small number of transactions, which transactions in an
agent capacity account for an immaterial percentage of UMG’s revenues.
(c)

Revenue recognition by business segment(i)

Recorded music

The sales of recorded music (physical, digital downloading or streaming) are intellectual property
licenses granted by UMG to distributors or digital platforms and which give them certain rights over thecompany’s musical works. In its relationship with the distributor/digital platform and the end customer, UMG-55-

cannot be “principal”, as the distributor or the digital platform is responsible for setting the transfer of control
conditions of the right of use granted by the license to the end customer (broadcasting, price setting and conditions
for reselling the physical devices).
(ii)

Physical sales of recorded music (CDs. DVDs and Vinyl).

These intellectual property licenses are static licenses transferring to the customer a right to use UMG’srecordings as they exist at the point in time at which the license is granted, i.e., on the physical device sold.
Revenues from the physical sales of recorded music, net of a provision for estimated returns and rebates, if any,
are accounted for, either: (i) upon the sale to the distributor, at the shipping point for products sold free on board(FOB) or on delivery for products sold free on destination; or (ii) upon the sale to the final customer forconsignment sales.
(iii)

Digital sales of recorded music, via downloading or streaming by subscription or freeof charge.

These intellectual property licenses are generally dynamic licenses providing a right to access the entire
catalog of recorded music as it exists throughout the license period considering potential add-ons to, orwithdrawals from, the catalog during that period. The consideration paid by the digital platform is variable in theform of a sales-based or a usage-based royalty. Revenues are then accounted for when these subsequent sales or
usages occur. Revenues from digital sales of recorded music, for which UMG has sufficient, accurate, and reliabledata from digital platforms, are recognized at the end of the month in which the sale or usage is made by the end
customer. If such data is not available, revenues are recognized when the digital platform notifies UMG of thesale or usage by the end customer.
For digital sales of recorded music streaming by subscription or free of charge, certain contracts may
include a non-refundable minimum guarantee which is generally recoupable and is in substance an advancepayment. In the case of a dynamic license, the minimum guarantee is spread over the period to which it relates
and takes into account the amount of royalties that are actually recoupable. The minimum guarantee is hence
apportioned in accordance with the accounting for these royalties.
(iv)

Music publishing.

Music publishing relates to the use by a third party of the copyrights on musical works owned oradministered by UMG, which are intellectual property licenses that UMG grants to the third party and which
provides a right to access a catalog of recorded music, as these intellectual property licenses are dynamic licenses.
The consideration paid by the third-party, notably a collection society (e.g., a company for the collective
management of intellectual property rights) is variable in the form of a royalty based on the usage by the third
party. The variable consideration being accounted for when these subsequent usages occur, revenues from music
publishing are accounted for when the collection society notifies UMG of the usage by the end customer andcollectability is assured.
(v)

Merchandising.

Revenues from merchandising are recognized either upon sale to the end customer, from direct sales
during touring, concessions and over the internet; on delivery for sales by a third-party distributor; when a contract
is signed; or when an invoice has been issued and the collectability is assured for sales of rights attached tomerchandising products.
8.6.2

Goodwill and business combinations(a)Business combinations from January 1, 2009

Pursuant to IFRS 1, UMG elected not to restate business combinations that occurred prior to January 1,
2016. Business combinations are recorded using the acquisition method. Under this method, upon the initialconsolidation of an entity over which the group has acquired exclusive control:the identifiable assets acquired, and the liabilities assumed are recognized at their fair value on
the acquisition date; and

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

non-controlling interests are measured either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets. This option is available on atransaction-by-transaction basis.

On the acquisition date, goodwill is initially measured as the difference between:the fair value of the consideration transferred, plus the amount of non-controlling interests inthe acquiree and, in a business combination achieved in stages, the acquisition-date fair valueof the previously held equity interest in the acquiree; andthe net fair value of the identifiable assets and liabilities assumed on the acquisition date.

The measurement of non-controlling interests at fair value results in an increase in goodwill up to theextent attributable to these interests, thereby leading to the recognition of a “full goodwill”. The purchase priceallocation shall be performed within 12 months after the acquisition date. If goodwill is negative, it is recognizedin the Statement of Earnings. Subsequent to the acquisition date, goodwill is measured at its initial amount lessrecorded accumulated impairment losses.
In addition, the following principles are applied to business combinations:

8.6.3



on the acquisition date, to the extent possible, goodwill is allocated to each cash-generating unit
likely to benefit from the business combination;

contingent consideration in a business combination is recorded at fair value on the acquisitiondate, and any subsequent adjustment occurring after the purchase price allocation period isrecognized in the Statements of Earnings;

acquisition-related costs are recognized as expenses when incurred;

in the event of the acquisition of an additional interest in a subsidiary, UMG recognizes thedifference between the acquisition price and the carrying value of non-controlling interests
acquired as a change in equity attributable to UMG shareowners; and

goodwill is not amortized.

Royalty advances and content assets

Royalty advances to artists, songwriters, and co-publishers are capitalized as an asset when their current
popularity and past performances provide a reasonable basis to conclude that the probable future recoupment ofsuch royalty advances against earnings otherwise payable to them is reasonably assured. Royalty advances arerecognized as an expense as subsequent royalties are earned by the artist, songwriter or co-publisher. Any portionof capitalized royalty advances not deemed to be recoverable against future royalties is expensed during the period
in which the loss becomes evident. These expenses are recorded in cost of revenues.
Royalties earned by artists, songwriters, and co-publishers are recognized as an expense in the period
during which the sale of the product occurs, less a provision for estimated returns from the physical sales ofrecorded music.
Music rights and catalogs include music catalogs, artists’ contracts and music publishing rights acquired.
The annual review of the value of the intangible assets, undertaken by UMG at year-end 2016 led to a change in
the amortization method of music rights and catalogs as from January 1, 2017, which notably resulted in an
extension of the amortization period from 15 to 20 years.
UMG presents expenses and cash considerations paid which are linked to content assets (whether directly
when paid to an artist or by destination in the case of a catalog acquisition) as operating expenses and cashflows
in its statement of comprehensive income and statement of cash flows, respectively. UMG believes thispresentation is relevant for readers of its financial statements as it consistently reports the cost of using music
recordings to generate revenue in its recorded music and publishing segments, regardless of the timing or
beneficiaries of payments which have been made to provide UMG with the right to use the music recordings. The
impact of this presentation is disclosed in UMG’s combined statement of cash flows.

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8.6.4

Cost of internal use software

Direct internal and external costs incurred for the development of computer software for internal use,
including website development costs, are capitalized during the application development stage. Application
development stage costs generally include software configuration, coding, installation and testing. Costs ofsignificant upgrades and enhancements resulting in additional functionality are also capitalized. These capitalized
costs are amortized over five to ten years. Maintenance, minor upgrades, and enhancement costs are expensed asthey are incurred.
8.6.5

Leases

UMG applies IFRS 16 with retrospective effect as from January 1, 2019 without restating comparative
periods in the Combined Financial Statements.
As licenses of intellectual property granted by a lessor and rights held by a lessee under licensing
agreements being excluded from the scope of IFRS 16, the main lease contracts for UMG correspond to real estateleases for which UMG is the lessee.
Real estate leases for which UMG is the lessee are recorded at the commencement date and result in therecognition of a lease liability equal to the present value of future lease payments against a right-of-use asset
relating to leases.
The determination of the lease liability as of January 1, 2019 was made by:

analyzing operating leases for which contractual obligations were disclosed as off-balance sheet
commitments until December 31, 2018;

assessing the lease term that relates to the non-cancellable period of the lease, and taking into
account all options to extend the lease which UMG is reasonably certain to exercise and all
options to terminate the lease which UMG is reasonably certain not to exercise. UMG
determined that real estate lease terms in France are generally nine years; andestimating the incremental borrowing rate as of January 1, 2019 of each lease contract, taking
into account their residual lease term at this date and their duration to reflect the interest rate ofa loan with a similar payment profile to the lease payments.

As of January 1, 2019, regarding the main impacts, it is specified that:

for some leases, as permitted by IFRS 16, at the date of transition, UMG used hindsight; and

UMG has applied the practical expedient provided by IFRS 16 to exclude initial direct costs
from the measurement of the right-of-use asset at the date of initial application.

For each lease, the lease term assessment and incremental borrowing rate estimate are determined at thecommencement date.
After initial recognition, the liability is:increased by the effect of undiscounting (interest expense on lease liabilities);decreased by the cash out for lease payments; andreassessed in the event of an amendment to the lease contract.

The right-of-use asset is recognized at cost at the effective date. The cost of the right-of-use asset
includes:

the lease liability;

the initial direct costs (incremental costs of obtaining the lease);

payments made prior to the commencement date less lease incentives received from the lessor;

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

dismantling and restoration costs (measured and recognized in accordance with IAS 37); andthe amortization period used is the lease term.

The lease liability is a current or non-current operating liability excluded from the calculation of Financial
Net Debt. Depreciation of right-of-use assets is included in Adjusted Earnings Before Interest and Income Taxes(EBITA) and excluded from earnings before interest and tax depreciation and amortization (EBITDA). The effectof undiscounting the lease liability (interest expense on lease liabilities) is included in other financial charges.
Cash payments for the principal of the lease liability and any interest thereon are presented as financing activities
in the condensed statement of cash flows.
8.6.6

Asset impairment

Each time events or changes in the economic environment indicate a risk of impairment of goodwill,other intangible assets, property, plant and equipment, and assets in progress, UMG re-examines the value of theseassets. In addition, in accordance with applicable accounting standards, goodwill, other intangible assets with anindefinite useful life, and intangible assets in progress are all subject to an annual impairment test undertaken in
the fourth quarter of each fiscal year. This impairment test is performed to compare the recoverable amount ofeach Cash Generating Unit (CGU) or, if necessary, group of CGUs to the carrying value of the corresponding
assets (including goodwill). A CGU is the smallest identifiable group of assets that generates cash inflows thatare largely independent of the cash inflows from other assets or groups of assets. UMG operates through different
media and content businesses. Each business offers different products and services that are marketed throughvarious channels. CGUs are independently defined at each business level, corresponding to the group operating
segments. For a description of UMG’s CGUs and groups of CGUs.
The recoverable amount is determined for each individual asset as the higher of: (i) its value in use; and(ii) its fair value (less costs to sell) as described hereafter. If the asset does not generate cash inflows that arelargely independent of other assets or groups of assets, the recoverable amount is determined for the group ofassets. In particular, an impairment test is performed by UMG for each CGU or group of CGUs, depending on thelevel at which UMG management measures return on operations.
The value in use of each asset or group of assets is determined, subject to exceptions, as the discounted
value of future cash flows (Discounted Cash Flow method (DCF)) by using cash flow projections consistent withthe budget of the following year and the most recent forecasts prepared by the operating segments.
Applied discount rates are determined by reference to available external sources of information, usuallybased on financial institutions’ benchmarks, and reflect the current assessment by UMG of the time value ofmoney and risks specific to each asset or group of assets.
Perpetual growth rates used for the evaluation are those used to prepare budgets for each CGU or groupof CGUs, and beyond the period covered, are consistent with growth rates estimated by the business by
extrapolating growth rates used in the budgets, without exceeding the long-term average growth rate for themarkets in which the group operates.
The fair value (less costs to sell) is the price that would be received from the sale of an asset or group ofassets in an orderly transaction between market participants at the measurement date, less costs to sell. These
values are generally determined based on market data (stock market prices or comparison with similar listedcompanies, with the value attributed to similar assets or companies in recent transactions) or, in the absence ofsuch data, based on discontinued cash flows.
If the recoverable amount is lower than the carrying value of an asset or group of assets, an impairment
loss equal to the difference is recognized in EBIT. In the case of a group of assets, this impairment loss is firstrecorded against goodwill.
The impairment losses recognized in respect of property, plant and equipment, and intangible assets(other than goodwill) may be reversed in a later period if the recoverable amount becomes greater than the carrying
value, within the limit of impairment losses previously recognized. Impairment losses recognized in respect of
goodwill cannot be reversed at a later date.
Other intangible assets include trade names, customer bases and licenses. By contrast, internallygenerated music catalogs, trade names, subscribers' bases and market shares are not recognized as intangible
assets.

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8.6.7

Financial assets

Financial assets are initially recognized at fair value corresponding, in general, to the consideration paid,
which is best evidenced by the acquisition cost (including associated acquisition costs, if any). Thereafter,
financial assets are measured at fair value or at amortized cost depending on which financial asset category they
belong to.
From January 1, 2018, financial assets are classified into the accounting categories “financial assets at
amortized cost”, “financial assets at fair value through other comprehensive income” and “financial assets at fairvalue through profit or loss”.
This classification depends on the entity’s business model for managing the financial assets and on
contractual terms enabling to determine whether the cash flows are solely payments of principal and interest(SPPI). The financial assets that contain an embedded derivative should be considered in full to determine whether
their cash flows are SPPI.
(a)

Financial assets at fair value

These include financial assets at fair value through other comprehensive income, derivative financial
instruments with a positive value and other financial assets measured at fair value through profit or loss. Most ofthese financial assets are actively traded in organized financial markets, as their fair value is calculated byreference to the published market price at the period end. Fair value is estimated for financial assets which do nothave a published market price on an active market. As a last resort, when a reliable estimate of fair value cannot
be made using valuation techniques in the absence of an active market, the group values financial assets at
historical cost, less any impairment losses.
Financial assets at fair value through other comprehensive income include:

Unconsolidated companies that are not held for trading: UMG elected to classify these into thecategory “fair value through other comprehensive income”. Unrealized gains and losses on
financial assets at fair value through other comprehensive income are recognized in charges andincome directly recognized in equity until the financial asset is sold, collected or removed fromthe Statement of Financial Position in another way, at which time the accumulated gain or loss
previously reported in charges and income directly recognized in equity is transferred to retained
earnings and never reclassified to profit or loss. Dividends and interest received fromunconsolidated companies are recognized in profit or loss.



Debt instruments held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets, and whose contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding. Unrealized gains and losses on financial assets at fair value through othercomprehensive income are recognized in charges and income directly recognized in equity until
the financial asset is sold, collected or removed from the Statement of Financial Position inother ways, at which time the accumulated gain or loss previously reported in charges andincome directly recognized in equity is expensed in other financial charges and income.

Other financial assets measured at fair value through profit or loss mainly consist of assets held for
trading which UMG intends to sell in the near future (primarily marketable securities) and other financial assets
unless it is measured at amortized cost or at fair value through other comprehensive income. Unrealized gains andlosses on these assets are recognized in other financial charges and income.
(b)

Financial assets at amortized cost

Financial assets at amortized cost consist of debt instruments held within a business model whose
objective is to hold financial assets to collect contractual cash flows that are solely payments of principal andinterest on the principal amount outstanding. At the end of each period, these assets are measured at amortizedcost using the effective interest method. If there is objective evidence that an impairment loss has been incurred,
the amount of this loss, measured as the difference between the financial asset’s carrying value and its recoverable
amount (equal to the present value of estimated future cash flows discounted at the financial asset’s initial effective
interest rate), is recognized in profit or loss. Impairment losses may be reversed if the recoverable amount of theasset subsequently increases in the future.

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(c)

Impairment of financial assets

UMG assesses the expected credit loss associated with its financial assets recognized at amortized costand debt instruments recognized at fair value through other comprehensive income on a prospective basis. A loss
allowance for expected credit loss based on probability of default is recognized at initial recognition. The loss
allowance is updated for changes in these expected credit losses at each reporting date to reflect changes in credit
risk since initial recognition.
To assess whether there has been a significant increase in credit risk, UMG compares the credit risk at
the reporting date with the credit risk at the date of initial recognition based on reasonable forward-looking
information and events, including credit ratings if available, significant adverse economic changes (actual or
expected), financial or business environment that are expected to result in a material change in the borrower's
ability to meet its obligations.
8.6.8

Financial liabilities
Long-term and short-term borrowings and other financial liabilities include:

8.6.9



bonds and credit facilities, as well as various other borrowings (including commercial paper anddebt related to finance leases) and related accrued interest;

obligations arising out of commitments to purchase non-controlling interests;

bank overdrafts; andthe negative value of other derivative financial instruments. Derivatives with positive values arerecorded as financial assets in the Statement of Financial Position.

Borrowings

All borrowings are initially accounted for at fair value net of transaction costs directly attributable to theborrowing. Borrowings bearing interest are subsequently valued at amortized cost, applying the effective interest
method. The effective interest rate is the internal yield rate that discounts future cash flows over the term of theborrowing. In addition, where the borrowing comprises an embedded derivative (e.g., an exchangeable bond) oran equity instrument (e.g. a convertible bond), the amortized cost is calculated for the debt component only, after
separation of the embedded derivative or equity instrument. In the event of a change in expected future cash flows(e.g., redemption occurs earlier than initially expected), the amortized cost is adjusted against earnings to reflect
the value of the new expected cash flows, discounted at the initial effective interest rate.
8.6.10

Other liabilities(a)Provisions

Provisions are recognized when, at the end of the reporting period, UMG has a legal obligation (statutory,
regulatory or contractual) or a constructive obligation, as a result of past events, and it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and the obligation can bereliably estimated. Where the effect of the time value of money is material, provisions are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time value of money. If
the amount of the obligation cannot be reliably estimated, no provision is recorded and a disclosure is made in theNotes to the Combined Financial Statements.
(b)

Employee benefit plans

In accordance with the laws and practices of each country in which it operates, UMG participates in, or
maintains, employee benefit plans providing retirement pensions, post-retirement health care, life insurance andpost-employment benefits to eligible employees, former employees, retirees and such of their beneficiaries whomeet the required conditions. Retirement pensions are provided for substantially all employees through defined
contribution plans, which are integrated with local social security and multi-employer plans, or defined benefit
plans, which are generally managed via group pension plans. The plan funding policy implemented by the groupis consistent with applicable government funding requirements and regulations.

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(c)

Defined contribution plans

Contributions to defined contribution and multi-employer plans are expensed during the year.
(d)Defined benefit plans

Defined benefit plans may be funded by investments in various instruments such as insurance contracts
or equity and debt investment securities, excluding shares in any UMG entity or debt instruments.
Pension expenses and defined benefit obligations are calculated by independent actuaries using the
projected unit credit method. This method is based on annually updated assumptions, which include the probabilityof employees remaining with UMG until retirement, expected changes in future compensation and an appropriate
discount rate for each country in which UMG maintains a pension plan. A provision is recorded in the Statementof Financial Position equal to the difference between the actuarial value of the related benefits (actuarial liability)
and the fair value of any associated plan assets, and this includes past service costs and actuarial gains and losses.
The cost of defined benefit plans consists of three components recognized as follows:

the service cost is included in selling, general and administrative expenses. It comprises current
service cost, past service cost resulting from a plan amendment or a curtailment, immediately
recognized in profit and loss, and gains and losses on settlement;

the financial component, recorded in other financial charges and income, consists of theundiscounting of the obligation, less the expected return on plan assets determined using thediscount rate retained for the valuation of the benefit obligation; andthe remeasurements of the net defined benefit liability (asset), recognized in items of othercomprehensive income not reclassified as profit and loss, mainly consist of actuarial gains andlosses, i.e., changes in the present value of the defined benefit obligation and plan assets
resulting from changes in actuarial assumptions and experience adjustments (representing thedifferences between the expected effect of some actuarial assumptions applied to previous
valuations and the effective impact).

Where the value of plan assets exceeds benefit obligations, a financial asset is recognized up to thepresent value of future refunds and the expected reduction in future contributions.
Some other post-employment benefits, such as life insurance and medical coverage (mainly in the UnitedStates) are subject to provisions which are assessed through an actuarial calculation comparable to the method
used for pension provisions.
8.6.11

Deferred taxes

Differences existing at closing between the tax base value of assets and liabilities and their carrying value
in the Combined Statement of Financial Position give rise to temporary differences. Pursuant to the liability
method, these temporary differences result in the accounting of:deferred tax assets, when the tax base value is greater than the carrying value (expected future
tax saving); anddeferred tax liabilities, when the tax base value is lower than the carrying value (expected future
tax expense).

Deferred tax assets and liabilities are measured at the expected tax rates for the year during which theasset will be realized or the liability settled, based on tax rates (and tax regulations) enacted or substantiallyenacted by the closing date. They are reviewed at the end of each year, in line with any changes in applicable tax
rates.
Deferred tax assets are recognized for all deductible temporary differences, tax loss carry-forwards andunused tax credits, insofar as it is probable that a taxable profit will be available, or when a current tax liability
exists to make use of those deductible temporary differences, tax loss carry-forwards and unused tax credits,
except where the deferred tax asset associated with the deductible temporary difference is generated by initialrecognition of an asset or liability in a transaction which is not a business combination, and that, at the transaction
date, does not impact earnings, nor tax income or loss.
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For deductible temporary differences resulting from investments in subsidiaries, joint ventures and otherassociated entities, deferred tax assets are recorded to the extent that it is probable that the temporary difference
will reverse in the foreseeable future and that a taxable profit will be available against which the temporary
difference can be utilized.
The carrying value of deferred tax assets is reviewed at each closing date, and revalued or reduced to theextent that it is more or less probable that a taxable profit will be available to allow the deferred tax asset to be
utilized. When assessing the probability of a taxable profit being available, account is taken, primarily, of prioryears’ results, forecasted future results, non-recurring items unlikely to occur in the future and the tax strategy.
As such, the assessment of the group’s ability to utilize tax losses carried forward is to a large extent judgmentbased. If the future taxable results of the group proved to differ significantly from those expected, the group would
be required to increase or decrease the carrying value of deferred tax assets with a potentially material impact on
the group’s Statement of Financial Position and Statement of Earnings.
Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred
tax liability results from goodwill or initial recognition of an asset or liability in a transaction which is not abusiness combination, and that, at the transaction date, does not impact earnings, tax income or loss.
For taxable temporary differences resulting from investments in subsidiaries, joint ventures and otherassociated entities, deferred tax liabilities are recorded except to the extent that both of the following conditions
are satisfied: the parent, investor or venturer is able to control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not be reversed in the foreseeable future.
Current tax and deferred tax shall be charged or credited directly to equity, and not earnings, if the tax
relates to items that are credited or charged directly to equity.
8.6.12

Share-based compensation

With the aim of aligning the interests of executive management and employees of Vivendi with its
shareholders’ interests by providing them with an additional incentive to improve Vivendi’s performance andincrease its share price on a long-term basis, Vivendi maintains several share-based compensation plans (sharepurchase plans, performance share plans and bonus share plans) or other equity instruments based on the value ofthe Vivendi share price (stock options), which are settled either in equity instruments or in cash. Grants underthese plans are approved by Vivendi’s management and supervisory boards. In addition, the definitive grant ofstock options and performance shares is contingent upon the achievement of specific performance objectives set
by Vivendi’s management and supervisory boards. Moreover, all granted plans are conditional upon active
employment at the vesting date.
In addition, Dailymotion set up a long-term incentive plan for certain key executives of Vivendi andcertain of its subsidiaries, including UMG, for a five year period until June 30, 2020.
Share-based compensation is recognized as a personnel cost at the fair value of the equity instruments
granted. This expense is spread over the vesting period, i.e., three years for stock option plans and for performance
share plans (two years for performance shares granted before June 24, 2014), and two years for Vivendi’s bonus
share plans, other than in specific cases.
The cost of share-based compensation is allocated to UMG, pro rata to the number of equity instruments
or equivalent instruments granted to their managers and employees.
Vivendi uses a binomial model to assess the fair value of such instruments. This method relies on
assumptions updated at the valuation date such as the calculated volatility of the relevant shares, the discount rate
corresponding to the risk-free interest rate, the expected dividend yield, and the probability of relevant managers
and employees remaining employed within the group until the exercise of their rights.
However, depending on whether the instruments granted are equity-settled or cash-settled, the valuation
and recognition of the expense will differ:(a)Equity-settled instruments:the expected term of the option granted is deemed to be the mid-point between the vesting date
and the end of the contractual term;

the value of the instruments granted is estimated and fixed at grant date; and
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8.7



the expense is recognized with a corresponding increase in equity.

(b)

Cash-settled instruments:the expected term of the instruments granted is deemed to be equal to one-half of the residual
contractual term of the instrument for vested rights, and to the average of the residual vesting
period at the remeasurement date and the residual contractual term of the instrument forunvested rights;

the value of instruments granted is initially estimated at grant date and is then re-estimated ateach reporting date until the payment date and the expense is adjusted pro rata taking into
account the vested rights at each such reporting date;the expense is recognized as a provision; andmoreover, as plans settled in cash are primarily denominated in US dollars, the value fluctuates
based on the EUR/USD exchange rate.

Results of Operations

The table below presents UMG’s results of operations for the periods indicated which has been extracted
without material adjustment from the historical financial information set out in Section 18 (Historical Financial
Information).
6 months ended June 30,
2021

2020

Year ended December 31,

2020

2019

2018

(€ millions, unless otherwise indicated)
Revenues
Cost of revenues ..................................................
Selling, general and administrative expenses ......
Restructuring charges..........................................
Impairment losses on intangible assets acquired
through business combinations ...........................
Income from equity affiliates – operational ........

(Unaudited)
3,831
3,459
(2,047)(1,820)(1,090)(1,104)
(9)
(8)
-

7,432
(3,917)(2,265)(20)-(Audited)
7,159(3,818)(2,276)
(24)
-

6,023
(3,110)(2,062)
(29)
-

(1)

(11)

(9)

(2)

(1)

Earnings before interest and income taxes(EBIT)
Interest ................................................................
Income from investments ....................................
Other financial income ........................................
Other financial charges .......................................

684

516

1,221

1,039

821

(9)
105
(183)

(6)
453
(13)

(15)
603
(28)

14
174
(57)

27
1
333
(29)

Earnings before provision for income taxes
Provision for income taxes ..................................

(87)
597
(144)

434
950
(214)

560
1,781
(412)

131
1,170
(195)

332
1,153
(251)

Earnings from continuing operations
Earnings from discontinued operations ...............
Earnings

453
453

736
736

1,369
1,369

975
975

902
902

Of which..............................................................
Earnings attributable to shareowners
Non-controlling interests.....................................

452
1

735
1

1,366
3

972
3

897
5

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Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020; Twelve Months
Ended December 2020 Compared with Twelve Months Ended December 2019 and 2018.
8.7.1

Total Revenues

Total revenues increased by €372 million, or 10.8% (17.3% at constant currency and 17.3% at constantcurrency and constant perimeter), to €3,831 million for the six months ended June 30, 2021 from €3,459 million
for the six months ended June 30, 2020. The increase is due to the growth in subscription and streaming andstronger physical sales, while the prior year was impacted by initial lockdown restrictions in response to the
COVID-19 pandemic. Prior to intersegment eliminations, recorded music and music publishing revenues
represented 82% and 15% and 80% and 17% of total revenue for the six months ended June 30, 2021 and June30, 2020, respectively.
Total revenues increased by €273 million, or 3.8% (5.1% at constant currency and 4.7% at constantcurrency and perimeter), to €7,432 million for the fiscal year ended December 31, 2020 from €7,159 million for
the fiscal year ended December 31, 2019. This increase was driven by the increase of streaming and subscription
revenue. UMG’s merchandising revenues were down 39.6% at constant currency and perimeter compared to 2019
due to the impact of the COVID-19 pandemic on both touring and retail activity, which cut off access for
consumers to purchase these products at their usual retail points. As such, UMG’s eCommerce business grewsignificantly in 2020, but could not fully offset the loss of touring and retail merchandise sales. UMG was able tofurther offset the negative impact of COVID-19 with a significant increase in subscription and streaming revenues.
UMG also generated some incremental revenue from its work on more than 100 live performances by artists
worldwide that streamed on more than a dozen platforms.
Total revenues increased by €1,136 million, or 18.9% (15.6% at constant currency and 14% at constantcurrency and perimeter), to €7,159 million for the fiscal year ended December 31, 2019 from €6,023 million for
the fiscal year ended December 31, 2018. The increase was mainly due to the growth of streaming and subscription
revenue, as well as favorable foreign exchange movements.
8.7.2

Cost of Revenues

Cost of revenues include royalties/copyrights to artists and songwriters, A&R, product, selling anddistribution costs, as well as related overheads.
Cost of revenues increased by €227 million, or 12.5%, to €2,047 million for the six months ended June30, 2021 from €1,820 million for the six months ended June 30, 2020. The increase is in line with the growth inrevenues.
Cost of revenues increased by €99 million, or 2.6%, to €3,917 million for the fiscal year ended December
31, 2020 from €3,818 million for the fiscal year ended December 31, 2019 and increased by €708 million, or
22.8%, to €3,818 million for the fiscal year ended December 31, 2019 from €3,110 million for the fiscal year
ended December 31, 2018, in line with the greater level of sales.
8.7.3

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily include salaries and employee benefits, consulting
and service fees, marketing and promotion costs, insurance costs, travel and entertainment expenses,
administrative department costs, provisions for receivables and other operating expenses. Selling, general andadministrative expenses decreased by €14 million, or -1.3%, to €1,090 million for the six months ended June 30,
2021 from €1,104 million for the six months ended June 30, 2020. The decrease is due to the favorable impact ofchanges in foreign exchange.
Selling, general and administrative expenses decreased by €11 million, or 0.5%, to €2,265 million for
the fiscal year ended December 31, 2020 from €2,276 million for the fiscal year ended December 31, 2019 as aconsequence of the COVID-19 pandemic impact on travel and entertainment expenses and marketing costs.
Selling, general and administrative expenses increased by €214 million, or 10.4%, to €2,276 million for
the fiscal year ended December 31, 2019 from €2,062 million for the fiscal year ended December 31, 2018, as aconsequence of increased headcount and activity driven increase in marketing spend.

-65-

8.7.4

Earnings before interest and income taxes (EBIT)

Total EBIT increased by €168 million, or 32.6%, to €684 million for the six months ended June 30, 2021
from €516 million for the six months ended June 30, 2020. The increase is due to the growth in revenues.
Total EBIT increased by €182 million, or 17.5%, to €1,221 million for the fiscal year ended December
31, 2020 from €1,039 million for the fiscal year ended December 31, 2019. The increase is due to the increase inrevenues and cost containment in light of the COVID-19 pandemic. Amortization increased by €24 million on thehigher balance of intangible assets following catalog acquisitions during 2019 and 2020. Depreciation increasedby €6 million on the higher balance of tangible assets following asset additions during 2019 and 2020.
Depreciation on right-of-use assets increased by €5 million on new leases entered into during 2019 and 2020.
Other non-recurring items increased by €7 million due to greater losses from equity investments.
Total EBIT increased by €218 million, or 26.6%, to €1,039 million for the fiscal year ended December
31, 2019 from €821 million for the fiscal year ended December 31, 2018 as a result of the increase in revenues
and despite higher selling, general and administrative costs driven by increased marketing expenses, and overhead
costs. Amortization increased by €5 million largely driven by unfavorable foreign currency movements.
Depreciation increased by €7 million on the higher balance of tangible assets following asset additions during
2018 and 2019. Depreciation on right-of-use assets was reported for the first time in 2019 following the adoptionof IFRS 16. Previously, costs in relation to operating leases were reported within EBITDA.
8.7.5

Earnings

Total earnings decreased by €283 million, or -38.5%, to €453 million for the six months ended June 30,
2021 from €736 million for the six months ended June 30, 2020. The decrease is due to the decrease in net financial
income on a lower fair value of the interests in Spotify and other equity holdings and despite the increase inearnings before interest and income taxes (EBIT). The Group’s interest in Spotify had a carrying value of €1,475
million as at June 30, 2021, when compared to €1,486 million as at June 30, 2020, whereas the Group’s interestin Tencent Music Entertainment had a carrying value of €156 million as at June 30, 2021 when compared to €146
million as at June 30, 2020.
Total earnings increased by €394 million, or 40.4%, to €1,369 million for the fiscal year ended December
31, 2020 from €975 million for the fiscal year ended December 31, 2019. The increase is due to an overall increasein earnings before interest and income taxes (EBIT), net financial income, including the change in fair value ofthe interests in Spotify and other equity holdings, despite an increased provision for income taxes and earnings
from continuing operations. The Group’s interest in Spotify had a carrying value of €1,669 million as at December
31, 2020, when compared to €871 million as at December 31, 2019, whereas the Group’s interest in Tencent
Music Entertainment had a carrying value of €193 million as at December 31, 2020 when compared to €129
million as at December 31, 2019.
Total earnings increased by €73 million, or 8.1%, to €975 million for the fiscal year ended December 31,
2019 from €902 million for the fiscal year ended December 31, 2018. The increase was due to an overall increasein earnings before interest and income taxes (EBIT) despite the decrease of the net financial income on a lower
fair value of the interests in Spotify and other equity holdings and a lower provision for income taxes. The Group’s
interest in Spotify had a carrying value of €871 million as at December 31, 2019, when compared to €647 million
as at December 31, 2018, whereas the Group’s interest in Tencent Music Entertainment had a carrying value of€129 million as at December 31, 2019 when compared to €142 million as at December 31, 2018.
8.7.6

EBITDA and EBITAEBITDA increased by €173 million, or 26.6% (31.8% at constant currency and 31.8% at constantcurrency and perimeter), to €822 million for the six months ended June 30, 2021 from €649 million for the six
months ended June 30, 2020. EBITA increased by €186 million, or 32.8% (37.7% at constant currency and 37.7%
at constant currency and perimeter), to €753 million for the six months ended June 30, 2021 from €567 million
for the six months ended June 30, 2020. The increase is due to the growth in revenues.
EBITDA increased by €220 million, or 17.4% (19% at constant currency and 19% at constant currency
and perimeter), to €1,487 million for the fiscal year ended December 31, 2020 from €1,267 million for the fiscal
year ended December 31, 2019. EBITA increased by €205 million, or 18.2% (20.1% at constant currency and20.1% at constant currency and perimeter), to €1,329 million for the fiscal year ended December 31, 2020 from
€1,124 million for the fiscal year ended December 31, 2019. The increase is due to the increase in revenues andcost containment in light of the COVID-19 pandemic.

-66-

EBITDA increased by €288 million, or 29.4%, to €1,267 million for the fiscal year ended December 31,
2019 from €979 million for the fiscal year ended December 31, 2018. EBITA increased by €222 million, or 24.6%(21.8% at constant currency and 22.3% at constant currency and perimeter), to €1,124 million for the fiscal year
ended December 31, 2019 from €902 million for the fiscal year ended December 31, 2018. The increase is as aresult of the increase in revenues despite higher selling, general and administrative costs driven by increased
marketing expenses and overhead costs. In addition, following the adoption of IFRS 16, lease costs previously
reported within EBITDA were reported as depreciation of right-of-use assets.
8.7.7

Earnings before provision for income taxes

Earnings before provision for incomes taxes decreased by €353 million, or -37.2%, to €597 million forthe six months ended June 30, 2021 from €950 million for the six months ended June 30, 2020. The decrease isdue to the decrease in net financial income on a change in fair value of the interests in Spotify and other equity
holdings and despite the increase in earnings before interest and income taxes (EBIT). The Group’s interest in
Spotify had a carrying value of €1,475 million as at June 30, 2021, when compared to €1,486 million as at June30, 2020, whereas the Group’s interest in Tencent Music Entertainment had a carrying value of €156 million as
at June 30, 2021 when compared to €146 million as at June 30, 2020.
Earnings before provision for incomes taxes increased by €611 million, or 52.2%, to €1,781 million for
the fiscal year ended December 31, 2020 from €1,170 million for the fiscal year ended December 31, 2019. The
increase is due to the increase in EBITA and improved financial income driven by the favorable change in fairvalue of the interests in Spotify. The Group’s interest in Spotify had a carrying value of €1,669 million as at
December 31, 2020, when compared to €871 million as at December 31, 2019.
Earnings before provision for incomes taxes increased by €17 million, or 1.5%, to €1,170 million for the
fiscal year ended December 31, 2019 from €1,153 million for the fiscal year ended December 31, 2018. The
increase is as a result of the increase in EBITA, partly offset by unfavorable financial income driven by theunfavorable change in fair value of the interests in Spotify. The Group’s interest in Spotify had a carrying valueof €871 million as at December 31, 2019, when compared to €647 million as at December 31, 2018.
8.8

Segmental analysis

8.8.1

Revenue and EBITDA(a)

Recorded music

Globally, recorded music revenues increased by €366 million, or 13.2% (20% at constant currency and
20% at constant currency and constant perimeter), to €3,137 million for the six months ended June 30, 2021 from
€2,771 million for the six months ended June 30, 2020. Recorded music EBITDA increased by €159 million, or
26.9%, to €749 million for the six months ended June 30, 2021 from €590 million for the six months ended June30, 2020. The increase is due to the growth in subscription and streaming and stronger physical sales, while theprior year was impacted by initial lockdown restrictions in response to the COVID-19 pandemic.
Globally, recorded music revenues increased by €333 million, or 5.9% (7.2% at constant currency and6.7% at constant currency and perimeter), to €5,967 million for the fiscal year ended December 31, 2020 from
€5,634 million for the fiscal year ended December 31, 2019. Recorded music EBITDA increased by €204 million,
or 17.6%, to €1,360 million for the fiscal year ended December 31, 2020 from €1,156 million for the fiscal year
ended December 31, 2019. The overall increase in recorded music revenue was primarily driven by the growth instreaming and subscription revenue which more than offset the decline in physical and download sales.
Globally, recorded music revenues increased by €806 million, or 16.7% (13.4% at constant currency and11.6% at constant currency and perimeter), to €5,634 million for the fiscal year ended December 31, 2019 from
€4,828 million for the fiscal year ended December 31, 2018. Recorded music EBITDA increased by €283 million,
or 32.4%, to €1,156 million for the fiscal year ended December 31, 2019 from €873 million for the fiscal year
ended December 31, 2018. The overall increase in recorded music revenue was primarily driven by the growth instreaming and subscription revenue and the release driven improvement in physical sales, which more than offset
the continued decline in download sales. Revenue also benefitted from favorable foreign exchange movements.
(b)

Music publishing

Globally, music publishing revenues decreased by €9 million, or -1.6% (3.9% at constant currency and3.9% at constant currency and constant perimeter), to €564 million for the six months ended June 30, 2021 from€573 million for the six months ended June 30, 2020. The decrease when comparing these two periods is due to-67-the receipt of a digital royalty claim in relation to a past copyright infringement by a digital service provider inthe first half of 2020 which resulted in the six months ended June 30, 2020 being comparatively higher than thesix months ended June 30, 2021. Excluding this digital royalty claim, music publishing revenues grew by 6.8%
due to growth in subscription and streaming income. Likewise, music publishing EBITDA increased by €2
million, or 1.5%, to €134 million for the six months ended June 30, 2021 from €132 million for the six months
ended June 30, 2020.
Globally, music publishing revenues increased by €134 million, or 12.7% (14.4% at constant currency
and 14.4% at constant currency and perimeter), to €1,186 million for the fiscal year ended December 31, 2020
from €1,052 million for the fiscal year ended December 31, 2019. Music publishing EBITDA increased by €19
million, or 7.6%, to €269 million for the fiscal year ended December 31, 2020 from €250 million for the fiscal
year ended December 31, 2019. The overall increase in music publishing revenue was primarily driven byincreased subscription and streaming revenues as well as the receipt of a digital royalty claim in relation to a past
copyright infringement by a digital service provider.
Globally, music publishing revenues increased by €111 million, or 11.8% (9.2% at constant currency
and 9.2% at constant currency and perimeter), to €1,052 million for the fiscal year ended December 31, 2019 from€941 million for the fiscal year ended December 31, 2018. Music publishing EBITDA increased by €36 million,
or 16.8%, to €250 million for the fiscal year ended December 31, 2019 from €214 million for the fiscal year ended
December 31, 2018. The overall increase in music publishing revenue was primarily driven by increased
subscription and streaming revenues.
(c)Merchandising

Merchandising revenues increased by €17 million, or 14.0% (22.2% at constant currency and 22.2% atconstant currency and perimeter), to €138 million for the six months ended June 30, 2021 from €121 million forthe six months ended June 30, 2020. The increase is due to growth in retail and direct-to-consumer activity anddespite the continued impact of the COVID-19 pandemic on touring activity. Merchandising EBITDA decreasedby €1 million to negligible for the six months ended June 30, 2021 from €1 million for the six months ended June30, 2020. This immaterial decrease is due to higher costs of revenue.
Merchandising revenues decreased by €197 million, or 40.3% (39.6% at constant currency and 39.6% atconstant currency and perimeter), to €292 million for the fiscal year ended December 31, 2020 from €489 million
for the fiscal year ended December 31, 2019. Merchandising EBITDA decreased by €4 million, or 16%, to €21
million for the fiscal year ended December 31, 2020 from €25 million for the fiscal year ended December 31,
2019. This decrease was due to the impact of the COVID-19 pandemic on both touring and retail activity.
Merchandising revenues increased by €216 million, or 79.1% (73.7% at constant currency and 73.7% atconstant currency and perimeter), to €489 million for the fiscal year ended December 31, 2019 from €273 million
for the fiscal year ended December 31, 2018. Merchandising EBITDA increased by €10 million, or 66.7%, to €25
million for the fiscal year ended December 31, 2019 from €15 million for the fiscal year ended December 31,
2018. This increase was driven by higher touring revenue due to a strong touring roster and growth in retail anddirect-to consumer sales driven by the success of key artists including Billie Eilish, The Rolling Stones and Taylor
Swift. Revenues also benefited from the acquisition of Epic Rights at the end of 2018.
8.8.2

Recorded music Revenue by Geographical Location

Recorded music revenues in North America increased by €158 million, or 11.3% (23% at constantcurrency and 23% at constant currency and perimeter), to €1,554 million for the six months ended June 30, 2021
from €1,396 million for the six months ended June 30, 2020. Recorded music revenues in North America increasedby €304 million, or 11.5% (12.7% at constant currency and 11.4% at constant currency and perimeter), to €2,940
million for the fiscal year ended December 31, 2020 from €2,636 million for the fiscal year ended December 31,
2019. Recorded music revenues in North America increased by €412 million, or 18.5% (12.6% at constantcurrency and 8.7% at constant currency and perimeter), to €2,636 million for the fiscal year ended December 31,
2019 from €2,224 million for the fiscal year ended December 31, 2018. The primary driver was the increase instreaming and subscription revenues. Between 2018 and 2019, revenues also benefited from favorable foreignexchange movements and the acquisition of Ingrooves.
Recorded music revenues in Europe increased by €82 million, or 9.8% (10.3% at constant currency and10.3% at constant currency and perimeter), to €920 million for the six months ended June 30, 2021 from €838
million for the six months ended June 30, 2020. Recorded music revenues in Europe increased by €47 million, or
2.7% (3.6% at constant currency and 3.6% at constant currency and perimeter), to €1,789 million for the fiscal-68-year ended December 31, 2020 from €1,742 million for the fiscal year ended December 31, 2019. Recorded music
revenues in Europe increased by €162 million, or 10.3% (10.1% at constant currency and 10.1% at constantcurrency and perimeter), to €1,742 million for the fiscal year ended December 31, 2019 from €1,580 million for
the fiscal year ended December 31, 2018. The primary driver was the increase in streaming and subscription
revenues.
Recorded music revenues in Asia increased by €46 million, or 12.0% (18.8% at constant currency and18.8% at constant currency and perimeter), to €428 million for the six months ended June 30, 2021 from €382
million for the six months ended June 30, 2020. Recorded music revenues in Asia increased by €30 million, or
3.9% (3.5% at constant currency and 3.5% at constant currency and perimeter), to €801 million for the fiscal year
ended December 31, 2020 from €771 million for the fiscal year ended December 31, 2019. Recorded music
revenues in Asia increased by €153 million, or 24.8% (18.5% at constant currency and 18.5% at constant currency
and perimeter), to €771 million for the fiscal year ended December 31, 2019 from €618 million for the fiscal year
ended December 31, 2018. The primary driver was the increase in streaming and subscription revenues.
Recorded music revenues in Latin America increased by €12 million, or 12.6% (27.7% at constantcurrency and 27.7% at constant currency and perimeter), to €107 million for the six months ended June 30, 2021
from €95 million for the six months ended June 30, 2020, primarily due to the growth in subscription andstreaming income. Revenues in Latin America decreased by €3 million, or -1.6% (an increase of 15.5% at constantcurrency and an increase of 15.5% at constant currency and perimeter), to €181 million for the fiscal year ended
December 31, 2020 from €184 million for the fiscal year ended December 31, 2019, driven by unfavorable foreignexchange. Recorded music revenues in Latin America increased by €31 million, or 20.3% (25.5% at constantcurrency and 25.5% at constant currency and perimeter), to €184 million for the fiscal year ended December 31,
2019 from €153 million for the fiscal year ended December 31, 2018, driven by the growth in streaming andsubscription income.
Recorded music revenues in the rest of the world increased by €68 million, or 113.3% (78.4% at constantcurrency and 78.4% at constant currency and perimeter), to €128 million for the six months ended June 30, 2021
from €60 million for the six months ended June 30, 2020. Revenues in rest of the word decreased by €45 million,or 14.9% (13.6% at constant currency and 13.6% at constant currency and perimeter), to €256 million for the
fiscal year ended December 31, 2020 from €301 million for the fiscal year ended December 31, 2019. Recorded
music revenues in the rest of the word increased by €48 million, or 19.0% (20.4% at constant currency and 20.4%
at constant currency and perimeter), to €301 million for the fiscal year ended December 31, 2019 from €253
million for the fiscal year ended December 31, 2018. The primary driver for these changes was the re-allocationof certain deals originally booked centrally to operating companies.
8.9

Financial Condition and Liquidity

8.9.1

Statement on Working CapitalIn the opinion of the Company, UMG has sufficient working capital for its present requirements, that isfor at least the next 12 months following the date of this Prospectus.
8.9.2

Cash FlowsThe following table summarizes UMG’s cash flows.
6 months ended June 30,
2021

2020

Year ended December 31,

2020

2019

2018

(€ millions, unless otherwise indicated)(Unaudited)
Operating activities
EBIT....................................................................
Adjustments1 .......................................................
Content investments, net2 ....................................
Gross cash provided by operating activities
before income tax paid
Other changes in net working capital ..................

(Audited)

684
88
(173)

516
94
(352)

1,221
213
(1,517)

1,039
201
(465)

821
106
(161)

599

258

(83)

775

766

(172)

(118)

287

82

179

-69-

Net cash provided by operating activities
before income tax paid
Income tax (paid)/received, net ...........................

427

140

204

857

945

(118)

(64)

(207)

(172)

(198)

309

76

(3)

685

747

(23)
(2)

(37)
(1)

(66)
(4)

(75)
(50)

(110)
(12)

(23)
(47)

(1)
-

(2)
(3)

(13)

(12)

Investments
Proceeds from sales of property, plant,
equipment and intangible assets ..........................
Proceeds from sales of consolidated companies,
after divested cash ...............................................
Disposal of equity affiliates ................................
Decrease in financial assets .................................

(95)
5

(39)
-

(75)
-

(138)
3

(134)
-

117

-

11

(2)

1

-

1
-

1
15

6

19

Divestitures
Dividends received from equity affiliates ...........
Dividends received from unconsolidated
companies ...........................................................
Net cash provided by/(used for) investing
activities
Financing activities
Distributions to shareowners ...............................
Other transactions with shareowners...................
Dividends paid by consolidated companies totheir non-controlling interests .............................
Transactions with shareowners
Principal payment on short-term borrowings ......
Other changes in short-term borrowings andother financial liabilities......................................
Interest paid, net ..................................................
Other cash items related to financial activities ....

122
1
1

1
1

27
2
-

7
2
-

20
2
1

29

(37)

(46)

(129)

(111)

(422)
(1)

(11)
(3)

(283)
(11)
(5)

(1,002)(5)(981)(1,414)
(5)

(423)
(103)

(14)
149

(299)
625

(1,007)2(2,400)
(57)
46

(9)
(9)

(6)
(1)

(15)
(3)

14
(2)

27
(3)

(121)

142

607

14

13

(40)

(43)

(91)

(83)

-

(584)

85

217

(1,076)(2,387)

6

(20)

(35)

(8)

(19)

Net cash provided by operating activities
Investing activities
Capital expenditures............................................
Purchases of consolidated companies, after
acquired cash .......................................................
Investments in equity affiliates ...........................
Increase in financial assets ..................................

Transactions on borrowings and otherfinancial liabilities
Repayment of lease liabilities and related
interest expenses .................................................
Net cash provided by/(used for) financing
activities
Foreign currency translation adjustments ofcontinuing operations ..........................................
Change in cash and cash equivalents andshareowners loans
Cash and cash equivalents and shareowners
loans
At beginning of the period ..................................

(240)

104

133

(528)

(1,770)

1,141

1,008

1,008

1,536

3,306

At end of the period ............................................

901

1,112

1,141

1,008

1,536

of which Shareowners loans
At beginning of the period ..................................

815

672

672

1,260

3,059

At end of the period ............................................

146

695

815

672

1,260

of which Cash and cash equivalent-70-

At beginning of the period ..................................

326

336

336

276

247

At end of the period ............................................

755

417

326

336

276

Note
(1) Adjustments relate to: (i) amortization and depreciation of intangible and tangible assets; (ii) change in provision, net;(iii) operational income from equity affiliates; (iv) and proceeds from sales of property, plant, equipment and intangible
assets.
(2) Content investments, net is comprised of net music content advances and catalog investments, net, which is split asfollows for the periods provided: (i) 6 months ended June 30, 2021: (a) net music content advances - €130 million; and(b) catalog investments, net - €43 million; (ii) 6 months ended June 30, 2020: (a) net music content advances - €266
million; and (b) catalog investments, net - €86 million; (iii) year ended December 31, 2020: (a) net music content advances- €588 million; and (b) catalog investments, net - €929 million; (iv) year ended December 31, 2019: (a) net music content
advances - €192 million; and (b) catalog investments, net - €273 million; and (v) year ended December 31, 2018: (a) netmusic content advances - €121 million; and (b) catalog investments, net - €40 million.

8.9.3

Net cash provided by operating activities

Net cash provided by operating activities increased by €233 million, or 306.1%, to an inflow of €309
million for the six months ended June 30, 2021 from an inflow of €76 million for the six months ended June 30,
2020. The increase is primarily due to the €168 million improvement in EBIT and the €179 million decrease in
net content investments due to lower net payments of artist advances and lower investment in catalog rights. Thiswas partly offset by €54 million higher payment of taxes and €55 million unfavorable variance in Net Working
Capital.
Net cash provided by operating activities decreased by €688 million, or 100.4%, to a negative €3 million
for the fiscal year ended December 31, 2020 from €685 million for the fiscal year ended December 31, 2019. Net
cash provided by operating activities was affected by a decrease of €858 million in gross cash provided byoperating activities before income tax paid, which in turn, was affected by an increase of €1,052 million in content
investments, net. The primary driving factors of these decreases were the increase in net content investments
pursuant to significant catalog acquisitions and multi-year artist advances for €1,052 million despite the €182
million increase in EBIT, and the €205 million favorable change in working capital driven by the timing of digital
license receipts received in advance.
Net cash provided by operating activities decreased by €62 million, or 8.3%, to €685 million for the fiscal
year ended December 31, 2019 from €747 million for the fiscal year ended December 31, 2018. The decrease isdue to the increase in net content investments for €304 million following the acquisition of catalog rights, the €97
million unfavorable change in working capital and despite the €218 million increase in EBIT. The €95 million
increase in adjustments is driven by the €64 million impact on right of use asset depreciation following theimplementation of IFRS16.
8.9.4

Net cash provided by / (used for) investing activities

Net cash provided by / (used for) investing activities increased by €66 million, or 177.8%, to an inflowof €29 million for the six months ended June 30, 2021 from an outflow of €37 million for the six months ended
June 30, 2020. The increase is due primarily to the €117 million higher proceeds on disposal of consolidated
companies that included the disposal of UMG’s interest in Alamo Records LLC and despite the €56 million higher
investments in the period.
Net cash provided by / (used for) investing activities decreased by €83 million, or 64.3%, to an outflow
of €46 million for the fiscal year ended December 31, 2020 from an outflow of €129 million for the fiscal year
ended December 31, 2019. Net cash provided by / (used for) investing activities benefitted from the €63 million
decrease in investment due to €46 million decrease in purchase of consolidated companies, after acquired cash.
Capital expenditures also decreased by €9 million.
Net cash provided by / (used for) investing activities increased by €18 million, or 16.2%, to an outflow
of €129 million for the fiscal year ended December 31, 2019 from an outflow of €111 million for the fiscal year
ended December 31, 2018. This change was primarily caused by €35 million lower capital expenditure (that in2018 included significant spend on leasehold improvements) and €13 million lower proceeds from the disposal of
financial assets and despite €38 million greater purchases of consolidated companies after acquired cash.

-71-

8.9.5

Net cash provided by / (used for) financing activities

Net cash provided by / (used for) financing activities decreased by €669 million, or -787.1%, to an
outflow of €584 million for the six months ended June 30, 2021 from an inflow of €85 million for the six months
ended June 30, 2020. The decrease is primarily due to the €422 million increase in dividends paid to shareholders
and the €252 million unfavorable movement in other changes in short-term borrowings and other financial
liabilities as a result of a reduction in borrowings entered into directly by UMGI.
Net cash provided by financing activities increased by €1,293 million, or 120.2%, to an inflow of €217
million for the fiscal year ended December 31, 2020 from an outflow of €1,076 million for the fiscal year ended
December 31, 2019. Net cash provided by financing activities was affected by a decrease in transactions withshareowners of €708 million. In turn, transactions with shareowners were affected by a decrease in distributions
to shareowners of €719 million. Transactions on borrowings and other financial liabilities also increased by €593
million, due to an increase of other changes in short-term borrowings and other financial liabilities of €623 million
as a result of additional borrowings entered into directly by UMGI.
Net cash used for by financing activities decreased by €1,311 million, or 54.9%, to an outflow of €1,076
million for the fiscal year ended December 31, 2019 from an outflow of €2,387 million for the fiscal year ended
December 31, 2018. This change was as a result of a decrease in transactions with shareowners of €1,393 million
driven by the €1,414 million share capital reduction of Universal Music Group S.A.S (UMG S.A.S) in 2018.
8.9.6

Cash and cash equivalents and shareowner loans

Cash and cash equivalents and shareowner loans decreased by €240 million, or 21.0%, to €901 million
for the six months ended June 30, 2021 from €1,141 million as at December 31, 2020. The decrease is due to the€584 million net cash used for financing activities predominately driven by the €422 million dividends paid toshareholders and the €103 million reduction in short-term borrowings and other financial liabilities as a result ofa reduction in borrowings entered into directly by UMGI. This was partly compensated by the €309 million net
cash provided by operating activities.
Cash and cash equivalents and shareowner loans increased by €133 million, or 13.2%, to €1,141 million
for the fiscal year ended December 31, 2020 from €1,008 million for the fiscal year ended December 31, 2019.
The increase was due to an inflow of €217 million from financing activities partly offset by the €46 million outflow
from investing activities. Financing activities included the €625 million increase in short-term borrowings andother financial liabilities as a result of an increase in borrowings entered into directly by UMGI, partly offset bythe €283 million dividends paid to shareholders.
Cash and cash equivalents and shareowner loans decreased by €528 million, or 34.4%, to €1,008 million
for the fiscal year ended December 31, 2019 from €1,536 million for the fiscal year ended December 31, 2018.
The decrease was due to an outflow of €1,076 million from financing activities driven by the €1,002 million
dividends paid to shareholders and despite the €685 million inflow from operating activities.
8.9.7

Borrowing and Commitments
The table below presents a breakdown of UMG’s interest-bearing liabilities as at the dates indicated.
June 30, 2021

December 31, 2020 December 31, 2019 December 31, 2018

Total Long- Short- Total Long- Short- Total Long- Short- Total Long- Shortterm term
term term
term term
term term
Shareowners borrowings (a)2,368Credit lines drawn by UMGI (b)546Bank overdrafts ..................
2
Other ...................................
2
Borrowings at amortized cost 2,918
Derivative financial instruments
Borrowings and other
2,918
financial liabilities(€ millions, unless otherwise indicated)- 2,368 2,368 2,368- 546 635
- 635
2
5
5
14
14
1
1
1
1
1
1
-

17
1

1

17
-

1 2,917 3,009 2,369
-

640
-

15
-

1
-

14
-

18
-

1
-

17
-

1 2,917 3,009 2,369

640

15

1

14

18

1

17

-72-

The table below sets forth the maturity structure of UMG’s financial debt as at June 30, 2021.
Less
than
one year

One to
two
years

More
Three to Four to
than
four
five
five
years
years
years
Audited(€ millions, unless otherwise indicated)
Two to
three
years

Total

Shareowners borrowings ..

2,368

Credit lines .......................

546

-

-

-

-

-

546

Bank overdrafts ................

2

-

-

-

-

-

2

Other .................................

1

1

-

-

-

-

1

2,917

1

-

-

-

-

2,918

Total
8.9.8

2,368

Borrowings at amortized cost(a)Long-Term

Long-term borrowings at amortized cost decreased by €2,368 million to €1 million as at June 30, 2021
from €2,369 million as at December 31, 2020. The decrease is due to the move of the borrowings from long-term
to short-term in anticipation of settlement of a series of transactions implemented to separate Vivendi’s and
UMG’s cash pooling and financing arrangements on July 7, 2021 (for more information, see Section 6.2(Indebtedness)).
Long-term borrowings at amortized costs increased by €2,368 million to €2,369 million for the fiscal
year ended December 31, 2020 from €1 million for the fiscal year ended December 31, 2019. The increase wasdue to an increase in shareowners’ borrowings of €2,368 million, which was part of the reorganisation to properlyalign the perimeter of UMG whereby subsidiaries directly owned by Vivendi (through UMG S.A.S.) were sold to
UMG after which UMG S.A.S. was dissolved with universal transmission of its property to Vivendi. For more
information, please see notes 14 and 15 of the audited Combined Financial Statements and Section 12.14.5(Reorganisation of UMG perimeter) below.
Long-term borrowings at amortized costs remained at €1 million for the fiscal year ended December 31,
2019 from the fiscal year ended December 31, 2018.
(b)

Short-Term

Short-term borrowings at amortized cost increased by €2,277 million to €2,917 million as at June 30,
2021 from €640 million as at December 31, 2020. The increase is predominately due to the move of borrowings
from long-term to short-term in anticipation of settlement of a series of transactions implemented to separate
Vivendi’s and UMG’s cash pooling and financing arrangements on July 7, 2021 (for more information, see Section
6.2 (Indebtedness)).
Short-term borrowings at amortized costs increased by €626 million to €640 million for the fiscal year
ended December 31, 2020 from €14 million for the fiscal year ended December 31, 2019. The increase was due
to an increase in credit lines drawn by UMGI of €635 million, which was primarily used to finance acquisitionsof collections of music compositions (or “catalog acquisitions”) in the US.
Short-term borrowings at amortized costs remained broadly stable, decreasing by €3 million to €14
million for the fiscal year ended December 31, 2019 from €17 million for the fiscal year ended December 31,
2018.
8.9.9

Borrowings and other financial liabilities

Borrowings and other financial liabilities decreased by €91 million to €2,918 million as at June 30, 2021
from €3,009 million as at December 31, 2020. The decrease is due to a reduction in the credit lines drawn by
UMGI.
Borrowings and other financial liabilities by increased by €2,094 million to €3,009 million for the fiscal
year ended December 31, 2020 from €15 million for the fiscal year ended December 31, 2019. The increase was-73-due to an increase in borrowings at amortized costs of €3,000 million, which was primarily driven by an €2,368
million increase in shareowners borrowings and a €626 million increase in credit lines drawn by UMGI.
Borrowings and other financial liabilities by remained broadly stable, decreasing by €3 million to €15
million for the fiscal year ended December 31, 2019 from €18 million for the fiscal year ended December 31,
2018.
8.9.10

Facilities Agreement and repayment of Vivendi Loan Agreements
For information about UMG’s Facilities Agreement, see Section 16.5 (Material Contracts).

In connection with the carve-out of the treasury function of the Group from Vivendi’s treasury function
in anticipation of the Distribution (the Treasury Carve-Out), certain loan agreements entered into between
Vivendi, as lender, and UIM, as borrower, were repaid by the Company on behalf of UIM on July 7, 2021.
Following draw-down of an amount of €2,240 million by the Company under the Facilities Agreement on July 7,
2021, the following amounts were repaid by the Company on behalf of UIM to Vivendi:

an aggregate amount of €388,655,596.11 (including accrued interest until July 7, 2021), undera loan agreement entered into by UIM and Vivendi on May 3, 2021, pursuant to which this loan
agreement was repaid in full;

an aggregate amount of €858,733,383.20 (including accrued interest until July 7, 2021), undera loan agreement entered into by UIM and Vivendi on May 6, 2021, pursuant to which this loan
agreement was repaid in full; andan aggregate amount of €1,120,846,460.45 (including accrued interest until July 7, 2021), undera loan agreement entered into by UIM and Vivendi on May 13, 2021, pursuant to which thisloan agreement was repaid in full.

(collectively, the Vivendi Loan Agreements).
Following the aforementioned repayments in full of the Vivendi Loan Agreements, the Vivendi Loan
Agreements ceased to exist and the Group no longer owes any amounts to Vivendi or the Vivendi Group pursuant
to any shareholder loans.
In connection with the repayment of the Vivendi Loan Agreements by the Company on behalf of UIM,
the Company and UIM entered into an revolving credit facility intercompany loan agreement (the RCF
Intercompany Loan Agreement) and a term loan intercompany agreement (the Term Loan Intercompany
Agreement) on July 7, 2021, whereby the Company, as lender, lent an amount to UIM, as borrower, in an amountequal to the aggregate of the amounts outstanding under the Vivendi Loan Agreements. The lent amount under
the RCF Intercompany Loan Agreement is subject to an interest rate of EURIBOR 1 month +1.13% (1.13% for
the first interest period). The lent amount under the Term Loan Intercompany Agreement is subject to an interest
rate of interest rate of EURIBOR 3 months +1.03% (1.03% for the first interest period).
At present, the Company does not require any additional borrowings for the conduct of its business andoperations, however, to the extent that the need for the Company to put in place additional funding arises in the
future, for example for opportunistic investments, the Company will consider this on a case by case basis and seek
to procure borrowings on appropriate terms.
8.9.11

Quantitative and Qualitative Disclosures about Market Risks

For a description of UMG’s management of market, interest rate, foreign exchange, capital and liquidity
risks, see “Risk management and derivative financial instruments” in Section 18 (Historical Financial
Information).
8.9.12

Critical Accounting Policies and Estimates

For a description of UMG’s critical accounting judgments and key sources of estimation uncertainty, see“Critical accounting judgments and key sources of estimation uncertainty” in Section 18 (Historical Financial
Information).

-74-

9. UMG PROFIT FORECAST
The discussion of forecasts presented below includes forward-looking statements that have been
prepared by the Company's management and represent, to the best of the Company’s management's knowledge
and opinion, the Company's expected developments. They are based on the Company’s management's current
beliefs, expectations, assumptions and the business plan of the Company and involve known and unknown risks
and uncertainties that could cause actual results, performance or events to differ materially from what is provided
below. No assurance can be given that what is described below will occur, continue or be achieved. These
forward-looking statements involve assessments about matters that are inherently uncertain and actual results
may differ for a variety of reasons including those described in Section 1 (Risk Factors) and Section 3 (ForwardLooking Statements) of this Prospectus. No assurance can be given that actual results will track those describedin the forward-looking statements set out below. The forecasts included in this section cancel and replace all theprovisional information previously disclosed by Vivendi and/or the Company that may be attributable to thebusiness activities carried out by the Group. The forecast set out below is based on data, assumptions andestimates considered reasonable by the Company as at the date of this Prospectus. These data and assumptions
may change or be modified due to the uncertainties related in particular to the economic, financial, accounting,competitive, regulatory and tax environment or to other factors that the Company may not be aware of as at thedate of this Prospectus. Furthermore, the occurrence of one or more risks described in Section 1 (Risk Factors)
could have an impact on the Company's business, financial condition, results or outlook and could therefore
adversely affect these forecasts. Consequently, the Company makes no commitment and gives no guarantee that
it will meet the forecasts set out in this section.
9.1

Forecasts for the year ending December 31, 2021

Subject to the assumptions described below and assuming anticipated market conditions and anticipatedmacro-economic conditions, the Company believes that it will achieve the following for the year ending December
31, 2021:

9.2



a revenue growth rate above 10% when compared to Group’s revenue for the year ended
December 31, 2020 (at constant currency and perimeter); and

an EBITDA growth rate above 20% when compared to the Group’s EBITDA for the year ended
December 31, 2020.

Assumptions

The Company's forecasts in this section of the Prospectus have been prepared on a basis which is: (i)comparable with the historical financial information of the Company included in the Combined Financial
Statements and the Interim Financial Statements and taking into consideration the adjustments made to determine
the KPIs; and (ii) consistent with the accounting policies applied by the Company for the preparation of the
Combined Financial Statements and the Interim Financial Statements.
The EBITDA growth rate forecast has been subject to a report by EY and Deloitte, as independent
auditors of UMG, and is based on the following main assumptions regarding factors indicated below.
The Company’s forecasts are mainly provided on the basis of: (i) the Company’s results for the six
months ending June 30, 2021 as set out in the Interim Financial Statements, management’s monitoring and initial
evaluation of the progress of the Company’s operations since June 30, 2021 up to the date of this Prospectus and,subject to the factors set out below, management’s expectations regarding the trajectory and progress of theCompany’s operations for the remainder of the period up to December 31, 2021; (ii) management’s expectedtrajectory of the Group’s recurring and relatively predictable revenues from its streaming and publishingsegments; (iii) the Company’s analysis of recent subscription numbers received from digital service providers;and (iv) the Company’s analysis and views of the strength of its labels and artists content to be released during
the remainder of the year ending December 31, 2021.
Factors that are outside of the control of the Company and its management:

any material changes to the macro-economic, legislative and regulatory environment of theGroup when compared to those in effect during the year ended December 31, 2020.
Additionally, the Group was not able, and in the future would not be able, to control the impactof the COVID-19 pandemic in the various markets where it operates, including the impact it has
had, and may continue to have, on the music industry;

-75-





developments in relation to the music industry and market in which the Group operates which
are in line with the market trends assumed, the most material trends of which are:othe continued growth of subscription music services and ad-supported music services,which, according to IFPI, accounted for approximately 62.1% of global recorded music
revenues in 2020; andothe continued global music-market development, which has undergone significant
growth in recent years, in large part as a result of growth in the digital consumption ofmusic-based entertainment, driven by technological innovation and consumer
consumption trends and facilitated by the music industry’s adoption of newtechnologies, formats and monetization models; andwhile the Company is not currently aware of any changes which it considers to be material atpresent, any material changes in the accounting principles for the Company for the year ended
December 31, 2021 required to be applied by the Company when compared to the principles
applied in the Company's Combined Financial Statements and Interim Financial Statements;

Factors that are partially or wholly within the control of the Company and its management:the schedule and timing of release of content by UMG’s labels and artists during the remainderof the year ending December 31, 2021;



UMG’s continued and planned efforts at marketing and promoting the content of its artists’during the remainder of the year ending December 31, 2021;

the continuation of UMG’s partnerships with digital music services; and

UMG’s cost of revenues and other expenses being higher for the year ending December 31,
2021 when compared to the year ended December 31, 2020.

-76-

9.3

Universal Music Group’s Independent Auditors’ report on the Universal Music Group’s profit
forecast for the year ending December 31, 2021
DELOITTE & ASSOCIES
6, place de la Pyramide
92908 Paris–La Défense Cedex
S.A.S. au capital de € 2 188 160
572 028 041 RCS Nanterre

ERNST & YOUNG et Autres
Tour FirstTSA 14444
92037 Paris-La Défense Cedex
S.A.S. à capital variable
438 476 913 R.C.S. Nanterre

Commissaire aux Comptes
Membre de la compagnie
régionale de Versailles et du Centre

Commissaire aux Comptes
Membre de la compagnie
régionale de Versailles et du Centre

Universal Music Group
Universal Music Group’s Independent Auditors’ report on the Universal Music Group’s profit forecast
for the year ending December 31, 2021

To the board of directors of Universal Music Group,
In our capacity as independent auditors of your company and upon your request, we hereby report to you on the
profit forecast (EBITDA growth rate forecast compared to the year ended December 31, 2020) of Universal Music
Group for the year ending 31 December 2021 set out in section 9 “UMG Profit Forecast” of the prospectus dated
September 14, 2021 prepared for the first admission to listing and trading of all the ordinary shares of Universal
Music Group on Euronext Amsterdam (the Prospectus).
It is your responsibility to compile the profit forecast, together with the material assumptions upon which it isbased, in accordance with the requirements of Regulation (EU) 2017/1129 supplemented by Commission
Delegated Regulation (EU) 2019/980 and ESMA’s guidelines on profit forecast.
It is our responsibility to express an opinion, based on our work as to the proper compilation of this forecast on
the basis stated.
We performed the work that we deemed necessary according to the professional guidance issued by the FrenchInstitute of Statutory Auditors (“CNCC”) applicable to such engagement. Our work included an assessment of theprocedures undertaken by management to compile the profit forecast as well as the implementation of procedures
to ensure that the accounting policies used are consistent with the policies applied by Universal Music Group forthe preparation of the historical financial information for the year ended 31 December 2020. Our work also
included gathering information and explanations that we deemed necessary in order to obtain reasonable assurance
that the profit forecast has been properly compiled on the basis stated.
Since profit forecast, by nature, is uncertain and may differ significantly from actual results, we do not express an
opinion as to whether the actual results reported will correspond to those shown in the profit forecast.
In our opinion:-

the profit forecast has been properly compiled on the basis stated; and
-77-

-

that basis of accounting used for the profit forecast is consistent with the accounting policies of Universal
Music Group for the preparation of its combined financial statements for the year ended 31 December
2020.

This report has been issued solely in connection with the Prospectus and cannot be used for any other purpose.

Paris-La Défense, September 14, 2021
The Independent Auditors
DELOITTE & ASSOCIESERNST & YOUNG et Autres

Géraldine Segond

Claire Pajona-78-10. INDUSTRY OVERVIEW
The information presented in this section contains statistics, data and other information relating tomarkets, market sizes, market shares, market positions and other industry data pertaining to the Company’sbusiness and markets. Unless the source is otherwise stated, the market, economic and industry data in thisProspectus constitute the Company’s estimates, using underlying data from independent third parties. For more
information, see Section 2.6 (Market, Economic and Industry Data).
10.1

Introduction and overview

Music is Universal. Like nothing else, it entertains, inspires and thrills. Music is central to culture and itis the soundtrack to peoples’ lives.
Today, great things are happening in music. There are new artists and musical trends and as well as new
ways of discovering older music. There is increased penetration by digital music services, expansion of music
services to new markets and new music-based products. Around the globe, fans are connecting with music in newand engaging ways and, as a result, enjoying more music than ever before.
The music entertainment industry, which now includes not only recorded music and music publishingbusinesses but also other business lines such as merchandising and music-based audio-visual content is dynamic,
growing and global. The industry has grown significantly in recent years, predominantly due to a growth in thedigital consumption of music-based entertainment driven by technological innovation and consumer consumption
trends and made possible by the industry’s adoption of new technologies, formats and monetization models.
Even with its strong growth in recent years, UMG believes streaming is still in the early stages of global
penetration and there remains a substantial opportunity for further expansion driven by growth in the number ofpaid subscribers of digital streaming services, including in established streaming markets which still have room
for meaningfully increased adoption. Similarly, in new, high growth markets, the continuing migration of
consumers online provides potential for significant growth of ad-supported streaming. This trend is also driven
by continued technological innovation across devices and formats, such as voice-controlled speakers, connectedcars, intersections with social media and gaming, audio-visual product evolution, which is deepening fans’engagement and consumption of music. These are also early days of the expansion of streaming music licensing
into new lifestyle categories such as digital health and fitness, which have considerable potential for growth.
Newer music markets (particularly in Latin America, China, Africa, India and Southeast Asia) are also
beginning to contribute more significantly to revenue growth. Latin America has been the fastest-growing regionin terms of global music revenue for the past six years and global music revenue in Asia (excluding Japan, itslargest market) grew by 30% in 2020 as compared to 2019 revenue. Also, in a marker of its increasing significancein the global music industry, for the first time Africa and the Middle East was listed as its own region in the IFPI
Global Music Report 2021.
Combining new technologies with music’s inherent ability to unite people across national borders,
geographic boundaries, generations, and languages with new technologies opens a world of possibilities. Musicis, indeed, Universal.
10.2

UMG’s Industry

The role of record labels is to identify, partner with and develop artists to help them achieve creative andcommercial success in a highly competitive environment. Labels find and develop new talent, fund and support
the creative process of making music and connecting artists with fans, authorize use of music by hundreds ofplatforms, and use digital technology to provide data insights and protect the value of artists’ content.
Labels are the primary “investor” in artists, and through their investment, labels support the broader
music ecosystem through a virtuous cycle of reinvestment. Labels bear the financial risk in the release andpromotion of new recordings as any upfront advances paid to artists and the costs of marketing and promoting
any recordings or content are not recouped by the labels if the project is not commercially successful. If the projectis successful, the profits are shared between artist and the label, which reinvests into new talent and the creationof more music.
10.2.1

Consumer Trends and Demographics

With new artists, musical trends and ways of discovering older music—combined with increased
penetration of digital music services, mobile handset devices, expansion of music services in new markets and-79-new music-based products—UMG believes there are more fans engaging with music and in more ways than at
any point in the history of the music industry. Despite the pandemic’s impact (see Section 10.3.5 (Initial Impactof the COVID-19 pandemic)), this trend continued in 2020, as listening to music is often associated with daily life
activities, such as being in the car, relaxing at, or working from home. Across all ages and geographies, growthcontinues through increased engagement, notably through streaming subscriptions. An IFPI global survey of 2019
reported that only 2.5% of those surveyed find music to be “unimportant.”
According to IFPI’s Global Listening Report, global consumers spent 18 hours listening to music eachweek in 2019. Demographic trends and digital music penetration have been key factors in driving growth in music
consumption. In 2020, Smartphones were the device on which people listen to most music and comprised morethan one-third (36.9%) of all music listening time across all age groups, an increase of 27.2% compared to 2019.
Smartphones were followed by music listening on computers (20.1%), on the radio (14.2%), on a music system /hi-fi or turntable (8.4%), with portable bluetooth speakers or smart speakers comprising 7.9% of all music listening
in 2020. Additionally, in the physical sales space, vinyl revenues grew for the 14th consecutive year in 2020, andit was the number one selling physical music format in 17 countries (up from 10 in 2019).

Global device share of music listening time
10%
7%

29%

8%

27%

19%
Radio

Smartphone

Computer/laptop

Hi-Fi or turntable

Portable Bluetooth or smart speaker

Other

Source: IFPIThe smartphone is the device of choice for music listening among younger people—who are typically
early adopters of new technologies, including music-enabled devices. Over half of the music listening time (51%)
of people aged 16 to 24 years was on a smartphone in 2020. In addition, slightly under half (48%) of all 16through 64-year-olds globally said that they would prefer to use their smartphone for music listening than any
other device in 2020. In rapidly developing markets the figures were even higher: in Brazil, 58% preferred theirsmartphone to any other music listening device; in Mexico the figure was 62%, in India 65%, and in South Korea
and China 71%. Amongst 16- to 24-year-olds, the figure was 69% globally. The increasing penetration of musicstreaming globally is driven by younger people: 93% of 16- to 24-year-olds used licensed audio streaming services
such as Spotify and Apple Music in 2020. New short form video formats that emerged over the last two years,
such as TikTok, have proved very popular as venues for music consumption, particularly amongst younger
demographics. While one-in-four 16- to 64-year-olds said that they used TikTok on a daily basis in 2020, thefigure was 50% amongst 16- to 24-year-olds. TikTok users said that more than two-thirds of all content they
viewed on the service had music as a central part of the video. Older social media services like Facebook andInstagram were also popular venues for music, and 25% of all 16- to 64-year-olds said Facebook was the social
media service they used the most for music. Members of older demographic groups also increased their
engagement with music streaming at a rapid pace in 2020. Among 35- to 64-year-olds globally, 75% enjoyedstreaming in 2020, and this group showed the highest rate of growth of use of streaming services across all age
groups. While older demographics tend to prefer listening to music on the radio or through physical media, suchas on CDs or vinyl, there is an increasing use of personal voice assistants among 35- to 64-year olds.
Consumer trends also show increasing engagement across music genres and languages as the music
market is becoming ever more global. The export of K-Pop into Western markets and the global influence of top
American, British and Latin artists are strong indicators of this trend, but the influence of artists in newer music-80-

markets in Asia, Africa and the Middle East beyond their geographies due to digital formats also reveals increasing
cultural exchanges through music. The analysis of music consumption by geography also reveals a variety ofgenres consumed within each country.
Music’s influence permeates beyond audio, as evidenced by the disproportionate popularity musicians
and artists have across social media. According to the Recording Industry Association of America (RIAA), as ofApril 2021, six out of the top ten most followed accounts on Twitter belong to musicians, as do five out of the top
ten on Instagram and seven out of the top ten on Facebook. In fact, as of April 2021, six of the top 10 influencers
across any category on social media were UMG artists, according to Visual Capitalist. It also permeates acrossformats, as YouTube figures show that the majority of videos that have achieved more than one billion lifetime
views as well as 23 of the 30 most watched videos of all-time belong to musicians. IFPI reports that 77% of people
used YouTube for music in the past month and 3.5 hours are spent listening to music via video streaming eachweek.
10.2.2

Recorded MusicThe IFPI Global Music Report 2021 notes that the recorded music industry generated US$21.6 billion
in global revenue in 2020, having grown by 7.4% in 2020, marking the sixth consecutive year of growth.

IFPI measures the recorded music industry on a global scale based on five revenue categories: streaming,
downloads and other digital (excluding streaming), physical, synchronization and performance rights. Streamingis the largest of these categories, generating US$13.4 billion of revenue in 2020, representing 62% of global
recorded music revenue. Within streaming, subscription audio streams generated approximately 74.9% ofrevenue, or US$9.9 billion, with the remainder of streaming revenue coming from ad-supported streams with 26%
of revenue, or US$3.5 billion. Social media and video platform revenues grew 53% in 2020, primarily due totechnology innovation but with music at its core. Overall, streaming grew by 19.9% in 2020 as compared to 2019.
Physical represented approximately 19% of global recorded music revenue in 2020, with growth in formats suchas vinyl partially offsetting declines in CD sales. Japan, in particular, accounts for a high percentage of physicalsales and CD prices can be in the US$30 equivalent range. Performance rights revenue represents the use ofrecorded music by broadcasters and public venues and represented approximately 11% of global recorded music
revenue in 2020. Downloads and other digital revenue represented approximately 6% of global recorded music
revenue in 2020. Synchronization revenue is generated from the use of recorded music in advertising, film, video
games and television content, and represented 2% of global recorded music revenue in 2020.
From a geographical standpoint, the largest markets for recorded music in 2020 were the United States,
Japan, the United Kingdom, Germany, France, South Korea, China, Canada, Australia and the Netherlands. The
graphic below sets out the top ten markets and their respective revenue growth for 2020.

-81-

Source: IFPI
While all regions across the world reported growth in the past year, newer music markets drove theincrease in recorded music revenues, with high-double digit rates. Latin America (+15.9% at US$0.78 billion)
was the fastest-growing region for the sixth consecutive year with Brazil, its largest market, growing close to 25%
year over year. It was followed by Asia (+9.5% at US$5.1 billion), where the annual growth rate excluding Japan
reached 30%, led by South Korea (+45%); and Africa & Middle East (+8.4% at US$0.13 billion) where Middle
East and North Africa grew by 38%. The US and Canada, the world’s largest region for recorded music, reported
a robust 7.4% growth at US$8.5 billion, with the US (+7%) providing a greater contribution to global revenue
growth than any other country. Europe (US$6.5 billion), where the UK (+2% at US$1.5 billion), Germany (+5.1% at US$1.4 billion) and France (- 1.2% at US$1 billion) account for 59% of revenues, and Australasia (US$0.5
billion) each grew by more than 3%. Japan, where physical still constitutes more than 60% of revenues and wastherefore more severely impacted by pandemic store closures, saw a -2.1% decline in 2020.

Source: IFPI
10.2.3

Music PublishingMusic publishing involves the acquisition of rights to, and the licensing of, musical compositions (asopposed to sound recordings) from songwriters, composers or other rights holders. According to Music &Copyright, the music publishing industry generated US$5.9 billion in global revenue in 2020, representing anapproximate 5.2% increase from US$5.6 billion in 2019. Music publishing revenues are classified by Music &Copyright as coming from four main royalty sources: digital; mechanical; performance; and synchronization.
Digital revenue is generated through the licensing of recorded music in various digital formats and by
the digital performance of musical compositions to the general public, including through streaming and download
services
Mechanical constitutes the sale of recorded music in various physical formats, including vinyl, CDs andDVDs.
Performance revenue is generated through the performance of the song to the general public, including
through:Broadcast of musical compositions on television, radio and cableLive performance at a concert or other venue (e.g., arena concerts, nightclubs)

Broadcast of musical compositions at sporting events, restaurants or bars

Performance of musical compositions in staged theatrical productions-82-

Synchronization revenue is generated through the use of the musical composition in combination withvisual images, including through:Films or television programs

Television commercialsVideo gamesMerchandising, toys or novelty items

Other smaller forms of music publishing revenue include the licensing of copyrights for use in printed
sheet music.
10.3

Global Recorded Music Industry Revenues
UMG believes the following trends will continue to drive growth in the recorded music industry:

10.3.1

Streaming Still in Early Stages of Global Penetration

The IFPI Global Music Report 2021 recorded global streaming revenue at US$13.4 billion for 2020,
representing 19.9% year-on-year growth from the 2019 figure of US$11.2 billion. The increase from 2019 to 2020
was the second highest annual value growth in the streaming format. Streaming is divided into two maincategories; subscription streaming, whereby users pay a subscription allowing advertisement-free access to therelevant platform; or ad-supported streaming, which provides users access to certain features of the platform at nocost, but with the regular advertisement served to the user. Numerous digital distribution platforms offer bothtypes to their users. Across the categories, streaming revenues grew at a CAGR of 41.3% from US$2.8 billion in2010 to US$13.4 billion in 2020. Per-capita music spend remains below its peak in the United States, which,according to JP Morgan Research, was in 1999 when the nominal and inflation adjusted recorded music revenue
per capita was $81, as compared to $24 in 2014 and $37 in 2020. UMG estimates that the potential to further
monetize digital music streaming extends globally, including both developed markets (such as South Korea,
Germany and the United States) and high-growth markets (such as Brazil, Mexico, China, India and Russia).
According to the IFPI Global Music Report 2021, global paid music streaming subscribers totaled 443
million at the end of 2020. While this represents an increase of 30% from 341 million at year-end 2019, it still
represents only approximately 12% of the 3.6 billion smartphone users globally in 2020, according to Statista. It
also represents a small fraction of the user base for large, globally scaled digital services such as Facebook, which
reported 2.9 billion monthly users across its services as of June 30, 2021, and YouTube, which reported 1.8 billion
unique logged-in monthly users as of May 2018. Global audio consumption continues to increase, and in 2020,
consumption increased from 1.8 trillion streams in 2019 to 2.2 trillion streams in 2020, according to Billboard’s
2020 year-end Report. According to Nielsen, as of July 2020, 51% of adults in the US (calculated across fourdemographic cohorts-Generation Z, Millennials, Generation X and Baby Boomers) reported that they are spending
more time with music during the COVID-19 pandemic. Further, according to Nielsen, 56% of adults in the US
who added an entertainment subscription during the COVID-19 pandemic added a music streaming subscription,and 87% of those who added a music streaming subscription intend to keep the subscription after the pandemic
passes. According to a 2021 IFPI study, just under half (49%) of those aged 16 through 64 said they listened tomusic streaming services when they exercise (the equivalent figure was 76% amongst 16- to 24-year-olds).
According to internal UMG estimates, in the first quarter of 2021, 41% of global music subscribers were underage 35, as compared to 39% in the first quarter of 2018.
The potential of global paid streaming subscriber growth is demonstrated by the penetration rates in early
adopter markets where there still remains growth potential. According to Midia, approximately 45% of the
population in Sweden, where Spotify was founded, was estimated to use a paid music subscription in 2021. This
compares to lower rates of approximately 38%, 24% and 4% for the United States, other developed markets1 andhigh growth markets2, respectively. Paid music subscription adoption in the United States continues to increaseand has grown from a 9% to a 21% to a 38% music subscriber penetration rate in 2015, 2017 and 2020,
respectively. High growth markets, such as China, are also rapidly growing, with Midia reporting China with a
3.7% penetration rate in 2019, as compared to 0.4% and 2.0% in 2015 and 2017, respectively. China represents a
1
2

Other developed markets include Norway, Denmark, United Kingdom, Canada, Switzerland, Netherlands, Ireland, Australia, Finland,
Germany, France, South Korea, Austria, Spain and Italy.
High growth markets include Argentina, Mexico, Brazil, Taiwan, Russia, Poland, Colombia, China, Philippines, Thailand, Indonesia andIndia.

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substantial growth market for the recorded music industry. Digital music monetization models, including paid
streaming and virtual gifting (the purchase of a digital, non-durable, non-physical item, such as an emoji, that isdelivered to another person often during a live karaoke performance), created the foundation for the recorded
music industry to overcome piracy and generate revenue in China. Despite its substantial population, China was
only the world’s seventh-largest music market in 2020, according to IFPI, having only broken into the top 10 in2017.
There also remains substantial opportunity in newer markets, such as Brazil and India, where smartphone
penetration and the percentage of paid music subscribers is lower when compared to developed markets. For
example, according to Statista, smartphone penetration for Brazil and India as at the end of 2020 was estimatedat 67% and 42%, respectively, compared to 85% in the United States. Approximately 0.4% of the population inIndia and 9.6% of the population in Brazil was estimated to be paid music subscribers in 2020.
The landscape of digital music services is fragmented and highly competitive, with a number of large,
well-funded technology companies competing for subscribers on a global scale, and with stand-alone music
services broadening competition at global, regional and local levels. The four largest global players in the music
subscription space are Amazon, Apple, Spotify and YouTube. Other global players include Deezer, Napster,Soundcloud and Tidal. Regional and local players have become increasingly important as the music business has
continued its expansion, especially into new, high-growth markets. Companies advancing competition at regional
and local levels include Boomplay, ByteDance, Netease, Pandora, RecoChoku, Tencent Music Entertainment andYandex, among many others. As the digital service market continues to expand and grow, its competitive profile
is becoming more diverse and dynamic.
10.3.2

Technology Enables Innovation and Presents Additional Opportunities

Technological innovation has helped facilitate the expansion of music listening across locations,
including homes, offices and cars, as well as across devices, including smartphones, tablets, wearables, digital
dashboards, gaming consoles, smart speakers, exercise equipment, personal computers and connected TVs(CTVs). These technologies represent advancements that are deepening listener engagement and driving further
growth in music consumption.
10.3.3

Device Innovation

According to Nielsen, as of July 2020, US consumers listened to music across an average of 3.7 devices
per month. UMG believes that the use of multiple devices is expanding listening hours by bringing music into
more facets of consumers’ lives, and the different consumption modes these devices enable are also broadening
the base of music to which consumers are exposed, and diversifying and deepening consumer’s relationship withmusic. The music that consumers listen to during a commute may be different than the music they listen to while
they exercise, and different still than the music they play through a smart speaker while cooking a meal. Smartspeakers enable consumers to access music more readily by using their voices. The global smart speaker market
grew by 58% in 2020, accounting for 154 million units shipped over the course of 2020, according to Omdia’s
latest Smart Speakers 2020 report. The global install base for smart speakers rose to 338.9 million devices in 2020,
up 138 million units from 2019, and is forecasted to rise to 512 million devices in 2021, according to Omdia’s
latest Smart Speakers 2020 report. Smart speaker adoption increased during the COVID-19 pandemic, with about
94 million people in the U.S. estimated to own at least one smart speaker in 2021, up from 76 million in 2020,
according to data from Edison Research. Smart speakers are fueling further growth in streaming, by converting
more casual listeners into paid subscribers, drawn in by music as a critical application for these devices. According
to Nielsen, in 2020, 61% of US consumers who use a smart speaker weekly to listen to music currently pay for a
subscription as well.
10.3.4

Format and Monetization Model Innovation

Short-form music and music-based video content has grown rapidly, driven by the growth of global social
video applications such as TikTok, which features short videos often set to music. According to Sensor Tower,
TikTok was the most downloaded and highest grossing non-game app globally in the first half of 2021, reachingnearly 383 million first-time installs. TikTok passed 3 billion installs globally in 2021 from across the App Storeand Google Play (including the iOS version of its Chinese release, Douyin, and excluding third-party Android
marketplaces), which Sensor Tower says makes it the first non-Facebook owned app to achieve this. Suchapplications have the potential for mass adoption, illustrating the opportunity for additional platforms of scale tobe created to the benefit of the music entertainment industry. These platforms enable incremental consumption ofmusic appealing to varied, and often younger, audiences. From a recording artist’s perspective, these platforms
have the potential to rewrite the path to stardom. Short-form music and music-based video content have also
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become increasingly popular on social media platforms such as Facebook, Instagram and YouTube (through its
recent introduction of “Shorts”), further illustrating the growing number of potential pathways through which
recording artists may gain consumer exposure and grow connections with their fans.
10.3.5Initial Impact of the COVID-19 pandemic

Globally, the recorded music industry continued to grow during 2020, despite the impact of COVID-19.
While lower when compared to pre-Covid-19 levels of recent years, the 2020 growth of 7.4% globally was thesixth consecutive year of increasing revenues in the recorded music industry, driven primarily by increased
revenues in paid subscription streaming, which off-set decreases in physical revenues, performance rights
revenues and synchronization revenues.
While there was an initial decrease in streaming consumption as a result of COVID-19 as traditional
streaming occasions such as the commuting and going to the gym became less relevant, there was a shift inconsumers behavior to steadier streaming consumption throughout the day resulting in an overall increase instreaming consumption for 2020. It has been widely reported that early in the COVID-19 pandemic, advertisers
temporarily reduced their advertising spend, resulting in an initial corresponding decline in ad-supported
streaming revenue, although this format did recover to double digit growth in the second half of 2020. The
increased paid streaming revenues provided the music industry with a level of resilience to off-set the direct effects
of COVID-19.
The direct effects of COVID-19, including stay-at-home orders, limitations on indoor and outdoor
gatherings, cancellation of concerts and live events and closure of physical points of sale, resulted in declining
rates of revenues in the performance rights and physical sales formats, including merchandising sold at concerts
and live events. Stay at home orders also resulted in the cessation of, or significant delay in, the production of
motion pictures and television programs, resulting in a decrease in global synchronization revenues, with thelargest part of the impact being seen in the US, UK, Japan and France.
UMG expects that the continuing impact of the COVID-19 pandemic on the music industry and themarkets in which it operates will depend largely on future developments, including the duration and spread of thepandemic and the effectiveness of vaccine distribution efforts globally, which are not possible to be predict at thisstage.
10.4

Global Music Publishing Industry Revenues

The music publishing business has a diverse set of revenue sources, which in turn are experiencing awide variety of drivers and trends, the main categories of which are set out in 10.2.3 (Music Publishing) above.
Music & Copyright calculated that global music publishing revenue grew 5.2% in 2020, to US$5.9 billion from
US$5.6 billion in 2019. The growth rate was up on the 2.2% rise in 2019 reported by Music & Copyright.
Historically, performance revenue generated the biggest share of revenue for music publishers. However,digital took the lead in 2018 and the gap between the two has widened in the two subsequent years (Music &Copyright defines digital revenue as including all revenue generated through the licensing of recorded music invarious digital formats and by the digital performance of musical compositions to the general public). Music &Copyright has estimated that total publisher revenue from digital grew 35.6%, to US$3.2bn from US$2.4bn in
2019. The digital share of total revenue increased, to 54.5% from 42.3%. Digital revenue growth is driven by the
global growth in subscription and streaming revenue.
Although digital revenue registered a sharp rise, the increase in the digital share was also tied to the dropin performance revenue. Music & Copyright estimates that measures introduced around the world to limit the
spread of the COVID-19 virus was the main reason performance revenue (revenue generated through theperformance of a song to the general public) slipped 29.7% last year, to US$1.2 billion from US$1.7 billion in
2019. Subsequently, the performance share was down, to 19.9% from 29.8%. Aside from the pandemic-driven
decline seen in 2020, the underlying trends in performance revenue are positive.
Music & Copyright estimates that synchronization accounted for approximately 17% of global music
publishing revenue in 2020, down from 18.5% in 2019. Synchronization revenue was also impacted by COVID19, as TV, film and TV commercial production was halted in the early part of the pandemic. Mechanical revenues
from traditional physical music formats (e.g., CDs, DVDs, vinyl), which accounted for approximately 7% of
global music publishing revenue in 2020, have continued to fall, while digital revenues have grown to more thanoffset this decline.

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Global Music Publishing Industry Revenue 2016-202010
98$ (billions)

7
5.5

5.6

2018

2019

6
5

5.9

4.9
4.4

4
3
2
1
0
2016

2017

2020

Global Music Publishing Industry Revenue

Source: Music & Copyright
10.5

Regulation and Selected Regulatory Developments

10.5.1

Overview

Given its global scale and operations in more than 60 territories and across approximately 200 markets,
UMG is subject to various regulations through its business activities.
10.5.1.1 Regulations related to intellectual property
In its countries of operation, UMG is required to comply with the various regulations relating tointellectual property, including copyright.
In the United States, UMG is subject to the United States Copyright Act of 1976 (US Copyright Act).
The US Copyright Act creates the framework for protecting original works of authorship under US law and grants
to the US Copyright Office the administrative duties required to implement the law. The US Copyright Act setsout a series of works that, where the necessary requirements are met, can be protected. Of most relevance to UMG,
these include musical works, audio-visual works, sound recordings, derivative works, compilations, and more.
Owners of copyrights have exclusive rights over the copyright, and copyright owners can bring infringement
lawsuits in the US federal courts. US law generally provides for a typology of rights similar to European law, withthe exception that the US law includes enhanced damages in the event of deliberate infringement, the range ofsuch damages being directly set by the US Copyright Act (statutory damages). In addition to the US CopyrightAct, a number of other US laws regulate the liability of online technical platforms for infringing content. These
include the Digital Millennium Copyright Act (DMCA) and, to a lesser extent, the Music Modernization Act(MMA). In the US, it also includes the protections afforded under certain state laws.
In the United States, copyright protection for works created as “works made for hire” (e.g. works of
employees or certain specially commissioned works) on or after January 1, 1978 generally lasts for 95 years fromfirst publication or 120 years from creation, whichever expires first. The period of copyright protection for works
created on or after January 1, 1978 that are not “works made for hire” lasts for the life of the author plus 70 years.
Works created and published or registered in the United States prior to January 1, 1978 generally enjoy copyrightprotection for 95 years, subject to compliance with certain statutory provisions including notice and renewal.
Additionally, the Music Modernization Act extended federal protection in the US to sound recordings createdprior to February 15, 1972. The duration of protection for such sound recordings varies based on the year of
publication, with all such sound recordings receiving protection for at least 95 years, and sound recordings
published between January 1, 1957 and February 15, 1972 receiving copyright protection until February 15, 2067.
In the United States, mechanical royalty rates are set every five years pursuant to an administrative
process under the US Copyright Act, unless rates are determined through industry negotiations, and performanceroyalty rates are determined by negotiations with performing rights organizations, which in the United States
include American Society of Composers, Authors and Publishers, (ASCAP), Broadcast Music, Inc. (BMI) and-86-

the Society of European Stage Authors and Composers (SESAC). ASCAP and BMI are subject to a consent decree
rate-setting process if negotiations are unsuccessful. Outside of the United States, mechanical and performanceroyalty rates are typically negotiated on an industry-wide basis (or for multi-territorial online licensing, on arepertoire-specific basis but still necessarily in partnership with collecting societies as rightsholders) and may besubject to mandatory collecting regimes. In most territories outside the United States, mechanical royalties are
based on a percentage of wholesale prices for physical product and based on a percentage of consumer prices for
digital formats. The performance royalty rates received by UMG’s recorded music business in the United States
for webcasting and satellite radio are set every five years by an administrative process under the US CopyrightAct unless rates are determined through industry negotiations. In most jurisdictions outside the United States,
UMG’s recorded music business receives payment for the public performance and broadcast of its soundrecordings via collecting societies, with rates generally set by industry agreement or rate setting tribunal. In certain
jurisdictions, governments either have, are proposing or face certain pressure to introduce legislation which may
introduce and/or extend mandatory collective licensing and direct remuneration claims for certain rights.
In the European Union, numerous secondary legislation texts have been adopted to approximate thenational laws of the Member States of the European Union in the field of intellectual property. More specifically,
within the European Union, Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001,
as well as Directive 2006/116/EC of the European Parliament and of the Council of 12 December 2006 on theterm of protection of copyright and certain related rights and Directive (EU) 2019/790 of the European Parliamentand of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market, harmonizedcertain aspects of copyright rights in the information society. The term of copyright in the European Union formusical compositions in all Member States lasts for the life of the author plus 70 years. In the European Union,
the term of copyright for sound recordings lasts for 70 years from the date of release in respect of sound recordingsthat were still in copyright on November 1, 2013 and for 50 years from date of release in respect of soundrecordings the copyright in which had expired by that date. The European Union also harmonized the copyrightterm for joint musical works. In the case of a musical composition with words that is protected by copyright on orafter November 1, 2013, Member States of the European Union are required to calculate the life of the author plus
70 years term from the date of death of the last surviving author of the lyrics and the composer of the musicalcomposition, provided that both contributions were specifically created for the musical composition.
Due to its global presence, UMG is subject to various local regulations in each of the countries andmarkets where it operates. While there may be similarities between local regulations and the regulations applicablein the United States and the European Union, their specifications, interpretation and application by local market
players and local authorities may require UMG to cater for bespoke solutions and provisions in the applicable
contracts which it enters into in these countries and markets, as applicable. In addition, while UMG’s intellectual
property generally receives some degree of copyright protection in each of the jurisdictions where it operates,
UMG operates in a number of countries where copyright regulations and case law are relatively new, subject tochange and may be inadequate.
10.5.1.2 Personal data regulations
In the course of its business, UMG collects and processes information that is subject to data protection
laws and regulations in the Unites States, Europe and in other regions where UMG operates.
In the United States, UMG is subject to overlapping federal and state laws governing privacy, dataprotection and security. For example, state data breach notification laws or consumer protection laws generally
mandate the rules that must be followed in the event of the unauthorized disclosure of personal information. Oneof the most significant state privacy laws, the California Consumer Privacy Act, as amended by the California
Privacy Rights Act, establishes actionable rights for stipulated parties relating to data handled by covered entities
such as UMG, as well as obligations on covered entities relating to privacy disclosures, data handling, and more.
The Commonwealth of Virginia has a similar law coming into force at the start of 2023, and other states may befollowing suit with similar laws. Moreover, UMG is also subject to regulatory authorities, such as the Federal
Trade Commission (FTC), and self-regulatory requirements, such as the Payment Card Industry Data Security
Standard (PCI DSS). Though some of its authority to impose financial penalties was recently eroded by the recent
Supreme Court decision in AMG Capital Management, LLC v. Federal Trade Commission (2021), the FTC is
authorized by the Federal Trade Commission Act to enforce prohibitions on “unfair or deceptive acts or practices,”to include a company’s violations of its own privacy policies or commitments, or security or privacy practices
that the FTC deems fundamentally “unfair”. The PCI DSS are a set of payment-related data security requirements
the violation of which can result in fines or restrictions on the ability to process transactions. Generally distinct
from state privacy laws, some state laws also impose separate requirements regarding the handling of payment
card information.

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In Europe, Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016
on the protection of natural persons with regard to the processing of personal data and on the free movement ofsuch data (GDPR) applies. The GDPR applies, among others, to the processing of personal data in the context of
the activities of an establishment of a controller or a processor in the European Union, regardless of whether theprocessing takes place in the European Union or not. The GDPR also applies to companies established outside of
the European Union that process personal data about EU data subjects. The GDPR protects the processing of“personal data”, which is defined as any information relating to an identified or identifiable natural person.
The GDPR has introduced significant requirements for data controllers and processors in relation toprocessing activities, including, without limitation, the processing of special categories of data, profiling andautomated decision making, and additional rights for data subjects, and transparency, data minimization, accuracy,
storage limitation, security and confidentiality. In addition, the GDPR requires notification of data breaches to thesupervisory authority and to data subjects and requires certain companies, under certain conditions, to appoint a
Data Protection Officer. Depending on the nature and gravity of the breach, non-compliance with the provisionsof the GDPR may result in penalties of up to €10 million or 2% of the previous year’s worldwide turnover,whichever is greater, or €20 million or 4% of annual worldwide revenue, whichever is higher. The fine may be
imposed instead of, or in addition to, measures that may be ordered by supervisory authorities (such as the request
to cease the processing). The GDPR offers European Union Member States the possibility to adopt local
specificities.
Similar sets of privacy, data protection, and cybersecurity rules will also apply in most other jurisdictions
in which the UMG carries out business, subjecting UMG to similar laws and regulations relating to data privacy
in other countries outside of the United States and Europe.
10.5.2Developments

As mentioned previously, applicable laws in various jurisdictions differ from each other in significant
respects, and the enforcement of such laws can be inconsistent and unpredictable. This could impact UMG’s
ability to operate its business in various jurisdictions and undertake activities that UMG believes is beneficial toits business. For example, the European Union (EU) adopted the Directive on Copyright in the Digital Single
Market (or the Copyright Directive) to modernize EU copyright rules. The Copyright Directive includes a numberof relevant provisions, including Article 17, which clarifies the EU copyright safe harbor requiring Online Content
Sharing Service Providers (OCSSPs or online platforms that host user-generated content) to employ “effective
and proportionate” measures to prevent unauthorized use of copyrighted materials. The EU’s Member States must
implement the Copyright Directive via enactment of domestic legislation. While some Member States (such as
France, the Netherlands, Hungary and Denmark) are implementing the Copyright Directive’s Article 17 faithfully
to the legislative intent, other Member States are considering legislation (and in the case of Germany, have
implemented legislation) that differs significantly from the Copyright Directive in letter and spirit – and which
would not only undo the benefit of Article 17 but also potentially disrupt existing licensing models.
10.6

Competitive LandscapeThe recorded music industry is highly competitive and is rapidly evolving, influenced by consumer
preferences. The competitive strength and profitability of recorded music companies depends on their ability to
attract, develop and promote recording artists, the public’s acceptance of those artists and the success of theirrecordings. UMG competes with other major recorded music companies for creative talent that includes both newand established artists. Additionally, UMG faces competition from independent labels and, to a lesser extent, fromcertain distribution platforms and financial investors. Based on the Company’s analysis of a number of sources in
the United States (Billboard), Japan (Oricon), United Kingdom (The Official Charts Company), Germany (GFK)and France (SNEP), 100% of breakthrough artists in 2020 (defined as an artist hitting gold for the first time andbeing in the country’s top 50 chart), were signed to a label, many of which were represented by a UMG label. The
music industry also competes with apps, video games and films for consumer leisure spending.
For almost 10 years the global recorded music industry has comprised three major record companies,
UMG, Sony Music Entertainment and Warner Music Group, with a higher number of mid-sized and smaller
players, including independent recorded music companies, accounting for the remaining recorded music revenues.
In 2020, Universal Music Group was the global market leader, followed by Sony Music Entertainment and WarnerMusic Group. According to Music & Copyright, the three major record companies accounted for 68.6% of global
recorded music revenues in 2020. UMG is also the market leader in four of the top 5 recorded music markets
internationally (the United States, the United Kingdom, Germany and France). UMG is the second-largest
recorded music label in Japan.

-88-Similarly, the music publishing industry is highly competitive. For 2020, Music & Copyright recorded
Sony Music Publishing as the market leader in music publishing, UMPG as the second-largest music publisher
and Warner Chappell Music being the third largest music publisher. However, UMPG is the market leader inFrance, Italy, the United States, Belgium, Netherlands, Sweden, Brazil, Australia, Hong Kong, Argentina andSouth Africa. UMPG is the second-largest music publisher in the United Kingdom, Germany, Spain and Mexico.
As with the recorded music industry, there are many mid-sized and smaller players in the industry that accountfor the remaining revenue, including many individual songwriters who publish their own works. According toMusic and Copyright, the three major music publishing companies accounted for 58.7% of global music
publishing revenues in 2020.
In music merchandising and music based visual entertainment, the Company believes it is the market
leader based on revenue and client/catalog size and scope.
As the music industry evolves, traditional players compete with one another and compete with newentrants, including investment funds and financial investors who are once again entering the industry.
Additionally, the emergence of new technologies and increased accessibility to a global network of
consumers may create further competition within the industry as this can result in artists choosing to make content
available to consumers directly without being affiliated with a label or an intermediary.

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11. BUSINESS DESCRIPTION
Investors should read this Section 11 (Business Description) in conjunction with the more detailed
information contained in this Prospectus including the financial and other information appearing in Section 8(Operating and Financial Review). Where stated, financial information in this section has been extracted from
Section 18 (Historical Financial Information).
11.1

The Company

UMG is a world leader in music entertainment based on revenue, engaged in three main operating
businesses: recorded music; music publishing; and merchandising.
UMG’s recorded music business discovers and develops artists, supports the creation of audio and audiovisual content by artists, and markets, distributes, sells and licenses such content to consumers across a wide arrayof formats and platforms. UMG owns and administers the copyright to the audio and audio-visual recordings
created by the artists signed to UMG’s labels and generates revenue from the physical sales of such content in theform of CDs and records, and from the distribution of such content to digital music streaming and subscription
platforms, and to consumers of recorded music using other platforms and formats, including films, television andvideo games.
The music publishing business discovers and develops composers and songwriters and owns andadministers the copyright to the musical and lyrical compositions created by such composers and songwriters,
which is licensed for use in recordings, public performances and for related uses, such as in films andadvertisements. UMG’s music publishing business generates royalty revenue from the licensing of musical andlyrical compositions.
UMG’s merchandising business produces and sells artist-branded products as well as other branded
products. UMG has also expanded into other businesses such as film and television (including production of film
and television shows) as well as other segments that are linked to its music business, including organizing live
events, livestreaming, brand partnerships and sponsorships, and podcasts. In addition to being successful atrevenue generation in their own right, these operations also contribute to the growth of UMG’s recorded music
and music publishing businesses, primarily by increasing visibility and reach of UMG’s artists and music andthrough royalties earned on the use of UMG’s catalog of recorded music and compositions in these otherbusinesses.
UMG’s revenue profile is geographically diverse and becoming more so with the emergence of legitimate
monetization opportunities in many new music markets around the world. In 2020, revenues from the industry’s
Top 5 global music markets (US, Japan, UK, Germany and France) accounted for 75% of UMG revenue, whileother global markets represented 25% of total company revenue. UMG’s revenue is also diverse from a businessmodel standpoint. While streaming and subscription revenue is commonly looked at as the main driver of musicindustry performance, these revenue streams account for only 59% of UMG’s total company revenue in 2020.
UMG’s recorded music business operates in more countries and markets than any other recorded musiccompany. With a diverse range of labels, UMG’s recorded music business has offices in more than 60 territories
and is present across approximately 200 markets, where markets may be defined by a number of factors, including
language and dialects. UMG is the world’s largest recorded music company (based on revenue) and the largest
recorded music company in major music markets including the United States, the United Kingdom, France andGermany. Its major record labels and groups include Capitol Music Group, Interscope Geffen A&M, Republic
Records, Island Records, Motown Records, Def Jam Recordings, Universal Music Group Nashville, Universal
Music Latin Entertainment, EMI Records, Polydor, Blue Note Records, Decca, Deutsche Grammophon andVerve, among others. Artists signed to UMG as part of its recorded music business span all genres and generations
and include the greatest artists of all time: ABBA, Louis Armstrong, The Beatles, The Beach Boys, The Bee Gees,
Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton John, Bob Marley,
Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The Rolling Stones, Frank Sinatra, U2, Amy Winehouseand Stevie Wonder, as well as many of the biggest artists today, such as J Balvin, Justin Bieber, Luke Bryan,
Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish, Eminem, Selena Gomez, Ariana Grande, Imagine
Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone, Shawn Mendes, Kacey Musgraves, Katy Perry,
Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie Underwood, Keith Urban and The Weeknd.
As a result of having such a broad array of frontline labels, label venture partners and label services, aswell as the diversification of revenue streams, UMG is not reliant on one artist, or on a small number of artists, to-91-

generate revenue in any given year. In fact, no single artist accounted for more than 1%, and the top 50 artists
only accounted for 23%, of UMG’s recorded music revenue in 2020.
In addition to this artist diversification, UMG has strong and reliable revenue flows from its catalog(defined as content older than three years), which accounted for 54% of recorded music digital and physicalrevenue in 2020, while frontline product (content less than three years old) accounted for 46% of recorded music
revenue.
UMG’s recorded music business is also geographically diverse. In 2020, North America accounted for
49% of UMG’s recorded music revenue, with Europe at 30%, Asia 14%, Latin America 3% and the rest of theworld at 4%.
UMG’s Universal Music Publishing Group (UMPG) controls the publishing rights to a global catalog
containing close to four million owned and administered compositions, including several of the world’s mostpopular songs. Major songwriters whose works are part of UMPG’s catalog include ABBA, Adele, The BeachBoys, Beastie Boys, The Bee Gees, Irving Berlin, Leonard Bernstein, Justin Bieber, Benny Blanco, Mariah Carey,
Coldplay, Neil Diamond, Dua Lipa, Bob Dylan, Billie Eilish, Eminem, Future, Billy Joel, Elton John/Bernie
Taupin, Alicia Keys, Kendrick Lamar, Dave Matthews, Pearl Jam, Post Malone, Britney Spears, Harry Styles,
Taylor Swift, Justin Timberlake, U2 and many more.
UMG’s relationships span the largest collection of artists of any company in the world. Successful
relationships in one area of UMG’s business can also translate into broader sets of rights, as well as expanded
relationships in other areas of the company’s operations. In addition, this broad network of artists allows UMG to
more effectively partner with digital service providers, provides UMG with the most comprehensive view oftechnological trends across the industry, and elevates UMG as the early partner of choice for helping to develop
industry business models for new service offerings, such as fitness, spatial audio, in-car audio, meditation andlearning/play.
This coverage universe provides UMG with extensive consumer data, which, along with the Group’s
investment in analytics, allows UMG to draw deep insights and action plans, benefiting UMG’s artists as well as
the Group, and further differentiating UMG as the partner of choice for artists at every stage of their careers.
UMG’s industry-leading, in terms of scope, data, analytics, engineering, and modeling, combined with thecompany’s network of content inventory and partner channels, have made the company an attractive media andadvertising partner for some of the world’s biggest brands.
UMG’s industry-leading position, in terms of market share, best-in-class artist development andcontinuous re-investment in its business creates a virtuous cycle that benefits the company and its artists overtime, which UMG believes puts its competitive position in a “category of one”. UMG’s success in adding newcontent, by breaking new artists, expanding its relationships with established artists and broadening its portfolio
through its artist and label services business, further increases its importance to its retail partners and consumers.
This leads to additional data and further insights into a broader set of consumer behaviors, which then helps better
inform UMG’s decision making around artist investment and development, again, furthering UMG’s appeal to
new artists and generating financial benefit to both UMG and its artists.
11.2

Artist-Centric Focus and Commitment

Artists and songwriters are at the center of everything UMG does. UMG is focused on the long-term
development of artists and songwriters and the company is built to serve their unique needs for each stage of theircareers. UMG has consistently demonstrated the value it represents to an artist’s success. Producing and marketingmusic successfully requires significant upfront investment and involves collaborating with the best writers andproducers. UMG invests more money and expertise through its staff of industry specialists than any other recorded
music company in signing and developing talent. Combining these investments and expertise with UMG’s
excellence in marketing and in promoting artists globally, enables UMG to consistently lead the industry inbreaking artists. UMG has also strategically expanded the revenue streams of its artists from film, television,theater, merchandise, touring, ticketing and sponsorship. As a result, several iconic artists, including Daddy
Yankee, Taylor Swift, The Rolling Stones and Elton John, among many others, recently signed (or re-signed) withUMG, solidifying the company’s position as their preferred partner.
In a crowded marketplace, where approximately 60,000 new recordings are uploaded daily to Spotify, it
has become harder than ever for an artist to break-through in a sea of music content. Doing so requires theprofessional expertise and resources of a major label, including a comprehensive approach to content creation,organic artist development, timing, marketing, promotion, financial investment, and forward planning. For this-92-

reason, UMG believes that traditional, high-touch, full-service label deals with its portfolio of world-renownedlabels provide the most long-term value to an artist and greatly increase the commercial success, consumer baseand longevity potential for artists at every stage of their careers.
To work with the broadest set of artists, UMG offers a wide spectrum of services to meet the needs of
independent labels, artists and entrepreneurs at every stage of their development, providing them with resourcesfrom global distribution, insights, data and marketing tools to fully staffed promotion, marketing and artist
development teams, both regionally and globally. Through Virgin Music Artist & Label Services, as well as
Ingrooves, UMG appeals to the broadest set of artists globally, and when mutually beneficial, can upstream artists
into a more traditional, high-touch, full-service frontline label deal. For example Zoe Wees, a new German singersongwriter who was originally released through Universal Music Germany’s artist services division, is now cosigned directly to Universal Music Germany and Capitol Records UK, where she has generated more than 500
million streams ahead of her debut album release, due in late 2021.
11.3

Role in Development of New Services and Consumer Offerings

UMG plays an active role in promoting the continued development of new digital services and consumer
offerings in order to support a competitive, healthy and increasingly global market. UMG has agreements withseveral hundred global and local digital service providers around the world, establishing legal consumption ofmusic in markets with high levels of piracy that previously didn’t have legitimate commercial outlets, including
the high-growth BRIC countries (Brazil, Russia, India and China), Latin America, Africa, the Middle East, Eastern
Europe and Southeast Asia. These partnerships have made music more accessible to fans around the world,
offering a free-to-use option for consumers as an alternative to pirated content, with additional upsell opportunities
created.
11.4

True Global Infrastructure

UMG operates in more countries and markets than any other recorded music company. With a diverse
range of labels, UMG’s recorded music business has offices in more than 60 territories and is present acrossapproximately 200 markets. UMG’s physical presence in all of these territories, rather than relying on outsourced
distribution or other business models, is critical to its continued growth and a key differentiator of the UMG
approach. This enables UMG to better understand, and engage with, local artist and label communities and identify
the key elements for success in each jurisdiction. UMG believes that its sustained investment and commitment tolocal music communities, including its established networks of artists, producers and creative executives, hasgiven it a significant advantage in high growth markets as they have developed monetizable forms of music
consumption.
In order to best understand and be effective in each individual market and region, many of which havehugely diverse populations, dialects and cultures, UMG is reliant on its local, dynamic executive teams throughout
each territory. These teams have been able to help build and contribute to the entire music ecosystem in the
countries in which they operate, establishing UMG as a key stakeholder and trusted partner within each market.
The local relationships and deep, broad experience of these management teams has also allowed UMG
to expand the suite of services available to offer artists, labels, partners and clients, including artist and talentmanagement, live booking and event promotions, brand and influencer partnerships, merchandising, music andbrand licensing and other forms of Non-Recorded Income (NRI). The ability to offer these non-traditional services
enables UMG to attract the best talent in each territory, which has resulted in a series of high-profile marqueeartist signings around the world.
A decade ago, when the industry revenue was in decline, other companies in the music industry attempted
to save costs by closing local offices in smaller music markets and outsourcing distribution of their content. On
the contrary, UMG continued to invest in local A&R, signing and developing local talent, and growing its
networks in markets around the world. In recent years, UMG has established new offices in Cameroon, Côte
d’Ivoire, Israel, Kenya, Morocco, Nigeria, Senegal and Vietnam and expects to add operations in other markets
in the near future.
During the past five years, UMG has taken a holistic approach to expanding operations across Africa,
opening new divisions in Nigeria, as well as becoming the first major music company to establish divisions in
Kenya, Côte d’Ivoire, Senegal, Cameroon and Morocco, alongside UMG’s longstanding operations in South
Africa. UMG has also led the industry in signing landmark licensing deals with local services and platform
partners in order to ensure that music from UMG’s artists reaches audiences throughout Africa. UMG has
introduced and launched both established and new label brands into the continent including Def Jam Africa,-93-Motown and Afroforce1, while partnering with some of Africa’s most innovative, acclaimed and entrepreneurial
talent such as Nigeria’s Aristokrat Group. Most recently, Ingrooves Music Group’s acquisition of leading South
African independent distributor, based on chart performance, Electromode allowed UMG to enhance its digital,
distribution and marketing services footprint across the continent.
In Asia, UMG expanded its domestic operations within mainland China: opening a new UMPG
publishing division, signing a series of innovative licensing agreements with new partners and platforms andlaunching several new label brands in order to attract new artist talent, drive new forms of income and revenue
and increase the opportunities for Chinese talent to reach new audiences abroad. In 2019, UMG became the firstmajor music company to enhance UMG’s regional presence by opening a new regional Southeast Asia
headquarters in Singapore. This shift allowed the company to better position itself among key partners,
stakeholders and brands, while also introducing a series of new, respected international labels into the market inorder to attract the best artist talent from the region and capitalize on the growing regional popularity of genres
including hip-hop and dance (Def Jam SEA, Astralwerks Asia, Island Records Philippines, Big Hit / HYBE, Red
Records among others).
UMG’s foresight to establish itself early in these territories, before they emerged as high-growth music
markets, has better positioned the Group to benefit from the legitimate music economies that streaming has now
begun to establish, replacing years of piracy-based music consumption with commercial opportunities. Using its
strong relationships with several hundred local, regional and global digital service providers, UMG is actively
working to break new domestic artists in markets around the world, as well as help those artists achieve regionaland global success. At the same time, UMG actively works to expand the fan base of its roster of artists from moredeveloped music markets, introducing them to new audiences in markets that did not previously have a clear pathto monetization. As a result, domestic and global stars, as well as fans around the world, are benefitting from
UMG’s physical presence in all of these territories.
11.5

Social Responsibility

UMG’s social responsibility program is centered around creating a more sustainable future with a focus
on supporting culture and its creators, its employees and local communities. Initially formulated as part ofVivendi’s Creation for the Future program, UMG’s work aligns with the United Nations Sustainable Development
Goals (SDGs), and UMG has adopted the recommendations of the Task Force on Climate Related Financial
Disclosures. In addition, UMG’s All Together Now philanthropy program supports its employees’ good works,
particularly across education and health & well-being – and especially related to music and the arts. In parallel,
UMG’s Task Force for Meaningful Change (TFMC) works to support marginalized communities in the ongoingfight for equality, justice and inclusion. UMG continued, and will continue, those commitments as it started
building its own environmental, social, governance (ESG) roadmaps in anticipation of the Admission andDistribution. With Board oversight, this process will continue into 2022. UMG intends to put in place a UMGspecific framework for action that directs its activities towards building a sustainable future, with a particularfocus on the well-being of: creators of music and the arts; its people and communities; and the environment.
11.6

UMG History

Home to recordings stretching back more than a century to 1898, the predecessor to UMG began in 1924
with the founding of Music Corporation of America (MCA), a music and talent agency, and expanded significantly
over the last century through a series of acquisitions and through organic growth, eventually becoming the world’s
largest music and entertainment company that it is today, based on revenue.
In 1962, MCA acquired Decca Records, becoming home to music, film and television operations, with
MCA subsequently being acquired by Japan’s Matsushita Electric Co. in 1990. Five years later, Seagram
Company Ltd. acquired 80% of MCA from Matsushita and the following year renamed MCA’s movie segment
Universal Pictures and relaunched its music segment as Universal Music Group.
In May 1998, Seagram acquired PolyGram, a joint venture between Phillips and Siemens that owned
music labels including Polydor, Phonogram, Deutsche Grammophon, Island Records, Def Jam Recordings, A+M
Records, London Recordings, Mercury Records, Fontana and Verve. A year later, Polygram was merged withUMG.
In 2000, Vivendi acquired Seagram, and gained full ownership of UMG in 2006 after buying the 20%
stake still held by Matsushita. A year later, in 2007, UMG expanded its music publishing operations with theacquisition of the BMG Music Publishing catalog.

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In 2012, UMG acquired EMI Music, the recorded music division of the EMI Group, including recordlabels Angel, Astralwerks, Blue Note, Capitol, Capitol Latin, Capitol Records Nashville, EMI Classics, EMI
CMG, EMI Records, EMI Records Nashville, Manhattan, Parlophone (which was subsequently divested), Virgin
Classics and Virgin Records.
UMG has also expanded outside of recorded music and music publishing. In 2007, UMG acquired
Sanctuary, a merchandising, live agency and artist management business, most of which was subsequently
divested. The merchandising arm of Sanctuary eventually became UMG's merchandising division, Bravado. In
2014, UMG acquired Eagle Rock Entertainment, enhancing the company’s presence in audio-visual content. In
2019, UMG further expanded its merchandising business with the addition of Epic Rights.
In March 2020, Vivendi completed the sale of a 10% stake in UMG to a Tencent-led Consortium. In
addition, a separate agreement was entered into on March 31, 2020, granting Tencent Music Entertainment an
option to acquire a minority interest in the share capital of the UMG’s subsidiary that owns its operations inGreater China. The Tencent-led Consortium, after exercising its call option, acquired an additional 10% stake in
the Company from Vivendi in January 2021.
In February 2021, as part of the Restructure, the shareholders of UMGI and UIM, being Vivendi,
Concerto and Scherzo contributed their shares held in UMGI and UIM, representing all of the issued capital ofboth UMGI and UIM, to the Company in exchange for newly issued shares in the Company, as a consequence
whereof the Company became the sole holding company of the Group.
More recently, following (i) the execution of definitive agreements between Pershing Square Tontine
Holdings Ltd (Tontine) and Vivendi on June 20, 2021 and (ii) the assignment agreement entered into between
Tontine, Pershing Square Holdings, Ltd., Pershing Square L.P., Pershing Square International Ltd. and PS VII
Master, L.P. (together the Pershing Entities) on July 18, 2021 (and notified to Vivendi on the same date), thePershing Entities assigned the share purchase agreement to Pershing Square Holdings, Ltd. and completed theacquisition of a 7.09% stake in the Company from Vivendi on August 10, 2021 for an aggregate purchase priceof US$2.8 billion, and subsequent acquisition of a 2.91% stake in the Company from Vivendi on September 9,2021 for an aggregate purchase price of US$1.15 billion.
11.7

Competitive Strengths

11.7.1

Industry-Leading Artist Development, Marketing and Promotion Creates Premier Roster of New andEstablished Talent

UMG’s core competency remains the discovery of superstar talent and the development, marketing andpromotion of artists. The process of identifying and developing artists has evolved and improved with the additionof data and analytics, and the performance of UMG’s labels and their ability to achieve new milestones in acompetitive market has only increased.
This has resulted in UMG’s recordings and recording artists topping charts regularly, and in 2020,
UMG’s and its artist’s key achievements included:

Four of the Top 5 artists of the year on Spotify globally (Drake, J Balvin, Juice WRLD and The
Weeknd);

The No. 1 song of the year (The Weeknd’s “Blinding Lights”) on Spotify globally;

Two of the top 3 albums streamed on Spotify globally (The Weeknd’s After Hours and Post
Malone’s Hollywood’s Bleeding);

Four of the Top 5 most-streamed artists of the decade on Spotify;

Artist and Songwriter of the Year on Apple Music (Lil Baby and Taylor Swift);

Four of the top 5 songs on the Billboard 2020 year-end chart from UMPG songwriters;J Balvin was the most-streamed artist on Deezer (for the third consecutive year);

Karol G was the most-streamed female Latin artist globally;

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

Based on data from Media Rating Council (formerly Nielsen Music) (MRC), all of the Top 6 albumsof the year in the US were created by UMG artists (Lil Baby, Taylor Swift, Pop Smoke, The Weeknd,
Juice WRLD and Post Malone);

As per MRC, UMG artists also had the Top 3 biggest debut weeks in the US with Taylor Swift, Juice
WRLD and The Weeknd;

Based on date from the Official Charts Company (OCC), 13 of the Top 20 artist albums in the UK
in 2020, including the number 1 album (Lewis Capaldi’s Divinely Uninspired to a Hellish Extent);

As per OCC, four of the Top 5 most-streamed artists (Drake, Eminem, Taylor Swift and Juice Wrld)in the UK and the No. 1 single in the UK (The Weeknd’s “Blinding Lights”);



OCC data named EMI Records as the UK’s No. 1 record company;



According to IFPI, all ten of the Top 10 global artists (with one of the Top 10 artists, UMG had only
a portion of the rights);

Based on GfK Entertainment’s Official Charts, five of 2020’s Top 10 albums In Germany (Sarah
Connor’s Herz Kraft Werke, Die Ärzte’s Hell, Metallica’s S&M 2, Kerstin Ott’s Ich muss Dir was
sagen, and Bonez MC’s Hollywood); andSix of the Top 10 albums of 2020 in France including the number 1 and number 2 albums (Versus
by Vitaa/Slimane and Les Derniers Salopards by Maes).

Additionally, in the first half of 2021, UMG artists held the number one spot on Spotify global chart for
20 of the first 26 weeks, with Olivia Rodrigo’s “driver’s license” and “Good 4 U”, and Justin Bieber’s “Peaches”.
UMPG also represents all of the top five artists/songwriters on Spotify’s top historical artist chart.
11.7.2

Leading Depth and Breadth of Catalog

UMG believes that it has the most comprehensive catalog of recorded music in the world. UMG’srecorded music catalog of over three million recordings includes a wide array of timeless performers such as
ABBA, Louis Armstrong, The Beatles, The Beach Boys, The Bee Gees, Andrea Bocelli, Neil Diamond, Guns N’
Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Queen, The Rolling Stones, Frank Sinatra, U2 andAmy Winehouse. UMG’s recorded digital and physical music revenue for the year ended December 31, 2020,
included 54% from catalog releases reinforcing the strength of UMGs recorded music catalog and further
developing monetization potential.
11.7.3

Industry’s fastest-growing major publishing business

UMG believes that UMPG is one of the world’s largest and fastest growing of the major music publishingcompanies, acquiring and administering rights to musical compositions (as opposed to recordings) and licensing
those musical compositions for use in a variety of formats. As a trusted partner to its songwriters and clients,
UMPG offers artists a focus on innovation, a dedicated global team of experts working on the ground in major
music markets across the world, and UMPG Window, an advanced platform and technology through which
songwriters and clients are provided real-time information on earnings, royalty and copyright data. UMPG has aworld-class team with local representation spanning 52 offices across 42 territories.
UMPG global teams focus on discovering, signing and developing regional talent, and creating unique
opportunities for success. Equally valuable, UMPG’s physical presence is crucial in maintaining relationships
with collection societies around the world. Localized teams ensure every piece of generated income is accounted
for and collected on behalf of songwriters and copyright holders.
UMPG and UMG have the ability to create synergies and leverage each other’s relationships with artists,
as many popular artists, including J Balvin, Bastille, The Beach Boys, Bee Gees, Justin Bieber, Blackbear, Bon
Jovi, DaBaby, Billie Eilish, Florence & The Machine, Selena Gomez, Ariana Grande, Halsey, Elton John,
Kendrick Lamar, Adam Levine of Maroon 5, Lil Baby, Post Malone, Shawn Mendes, Nicki Minaj, Taylor Swift,
U2, and Sebastian Yatra, among others. At the same time, UMPG also has artists and songwriters (e.g., Coldplay,
Harry Styles and Justin Timberlake) that are signed only to UMPG demonstrating the scope of UMPG’s catalog
and its ability to diversify and work with artists that work with other companies for their recordings.

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As a result of UMPG’s innovative and comprehensive approach, UMG’s publishing revenues havegrown by 26% between 2018 and 2020.
11.7.4Global presence with local expertise around the world

As UMG has continued to expand its operations around the world, it has invested in dedicated local
expertise, artist and repertoire (A&R), marketing and management teams that truly understand the music
ecosystem of each region where UMG is present reinforcing its commitment to the success of local talent. As aresult, UMG is considered a key stakeholder and trusted partner in the world’s most exciting and rapidly evolving
markets. UMG has offices in more than 60 territories worldwide and is present in approximately 200 markets
around the world. In recent years, UMG has established new offices in Cameroon, Côte d’Ivoire, Israel, Kenya,
Morocco, Nigeria, Senegal and Vietnam and expect to rollout in other markets in the near future. This enables
UMG to better understand and engage with local artist and label communities and identify the key elements for
success in each jurisdiction. UMG takes a holistic approach when expanding its operations in a new region, by
opening new offices on the ground, hiring local teams, partnering with local services and platforms and signing
artists from that region in order to reach audiences in that region.
11.7.5

Capabilities in data and analytics complemented by scale

Data has proven to be key in maximizing success in the music industry. UMG has made on-goingstrategic investment into data and analytics over the past few years, including by building a world-class analytics
infrastructure based on cloud technology.
UMG’s data and analytics team consists of strategic analysts, data scientists, and front-end/back-end
coders who work to develop algorithms to help UMG spot talent faster than its competition and find its audiencein the most efficient manner. UMG has also developed methods to identify tracks that are popular among distinct
audience clusters allowing UMG to tailor its marketing initiatives to the target audience, maximizing its reach andconversion. UMG’s data scientists have developed a proprietary marketing mix model and a framework for testingcausal effect to help it optimize its marketing channel mix as well as the creative used to activate on these channels.
Universal Music Artists, an iOS/Android application launched in 2019, is a tool designed by UMG withthe artist in mind. It allows artists and their management to see the location of their fans by country and city
(helping them in planning tours and other engagement), identify tracks that work best with specific audiences andthe social posts that drive the most engagement. While digital service providers may be able to provide data
directly to UMG’s artists, only UMG is able to provide a cross-platform and global view of the performance ofan artist’s recording whereby enabling labels and artists to make informed commercial decisions and optimize theimpact of marketing campaigns.
11.7.6

Deeply experienced, inventive and entrepreneurial creative leadership

The creative executives at UMG are some of the most experienced, inventive and highly entrepreneurial
in today’s industry with an unmatched track record of artist successes around the world.
Among their talents, the team of leaders assembled by UMG Chairman and Chief Executive Officer Sir
Lucian Grainge are expert at developing artists’ careers. Sir Lucian’s own history as a talent scout, label head andinternational executive informs the way he recruits and develops his creative executive leadership. Sir Lucian has
spent his entire career in the music industry and has signed and guided the careers of some the world’s mostsuccessful recording artists and songwriters.
Sir Lucian’s focus on promoting a creative and entrepreneurial culture is evident in UMG’s recordbreaking global and regional artist successes, as well as by the team of creative executives he has built. For
example:Interscope Geffen A&M Records Chairman and CEO John Janick founded the record company
Fueled By Ramen while he was in college - then sold that label to a major music company - andhas been with Interscope for nearly a decade. He was named Variety's "Hitmakers Exec of theYear" in 2018 and in 2020, led Interscope to be named as "Top Label" on Billboard's year-end
charts for the first time since 2013.

Monte and Avery Lipman, the Chairman and CEO of Republic Records and President and Chief
Operating Officer, respectively, founded that label in 1995, which was later brought into the-97-Universal Music Group family. In 2019, Republic Records was named Billboard's "Top Label"for the fourth time in five years.

11.7.7



Executive Vice President Michele Anthony, who joined UMG in 2013, has enormous depth ofexperience working with labels and artists through a career in label management, artist
management and entertainment law. At UMG, her responsibilities include helping manage
UMG's US labels and overseeing Universal Music Canada, the global catalog division Universal
Music Enterprises, as well as the company's global brand partnerships.

Andrew Kronfeld, UMG's Executive Vice President, Marketing, first joined UMG 30 years ago
and manages the interaction and coordination of artist repertoire around the world, having
previously served as President of Global Marketing for UMG's international division.

Richelle Parham, UMG’s President of Global E-Commerce and Business Development,
oversees the company’s global e-commerce strategy and business development across its labels,
music publishing company, operating units and territories. She possesses more than 25 yearsof global strategy and marketing experience at companies including eBay and Visa and has aproven track record of leading high-performing business and marketing teams, creatively
utilizing strategic and analytical decision-making expertise to successfully drive key businessperformance.

David Joseph, Chairman and CEO of Universal Music UK and Ireland, joined UMG in 1998
and has been in his current role since 2008. In this role, he oversees all divisions of the company
in those countries including the labels Capitol, Decca, Island, Polydor and EMI alongside theworld's most famous recording studios, Abbey Road.

Frank Briegmann, Chairman & CEO of Central Europe & Deutsche Grammophon, joined UMG
in 2004. He is responsible for Universal Music Group’s operations in Germany, Austria, Italy,
Switzerland, Benelux, the Scandinavian Countries, Eastern Europe and Western Balkans, which
together UMG believes is the world’s most diverse music region in terms of consumption andbusiness models, as well as the Deutsche Grammophon label.

Naoshi Fujikura, President and CEO of Universal Music Japan, is one of the leading architectsof streaming growth in Japan and has been with UMG for nearly 30 years.

Adam Granite, UMG’s Chief Executive Officer, Africa, Middle East and Asia, has more than
20 years of experience in the music business, overseeing international expansion in new music
markets.



Jesus Lopez, Chairman/CEO, Universal Music Latin America & Iberian Peninsula, has worked
with the greatest Latin artists for nearly four decades and is credited with shaping the Latinmusic industry today.

Strong financial position with track record of revenue growth, margin expansion and significant cash
flow generation.

In the current digital media environment, global music industry revenues have continuously been
growing since 2015. From 2018 to 2020, UMG has grown revenues by 23%, driven by strong chart performanceand focused effort to expand catalog sales, as well as positive industry trends and notably the growing penetrationof digital streaming across the globe. Over the same period, UMG has grown EBITDA by 52%, which has led tomargin expansion of 3.7 percentage points over the period. This was driven by the revenue growth, revenue mix,
operating leverage, and expense savings, and partially helped by lower marketing spend in 2020 related to the
COVID-19 pandemic as well as the change in presentation of lease expenses following the adoption of IFRS 16
in 2019. While net cash provided by operating activities in 2020 was significantly lower in 2020 than in 2019,
this was due to investments which the Company believes will have strong returns and will help UMG’s financial
and operational profile going forward and shows that even in a year of heavy investment, the business has theability to remain cash-flow positive without outside financing.
Further, the continued growth of paid subscription streaming revenue provides more resilient recurring
revenues for UMG, with streaming and music publishing representing over 67.5% of UMG’s revenues in 2020.
As the recorded music industry has transitioned from a physical and digital ownership model, to paid subscription-98-and advertising based streaming models, UMG’s revenues have reflected this shift. In recorded music, 64% of
UMG’s 2020 revenues came from streaming and subscription, which figure was 59% and 54% in 2019 and 2018,
respectively.
UMG believes its financial profile provides a strong foundation for its continued growth.
11.7.8

Leading relationship with platforms.

UMG believes it has a strong position in the digital music ecosystem through a track record of industry
leadership in pioneering new deals, major partnerships and key technology agreements. This includes developing
new consumer categories into important business segments and providing critical support to entrepreneurs aroundthe world who are creating the next generation of innovative products and services that will continue to diversify
the industry.
While a number of digital service providers compete with each other in the music industry around theworld, they all seek to work closely with UMG, the largest supplier of content to all of the digital service providers.
This is because UMG’s artist content is a key driver of customer acquisition for all of these platforms. UMG’sworld-renowned catalog, which is continuously growing through UMG’s proven ability to develop and break new
artists, makes UMG an important customer acquisition partner for platforms. In the first half of 2021, 66% ofindustry-wide streams were catalog, according to the MRC Data 2021 Mid-Year Report.
UMG has agreements and partnerships with every major digital music service launched in the last decade,including Amazon, Apple, Pandora, Spotify, YouTube and others and was one of the earliest supporters of digital
streaming and subscription services displaying its capability for innovation and the ability to lead a transformationof the music industry.
UMG’s landmark agreement with Facebook in 2017 represented the first time a music company haslicensed its catalog for use with videos and other social features on a social media platform and remains amilestone for unlocking value for recording artists and record labels through social media. UMG reached a newpartnership agreement with TikTok in February 2021, providing TikTok users access to UMG’s entire recorded
music and publishing catalog of song clips, thus enabling equitable compensation for recording artists andsongwriters while adding new data analysis and marketing tool features.
By aggressively supporting and partnering with new music services around the world, UMG is expanding
the ability of audiences in territories covered by such services to access its catalog of music. For example, UMG’sagreements with Tencent Music Entertainment, which includes a multi-year license to Tencent MusicEntertainment.
The result of UMG’s leadership position, as well as its willingness to embrace new business partners andspearhead the development of new business models around the world, has resulted in an expanded market formusic consumption and monetization, benefiting artists, fans, platform partners and music companies.
11.7.9

Leading position in music-based audio-visual content.

UMG is the global leader in music-based audio-visual content, based on the volume of award-winning
content it is producing and selling, and the demand for this content continues to increase at a rapid pace. UMG is
focused on creating new content from existing content and rights, creating new media formats and capturing live
events. From premium long-form content including music documentaries, feature films, musicals, music-based
television series and reality shows, to short-form content such as live event streaming, premium music videos,viral content, behind-the-scenes footage and podcasts, UMG is working to accelerate the monetization of audio
and video assets. In 2020, UMG’s artists featured in tens of thousands of hours of videos, and UMG content
enjoyed over four trillion minutes of cumulative watch time on YouTube.
UMG participation in audio-visual projects ranges from the development and production of content to
the financial investment in projects developed by external production partners. UMG’s audio-visual projects are
distributed through theatrical distribution partners which have included A24, Abramorama, Altitude Film
Distribution, CBS Films, HanWay Films and StudioCanal, and digital distribution partners including Apple TV+,
Amazon Prime Video, HBO, Netflix and Showtime. UMG operates two audio-visual divisions, Polygram
Entertainment, that develops and produces premium film and television content, and Mercury Studios, whichdevelops, produces, sells, promotes and digitally distributes film, television, short-form and podcast content aswell as home video/DVD. UMG also oversees audio-visual divisions within labels such as Interscope Record’s
Interscope Films and Republic Record’s Federal Films.

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UMG’s audio-visual work includes projects from directors including Alison Elwood, Asif Kapadia,
Frank Marshall, Roger Ross Williams, Ron Howard, Spike Jonez and Todd Haynes. UMG has been involved in
the creation of a variety of audio-visual content, including award-winning film and television projects such as
AMY (A24), The Apollo (HBO), The Bee Gees (HBO), Beastie Boys Story (Apple TV+), Billie Eilish: The
World’s a Little Blurry (AppleTV+), Jonas Brother’s Chasing Happiness (Amazon), The Go-Go’s (Showtime),
Hitsville: The Making of Motown (Showtime), Miles Davis: The Birth of Cool (Netflix), Pavarotti (CBS Films),
That Little Ol’ Band from Texas (Netflix) and NBCs Zoey’s Extraordinary Playlist.
11.8

UMG Growth Strategies
UMG has multi-faceted growth strategies, including:

11.8.1

Continuing to sign and develop the industry’s top new artists and songwriters.

Discovering, developing, breaking and retaining new recording artists and songwriters who will achieve
long-term success is a critical component of UMG’s global strategy. UMG does this successfully through an“artist-first” approach. Developing artists is at the core of every initiative at UMG. By combining its unrivalled
regional executive teams with dedicated resources and best-in-class services and technology for artists, UMG
fosters long-term partnerships with artists, driving success for the next generation of independent labels and artists.
UMG plans to capitalize on its industry-leading A&R capabilities, based on chart performance, to signtalented recording artists and songwriters who will generate meaningful revenues and increase the enduring valueof its catalog across genres and geographies. In addition to the creative expertise of its teams and labels in
identifying and marketing artists, UMG uses the comprehensive data and insights derived from its current portfolio
to help inform the potential of new artists, help the labels identify the best platforms and formats to reach a newartist’s audience and steer them towards realizing their full artistic potential and achieving commercial success.
UMG believes it offers the broadest options for artists as they look to enter into a label deal. For example,
UMG is increasing its efforts to provide independent artists and entrepreneurs with the most powerful, global
resources available such as UMG’s marketing and distribution company, Ingrooves, and UMG’s recently
launched Virgin Music Label & Artist Services – a new global network delivering premium and flexible artist andlabel services to the industry’s most dynamic entrepreneurs and independent talent worldwide. Virgin Music Label& Artist Services enables UMG to offer bespoke service packages to artists by allowing them to pick and choose
which services they would like to utilize.
11.8.2Retain and expand relationships with established artists.

Beyond being the partner of choice in recorded music and music publishing, UMG has expanded its
business with its established artists with whom it has partnered for many years to include offerings such as
merchandising, branding and sponsorship, film and television production and eCommerce. UMG plans to continue
to expand its relationship with its existing roster of artists.
For example, in 2018, The Rolling Stones and UMG announced an expansive worldwide agreement thatwill allow UMG to use all of the band’s recorded music and audio-visual catalog for future projects with UMG
providing archival support for the band’s physical assets, musical instruments and equipment and global
merchandising and brand management services to the band. This agreement expanded the collaboration between
The Rolling Stones and UMG after a decade of partnership. Additionally, in 2018, Rocket Entertainment, acompany co-founded by Elton John, and UMG announced a new agreement to provide Elton John with UMG’s
resources and expertise across recorded music, music publishing and licensing rights, including services relating
to merchandising, branding and retail licensing and provides UMG with the publishing rights to Elton John’sentire song writing catalog and the ability to bring Elton John’s recorded music and songwriting to new
generations of fans. This partnership reflects UMG’s evolution from recorded music and music publishingbusiness to a global media and entertainment company with a unique combination of global reach, creative andcommercial expertise and renowned marketing and promotional support. Other recent examples include UMG’s
expanded partnerships with Taylor Swift, U2, J. Balvin and Eminem.
The growing scope of UMG’s artist deals reflects UMG’s value proposition to established artists and
UMG plans to continue to expand its relationships with key artist partners as an avenue for continued growth of
UMG’s business.

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11.8.3

Network of relationships is key differentiator in attracting and retaining artists and other clients.

The power of UMG’s network of relationships is a key differentiator that helps UMG build its roster ofartists, songwriters and other client relationships. Whether for music distribution, publishing administration, orother rights partnerships, UMG has positioned itself as the partner of choice for a wide variety of high-quality
partners (including leading music and entertainment companies, artist representatives, consumer brands andothers) seeking to work with a music company on any of a range of music-related activities.
In recorded music, UMG has deep, long-term partnerships with independent record labels including
Concord, Roc Nation, Big Machine and Quality Control, among many others. These relationships are mutually
beneficial, capitalizing on UMG’s global infrastructure to build and reach the broadest set of music fans.
Among music publishers, UMPG has positioned itself as a leading rights administrator for the world’s
most prominent film and TV studios, including Warner Bros., NBC Universal, Disney, HBO, Dreamworks,
MGM, Paramount, Lionsgate, Viacom, STX and many more.
Through these relationships, UMG both looks to broaden opportunities for its current artists (e.g. in theaudiovisual space) and seeks to identify new artist talent to broaden the scope of its A&R capability.
11.8.4

Expanding eCommerce and direct-to-consumer businesses.

UMG believes there is significant opportunity to use consumer data and insights to expand its
eCommerce business and its direct-to-consumer sales in all of its business segments. UMG is well positioned toreach music fans through multiple touch-points based on the artists they follow and the platforms and websites
they use. Music fans have historically been willing to spend more on their artists than the average customer;
however, as download sales decreased and were replaced by paid subscription streaming services, the spend
difference between fans and average customers flattened. UMG's growth strategy and expansion of its direct-toconsumer efforts aims to address this discrepancy and includes the following elements:



Expanded eCommerce ecosystem: reach fans through websites and music and other platforms
where they already spend time;Product design and development: create leading music merchandise to both drive and fulfill
demand;Drop strategy: elevated experiences around product drops to capture audience and build artistfan engagement;Marketing strategy: effective global media strategies to reach existing fans and appeal to new
consumers; and

Audience development: building long-term relationships with music fans, yielding loyalty andincreasing the lifetime value of a consumer.

The elements of this strategy are dynamic, including pricing, supply chain and audience outreach as
UMG is responsive to new data and insights and advancement of technology.
11.8.5

Supporting innovation and expanding into new product offerings.

UMG is a key promotor of innovation across the digital ecosystem through partnerships in new productcategories and through proactive efforts to cause its partners to evolve and innovate.
UMG maximizes opportunities to introduce new products, services and revenue streams in various
segments spanning voice, fitness, social media gaming, live streaming, brand partnerships, start-ups and othercategories.

Voice: Universal was a launch partner for Amazon's voice-activated music service in 2016 andsince then has played a key role in expanding voice-activated music to hundreds of millions ofsmart speakers globally through Amazon, Apple, Google and many more partners.



Fitness: Starting with Peloton, a partnership inaugurated in 2017, UMG has been the industry
leader in crafting new licensing models for integrating music within the thriving digital fitness
category, which in 2021 has an estimated market size of $10 billion according to 360 Research-101-

Reports, entering into nearly a dozen new agreements in 2020 with a diverse range of newer
services.

Social Media: Starting in 2017 with UMG's landmark commercial partnership with Facebook,
UMG has accelerated its leadership position through innovative new agreements with othersocial media players, including agreements with TikTok and SNAP in 2021. As an indicationof UMG's success in the segment social media segment, which, according to Zenith Media, hasa market size of $135 billion in 2021, UMG's artists routinely hold the top spots on the RIAA's
ranking of recording artists by social media following on Facebook, Instagram and Twitter (allsix of the top six as of March 27, 2021).

Gaming: UMG has experimented with harnessing mass audience engagement in the video gamesegment, which, according to Research and Markets, has a market size of $170 billion in 2021,
including with Marshmello’s industry-first virtual Fortnite concert in 2019. Since then, UMG
has continued to innovate with projects that include J Balvin’s Halloween 2020 event in Fortnite
and Post Malone's performance in the Pokémon 25 event in 2021.



Livestreaming: UMG has executed hundreds of livestream music events with dozens of partners
since the onset of the Covid-19 pandemic. A recently announced co-venture between UMG, Big
Hit Entertainment and YG Entertainment to expand VenewLive, a livestreaming platform thatwas launched in 2019 and uses digital technology to provide immersive concert experiences, isindicative of UMG’s focus on developing opportunities within the category.

Brands: UMG has entered into multi-year global sponsorships with leading brands including
American Airlines, Citibank, Lenovo, Marriott, Microsoft and Pokémon. In 2021, UMG
partnered with LEGO in an innovative collaboration that resulted in the launch of VIDIYO, a
music video maker for children that uses a combination of LEGO elements, minifigures, music
and augmented reality. Additionally, UMG has focused on creating consumer productpartnerships between its artists and other recognizable brands, for example, Burton and the
National Football League.

UMG consistently enhances established relationships on an ongoing basis. For example, UMG enteredinto a music video remastering agreement with YouTube in 2019, a content development agreement for higherquality audio and spatial audio with Amazon in 2020 that resulted in the launch of a premium-priced subscription
service and the launch on Facebook in 2020 of premium music videos. UMG consistently supports and enables
the launch of new technologies. For example, UMG entered into a landmark industry agreement with Dolby tocollaborate on the development of Atmos Music, a world-class spatial audio format that empowers artists andproducers to create three-dimensional soundscapes and fill a room with instrumental music and vocals.
In addition, digital goods is an area of recent focus by UMG, which encompasses a number of emerging
virtual product opportunities including non-fungible tokens, an area of active experimentation. Music-based nonfungible tokens from The Weeknd, Zedd and Eminem were highlights among a number of successful UMG artist
drops earlier this year, executed with Nifty Gateway, a non-fungible tokens marketplace.
UMG intends to continue to expand its business to bring innovative music-based products and services
to its consumers.
11.8.6

Invest in new music markets and continue to sign and develop local artists.

Local A&R, especially in newer markets is valuable as the next global hit can come from any part of theworld, as shown by the global explosion of reggaeton from Latin America and the popularity of K-pop outside of
Korea and Asia.
According to IFPI, in 2020, while the top five markets (the US, U.K., France, Germany and Japan)
accounted for 68% of global music industry revenues, markets outside of the top five (led by South Korea, China,
Brazil and Russia) accounted for more than 30% of global revenues for the first time. UMG is committed toshaping culture through artistry and is responsive to the needs and ambitions of local talent. UMG provides artists
and labels of all sizes with different opportunities, services and routes into the global music market expanding
UMG’s success and visibility across all major markets and continents.
UMG’s A&R teams sign and identify artists with the potential to scale up from local success, to regionaland eventually international success. In 2020, 60% of UMG’s total revenues came from local repertoires in their-102-

own countries. UMG’s expansion strategy in Africa, Asia, Europe and MENA is already bearing fruit. In 2020,
UMG’s international labels in the US, U.K., France, Germany and across other major markets, partnered with andsimultaneously released music from artists in Nigeria, South Africa, Turkey, India, China, Thailand, Japan and
Korea amongst others.
The launch of the historic hip-hop label Def Jam Recordings in Southeast Asia in 2019 includes dedicatedlocal Def Jam labels and resources in; Indonesia, Malaysia, The Philippines, Singapore, Thailand and Vietnam,
which has bolstered both the brand across the region, helped reinforce the growing popularity of hip-hop in theregion, and stimulated a swell of established and exciting next-generation artist signing with UMG.
In India, over the course of the last three years, UMG has led the evolution of domestic Indian musicwith a series of strategic label launches (VYRL Originals and Mass Appeal India), combined with increased A&R
focus in original Indian non-film music and artist development. Over the past decade, India has witnessed aphenomenal growth in the consumption of music, thanks in part to the penetration of smart phones, access to hispeed, low-cost internet and proliferation of streaming platforms, which has increased the interest and popularityof new music and genres. UMG recently partnered with one of India’s leading Punjabi language labels, Desi
Melodies. The popularity of Punjabi language music and other regional dialects has increased rapidly across India
and South-Asia, and throughout the global Indian diaspora (the world’s largest at 17.5 million people), finding
dedicated new audiences in the US, U.K., Canada and Australia.
This is a strategy that has been mirrored elsewhere, and UMG expects to continue to use, throughout therest of Asia, MENA, Europe and Latin America as UMG looks to increase the popularity of its local artists
amongst new audiences around the world.
11.8.7

Increase digital footprint and promote competition by partnering with local digital players andexpanding global streaming partnerships into new markets.

With nearly one-fourth of 2020’s global paid music subscriber share attributable to regional and local
services, many of them in newer markets, UMG is focused on unlocking growth in digital streaming andsubscription in newer markets.



UMG’s landmark agreement in 2018 with Africa's leading digital music service Boomplay was
expanded to encompass 47 countries across the continent in 2021, as an example of UMG'sleadership in market development.



In March 2019, UMG acquired the remaining rights in Ingrooves, UMG’s marketing anddistribution company, that provides marketing and rights management services for independentlabels and artists.

Another example is UMG’s agreements with Tencent Music Entertainment, which includes amulti-year license to Tencent Music Entertainment.



UMG has also licensed NetEase Cloud Music, a leading interactive music streaming service
provider in China. NetEase’s subscribers will be able to access music-on-demand from UMG’sfull roster of artists, catalog and distributed labels, and there is a focus on increasing the scopeof premium offerings and experiences available to music fans in China via NetEase CloudMusic.



UMG has extended its partnership network across India, Asia, Africa, Latin America and otherstrategically important, fast-growth markets. These include an exclusive global licensing deal
with Desi Melodies, India’s leading Punjabi language label, and the acquisition of Electromode,a leading South African independent distributor based on chart performance. Other examples
include label, artist and management partnerships with the likes of: Big Hit
Entertainment/HYBE (Korea), Aristokrat Group (Nigeria), IAM (Thailand), Wonderland
Records (Indonesia), Metales Preciosos (Spain), Times Records /Hãng Đĩa Thời Đại (Vietnam)& TR Entertainment (Korea) amongst others.



UMG’s total footprint of several hundred digital music service providers enables it to bring its
music to consumers in every corner of the globe as well as adapt its content to local markets
and culture.

-103-

While the Company believes that it is well placed and appropriately equipped to pursue these growthstrategies successfully, the Company’s pursuit of these strategies may be influenced by a number of factors,
including the potential materialization of one or more of the risk factors set out Section 1 (Risk Factors), 1.1 (Risks
Related to UMG’s Business and Industry) to 1.3 (Legal, Regulatory and Tax Risks), and the manner in which theCompany responds to any such materialization of such risk factors.
11.9

Recorded music

UMG’s recorded music business operates in more territories and markets than any other recorded musiccompany. With a diverse range of labels, UMG’s recorded music business has offices in more than 60 territories
and is present across approximately 200 markets - where markets may be defined by a number of factors including
language and dialects - and UMG is the leader in many major music markets, including the United States, theUnited Kingdom, France and Germany. UMG’s best-selling artists include major global superstars such as J
Balvin, Justin Bieber, Luke Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish, Eminem, Selena
Gomez, Ariana Grande, Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone, Shawn Mendes,
Kacey Musgraves, Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie Underwood,
Keith Urban and The Weeknd, as well as successful local artists including Celeste, Mabel and Stormzy in the UK,
Slimane and Vitaa in France, Capital Bra, Sarah Connor and Helene Fischer in Germany, backnumber and King& Prince in Japan, and Karol G and Sebastián Yatra in Latin America.
UMG’s recorded music segment derives its revenues from the commercial exploitation of recorded
music. Sales from prior years’ releases reinforce UMG’s recorded music revenues each year. UMG has acomprehensive catalog of recorded music and its catalog includes timeless performers such as ABBA, Louis
Armstrong, The Beatles, The Beach Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond,
Marvin Gaye, Guns N’ Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The
Rolling Stones, Frank Sinatra, U2, Amy Winehouse and Stevie Wonder.
UMG’s recorded music business is focused on the discovery and development of recording artists andthe creation, marketing, promotion, distribution, sales and licensing of audio and audio-visual content. Thisbusiness is conducted principally through UMG’s major record labels, including Capitol Music Group, Interscope
Geffen A&M, Republic Records, Island Records, Motown Records, Def Jam Recordings, Universal Music Group
Nashville, Universal Music Latin Entertainment, EMI Records and Polydor, and its classical and jazz labels, Blue
Note Records, Decca, Deutsche Grammophon and Verve Label Group.
In addition to its own major record labels, UMG has also entered into multi-year, worldwide partnerships
with Roc Nation, Disney, Concord, Big Machine and other label venture partners that allow UMG to physicallyand digitally distribute releases from its partners’ frontline labels.
UMG’s recorded music business also includes Virgin Music Label & Artist Services, which offers
premium and flexible artist and label services around the world to entrepreneurs and independent talent, including
global distribution, insights, data and marketing tools to fully staffed promotion, marketing and artist development
teams both regionally and globally. This new model for global distribution and label services, combining UMG’sexperienced regional executive teams with dedicated resources and innovative services and technology, fosters
long-term partnerships and is the best path to success for entrepreneurs, independent labels and artists.
As a result of having such a broad array of frontline labels, label venture partners and label services, aswell as the diversification of revenue streams, UMG is not reliant on one artist, or on a small number of artists, togenerate revenue in any given year. In fact, no single artist accounted for more than 1%, and the top 50 artists
only accounted for 23%, of UMG’s recorded music revenue in 2020.

-104-

UMG’s Recorded Music Revenue per Artists in 2020
1%
11%

11%

Top 1
Artists 2-15
Artists 16-50
Rest
77%

In addition to this artist diversification, UMG has strong and reliable revenue flows from its catalog(defined as content older than three years), which accounted for 54% of recorded music digital and physicalrevenue in 2020, while frontline product (content less than three years old) accounted for 46% of recorded music
revenue.
UMG’s Recorded Music Revenue Split in 2020: Catalog v Frontline

46%

54%

Catalog
Frontline productAs the recorded music industry has transitioned from a physical and digital ownership model, to paid
subscription and advertising based streaming models, UMG’s revenues have reflected this shift. In recorded
music, 64% of UMG’s 2020 revenues came from streaming and subscription, which figure was 59% and 54% in2019 and 2018, respectively. Ad-supported revenues in particular, which are at-scale, growing rapidly and mostly
complementary to our subscription streaming model were 66% (compared to 58% in the first half of 2020) fromsocial and video, and 34% from ad-supported streaming.
Subscription and streaming revenues are generated through partnerships where UMG’s content is
distributed via global, regional and local digital service providers, including Spotify, Apple Music, YouTube,
Amazon, Tencent Music Entertainment and NetEase. Physical sales, consisting primarily of CDs and vinyl
albums, continued to account for 16% of UMG’s recorded music revenue in 2020. While CD sales have continued
to decline as the industry continues its transition to digital streaming, vinyl album sales have seen a resurgence,as fans appreciate the sound quality and the collectability value and pride in physical ownership.
UMG has continued to diversify its business activities and revenues by expanding into areas such as film
and television, live and livestreamed events, sponsorship, and podcasts, with a primary focus on audio-visualcontent.
In the audio-visual space, UMG is focused on creating new content from existing content and rights,
capturing live events and creating new media formats. From long-form content including music documentaries,
feature films, musicals, music-based television series and reality shows, to short-form content including live event
streaming, viral content, behind-the-scenes footage and podcasts, UMG is working to accelerate the monetizationof audio and video assets. In 2020, UMG re-engaged fans and introduced its catalog of music to new audiences-105-through award-winning film and television productions including Polygram Entertainment’s The Apollo, The BeeGees, Beastie Boys Story, The Go-Go’s and Zoey’s Extraordinary Playlist, along with Mercury Studio’s That
Little Ol’ Band From Texas.
UMG consistently enhances established relationships on an ongoing basis, including through important
ancillary agreements for additional services and offerings. A few examples of these ancillary agreements include
a “first of its kind” music video remastering agreement with YouTube in 2019, a content development agreement
for higher-quality audio and spatial audio with Amazon in 2020 that resulted in the launch of a premium-priced
subscription service and the launch on Facebook in 2020 of premium music videos. UMG consistently supports
and enables the launch of new technologies. For example, UMG entered into a landmark industry agreement with
Dolby to collaborate on the development of Atmos Music, a world-class spatial audio format that empowers artists
and producers to create three-dimensional soundscapes and fill a room with instrumental music and vocals.
Additionally, UMG has taken a leadership position in expanding the music business to encompass important newopportunities in digital health and fitness. UMG has completed nearly a dozen recorded music license agreementsin the category in 2020 and no music company has a larger portfolio of fitness technology partners.
Focusing on the next wave of industry transformation, UMG is elevating its role as industry leader inpromoting entrepreneurship through the efforts of digital innovation programs, including Abbey Road Red andCapitol360’s gBeta Music-Tech, and through its Accelerator Engagement Network, a growing incubation program
spanning 12 accelerator partners located in key entrepreneurial centers around the world. Since its founding in
2017, UMG’s Accelerator Engagement Network has supported the mentorship of over 120 music-technology
startups that have collectively raised over US$130 million in funding. Among these, there are numerous awardwinning, marketplace-impacting disruptors working to transform the music industry in a wide variety of ways.
Beyond engagement directly with music technology startups, UMG is working to seed entrepreneurship at theearliest stages, having hosted 25 innovation challenges and hackathons over the past several years, which haveyielded more than 215 working prototypes.
11.9.1

Research and Development

UMG maximizes opportunities for new products, services and revenue streams by partnering with bothestablished and newer digital businesses. It advances initiatives in sectors such as automotive, gaming, education,
fitness, digital merchandise, health and wellness, virtual reality/augmented reality/cross reality and various othercategories. UMG’s research and development efforts enable it to evolve underlying assets and metadata, andadvance production processes to refine and scale new formats. UMG works with partners to create new productdefinitions and standards and consults with its partners on the architecture of content delivery systems to power
new consumer experiences.
UMG also brings research and development to optimize existing revenue streams, including in-housedevelopment of innovative marketing methodologies and tools and development of new business processes toimprove internal operations and more effectively partner with technology companies and UMG licensees. UMG
also maintains a dedicated global catalog team that works closely with all UMG labels, territories and operatingcompanies, maximizing revenues by focusing on strategic marketing initiatives and brand management to create
new opportunities in both existing and new technologies. The UMG catalog team leverages data to reach current
fans and develop new generations of fans and new sources of revenues. In order to further develop its catalog
audience, UMG has developed an expertise in areas including streaming platform consumption analysis, audience
growth and engagement, playlist curation, eCommerce, consumer research and content creation.
In addition, UMG uses research and development to employ data that was previously unavailable, forboth its core business operations as well as to provide more transparency to its artists and creative partners andhelp them understand consumer engagement. In 2019, UMG launched its “Universal Music Artists” mobile
application that provides comprehensive analytics to its artists and their management teams based on aggregateddata from major streaming services and social media platforms around the world. In 2020, UMG launched a“Royalty Statement Portal,” which is available to artists signed to UMG’s recorded music labels in the US, as wellas its publishers and songwriters and allows them to view their earnings by work title, accounting periods,
territory, digital service provider, income source, income group, income type, local/international and otherclassifications.
11.9.2Artist and Repertoire

Artist discovery and development is at the core of all functions at UMG’s recorded music business and
UMG’s A&R team is responsible for identifying and developing talent. For decades, UMG has been building a-106-

track record of identifying and breaking new recording artists, who have the potential to become both artisticallyand commercially successful, and to attract and connect with a fan base that will support their long-term careers.
UMG’s A&R expertise differentiates it from its competitors and has led to UMG’s long-term success.
UMG’s strength in A&R is attributable to the experience of its global team of A&R executives along with thelongstanding reputation of UMG, its labels and their employees, and the understanding and appreciation for thiscritical role by UMG’s label executives. UMG’s A&R function also relies on the relationships between UMG’slabels and executives with artists, artist managers, legal, independent labels and other music communities.
Traditionally, artist discovery was driven entirely by the knowledge and intuition of an experienced A&R
professional. Today, while this remains the primary driver, this is also guided by data analysis and predictivemodeling allowing UMG to apply data science to validate the intuition of its A&R professionals. This is also true
for repertoire creation, as both experience and data are critical elements of matching songs and artists. UMG has
invested in developing technology, tools and data analytics expertise to further expand its A&R capabilities andremain a leader in this dynamic industry.
Around the world, UMG’s labels identify and sign talent across all music genres, including pop, rock,
jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, K-Pop, J-Pop, alternative, blues and many others. Witha roster of recording artists performing in various languages throughout the world, UMG has an ongoingcommitment to developing local talent aimed at achieving domestic, regional and global success.
11.9.3

Multiple Label Structure

UMG believes there is significant benefit to operating multiple major frontline labels in major markets
around the world. This is why UMG has developed, acquired, revitalized its label brands, and continues to invest
in all of them. Each label has its own unique culture. This unique culture comes from both the history of the label,the label’s management team and employees and the artists that have been a part of the label family over the years.
Having multiple labels allows UMG to maximize the entrepreneurial environment that each label thrives on. Eachlabel takes a different approach to what they look for in the artists they sign and how they develop, market andpromote and partner with an artist. Additionally, different labels may have different genre focuses or may resonate
different among different demographics. UMG believes this structure means every artist can find the right label
fit within the Universal Music Group family of labels.
This multiple label structure creates some level of competition even amongst UMG labels. UMG believes
that this healthy competition is what ultimately drives innovation and keeps the labels continuously evolving tostay on the cutting edge of industry trends. This structure also has the benefit of alleviating certain short-term
performance pressure from any individual label. By knowing that different UMG labels will as a whole have acontinuous flow of significant new content being released, each individual label can take a more long-term
approach to artist development, and not feel pressured to rush content into the market before it is ready from anartist development standpoint.
While this multiple-label structure provides these benefits to each label, they also benefit from being
collectively part of Universal Music Group as a whole. UMG negotiates with demand side platforms, aggregatesdata and analytics and shares best practices and certain back-office functions at a company-wide level. This systemallows UMG to benefit from its scale while still operating with the advantage of a quick moving, innovative,
entrepreneurial company.
11.9.4

UMG’s Exclusive Recording Agreements with Artists

UMG believes that traditional, high-touch, full-service label deals with its leading, based on market
share, portfolio of world-renowned labels provide the most long-term value to an artist and greatly increase thecommercial success, consumer base and longevity potential for artists at every stage of their careers. These deals
provide for the full suite of professional expertise and global resources of a major label, including a comprehensive
approach to content creation, organic artist development, timing, marketing, promotion, financial investment, andforward planning.
UMG’s exclusive recording agreements establish and define the commercial relationship between eachrecording artist and the relevant UMG record label. UMG’s recording agreements with artists typically include
exclusivity for a certain term, an option for UMG to extend the term of the agreement, the territories of distribution(which usually is worldwide), minimum product commitments by UMG, ownership of copyrights in therecordings, recording royalties payable to the artist, mechanical royalties, marketing and promotion commitments,-107-

creative approval rights, representations and warranties, related indemnities, audit rights, and so-called rights offirst negotiation and matching rights in the artist’s music publishing and merchandising rights.
Except in certain circumstances relating to specific territories, genres or certain unusually competitive
situations, UMG’s recording agreements typically grant UMG ownership of the copyrights in and to therecordings, videos, artwork, and other intellectual property created during the exclusive term of the agreement.
United States copyright law permits authors or their estates to terminate an assignment or license of copyright (forthe United States only) after a set period of time in certain circumstances. See Section 1.2.5 (UMG faces a potential
loss of catalog to the extent that its recording artists have a right to recapture rights in their recordings under the
US Copyright Act).
The form of exclusive recording agreements that UMG typically uses constantly evolves to adapt tocurrent marketplace trends. For many years, UMG has entered into expanded-rights deals, contemporaneouslywith the signing of the exclusive recording agreement, in which UMG participates financially in areas such as
touring, merchandising, sponsorship and endorsements, fan clubs, acting, and book publishing, where UMG’sinvestment of time, money, resources, and expertise has contributed to the artist’s success.
11.9.5Marketing and Promotion

UMG has a comprehensive approach to marketing and promoting its artists that combines global
planning and execution with robust local presence around the world. UMG’s centralized team utilizes an internal
media team, creative and innovation hubs, as well as expertise in worldwide commercial marketing and tactics.
UMG’s centralized teams in key jurisdictions allow UMG to, inter alia, coordinate cohesive marketing plans
throughout different geographies, provide geographic support through regional hubs and connect artists aroundthe world and throughout various regions. UMG’s regional and country-specific marketing teams have the local
expertise and relationships necessary to create the best opportunities for fans to engage with UMG’s artists, while
respecting local culture and consumer behavior. By blending a global macro approach to marketing, which
maximizes efficiency and cost savings, with local expertise and execution in each market around the world, UMG
best serves the interests of its artists and fans and creates the opportunity for commercial success and sustained
engagement.
11.9.6

Sales and Digital Distribution

UMG’s recorded music business generates revenues both from releases of new and established artists
and its existing catalog of recordings. UMG’s revenues are generated from digital formats, including streamingand downloads, as well as from sale of CDs and vinyl.
UMG enters into agreements with digital music service providers to make its music available to accessor purchase in digital formats (e.g., streaming and downloads). UMG then provides digital assets for its music tothese services. Streaming services’ customers are able to access UMG’s music on an ad-supported or paid
subscription basis. Downloading services allow their customers to pay to download UMG’s music on a per-album
or per-track basis.
UMG’s agreements with digital service providers establish the fees for distribution of UMG’s music,
which vary based on the service. UMG typically receives accounting from the digital service providers on amonthly basis, detailing the distribution activity, with payments rendered on a monthly basis. UMG currently
partners with a broad range of digital music service providers that range from established to newer service
providers and from global to regional and local service providers, including Amazon, Apple, Deezer, Facebook,
KKBox, LINE, Pandora, Spotify, Tencent Music Entertainment and YouTube. UMG is continuously seeking todevelop and grow its digital business by partnering with new service providers.
UMG sells its physical recorded music products through a variety of different retail and wholesale outlets
including music specialty stores, general entertainment specialty stores, supermarkets, mass merchants anddiscounters, independent retailers and other traditional retailers. Although some of its retailers are specialized,
many of its customers offer a substantial range of products other than music. Sales may be made throughtraditional retail distribution both in store and online (such as Best Buy, Target, HMV, Media Markt, Fnac),through online physical retailers (such as amazon.com) and directly to customers through UMG’s online websites.
UMG’s sale and return policies conform to wholesaler and retailer requirements, applicable laws and regulations,
territory and customer-specific negotiations and industry practice. UMG attempts to minimize the return of unsold
product by working with retailers to manage inventory and stock-keeping unit counts as well as by monitoring
shipments and sell-through data.

-108-11.10Music Publishing

UMPG believes that it is one of the world’s largest and fastest-growing major music publishingcompanies, acquiring and administering rights to musical compositions (as opposed to recordings) and licensing
those musical compositions for use in a variety of formats. UMPG has 51 offices in 41 countries and licenses
musical compositions for use in sound recordings, films, television, advertisements, video games, concerts and inother public performances. It also licenses compositions for use in printed sheet music and song folios. UMPG
owns and controls a vast catalog of original music and arrangements and offers this for use in films, television,
advertising and new media industries. UMPG is a leader in licensing musical compositions to film/TV studios,
major brands and digital service providers for use in their content and products.
UMPG’s global publishing catalog contains close to four million owned and administered titles,
including some of the world’s most popular songs from major songwriters and artists such as ABBA, Adele,
Axwell & Ingrosso, J Balvin, The Beach Boys, Beastie Boys, The Bee Gees, Irving Berlin, Leonard Bernstein,
Justin Bieber, Benny Blanco, Chris Brown, Mariah Carey, Brandi Carlile, Kenny Chesney, Coldplay, DaBaby,
Jason Derulo, Neil Diamond, Disclosure, Dua Lipa, Bob Dylan, Billie Eilish, Eminem, Gloria and Emilio Estefan,
Florence + the Machine, Future, Selena Gomez, Ariana Grande, Al Green, Josh Groban, Halsey, Jimi Hendrix,
H.E.R., Imagine Dragons, Carly Rae Jepsen, Billy Joel, Elton John/Bernie Taupin, Jonas Brothers, Alicia Keys,
Kendrick Lamar, Lil Baby, Lil Yachty, Linkin Park, Logic, Demi Lovato, the Mamas & the Papas, Steve Mac,
Maroon 5, Dave Matthews, Megan Thee Stallion, Shawn Mendes, Metallica, Miguel, Nicki Minaj, Maren Morris,
Mumford & Sons, Pearl Jam, Post Malone, Quavo, Otis Redding, R.E.M., Red Hot Chili Peppers, Rex Orange
County, Rosalía, Carly Simon, Britney Spears, Stax (East Memphis Music), Harry Styles, Taylor Swift, SZA,
Shania Twain, Justin Timberlake, U2, Keith Urban, Jack White, and Zedd. UMPG also administers catalogs forthe world’s most prominent film and TV studios, including Warner Bros., NBC Universal, Disney, HBO,
Dreamworks, MGM, Paramount, Lionsgate, Viacom, and STX.
In 2020, UMPG entered into deals with numerous songwriters and artists ranging from legendary talent
to today’s superstars and promising names, such as Taylor Swift, Kendrick Lamar, Megan Thee Stallion, Brandi
Carlile, Kenny Chesney, Luke Combs, Bad Bunny, Andrew Lloyd Webber, Van Halen, Louis Bell, Dave Cobb,
Billy Walsh, Lil Mosey and Rina Sawayama. UMG has also reached a historically significant deal, acquiring theiconic song catalog of Bob Dylan.
UMPG offers a technologically leading royalty platform and administration services to songwriters. It
also offers songwriters, UMPG Window, an advanced platform and technology through which songwriters andclients are provided real-time information on earnings, royalty and copyright data. This advanced system reflects
UMPG’s longstanding commitment to transparency, integrity and trust. Launched in January 2020, UMPG
Window uses the latest in cloud-indexing technology to provide comprehensive views of where, when and how
songs are consumed around the world. UMPG Window also features: one-click, no-fee advances; international
royalty ‘pipeline’ income views; society registration information, status, and full copyright details on all works;comprehensive Film and TV information for works used and royalties earned; and numerous other powerful tools
to help songwriters and clients.
Music publishers generally receive royalties pursuant to licenses concerning various rights, including
public performance, digital, mechanical, synchronization, and print, amongst others. In the United States, music
publishers collect and administer mechanical royalties, and statutory rates are established pursuant to the US
Copyright Act for the royalty rates applicable to musical compositions for sale and licensing of certain audio-onlyrecordings embodying those musical compositions. In the United States, public performance income isadministered and collected by music publishers and their performing rights organizations, and in some countries
outside of the United States, collection, administration and allocation of both mechanical and performance income
are undertaken and regulated by governmental or quasi-governmental authorities. Throughout the world, bothsynchronization and lyrics license are generally subject to negotiation with a prospective licensee and music
publishers pay a contractually required percentage of income derived from such licenses to the songwriters or
their designated payees.
UMPG acquires copyrights or portions of copyrights or administration rights from songwriters or otherthird-party holders of rights in musical compositions. In either case, typically, the grantor of rights retains a rightto receive a percentage of revenues collected. As an owner and administrator of musical compositions, UMPG
promotes the use of those musical compositions to record labels and artists both within the UMG record groupand to record labels outside of UMG. For example, UMPG encourages recording artists to record and include its
musical compositions on their recordings, to offer opportunities to include its musical compositions in filmed-109-entertainment, advertisements and digital media, and to advocate for the use of its musical compositions in live
stage productions.
In the United States, mechanical royalties are collected directly by music publishers from recorded musiccompanies, and in some instances via The Harry Fox Agency, a non-exclusive licensing agent affiliated withSESAC. Outside the United States, mechanical royalties are collected directly by music publishers or from local
collecting societies, and UMG has local infrastructure to enable administration and collection of licensing revenue
in 35 countries. Once mechanical royalties reach the publisher, a percentage of those royalties are paid or credited
to the writer or other rightsholder of the copyright in accordance with the underlying rights agreement. Mechanicalroyalties are currently paid at a rate of 9.1 cents per song in the United States for physical formats (e.g., CDs andvinyl albums) and permanent digital downloads (recordings in excess of five minutes attract a higher rate). There
are also rates set for interactive streaming and non-permanent downloads based on a formula that takes into
account revenues paid by consumers or advertisers with certain minimum royalties that may apply depending on
the type of service. The current US statutory mechanical rates will remain in effect through December 31, 2022,
although they were recently remanded to the Copyright Royalty Board for further review. In most other territories,
mechanical royalties are based on a percentage of wholesale prices for physical formats but based on a similar
payment structure as in the United States for digital distribution.
Throughout the world, performance royalties are collected by publishers directly or on behalf of music
publishers and songwriters by performance rights organizations and collecting societies. Key performing rights
organizations and collecting societies include ASCAP, SESAC, GMR and BMI in the United States, MechanicalCopyright Protection Society and The Performing Right Society in the United Kingdom, The German CopyrightSociety in Germany and the Japanese Society for Rights of Authors, Composers and Publishers in Japan. These
societies pay a percentage (which is unique to each country) of the performance royalties to the copyright owner(s)or administrators (i.e., the publisher(s)), and a percentage directly to the songwriter(s), of the composition.
11.11

Merchandising

Bravado is UMG’s wholly owned, global, full-service merchandise and brand-management company
that represents the merchandising rights of new and established artists as well as longstanding and more recent
entertainment brands and properties. Bravado provides an end-to-end merchandising ecosystem including creative
design, production and distribution for its clients. It utilizes UMG’s global network to provide services including
sales, licensing, branding, marketing, eCommerce and creative resources to its clients, as well as to devise
innovative cultural and retail experiences for fans throughout the world. Bravado’s merchandise is sold globally
through various channels including in-store retailers, online retailers, direct-to-consumer, limited-edition retailexperiences and artist tours. It also licenses rights to an extensive global network of third-party licensees.
Bravado’s roster is comprised of artists signed to labels within UMG as well as artists who have recording
agreements outside of the company, and in 2020, Bravado’s roster comprised over 250 artists. The agreementsthat Bravado signs with its clients provide for usage rights of the client’s name and likeness across productcategories and distribution channels. In return, clients receive a royalty or a share of proceeds for all items sold.
Most agreements provide Bravado with exclusive global rights, although some have regional and productrestrictions. The roster of clients for whom Bravado provides merchandising services includes Aerosmith, Ariana
Grande, Billie Eilish, Blackpink, Bob Marley, Elton John, Guns N’ Roses, Justin Bieber, Kiss, Lady Gaga, Queen,
Selena Gomez, Taylor Swift, The Rolling Stones, Shawn Mendes, The Weeknd and The Who, among others. A
number of these artists, including Taylor Swift, The Weeknd, Lady Gaga and The Rolling Stones, among manyothers, are also signed across other UMG segments, such as UMPG, allowing for synergies and increased
opportunities for artists.
With core capabilities in product design, global production and distribution, Bravado has an in-housecreative development team that designs products that are consistent with the client’s vision and that connect withfans. Production is completed with various manufacturing partners around the world.
Bravado’s primary distribution channels are retail, online/direct-to-consumer and artist tours. Retail sales
are primarily made through traditional brick-and-mortar retailers across the world including Hot Topic, Target,
Primark, H&M, Inditex, Urban Outfitters, and Zara, among others.
Bravado’s online distribution channels, primarily through artist’s webstores, have been the company’s
fastest growing sales channels. From marketing and promotions to fulfillment and customer service, Bravado
manages artist and brand webstores and continues to innovate and evolve to grow costumer engagement. This
channel has grown significantly over the past few years through campaigns such as limited-edition merchandise-110-

drops and other unique offerings that engage fans as they continue to shift to purchasing online. In addition toartist stores, Bravado also sells through a handful of third-party platforms such as Amazon and JD.
Bravado also oversees the development and sales of merchandise products for artist tours. Bravado
designs, produces and manages the merchandise at venues around the world. This channel suffered significantly
during the Covid-19 pandemic but has historically been a very meaningful portion of Bravado’s overall business.
In addition to its core business of creating, producing and distributing merchandise, Bravado also works
with key third party partners on licensing opportunities for clients. These are opportunities to expand client brands
beyond apparel and to connect UMG’s clients with some of the world’s best brands in categories including home
products, beverage and alcohol, beauty and fragrance and other consumer packaged goods.
11.12

Branding

UMG’s brand-marketing segment, Universal Music Group For Brands, is a global team of experts who
utilize the resources and reach of UMG to accelerate brand partners’ businesses in more than 70 countries andenter into global partnerships with popular companies such as Coca Cola, Pokémon, MLS / FIFA World Cup,
Samsung and Adidas. Strategic and consultative, the business creates branded content, sonic branding, events andlive experiences, social activations and media sales solutions unique to the marketplace, across various industries,
including media, technology, consumer goods, auto, banking, hospitality, luxury and telecommunications.
Universal Music Group For Brands helps its clients define strategies to improve their voice in music andculture, increase audience reach and build brand awareness and differentiation to drive long-lasting engagementwith customers and fans. Its targeted approach to brand marketing delivers measurable results and brings together
fans, brands and culture.
11.13

Intellectual Property

The success of UMG’s business depends on its ability to protect and enforce its vast selection of
intellectual property rights, including copyrights and trademarks. UMG protects its intellectual property underpatent, trade secret, trademark, and copyright laws through a combination of intellectual property registration,
employee or third-party assignment and nondisclosure agreements, other contractual restrictions, technologicalmeasures, and other methods. See Section 11.9.4 (UMG’s Exclusive Recording Agreements with Artists) for a
description of the terms generally applicable between UMG and recording artists, which govern, amongst otherthings relevant intellectual property rights.
11.13.1 Copyrights
UMG’s business, like that of other companies involved in the music entertainment industry, depends on
its ability to maintain rights in sound recordings and musical compositions through copyright protection. In the
United States, copyright protection for works created as “works made for hire” (e.g. works of employees or certain
specially commissioned works) on or after January 1, 1978 generally lasts for 95 years from first publication or
120 years from creation, whichever expires first. The period of copyright protection for works created on or afterJanuary 1, 1978 that are not “works made for hire” lasts for the life of the author plus 70 years. Works created andpublished or registered in the United States prior to January 1, 1978 generally enjoy copyright protection for 95
years, subject to compliance with certain statutory provisions including notice and renewal. Additionally, theMusic Modernization Act extended federal protection in the US to sound recordings created prior to February 15,
1972. The duration of protection for such sound recordings varies based on the year of publication, with all suchsound recordings receiving protection for at least 95 years, and sound recordings published between January 1,
1957 and February 15, 1972 receiving copyright protection until February 15, 2067. See Section 1.2.5 (UMG
faces a potential loss of certain catalog titles to the extent that those recording artists have a right to recapturerecordings under the US Copyright Act).
The term of copyright in the European Union for musical compositions in all Member States lasts for thelife of the author plus 70 years. In the European Union, the term of copyright for sound recordings lasts for 70
years from the date of release in respect of sound recordings that were still in copyright on November 1, 2013 andfor 50 years from date of release in respect of sound recordings the copyright in which had expired by that date.
The European Union also harmonized the copyright term for joint musical works. In the case of a musicalcomposition with words that is protected by copyright on or after November 1, 2013, Member States of theEuropean Union are required to calculate the life of the author plus 70 years term from the date of death of thelast surviving author of the lyrics and the composer of the musical composition, provided that both contributions
were specifically created for the musical composition.

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UMG is largely dependent on legislation in each territory in which it operates to protect its rights against
unauthorized reproduction, distribution, public performance or rental. In all territories where UMG operates, its
intellectual property receives some degree of copyright protection, although the extent of effective protection
varies widely. In a number of developing countries, the protection of copyright remains inadequate.
Technological changes have focused attention on the need for new legislation that will adequately protect
the rights of producers. UMG actively lobbies in favor of industry efforts to increase copyright protection andsupport the efforts of organizations such as RIAA, IFPI, National Music Publishers’ Association, International
Confederation of Music Publishers and the World Intellectual Property Organization.
11.13.2 Trademarks
UMG considers its trademarks to be valuable assets to its business. The major trademarks owned by orlicensed to UMG include A&M, ABBA, Abbey Road, Blue Note, Bravado, Def Jam Recordings, Capitol,
Casablanca, Decca, Deutsche Grammophon, Eagle Rock, EMI, Geffen, Interscope, Island, London, Mercury,
MCA, Motown, Now That’s What I Call Music (outside of the European Economic Area and Switzerland),
Polydor, Polygram, Republic, Universal Music, Verve and Virgin. Although UMG cannot be assured that its
trademark applications, even for major trademarks, will be approved, UMG endeavors to register its major
trademarks in every country where it believes the protection of these trademarks is important for its business.
UMG also uses certain trademarks pursuant to license agreements entered into with the owner of the trademarks.
The duration of UMG’s licenses relating to Virgin and Def Jam Recordings is perpetual and the earliest
termination date for UMG’s license relating to Universal Music is 2029, but may be terminated under certain
limited circumstances, including its material breach of the license agreement and certain events of insolvency.
UMG actively monitors and seeks to protect against activities that might infringe, dilute or otherwise harm its
trademarks.
11.14

Litigation

11.14.1 John Waite and Joe Ely against UMG Recordings, Inc.
On February 5, 2019, a class action lawsuit was filed against UMG Recordings, Inc. on behalf of aputative class of all recording artists who have to date requested the termination of alleged transfers of US
copyright to UMG pursuant to Section 203 of the Copyright Act, which allows, under certain conditions, an author
who has contractually transferred the US copyright rights to his or her work to a third party to terminate such grant
after 35 years. While a class has not been certified in this case, and UMG believes it has valid defenses to theclaims, the complainant seeks to have the court recognize the purported termination of certain alleged grants by
the artists involved in the litigation and also alleges copyright infringement, alleging that UMG continued to use
certain recordings after the purported termination dates. To the extent that UMG is unable to successfully defend
these claims, amongst other things, it may face damages claims from the relevant artists.
11.14.2 UMG Recordings, Inc. and UMPG (along with the other major labels and publishers) against Cox
Communications, Inc. and CoxCom LLC
On July 31, 2018, a complaint for copyright infringement was filed by UMG Recordings, Inc. and UMPG
(along with the other major labels and publishers including Sony Music Entertainment and Warner Music Group)
against Cox Communications, an Internet access and service provider, and its parent company CoxCom, forknowingly inducing and supporting copyright infringement by its customers, contrary to the provisions of theDigital Millennium Copyright Act, which requires an Internet service provider to implement a termination policy
against its repeat infringing customers. At the end of the trial, which took place in December 2019, the jury
awarded the plaintiffs US$1 billion in damages. Cox Communications filed a motion to reduce the jury’s damages
award, as well as for judgment as a matter of law on the plaintiffs’ infringement claims. The court denied that
motion and entered judgment. Defendants bonded the judgment and the matter is currently on appeal.
11.14.3 SAMR Investigation
In August 2019, UMG received a notice of investigation from SAMR, the enforcement arm of theChinese Government in charge of investigating market competition, monopolies and intellectual property, statingthat it was opening an anti-monopoly investigation into licensing activities in that jurisdiction. An adverse finding
against UMG could result in financial penalties as well as other measures.

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11.14.4 David Marks against UMG
In May 2021, David Marks, a former member of The Beach Boys, filed a putative class action against
UMG in federal court in California, purporting to represent a nationwide class of recording artists as to whom healleges UMG has underpaid royalties derived from streaming activity outside the United States. An adverse ruling
could result in monetary, injunctive or other equitable relief.
11.14.5 Other Matters
In addition to the matters discussed above, UMG is involved in various litigation and regulatory
proceedings arising in the normal course of business. Where it is determined, in consultation with counsel basedon litigation and settlement risks, that a loss is probable and estimable in a given matter, UMG establishes anaccrual. In the current pending proceedings, the amount of accrual is not material. An estimate of the reasonably
possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various
factors typical in contested proceedings, including (i) the results of ongoing discovery; (ii) uncertain damage
theories and demands; (iii) a less than complete factual record; (iv) uncertainty concerning legal theories and theirresolution by courts or regulators; and (v) the unpredictable nature of the opposing party and its demands.
However, UMG cannot predict with certainty the outcome of any litigation or the potential for future litigation.
As such, UMG continuously monitors these proceedings as they develop and adjusts any accrual or disclosure asneeded. Regardless of the outcome, litigation could have an adverse impact on UMG, including UMG’s brandvalue, because of defense costs, diversion of management resources and other factors, and it could have a material
effect on UMG’s results of operations for a given reporting period.
Provisions recorded by the Group for all claims and litigation were €4 million as of December 31, 2020,€12 million as of December 31, 2019 and €15 million as of December 31, 2018.

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12. BOARD AND EMPLOYEES
12.1

GeneralThis section gives an overview of the material information concerning the Board, the Corporate
Executives and the Group’s employees and a brief overview of certain provisions of Dutch law, the Company’s
articles of association (the Articles of Association) and its Board Rules (as defined in Section 1.3.2 (Board Rules)),in each case as it will be constituted and in force prior to and following Settlement.
This overview does not purport to give a complete overview and is qualified in its entirety by Dutch law
as in force on the date of this Prospectus, the Articles of Association and the Board Rules as they will be in effectultimately on Admission. This overview does not constitute legal advice regarding those matters and should not
be regarded as such. The full text of the Articles of Association is incorporated by reference in this Prospectus
and will be available free of charge in the governing Dutch language thereof (and an unofficial English translation)at the offices of the Company during business hours and in electronic form on the Company’s website(https://universalmusic.com/Universal_Music_Group_N.V._-_Articles_of_Association). The full text of theBoard Rules in the English language will be available in electronic form on the Company’s website(https://investors.universalmusic.com/governance).
12.2

Management Structure

The Company has a one-tier board structure (the Board) comprising of executive and non-executive
directors (the Executive Directors and Non-Executive Directors and each of them a Director). The Executive
Directors are primarily responsible for all day-to-day operations of the Company. The Non-Executive Directors
supervise (i) the Executive Directors’ policy and performance of duties and (ii) the Company's general affairs andits business, and render advice and direction to the Executive Directors. The Directors furthermore perform any
duties allocated to them under or pursuant to the law or the Articles of Association. Each Director has a duty to
the Company to properly perform the duties assigned to each Director and to act in its corporate interest. Under
Dutch law, the Company’s corporate interest extends to the interests of all its stakeholders, including its
shareholders, creditors and employees.
12.3

The Board

12.3.1

Powers, Responsibility and Function

The Board is the executive and supervisory body of the Company. It is entrusted with the managementof the Company, it supervises the general course of affairs in the Company and the business affiliated with theCompany and is responsible for the continuity of the Company. The Board is accountable for these matters to theCompany’s general meeting (the General Meeting).
The Board’s responsibilities include, among other things, developing a view on long-term value creationby the Company, determining the Company’s strategy and risk management policy, appointing and dismissing
the senior internal auditor, annual assessment of the way in which the internal audit function fulfils its
responsibility and approving the audit plan drawn up by the internal audit function, ensuring compliance withlegislation and regulations and the corporate governance structure of the Company, publishing the corporate
structure of the Company and any other information required under the Dutch Civil Code (Burgerlijk Wetboek)(Dutch Civil Code).
The Board may perform all acts necessary or useful for achieving the Company’s objectives, with the
exception of those acts that are prohibited by law or by the Articles of Association. Pursuant to the Articles of
Association, the Board may allocate its duties and powers among the Directors pursuant to the Board Rules orotherwise in writing, provided that the following duties and powers may not be allocated to the Executive
Directors: (i) supervising the performance of the Executive Directors, (ii) making a nomination for theappointment of Directors, (iii) determining an Executive Director’s remuneration and (iv) instructing an auditor
to audit the financial statements. Regardless of an allocation of tasks, all members of the Board remain collectively
responsible for the proper management and strategy of the Company (including supervision thereof in case of
Non-Executive Directors).
Pursuant to the Articles of Association, the Company is represented by the Board. Any Executive
Director shall also be authorized to represent the Company (see Section 12.12 (Conflicts of Interest and Related
Party Transactions). Furthermore, pursuant to the Articles of Association, the Board may appoint officers withgeneral or limited power to represent the Company subject to the restrictions imposed on him or to grant one ormore persons such titles as it sees fit. In addition, the Articles of Association provide that the Board may determine-114-

pursuant to the Board Rules or otherwise in writing that one or more Directors can lawfully adopt resolutions
concerning matters belonging to their duties within the meaning of Section 2:129a(3) of the Dutch Civil Code.
Dutch law provides that resolutions of the Board involving major changes in the Company’s identity or
character are subject to the approval of the General Meeting (see Section 12.3.7 (Board Resolutions Requiring
Prior Approval)).
12.3.2

Board Rules

Prior to Settlement and pursuant to the Articles of Association, the Board shall adopt rules and regulations
dealing with its internal organization, the manner in which decisions are taken, any quorum requirements, thecomposition, duties and organization of committees and any other matters concerning the Board, the Executive
Directors, the Non-Executive Directors and committees established by the Board (the Board Rules).
12.3.3Composition, Appointment, Term of Appointment and Dismissal of the Board

The Articles of Association provide that the Board shall consist of one or more Executive Directors andone or more Non-Executive Directors. The number of Executive Directors and the number of Non-Executive
Directors shall be determined by the Board. As of Admission, the number of Directors shall be ten, comprising of
two Executive Directors and eight Non-Executive Directors, as more fully set out in Section 12.3.9.
The Board shall grant titles to Directors. The Board shall designate a Non-Executive Director as chairmanof the board (the Chairman of the Board), who shall ensure the proper functioning of the Board as a whole andthe Board may designate a Non-Executive Director as vice-chairman (the Vice Chairman of the Board). The
Board shall be supported by a company secretary (the Company Secretary) to be appointed and dismissed by the
Board from outside its members. The Company Secretary as at Admission shall be Jeffrey Harleston, the GeneralCounsel and Executive Vice President of Business & Legal Affairs. In addition, the Board shall appoint one of
its Executive Directors as chief executive Officer (the Chief Executive Officer or CEO) and the Board shall have
one Executive Director to support the CEO (the Deputy Chief Executive Officer or Deputy CEO).
The Directors are appointed by the General Meeting at the non-binding nomination of the Board. A
nomination by the Board shall state whether a person is nominated for appointment as Executive Director or NonExecutive Director. The person so nominated is appointed by a resolution adopted by the General Meeting with asimple majority of the votes cast.
A Director shall be appointed for a maximum period of two years, provided, however, that his or her
term of office shall lapse immediately after the close of the first annual General Meeting held in the second year
after his or her appointment. A Director may be reappointed with due observance of the preceding sentence. At
the proposal of the Board, the General Meeting may resolve to deviate from the maximum period of two years.
The Articles of Association provide that each Non-Executive Director may be in office for a period of not morethan twelve years, unless at the proposal of the Board the General Meeting resolves otherwise. A Director’s termof office shall lapse in accordance with the retirement schedule drawn up by the Board.
The General Meeting may at all times suspend or dismiss any Director. The Board may at all times
suspend an Executive Director. A suspension may be extended one or more times but may not last longer than
three months in aggregate. If at the end of that period, no decision has been taken on the termination of thesuspension or on dismissal, the suspension shall end. A suspension can be terminated by the General Meeting at
any time.
The independency of Non-Executive Directors in accordance with the Dutch Corporate Governance
Code is assessed prior to their appointment on the Board and, thereafter, annually.
12.3.4

Diversity

Until recently, pursuant to Dutch law, certain large Dutch companies had to pursue a policy of having atleast 30% of the seats on the board of directors to be held by men and at least 30% of those seats to be held by
women. This legislation ceased to have effect on January 1, 2020. However, on February 11, 2021 the bill toamend Book 2 of the Dutch Civil Code was submitted to the Senate (Eerste Kamer) and the Dutch House ofRepresentatives (Tweede Kamer) in connection with balancing the ratio of men to women on the management
board and supervisory board of large companies. On the basis hereof, the appointment of a supervisory board
member to a listed public limited company is void in the event that the supervisory board does not consist of men
and, respectively, women for at least one-third of the number of members and the appointment of the supervisoryboard member in question does not lead to a more balanced ratio between the number of men and women in the-115-supervisory board. It is proposed to apply the rule accordingly to non-executive directors of a listed company witha one-tier board. Should this bill be passed, the Company must meet the applicable gender diversity targets. If theCompany does not do so, the Company will be required to explain in its annual report or in the report of the boardof directors (bestuursverslag): (i) why the seats are not allocated in a well-balanced manner; (ii) how the Company
has attempted to achieve a well-balanced allocation; and (iii) how the Company aims to achieve a well-balanced
allocation in the future.
The Company qualifies as a “large Dutch Company” for purposes of the diversity policy regime.
12.3.5

Limitation on non-executive positions

Pursuant to Dutch law, there are limitations to the number of supervisory or non-executive positions
persons can hold on the boards of directors of large Dutch companies. The Company qualiﬁes as a “large Dutch
Company”.
A person cannot be appointed as a managing or executive director of a “large Dutch company” if: (i)he/she already holds a supervisory or non-executive position at more than two other “large” Dutch public or
private companies or “large” Dutch foundations; or (ii) if he/she is the chair of the supervisory board or one-tierboard of directors of another “large” Dutch public or private company or “large” Dutch foundation. Also, a person
cannot be appointed as a supervisory director or non-executive director of a “large Dutch company” if he/she
already holds a supervisory position or non-executive position at ﬁve or more other “large” Dutch public or privatecompanies or Dutch foundations, whereby the position of chair of the supervisory board or one-tier board of
directors of another “large” Dutch company is counted twice. The term “large Dutch company” applies to any
Dutch company or Dutch foundation that at two consecutive balance sheet dates meets at least two of the following
criteria: (i) the value of its assets, as given in its balance sheet (together with explanatory notes) on the basis of
their acquisition price and production costs, is more than €20 million; (ii) its net turnover in the applicable year ismore than €40 million; and (iii) the average number of employees in the applicable ﬁscal year is at least 250. An
appointment in violation of these restrictions will result in that last appointment being void. Earlier appointments
at other entities are not affected. The fact that an appointment is thus void does not affect the validity of decisionmaking.
As at the date of this Prospectus, the Company meets these requirements, as: (i) none of the Executive
Directors holds any other supervisory position with a large Dutch company; and (ii) none of the Non-Executive
Executive Directors holds a supervisory position with five or more large Dutch companies.
12.3.6

Decision-making and Approvals of the Board

The Board shall hold meetings on a regular basis at a time to be determined by the Board and whenever
one or more of its Directors have requested a meeting.
In a meeting of the Board, each Director is entitled to cast one vote. A Director may grant a written proxy
to another Director (if in office) to represent him/her at a meeting. Resolutions of the Board shall be adopted by asimple majority of the votes cast by Directors present or represented at the meeting, provided that Directors who
have a conflict of interest shall not take part in the voting. In case of a tie of votes, the Chairman of the Board
shall have the casting vote. The Board may in principle pass resolutions only if at least the majority of the Board
is present or represented, provided that directors who have a conflict of interest shall not be taken into accountwhen calculating this quorum.
The Board will ensure that the Company does not enter into any transactions with a value in excess of€300 million that relate to:disposals, sales or acquisitions of all or a portion of investments in any company, business or group
created or to be created, whatever its legal form;

any proposal or approach to a third party concerning a significant transaction involving the Company
or any of its subsidiaries; and

any financing activity (including, amongst others, bank loans, overdrafts, vendor financing, asset
securitisation programmes, pension funds and transactions involving joint ventures and minority
interests) and the ranting of guarantees and security rights,

without the prior approval of the Board.

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The Board may also adopt resolutions outside a meeting, in writing or otherwise, provided that such
resolutions are recorded in writing or otherwise and that none of the Directors entitled to vote objects to thismanner of decision-making.
12.3.7

Board Resolutions Requiring Prior Approval
12.3.7.1 Prior Approval of the General Meeting

Pursuant to Dutch law, resolutions of the Board concerning a material change in the identity or characterof the Company or its business are subject to the approval of the General Meeting. Such changes include in any
event:

the transfer the enterprise or practically the entire enterprise to a third party;the conclusion or cancellation of any long-lasting cooperation by the Company or a subsidiary(dochtermaatschappij) with any other legal person or company, or as a fully liable generalpartner of a limited partnership or a general partnership, provided that such cooperation orcancellation thereof is of material importance to the Company; andthe acquisition or disposal of participating interest in the capital of a company with a value ofat least one-third of the sum of the assets according to the consolidated balance sheet with
explanatory notes thereto according to the latest adopted financial statements, by the Company
or a subsidiary.

The absence of approval of the General Meeting does not affect the authority of the Board to represent
the Company in dealings with third parties.
12.3.8Committees

The Board remains accountable for the performance and affairs of the Company. As at the date of theProspectus, the Board has appointed from amongst its Non-Executive Directors three committees to assist it todischarge its duties: an audit committee (the Audit Committee), a remuneration committee (the Remuneration
Committee), and a nomination committee (the Nomination Committee). Unless, disclosed otherwise the membersof each committee are independent pursuant to the Dutch Corporate Governance Code. The Board may appoint
additional committees from time to time, as it deems necessary and appropriate to carry out its responsibilities
and oversight function.
(a)

Audit Committee

According to its rules, the Audit Committee advises the Board in relation to its responsibilities,
undertakes preparatory work for the Board’s decision-making regarding the supervision of the integrity andquality of the Company’s financial reporting and the effectiveness of the Company’s internal risk management
and control systems and shall prepare resolutions of the Board in relation thereto.
The Audit Committee consists of at least three Non-Executive Directors appointed by the Board, themajority of whom, including the chair of the Audit Committee, are independent Non-Executive Directors. The
Audit Committee may not be chaired by the Chairman of the Board or by a former Executive Director. At the dateof this Prospectus, the Audit Committee comprises: Luc Van Os (chairman of the Audit Committee), Anna Jones
and Cathia Lawson-Hall. At least one member of the Audit Committee has competence in accounting and/or
auditing. The members as a whole shall have competence relevant to the sector in which the Company is operating.
The Audit Committee shall hold at least four meetings per year and whenever one or more of its members haverequested a meeting. The quorum of any meeting shall be a majority of the members of the Audit Committee. The
Audit Committee shall meet with the external auditor as often as it considers necessary, but at least once a year,
outside the presence of the Executive Directors.
The Chief Financial Officer, the Director in charge of Company’s financial affairs, the internal auditor(if present) and the external auditor shall attend the Audit Committee meetings, unless the Audit Committee
determines otherwise. The Audit Committee shall decide whether and, if so, when the Chairman of the Board
shall attend its meetings.
In short, the Audit Committee’s main responsibilities include, among others: (i) supervising andmonitoring, and discussing with and advising the Board on, the effectiveness of the design and operation of theinternal risk management and control systems and supervising the effect of the code of conduct; (ii) supervising-117-the submission of financial information by the Company; (iii) supervising the compliance with recommendations
and observations of the Company’s internal and external auditor; (iv) supervising the functioning of the internal
audit department (if present); (v) supervising the Company’s tax policy; (vi) supervising the financing of theCompany; (vii) supervising the applications of information and communication technology, including risks
relating to cybersecurity; (viii) maintaining frequent contact and supervising the relationship with the external
auditor; (ix) implementing the procedure for the selection of a statutory auditor and submitting a recommendation
to the Non-Executive Directors for the (re)appointment or dismissal of a statutory auditor by the General Meeting;(x) informing the Board of the outcome of the statutory audit and explaining how the statutory audit contributed
to the integrity of financial reporting and what the role of the Audit Committee was in that process; (xi) monitoring
the financial reporting process and submitting recommendations or proposals to ensure its integrity; (xii)
determining whether, and if so, how the external auditor shall be involved in the content and publication offinancial reports other than the financial statements; (xiii) issuing a recommendation on the appointment anddismissal of the senior internal auditor (if present); (xiv) if there is no separate department for the internal audit
function, issuing a recommendation to the Board whether adequate alternative measures have been taken; (xv)submitting a proposal to the Board for the external auditor’s engagement to audit the financial statements; and(xvi) approving the financial statements, the annual budget and major capital expenditures of the Company.
The Audit Committee shall have the power, without the Board’s approval and at the Company’s expense,to engage any independent legal counsel and other advisors as it deems necessary or appropriate and shall havethe sole authority to approve such firms’ fees and other retention terms.
(b)Remuneration Committee

According to its rules, the Remuneration Committee advises the Board in relation to its responsibilities
and shall prepare resolutions of the Board in relation thereto.
The Remuneration Committee consists of at least three Non-Executive Directors appointed by the Board,the majority of whom are independent Non-Executive Directors. The Remuneration Committee may not bechaired by the Chairman of the Board or by a former Executive Director. At the date of this Prospectus, theRemuneration Committee comprises: Anna Jones (chairwoman of the Remuneration Committee), Judy Craymer
CBE, Antoine Fievet, Margaret Frerejean-Taittinger, Cathia Lawson-Hall and James Mitchell. The Remuneration
Committee shall hold at least two meetings per year and whenever one or more of its members have requested ameeting. The quorum of any meeting shall be a majority of the members of the Remuneration Committee.
In short, the Remuneration Committee’s main responsibilities include, among other things: (i) every four
years, submitting a proposal to the Board for the remuneration policy to be pursued; (ii) preparing the Board’s
decision-making regarding the determination of remuneration of the individual Executive Directors and of theindividual Non-Executive Directors; and (iii) annually preparing the remuneration report to be tabled at theGeneral Meeting.
The Remuneration Committee shall have the power, without the Board’s approval and at the Company’s
expense, to appoint, compensate and oversee the work of any outside advisor to assist the Remuneration
Committee in connection with its responsibilities.
(c)

Nomination Committee

According to its rules, the Nomination Committee advises the Board in relation to its responsibilities andshall prepare resolutions of the Board in relation thereto.
The Nomination Committee consists of at least three Non-Executive Directors appointed by the Board,the majority of whom are independent Non-Executive Directors. At the date of this Prospectus, the Nomination
Committee comprises: Margaret Frerejean-Taittinger (chairwoman of the Nomination Committee), Judy Craymer,
James Mitchell and Luc van Os. The Nomination Committee shall hold at least two meetings per year andwhenever one or more of its members have requested a meeting. The quorum of any meeting shall be a majorityof the members of the Nomination Committee.
In short, the Nomination Committee’s main responsibilities include, among other things: (i) drawing up
selection criteria and appointment procedures for the Directors; (ii) periodically assessing the size and compositionof the Board, and making a proposal for a composition profile of the Non-Executive Directors; (iii) periodicallyassessing the functioning of individual Directors and the Board as a whole, and reporting on this to the Board; (iv)making recommendations for appointments and reappointments; and (v) supervising the policy of the Board on
the selection criteria and appointment procedures for senior management.

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The Nomination Committee shall have the power, without the Board’s approval and at the Company’s
expense, to appoint, compensate and oversee the work of any outside advisor to assist the Nomination Committee
in connection with its responsibilities.
(d)Market Disclosure Committee

The Company has established a market disclosure committee in order to ensure timely and accurate
disclosure of all information that is required to be so disclosed to the market to meet the legal and regulatory
obligations and requirements arising from the listing of the Company’s securities on Euronext Amsterdam,
including the Market Abuse Regulation.
The market disclosure committee will meet at such times as shall be necessary or appropriate, as
determined by the chair of the market disclosure committee or, in his or her absence, by any other member of themarket disclosure committee. The market disclosure committee is not a committee of the Board. It must have atleast four members. Members of the market disclosure committee are appointed by the Board.
12.3.9Composition of the Board

As at Admission, the Board shall be comprised of the following Directors, with a term that will end at
the annual General Meeting to be held in , which is the first annual General Meeting to be held after two fullyears following the Distribution Date.
Name

Age

Position

Member fromTerm

Sir Lucian Grainge

61

September 20,
2021

Until Annual General
Meeting to be held in 2024

Vincent Vallejo

60

September 20,
2021

Until Annual General
Meeting to be held in 2024

Judy Craymer

63

September 20,
2021

Until Annual General
Meeting to be held in 2024

Antoine Fievet

57

September 20,
2021

Until Annual General
Meeting to be held in 2024

Anna Jones

46

Cathia Lawson-Hall

50

Chairman & Chief
Executive Officer andExecutive Director
Deputy Chief Executive
Officer, Corporate andExecutive Director
Chairman of the Board andIndependent Non-Executive
Director
Vice Chairman of the Board
and Independent NonExecutive Director
Independent Non-Executive
Director
Non-Executive Director

James Mitchell

47

Non-Executive Director

Luc Van Os

55

Non-Executive Director

Margaret FrerejeanTaittinger
Manning Doherty

36

Independent Non-Executive
Director
Non-Executive Director

September 20,
2021
September 20,
2021
September 20,
2021
September 20,
2021
September 20,
2021
September 20,
2021

Until Annual General
Meeting to be held in 2024
Until Annual General
Meeting to be held in 2024
Until Annual General
Meeting to be held in 2024
Until Annual General
Meeting to be held in 2024
Until Annual General
Meeting to be held in 2024
Until Annual General
Meeting to be held in 202448

12.3.10 Biographical Details of the Executive Directors
Sir Lucian Grainge (Chairman & Chief Executive Officer)
Sir Lucian Grainge has spent his entire career in the music industry and has signed and worked withmany worldwide stars, including ABBA, Jay Z, Elton John, Katy Perry, Queen, Rihanna, The Rolling Stones,
Sam Smith, U2 and Amy Winehouse, among many others. Over the span of four decades, he has not only
pioneered new approaches to the signing and development of the world’s most successful recording artists andsongwriters but he has consistently championed the development of innovative business models and partnerships
with a wide range of technology and media partners around the world. He has transformed UMG into the most-119-successful company in the history of the music industry, both competitively and financially, and his vision andleadership is widely recognized as having returned the entire industry to growth after many years of decline. In
2011, he led UMG’s successful acquisition of the recorded music assets of the legendary British music company
EMI, revitalizing its iconic Capitol Records, and, in the process, further strengthening UMG’s position as theglobal leader in music.
A native of London, Sir Lucian was bestowed with a knighthood in 2016 by Her Majesty Queen Elizabeth
II in the Queen’s 90th Birthday Honours list for accomplishments in the music industry and leadership throughits challenging times, contributions to British business and inward investment, as well as his development ofinnovative business models, technology and media partnerships that have expanded UMG’s global presence.
He serves on the board of Northeastern University in Boston, Massachusetts.
Vincent Vallejo (Deputy CEO, Corporate)
Based at the Company’s corporate headquarters in Hilversum, Netherlands and reporting to UMG’s
Chairman and Chief Executive Officer Sir Lucian Grainge, Vincent Vallejo is leading a number of corporate
initiatives related to the Company’s proposed listing on the Euronext NV in Amsterdam. Vallejo has worked
closely across UMG matters since joining Vivendi in 1998, most recently as SVP, Audit & Special Projects. Prior
to joining Vivendi, Vallejo held positions at AGF-ALLIANZ France (Deputy CFO) and Ernst & Young Paris andMadrid. He received an MBA from Montpellier University and a Master of Science from Cornell-Essec, CergyPontoise, France.
12.3.11 Biographical Details of the Non-Executive Directors
Judy Craymer (Chairman of the Board and Independent Non-Executive Director)
Judy Craymer is an award-winning producer who has extensive experience in the theatre, film, televisionand music industries. She originated the idea of MAMMA MIA! and co-founded Littlestar Services Ltd. in 1996
with Benny Andersson, Björn Ulvaeus and Richard East to produce the musical in London. Since then, she has
produced 50 productions of MAMMA MIA! in 16 languages around the world, in addition to numerous other hit
productions. In 2008, she produced MAMMA MIA! THE MOVIE, which went on to become the highest-grossing
live-action musical of all time. Ten years later, she produced MAMMA MIA! HERE WE GO AGAIN which atthat time became the most successful live-action musical movie sequel of all time. She graduated fromthe Guildhall School of Music & Drama in 1977 and in 2006 was awarded an Honorary Fellowship. In the Queen's
Birthday Honours list of 2007, Craymer was honored with an MBE for her contribution to the music industry andin 2020, she was awarded a CBE for her services to theatre and charity.
Antoine Fievet (Vice Chairman of the Board and Independent Non-Executive Director)
Antoine Fievet is the Chairman and CEO of the Bel Group, a world leader in branded cheese and a major
player in the healthy snack market with 33 production sites and a distribution network spanning nearly 120
countries. His three decades of professional experience include 20 years as Bel Group’s CEO, where he has
additionally served as Chairman since 2009. Under Fievet’s leadership, Bel Group adopted concrete actions toaddress sustainable agriculture, healthy food, responsible packaging, the fight against climate change and productaccessibility. Fievet received a graduate degree from Université Paris II Panthéon Assas and an undergraduate
degree from Institut Supérieur de Gestion.
Anna Jones (Independent Non-Executive Director)
Anna Jones is the CEO and co-founder of AllBright, the global women’s network and members' clubfounded in 2017 to connect, upskill and inspire professional women. She has more than 15 years of experience inleadership roles with broad and deep expertise in content, digital disruption, strategic growth and business
transformation. Prior to founding AllBright, Jones served as CEO of Hearst Magazines U.K. from 2014 to 2017,
where she oversaw 24 media brands that together formed a network of content and experiences across multiple
platforms that reached a quarter of all U.K. adults. As Hearst Magazines U.K.’s Chief Operating Officer from2011 to 2014, she had strategic and operational responsibility for the business overall, following the acquisition
and integration of Hachette Filipacchi in 2011. Jones has additionally served on the board of the Creative
Industries Federation, a national membership organisation for the public arts, cultural education and creative
industries, from 2015 to 2019. She holds a Bachelor of Arts degree in International Business Management from
Newcastle University.

-120-Cathia Lawson-Hall (Non-Executive Director)
Cathia Lawson-Hall is Head of Coverage and Investment Banking for Africa for Société Générale, where
she oversees the overall relationship and strategic consulting with governments, large corporates and financial
institutions in Africa. Previously, she serves as Managing Director, Co-Head of Debt Capital Markets forcorporates in France, Belgium and Luxembourg. Lawson-Hall joined Société Générale in 1999 as a financial
analyst covering the telecommunications and media sectors before moving into financial consulting. She has morethan 25 years of experience in financial services, starting as a corporate finance professor at the University ofParis-Dauphine. Lawson-Hall is the founding member of the acquisition committee of African Modern andContemporary Art at the Centre Georges Pompidou in Paris. Lawson-Hall holds a Master’s degree and a
postgraduate degree (DEA) in Finance from Paris Dauphine University in France.
James Mitchell (Non-Executive Director)
James Mitchell is Senior Executive Vice President and Chief Strategy Officer of Tencent Holdings
Limited (HKEX:0700), where he has worked since July 2011. James Mitchell has also served as the Chairman
and Non-Executive director of the board of China Literature Limited (HKEX: 0772) since June 2017. He is alsoa director of certain other listed companies including Frontier Developments Plc (AIM: FDEV), NIO Inc. (NYSE:
NIO) and Tencent Music Entertainment Group (NYSE: TME). He also holds directorships in various unlistedcompanies. Prior to joining Tencent, Mr. Mitchell was a managing director at Goldman Sachs. He received a
Bachelor of Arts degree from Oxford University and holds a Chartered Financial Analyst Certification.
Luc Van Os (Non-Executive Director)
Luc Van Os is co-owner of Misset Uitgeverij, a B2B publisher of multimedia brands for the agricultural
sector based in Doetenchem, Netherlands, and he previously served for 12 years as chief executive officer ofHearst Netherlands and its predecessors, home to titles including Harper’s Bazaar, Elle, Quote and Cosmopolitan.
Prior to serving as CEO, he held different leadership roles at Hearst and its predecessors, Hachette Filipacchi
Media and Quote Media. Under his leadership, Hearst became the largest upscale magazine publisher in the
Netherlands. Van Os additionally serves as Chairman of the Supervisory Board at Audax Group, a distribution
and retail company based in Gilze, Netherlands, and he is a member of the Supervisory Board of deMediafederatie, the national association of media companies and publishers in the Netherlands. Additionally, he
is a member of the Supervisory Board of VNO-NCW, the national employers association in the Netherlands.
Margaret Frerejean-Taittinger (Independent Non-Executive Director)
Margaret Frerejean-Taittinger is the International Development Manager for the MICHELIN Guide, therenowned restaurant rating system that publishes its yearly selections in over 30 countries. In this role, she builds
partnerships with destinations around the world to promote their unique culinary assets. Prior to Michelin, she
served as the Director of Communications and Marketing for Laboratories Surface-Paris, a beauty company thatspecializes in cosmeceutical skincare. Before joining Laboratories Surface-Paris, Frerejean-Taittinger spent eight
years in the International Development field, addressing cross-sector challenges to sustainable development witha focus on education and microfinance in East Africa. She holds a Master of Development Practice from L’Institut
d'Etudes Politiques de Paris (Sciences Po), where she graduated Summa Cum Laude.
Manning Doherty (Non-Executive Director)
Manning Doherty is Senior Vice President of GIC Pte Ltd., Singapore’s sovereign wealth fund, where
he sits in the Integrated Strategies Group that primarily focuses on public and private debt and equity investments
globally. Doherty is a bilingual investment professional, whose career spans senior roles in equity research, private
equity and special situation investment and monitoring in Asia and the U.S. Prior to GIC, he served as Managing
Director of Mount Kellett Capital from 2011 to 2015 and Managing Director of Oaktree Capital Managementfrom 2006 to 2011. Doherty has specialized knowledge in providing strategic review to develop adjacent businesslines; improvement of KPI monitoring and decision making; broadening Company contacts across industry; andthe evaluation of strategic M&A and corporate finance actions. He holds an MBA from The Wharton School at
the University of Pennsylvania, where he also earned a Master’s degree in International Studies from the Lauder
Institute. He also holds a Bachelor of Arts degree from Queen’s University in Kingston, Ontario in Canada.
12.3.12 Further Information Relating to the Directors
At the date of this Prospectus, the Directors have not, in the previous five years:

been convicted of any fraudulent offences;
-121-



as a member of the administrative, management or supervisory body at any company, or as
partner, founder or senior manager at any company, been associated with any bankruptcy,
receivership or liquidation of such company;as a member of the administrative, management, or supervisory body at any company, or as
partner, founder or senior manager at any company, been associated with that company being
put into administration;

been subject to any official public incriminations and/or sanctions by any statutory or regulatory
authority (including any designated professional body); orbeen disqualified by a court from acting as a member of the administrative, management or
supervisory bodies of an issuer or from acting in the management or conduct of the affairs of
any issuer.

12.4

Corporate Executives

12.4.1Introduction

The Group is managed by corporate executives (the Corporate Executives). The current Corporate
Executives consists of nine key members, each of whom oversees a specific aspect of the business. The persons
set forth below are the current members of the Corporate Executives.
Name

Age

Position

Sir Lucian Grainge

61

Chairman & Chief Executive Officer

Philippe Flageul

57

Executive Vice President, Controller

Jody Gerson

60

Chairman & CEO for Universal Music PublishingGroup

Jeffrey Harleston

60

General Counsel and Executive Vice President of
Business & Legal Affairs

Eric Hutcherson

52

Executive Vice President, Chief People and Inclusion
Officer

Boyd Muir

62

Executive Vice President, Chief Financial Officer
and President of Operations

Michael Nash

64

Executive Vice President of Digital Strategy

Will Tanous

51

Executive Vice President, Chief Administrative
Officer

Vincent Vallejo

60

Deputy Chief Executive Officer, Corporate

For information in respect of the members of the Corporate Executives who will also be members of theBoard, including Sir Lucian Grainge and Vincent Vallejo, see Section 12.3.10 (Biographical Details of the
Executive Directors).
Set out below are brief summaries of the biographies of the remaining members of the Corporate
Executives:
Philippe Flageul (Executive Vice President, Controller)
Philippe Flageul is responsible for overseeing many aspects of UMG’s finance operations, including
accounting, tax, treasury, risk management and IT and supply chain finance. He also oversees UMG’s global
procurement. Flageul joined UMG is 2015 from Bolloré Group, where he worked for more than two decades as
CFO of the industrial division and Chairman of IER. Philippe holds an MBA from EDHEC.
Jody Gerson (Chairman & CEO for Universal Music Publishing Group)With more than three decades of experience, Jody Gerson is one of music’s most respected, accomplishedexecutives and creative authorities. She is the first female chairman of a global music company and the first-122-

woman to be named CEO of a major music publisher. Since joining UMPG in 2015, Gerson transformed thecompany into the industry’s most sought-after home to songwriters evidenced by her signing and work with the
Bee Gees, Elton John, Carly Simon, Prince, Taylor Swift, Billie Eilish, Rosalia, Alicia Keys, Coldplay, Justin
Bieber, Jack White, SZA, Post Malone, Quavo, Ariana Grande, H.E.R., Harry Styles, Maren Morris and more.
Prior to UMPG, Gerson served as Co-President of Sony/ATV Music Publishing. Gerson is the cofounder of She
Is The Music, a non-profit championing equality and inclusion for women. She serves on boards of the USC
Annenberg Inclusion Initiative, Rock & Roll Hall of Fame, the National Music Publishers Association and The
Archer School for Girls.
Jeffrey Harleston (General Counsel and Executive Vice President, Business & Legal Affairs)
Jeffery Harleston is responsible for globally overseeing all business transactions, contracts, and litigation.
He is additionally responsible for the development of corporate policies, including the coordination of theCompany's government relations, trade and anti-piracy activities, to ensure a unified strategy across theCompany's divisions. Harleston, who joined UMG in 1993 at MCA, is co-chairman of UMG’s Task Force for
Meaningful Change, where he leads a group of influential executives from across the Company to focus on issues
regarding inclusion and social justice. He is also currently serving as interim Chairman & CEO of Def Jam
Recordings. Harleston serves on the boards of SoundExchange and the Recording Industry Association ofAmerica (RIAA) and received a B.A. in Political Science from Williams College and his J.D. from the Universityof California, Berkeley School of Law.
Eric Hutcherson (Executive Vice President, Chief People and Inclusion Officer)
With a focus on people, culture and inclusion, Eric Hutcherson leads a global team across UMG’s recordlabels, publishing division and operating companies to align talent functions, amplify the Company’s
entrepreneurial-based culture, accelerate diversity and inclusion across all levels and territories, attract, retain anddevelop talent, accelerate the Company’s social justice initiatives and build on UMG’s successful track-record ofdriving innovation by recruiting employees who bring new ideas, perspectives and skillsets. Prior to joining UMG,
he was EVP, Chief Human Resources Officer of the National Basketball Association (NBA) where he manageda team that drove the NBA’s global workforce strategy. Hutcherson earned a bachelor’s degree in Political
Science from New York University and a master’s degree in Sports Management and Administration from the
University of Massachusetts-Amherst.
Boyd Muir (Executive Vice President, Chief Financial Officer and President of Operations)
Working seamlessly across the corporate and creative aspects of UMG’s operations, Boyd Muir is
responsible for overseeing many of UMG’s corporate operations including global finance. Muir leads the strategic
physical-to-digital reshaping of the Company’s businesses, and he has played a key role in several of UMG’s mostprominent acquisitions, including Sanctuary Group and V2 Music Group, as well as the Company’s successfulacquisition of EMI, Ingrooves Music Group and Epic Rights, among others. Muir joined UMG in 1994 andpreviously served as Chief Financial Officer for Universal Music Group International, the division which managed
UMG’s businesses in more than 50 countries.
Michael Nash (Executive Vice President of Digital Strategy)
Michael Nash oversees UMG’s digital business development activities around the world, managing therelationships with the Company’s largest digital partners. Nash has worked at the forefront of media andtechnology convergence for his entire career as an executive, entrepreneur and producer. Before joining UMG in
2015, Nash served as a strategic advisor to Warner Music Group (WMG), as well as several digital media startups
and new technology companies. Prior to that, he served as the Company’s Executive Vice President of Digital
Strategy and Business Development where he oversaw new media projects, strategic relationships and businessdevelopment activities worldwide. Prior to WMG, Nash was the Executive Director of the Madison Project, themusic industry’s first digital distribution trial, and he was the founding CEO of Inscape, an interactive
entertainment and games publishing joint venture between WMG and HBO.
Will Tanous (Executive Vice President, Chief Administrative Officer)
Will Tanous plays a key role in the development of the Company’s business strategy, overseeing several
major strategic and corporate endeavors, as well as managing worldwide external and internal communications,
global public policy, investor and government relations, event functions and social responsibility. Prior to joining
UMG in 2013, Tanous served as Executive Vice President of Communications & Marketing for Warner Music
Group where he was central in all of the Company’s major corporate initiatives, including: the sale of WMG to-123-

Access Industries, Inc.; WMG’s initial public offering on the New York Stock Exchange in 2005; and the sale of
WMG by Time Warner Inc. to a private equity consortium. He serves on the board of the Recording Industry
Association of America and is a graduate of Georgetown University in Washington D.C.
12.4.2Further Information Relating to the Corporate Executives
At the date of this Prospectus, the Corporate Executives have not, in the previous five years:

12.5



been convicted of any fraudulent offences;

as a member of the administrative, management or supervisory body at any company, or as
partner, founder or senior manager at any company, been associated with any bankruptcy,
receivership or liquidation of such company;as a member of the administrative, management, or supervisory body at any company, or as
partner, founder or senior manager at any company, been associated with that company being
put into administration;

been subject to any official public incriminations and/or sanctions by any statutory or regulatory
authority (including any designated professional body); orbeen disqualified by a court from acting as a member of the administrative, management or
supervisory bodies of an issuer or from acting in the management or conduct of the affairs of
any issuer.

General information about the Directors and Corporate Executives

The table below sets out the names of all companies and partnerships of which an Executive Director,
Non-Executive Director or a Corporate Executive has been a member of the administrative, management or
supervisory bodies or partner at any time in the previous five years, other than a subsidiary of the Company.
Name

Current directorships / partnerships

Sir Lucian Grainge

Northeastern University

Vincent Vallejo

Esri France

Judy Craymer

Judy Craymer Limited
Judy Craymer Productions Limited
Judy Pictures Limited
VF London Limited
VF Productions Limited
VF (Licensed Productions) Limited
Littlestar Services Limited
Littlestar Services (Europe) Limited
Littlestar (Licensing) Limited
Littlestar Services (USA Tour 2) Inc
Littlestar Services (Broadway) Inc
Littlestar Films Limited
Littlestar 2Up Limited
Mamma Mia! Broadway Limited Partnership
Mamma Mia! (USA Tour 2) Limited
Partnership
Unibel SA
Bonduelle SCACITEOSCI MORIGINKGO

Antoine Fievet-124-

Past directorships / partnerships
American Friends of the Royal Foundation
Lionsgate Entertainment Corporation
Boulogne Studios EURLGroupe Canal+
L’Olympia
Radionomy Group BV
Watchever GroupRadionomy Group SA
WINAMP SA
Littlestar Services (Australia) Limited
Littlestar Services (Canada) Limited
Littlestar Services (USA Tour) Limited
Mamma Mia! Las Vegas Limited
Partnership
Littlestar Services (Las Vegas) Inc-

Anna Jones

Cathia Lawson-Hall

James Mitchell

Luc Van Os

Margaret FrerejeanTaittinger
Manning DohertyGroupement Forestier de la Croix d’Urbay
AllBright Ltd
UN Women UK

Agence Francaise De Developpement (AFD)
VivendiSociété Générale Côte D’Ivoire
France Nigeria Investment Club (FNIC)
Riot Games Inc
CITIC Capital Holdings Limited
Miniclip Group SA and its SPVs including
ICI(J) Ltd
Supercell Oy. And its SPVs including:
Halti S.A.
Inari S.à r.l.
Nilakka S.à r.l.
Lokka S.à r.l.
Flipkart Limited
Frontier Developments plc
China Literature Limited
Skydance Media LLCNIO Inc.
Tencent Music Entertainment Group
PhonePe Private Limited
SPVs of Tencent-led Consortium, including:Concerto HK2 Company Limited
Scherzo HK2 Company Limited
Doorakkeren B.V.
Audax Groep B.V.
Magazine Media Association (branche
organisatie)
De MediaFederatie (branche organisatie)
VNO NCW
French Bloom
Pure Salmon
BBAM
Azure Sky Investment Limited-125-

Hearst Magazines UK
Telecom Italia
Creative Industries Federation
Comag
Press and Periodical Association Board
Société Générale Bénin - Togo

Yixin Group Limited

Hearst Burda Publ Gmbh. (Germany)
Hearst Independent Media (Russia)
International Publication Holding B. V.
Hearst Magazines Netherlands B.V

Mimosa Green Investment Pte. Ltd.
Clear Turquoise Investment Pte. Ltd.
Hammerhead Investment Pte Ltd
Burgundy Wheel Investment Pte. Ltd.
Tangy Orange Investment Pte Ltd
Sunny Yellow Investment Pte Ltd
Pastel Pink Investment Pte. Ltd.
Evening Gold Investment Pte. Ltd.
Dusky Maroon Investment Pte Ltd
Cerulean Bay Investment Pte Ltd
Kakapo Investment Pte Ltd
Pure Magenta Investment Pte. Ltd.
Iris White Investment Pte. Ltd.
Crossbones Investment Pte Ltd
GIC Blue Holdings Pte. Ltd.
Amber Red Investment Pte. Ltd.
Crimson White Investment Pte.Ltd.
Royal Violet Investment Pte. Ltd.
Coral Blue Investment Pte.Ltd.
Omega Red Investment Pte. Ltd.
Purple Green Investment Pte.Ltd.
Twilight Silver Investment Pte. Ltd.

Boyd Muir
Philippe Flageul
Jody Gerson

Jeffrey Harleston

Eric Hutcherson

Michael Nash
Will Tanous

12.6

Vevo, LLC
Dakia UMusic Hospitality, LLC--

Archer School for Girls (trustee)
She is the Music
National Music Publisher’s Association
SoundExchange
Rhythm & Blues Foundation
Recording Industry Association of America
Williams College
Harvard-Westlake School
MusicCares
TJ Martell Foundation
UCLA Herb Albert School of Music
National Museum of African American Music
Covenant House International
USC Annenberg School of Communications
and Journalism
Vevo, LLC
SongLily, Inc
Dakia Umusic Hospitality, LLC
Recording Industry Association of America

TJ Martell Foundation
MusiCares
City of Hope--The Hun School of Princeton
Covenant House NY
Young People’s Chorus-

Equity Holdings of Directors and Corporate Executives

As of the date of this Prospectus, the Existing Shareholders are the only Shareholders of the Company
and neither the Directors nor the Corporate Executives hold any Shares in the Company.
In connection with the Distribution, the Directors and the Corporate Executives, to the extent that theyhold shares in Vivendi, will, in accordance with the Allocation Ratio and similar to all other Vivendi Shareholders,receive one Share for every one (1) Vivendi share which they hold as of the Distribution Record Date. This
assumes that no Adjustment of the Allocation Ratio has occurred, and each Vivendi Shareholder will be allotted
one (1) Share for one (1) share which it holds in Vivendi on the Distribution Record Date.
The following sets forth each Director's and Corporate Executives’ shareholdings in Vivendi as at thedate of this Prospectus and expected shareholdings in the Company immediately after the Distribution.
Name

Directors
Sir Lucian Grainge
Vincent Vallejo
Judy Craymer
Antoine Fievet
Anna Jones
Cathia Lawson-Hall
James Mitchell
Luc Van Os
Margaret Frerejean-Taittinger
Manning Doherty
Corporate Executives
Philippe Flageul

Jody Gerson
Jeffrey Harleston
Eric Hutcherson

Number of shares in Vivendi held
as at the date of this Prospectus

Expected number of Shares in
the Company to be held
immediately after theDistribution(1)13,187
91,7702,356
105-

13,187
91,770

105
-

8,000
18,422
4,564
-

8,000
165,717(2)196,688(2)-126-Boyd Muir
Michael Nash
Will Tanous

207,625(3)5,173
202,071(2)72,989
5,173
9,947

Notes
(1) Assuming that no Adjustment of the Allocation Ratio has occurred, and each Vivendi Shareholder will be allotted one(1) Share for one (1) share which it holds in Vivendi on the Distribution Record Date.
(2) These figures include an estimate of the number of Shares to be transferred by Vivendi to the relevant Corporate
Executives pursuant to an award by Vivendi to a limited number of senior managers of UMG, including certain of the
Corporate Executives, which award was satisfied in part in cash paid by Vivendi and/or a portion is to be satisfied in
Shares in UMG to be transferred by Vivendi, which awards related, amongst other things, to the Admission and theTencent-led Consortium’s acquisition of its interest in UMG. The number of Shares to be transferred to the relevant
Corporate Executive will only be determinable closer to the date of listing and may vary depending upon the expected
trading price of the Shares, and the number of shares will be reduced to cover any required local payroll and income
withholding, and market capitalization of the Company. Such transfer is expected to take place on or after the date oflisting. The Shares to be transferred will be subject to a one year holding period.
(3) A number of Shares is expected to be delivered by UMG to Boyd Muir on or immediately after the Admission pursuant
to a recognition award granted whereby he will receive an award of Shares which settle over three years, one third ofwhich shall be settled on or after the Admission, whereafter a further third is expected to settle on the first anniversary of
the Admission and the final third is expected to settle on the second anniversary of the Admission. The number of Shares
to be delivered will only be determinable closer to the date of listing and may vary depending upon the expected trading
price of the Shares and the number of shares will be reduced to cover any required local payroll and income withholding,however, the total number of Shares to be granted and delivered over the three year period is estimated to be 403,908,
134,636 Shares of which are estimated be delivered to Boyd Muir as the first third of this award (which is reflected in thetable above). In addition, Boyd Muir was granted a number of Shares pursuant to the award by Vivendi (related, amongst
other things, to the Admission and the Tencent-led Consortium’s acquisition of its interest in UMG) to a limited numberof senior managers of UMG, which award was satisfied in part in cash paid by Vivendi and/or a portion is to be satisfied
in Shares in UMG to be transferred by Vivendi. The number of Shares to be transferred to Boyd Muir will only be
determinable closer to the date of listing and may vary depending upon the expected trading price of the Shares, and thenumber of shares will be reduced to cover any required local payroll and income withholding, and market capitalizationof the Company. Such transfer is estimated to comprise 201,955 Shares; however, such transfer shall only take place on
the first anniversary of the date of listing. See Section 12.7.3(b)(iii) for further details in this regard.

12.7

Remuneration

12.7.1

Board remuneration

Every four years, the Remuneration Committee shall submit a clear and understandable proposal to theBoard concerning the remuneration policy to be pursued with regard to Directors, which will be submitted to theGeneral Meeting for adoption as required by law. The remuneration policy is expected to be adopted by theGeneral Meeting at the proposal of the Board on September 20, 2021. A resolution to adopt the remuneration
policy requires a simple majority of the votes cast. Pursuant to the Articles of Association, remuneration of the
Executive Directors shall be determined by the Board with observance of the remuneration policy adopted by theGeneral Meeting. The Executive Directors shall not participate in the deliberations and decision-making on this.
The remuneration of the Non-Executive Directors shall be determined by the Board, with observance of the
remuneration policy adopted by the General Meeting. A proposal with respect to remuneration schemes in theform of shares or rights to subscribe for shares shall be submitted by the Board to the General Meeting for its
approval.
12.7.2

Remuneration components for the Executive Directors and Chief Financial Officer

Pursuant to the Company’s remuneration policy, the remuneration of the Executive Directors and theChief Financial Officer generally consists of the following components, excluding current employment contract
terms that might deviate from the remuneration policy, providing for an appropriate balance between fixed andvariable remuneration over the short- and longer-term, which is directly linked to business performance andshareholder value-creating and supporting the Company’s strategy, its long-term interests and its sustainability:a fixed base salary. Base salaries are reviewed annually in the context of inflation and/or
company performance;

a pension contribution and other benefits such as life assurance and private medical insurance
that are additional to the fixed base salary;

-127-



a short-term variable annual cash bonus. Bonuses are determined by the Remuneration
Committee on the basis of individual performance and the Company's performance against
financial, strategic and risk-related measures; and

the Company has not yet established a long-term incentive plan, but its intention is to introduce
a share-based long-term incentive plan following the Admission. An overview of the high-level
principles of the proposed long-term incentive plan is set out in Section 12.8.3 (UMG Equity
Inventive Plan).

Section 12.7.3 (Current terms of Board members and the Chief Financial Officer) contains an overview
of the terms and conditions of the Chief Financial Officer and of the Non-Executive and Executive members of
the Board as per the date of the Prospectus.
12.7.3Current terms of Board members and the Chief Financial Officer(a)Non-Executive Directors

The initial terms in office of the Non-Executive Directors are referred to in Section 12.3.9 (Compositionof the Board). The Nomination Committee periodically assesses the skills represented on the Board anddetermines whether these meet the Company’s needs.
The fee structure for Non-Executive Directors has been designed to ensure that the Company attracts,
retains and appropriately compensates a diverse and internationally experienced board of Non-Executive
Directors. On and from Admission, each independent Non-Executive Director shall be entitled to a fee of:€90,000 per annum for performing their role as a Non-Executive Director;€20,000 per annum being payable for membership of a Board committee;

€10,000 per annum for performing the role of chair of a Board committee; and€50,000 per annum for performing the role of Chairman of the Board.

Remuneration is reviewed annually and is not linked to the price of the Shares or the Company’s
performance.
The fees for the Non-Executive Directors are benchmarked against Euronext Amsterdam listedcompanies, using publicly disclosed data and considering the relative size, scale and complexity of the Company’s
activities.
Each Non-Executive Director is also entitled to reimbursement of reasonable expenses incurred inconnection with the attendance of Board and Board committee meetings.
The Non-Executive Directors are not entitled to receive any compensation on termination of their
appointment and are not entitled to participate in the Company’s bonus or pension schemes.
The Non-Executive Directors are subject to confidentiality undertakings without limitation in time. They
are not subject to non-compete restrictive covenants.
(b)

Executive Directors and Chief Financial Officer

The remuneration for the Executive Directors and the Chief Financial Officer includes the elements set
out below. Where applicable, the below sets out US$ remuneration in Euros based on the US$/€ exchange rate asof June 1, 2021, being 0.82, therefore certain of the amounts below have been subject to conversion and rounding
and may vary in accordance with movements in the US$/€ exchange rate.
(i)

Annual base pay

In accordance with the remuneration policy, the annual base pay is paid bi-weekly for Sir Lucian Grainge
and Boyd Muir; monthly for Vincent Vallejo in cash on a net basis i.e. all tax and social security contributions are
deducted from this amount. Inflation, personal and Company performance are the drivers for any salary increases
and the base salary is set at a level to ensure the Company can attract and retain talent of the required caliber. Sir-128-

Lucian receives an annual base salary of €12,860,000, whereas Vincent Vallejo and Boyd Muir each receive anannual base salary of €960,000 and €1,731,000, respectively.
The Non-Executive Directors review the fixed base salaries of the Executive Directors and Chief
Financial Officer annually and may increase the fixed base salary levels for the Executive Directors and Chief
Financial Officer as appropriate based on the terms of the employment agreements of the Executive Directors andChief Financial Officers. In making its decision, the Non-Executive Directors with advice from the Remuneration
Committee, take into account global, regional, local and relevant industry practice as well as an individual’scontribution and affordability for the Company. A number of factors may be taken into account during the review
process, including personal performance, the scope and nature of the role, competing businesses in the industry
and local economic indicators such as inflation and labor market changes to ensure the remuneration is fair,sensible and competitive. In preparation of the review process, the Remuneration Committee considers data fromcomparator companies, bearing in mind the size of the business, its complexity and its geographic footprint. Given
that the Executive Directors and Chief Financial Officer have fixed term employment contracts which set forthsalary increases, if any, during the fixed term, there is no requirement to increase the fixed base salary on anannual basis, other than as may be obligated pursuant to the terms of the employment contract. Sir Lucian’s current
fixed term contract extends through December 31, 2023. Boyd Muir’s current fixed term contract extends throughJune 30, 2024. Vincent Vallejo’s current fixed term contract extends through September 30, 2023.
(ii)

Short-term variable annual cash bonus

Sir Lucian Grainge, Vincent Vallejo and Boyd Muir are eligible to participate in an annual bonus plan.
The awards are made fully in cash and are subject to specific financial and non-financial targets set annually by
the Board of Directors and are in line with the Company’s remuneration policy.
Sir Lucian is entitled to receive: (i) an annual cash bonus in an amount equal to 1% of UMG’s EBITA
for the relevant financial year; and (ii) a contingent cash bonus of €8,575,000 per annum, subject to UMG meeting
specific financial and non-financial targets. Subject to the achievement of specific financial and non-financial
targets: (i) Vincent Vallejo and Boyd Muir are eligible for a target bonuses of 50% of annual base salary and€1,637,000, respectively, with a minimum payout of 0% and a maximum payout potential of two times the target
bonus amount.
Performance against targets, as set at the beginning of the fiscal year, is based on verifiable financial
results and metrics that are reviewed by the Company’s auditors. For targets which are more qualitative in nature,
the Remuneration Committee considers supporting evidence and discusses the extent to which those goals havebeen achieved together with the Human Resources department.
(iii)

Admission related bonuses

In connection with the Admission and Distribution, Sir Lucian Grainge will receive a transaction bonus
paid by Vivendi in an amount equal to the product of (i) US$150,000,000 plus 1% of the implied value of 100%of the equity of UMG in excess of USD $30 billion; and (ii) the percentage of UMG Shares which are transferredby Vivendi pursuant to the Distribution. This bonus is expected to be paid before October 20, 2021. Sir Lucian
received a payment from Vivendi in the amount of €17,530,000 in February 2021 in relation to the Tencent-led
Consortium acquiring an additional 10% of the Shares in the Company. In addition, in September 2021, he will
receive a payment from Vivendi in relation to the Pershing Entities acquiring their 7.09% and 2.91% interests in
the Company.
Vincent Vallejo will receive a recognition award of €800,000 from UMG as a cash payment at the endof the month after Admission, as well as a similar €800,000 cash payment in April 2022.
In connection with the Admission, Boyd Muir will receive the following two equity based payments: (i)from UMG: a recognition award to be made in Shares with an equivalent value of €12,281,000 (vesting pro rata
over a period of three years); and (ii) from Vivendi: a recognition award to be made in Shares with an equivalentvalue of €6,140,000 (to be settled one year post the Admission), subject to UMG’s market capitalization being€30 billion as at Admission, with the possibility of an additional payment of up to €1,535,000 if the market
capitalization of UMG at the time of the Admission exceeds €40 billion. The number of Shares to be transferredby Vivendi is pursuant to an award by Vivendi to a limited number of senior managers of UMG, including certainof the Corporate Executives, which award was satisfied in part in cash and a portion is to be satisfied in Shares in
UMG, which awards related, amongst other things, to the Admission and the Tencent-led Consortium’s
acquisition of its interest in UMG.

-129-

(iv)

Pension contribution and other fringe benefits

Sir Lucian Grainge, Vincent Vallejo and Boyd Muir are entitled to receive employer pension
contributions or a cash retirement allowance in lieu of pension contributions, in the amounts of 20% of annual
base salary (total potential maximum of €262,000), €20,000 and 20% of annual base salary, respectively. In
addition, each of Sir Lucian, Vincent Vallejo and Boyd Muir are entitled to employer paid life insurance andinternational health insurance for themselves and each of their families.
Sir Lucian is entitled to an annual housing allowance of €418,200. For such time as he is located in the
Netherlands, Vincent Vallejo is entitled to be reimbursed the rental of his residence of choice, subject to reasonable
limitations as to the type of residence. For such time as he is located in the US, Boyd Muir is entitled to receive a
housing allowance of €254,000.
Sir Lucian is entitled to the use of a car, with a driver, for business and reasonable private use.
Additionally, Sir Lucian is provided with the use of a chartered or private aircraft for business purposes, subject
to requiring prior approval for any such usage in excess of €410,000 per annum. Vincent Vallejo is entitled to theuse of a car for business and reasonable private use. In lieu of a company car, Boyd Muir receives an annual car
allowance of €22,500.
To the extent that Vincent Vallejo remains employed by the Company on February 1, 2023, he will
receive payment of a retention bonus of €800,000.
In the event of termination or non-renewal of employment, Boyd Muir is entitled to repatriation for
himself and his family to the United Kingdom.
Sir Lucian is entitled to tax equalization between the US and the UK (his home country) and UMG covers
the taxes in relation to his housing allowance and usage of aircraft for business purposes. The Company covers
taxes for social assistance measures (housing, car, insurance) for Vincent Vallejo while he is in the Netherlands.
The Company covers taxes for Boyd Muir’s housing allowance and tax equalization between the US and the UK(his home country).
(v)

Long-term variable incentive planLong-term incentives are designed to incentivize the delivery of sustainable long-term grown and providealignment with shareholders. Following Admission, each of Sir Lucian Grainge, Vincent Vallejo and Boyd Muir
will be entitled to participate in such long-term incentive plans as the Company may establish for its executives.
(vi)

Termination policy

The employment contract of Sir Lucian Grainge may be terminated by him on not less than 3 months’
notice or by the Company without cause without prior notice. The employment contract of Vincent Vallejo may
be terminated by: (i) him on not less than three months’ prior notice; or (ii) the Company on not less than six
months’ prior notice. The employment contract of Boyd Muir may be terminated by the Company without cause
without prior notice.
In the event of termination by the Company without cause, or non-renewal of employment Sir Lucian
and Boyd Muir shall be paid two years’ salary, target bonus, pension contributions, car allowance, tax equalizationand health and welfare benefits in a lump sum in exchange for a release of claims against the Company, andVincent Vallejo shall be paid salary, contractually agreed exceptional premiums, his retention bonus and otherbonuses in a lump sum for the period remaining on his initial two and half year fixed term agreement.
(vii)

Restrictive covenants

Sir Lucian Grainge and Boyd Muir are subject to confidentiality undertakings without limitation in time
and to non-solicitation provisions (in respect of clients and employees) for a period of 12 months after thetermination of their employment with the Company. Sir Lucian is also subject to a non-competition provision fora period of 12 months after the termination of his employment with the Company.
(viii)Other

The Company arranges for, and pays, directors’ and officers’ liability insurance for Sir Lucian Grainge,
Vincent Vallejo and Boyd Muir.

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As at the date of this Prospectus, neither the Company nor Vivendi have provided any personal loans,advances or guarantees to Sir Lucian, Vincent Vallejo or Boyd Muir.
The remuneration payable to the Executive Directors and the Chief Financial Officer, as described above,is in all cases subject to any applicable regulatory requirements.
12.7.4

Executive Directors’ Remuneration for the financial year ended December 31, 2020

The remuneration for the Executive Directors and the Chief Financial Officer for the financial year ended
December 31, 2020 was as follows:

Executive Director(1)Sir Lucian Grainge
Boyd Muir

Base salary€13,563€1,854Cash
Bonus

Equity(2)Pensioncontributions

Fringebenefits

Total(in € thousands)€35,450(3)€574€5,762(5)
€510

€281
€369

€450(4)€1,176(6)€50,318€9,671Notes(1) For Sir Lucian and Boyd Muir, this table sets out US$ remuneration in Euros based on the average US$/€ exchange rate
for 2020.
(2) Equity includes earnings from Vivendi’s Performance Share Scheme Plan granted in 2015, 2017 and 2018.
(3) Sir Lucian cash bonus includes a one-time bonus of €15,523 paid by Vivendi in relation to the Tencent-led Consortium’s
acquisition of its stake in UMG, an annual bonus of €10,741 from UMG’s annual short-term incentive program and a biweekly bonus (€9,186 annually) associated with a UMG contingent bonus per his contract terms.
(4) Sir Lucian fringe benefits include employer paid benefits and housing allowance (€447).
(5) Boyd Muir’s cash bonus includes a one-time signing bonus of €66, a one-time bonus of €3,289 paid by Vivendi in relation
to the Tencent-led Consortium’s acquisition of its stake in UMG and an annual bonus of €2,407 from UMG’s annual
short-term incentive program.
(6) Boyd Muir’s fringe benefits include employer paid benefits and other allowances, such as housing (€272), travel, car,school and tax equalization (€717).

12.7.5

Non-Executive Directors’ Remuneration for the financial year ended December 31, 2020

As the Non-Executive Directors were appointed after December 31, 2020, no remuneration was paid to
the Non-Executive Directors for the financial year ended December 31, 2020.
12.7.6

Corporate Executives remuneration for the financial year ended December 31, 2020

The following table describes the aggregate remuneration for the members of the Corporate Executives(other than the Executive Directors and the Chief Financial Officer) for their services as members of the
management of the Company and its subsidiaries for the year ended December 31, 2020.
Base salaryCorporate Executives (1)€8,222

Cash bonus(2)Equity(3)Pensioncontributions(4)(in € thousands)
€647
€83

€14,614

Fringebenefits(5)€1,027

Total€24,593

Notes(1) Includes remuneration for Eric Hutcherson from his hire date of September 1, 2020 through December 31, 2020. Figures
include actual earnings for the year ended December 31, 2020. This table sets out US$ remuneration in Euros based on
the average US$/€ exchange rate for 2020.
(2) Includes incentive payments from UMG’s annual bonus plans and other bonus plans.
(3) Includes earnings from Vivendi’s Performance Share Scheme Plan granted in 2015, 2017 and 2018.
(4) Includes 401K company match and the non-elective company contributions.
(5) Includes employer paid benefits, relocation costs, housing and other allowances.

12.8

Vivendi Equity Incentive Plans

12.8.1Vivendi Share Schemes

Certain members of the Company’s Corporate Executives, including the Chairman & Chief Executive
Officer, Deputy Chief Executive Officer and the Chief Financial Officer, participated in the Vivendi Share
Schemes prior to the date of this Prospectus.
-131-

The shares granted under the Vivendi Share Schemes vest over a defined period of time from granting(subject to certain acceleration provisions) and are subject to leaver provisions under which departure in specified
circumstances may result in the non-vesting of a portion of those shares (such portion depending on thecircumstances in which the relevant manager leaves).
The Vivendi Share Schemes represent historical arrangements established by Vivendi and the Company
anticipates that in the future the Company will provide long-term incentivisation to senior employees by
establishing a share-based long-term incentive plan, the details of which will be determined following theAdmission. An overview of the high-level principles of the proposed long-term incentive plan is set out in Section
12.8.3 (UMG Equity Incentive Plan) below.
(a)Vivendi Performance Share Scheme Plans

The table below sets out details of the Vivendi Performance Share Scheme Plans in which the Executive
Directors and the members of the Corporate Executives participate in as at the date of this Prospectus:

Name

Plan Year

Number ofVivendi Shares
GrantedGrant Date

Vesting Date

Vesting Rate

Settlement Date

2017
2018
2019

30,00030,00040,000Feb 23, 2017
May 17, 2018
Feb 14, 2019Feb 24, 2020
May 18, 2021
Feb 15, 2022

75%
75%
0% - 100%(1)Feb 25, 2022
May 19, 2023
Feb 16, 2024

2019
2020

7,500
7,500

Feb 14, 2019
Feb 13, 2020

Feb 15, 2022
Feb 13, 2023

0% - 100%(1)0% - 100%(1)Feb 16, 2024
Feb 14, 2025

2017
2018
2019
2020

15,00013,50018,00020,000Feb 23, 2017
May 17, 2018
Feb 14, 2019
Feb 13, 2020

Feb 24, 2020
May 18, 2021
Feb 15, 2022
Feb 13, 2023

75%
75%
0% - 100%(1)0% - 100%(1)Feb 25, 2022
May 19, 2023
Feb 16, 2024
Feb 14, 2025

2017
2018
2019
2020

53,25042,00056,00056,500Feb 23, 2017
May 17, 2018
Feb 14, 2019
Feb 13, 2020

Feb 24, 2020
May 18, 2021
Feb 15, 2022
Feb 13, 2023

75%
75%
0% - 100%(1)0% - 100%(1)Feb 25, 2022
May 19, 2023
Feb 16, 2024
Feb 14, 2025

Sir Lucian Grainge

Vincent Vallejo

Boyd Muir

Corporate
Executives(2)Notes(1) Final Vesting Rate will be determined on the Vesting Date.
(2) Other than the Executive Directors and Chief Financial Officer.

(b)Vivendi Opus Share Scheme Plan

The table below sets out details of Vivendi Opus Share Scheme Plan in which Vincent Vallejo
participates in as at the date of this Prospectus. No other Executive Directors or Corporate Executives participate
in this scheme as at the date of this Prospectus:
Name

Plan Year

Number of Vivendi Shares
GrantedGrant Date

Vesting Date

2017
2018
2019
2020

135.39113.83104.24132.90July 25, 2017
July 19, 2018
July 17, 2019
July 21, 2020

June 1, 2022
June 1, 2023
June 1, 2024
June 1, 2025

Vincent Vallejo-132-12.8.2

Effect of Distribution on Vivendi Employee Share Schemes

In connection with the Distribution, any Vivendi equity awards held by Directors, Corporate Executives
and employees of the Group will be treated as follows:

Vivendi Stock Options

All outstanding Vivendi Stock Options were granted on April 17, 2012, at an exercise price of €11.76
per share, are fully vested and will expire on April 17, 2022. Directors, Corporate Executives and employees of
the Group holding these Vivendi stock options can either:(i)exercise the Vivendi Stock Options and sell the Vivendi shares prior to September 21, 2021
(the expected ex-dividend date in relation to the Distribution), before the Distribution impact
on the Vivendi share price; or(ii) exercise them so that they receive shares in Vivendi before September 21, 2021 and thecorresponding Vivendi shares would entitle the relevant holder to receive one Share for each
Vivendi share held in the context of the Distribution, subject to any Adjustment of the
Allocation Ratio.
If the Vivendi Stock Options are not exercised before September 21, 2021, the Vivendi shares resulting
from any subsequent exercise will not participate in the Distribution.

Vivendi Performance Shares

Performance shares granted during 2017 and 2018 have already vested and been measured against therelevant 3-year Vivendi performance criteria. The resulting earned Vivendi shares will be settled with UMG
employees during the year ending December 31, 2022 and December 31, 2023, respectively, based on the original
settlement dates under these schemes. These performance awards will not participate in the Distribution orotherwise be adjusted pursuant to the Distribution.
At their meeting on April 19, 2021, the management board of Vivendi approved an exception to allow
any unvested performance shares granted to UMG employees to continue to vest after listing and Admission(provided that the relevant individuals remain employed by the Group until the original vesting date of the relevant
Vivendi performance shares). Performance shares granted during 2019 and 2020 have not yet vested and willcontinue to be measured against the relevant 3-year Vivendi performance criteria. However, the relevant
performance targets may be adjusted after the listing and Admission. The resulting earned Shares will be settledwith UMG employees during the year ended December 31, 2024 and December 31, 2025, respectively, based on
the original settlement dates under this scheme. These performance awards will not participate in the Distribution
or otherwise be adjusted pursuant to the Distribution.

Vivendi OPUS

It is expected that the 2017, 2018, 2019 and 2020 Vivendi OPUS Plans (excluding the Canada and USA
Vivendi Opus Plans) will be paid out on their original settlement dates. The Vivendi shares held in these plans
will receive the Distribution but, in accordance with the contractual arrangements governing these plans, it isexpected that the resulting UMG Shares will be transferred to Société Générale S.A., the bank that has arranged
these plans. An adjustment will be made to the indexation formula in these plans to reflect the transfer of value toSociété Générale S.A. The adjustment will result in a “multiple” formula that follows both the Vivendi shares and
UMG Shares going forward. At present, the adjustment of the Vivendi OPUS Plans remains subject to ongoing
discussions with Société Générale S.A., the FCPE manager and the French regulators.
For the Vivendi OPUS Canada Plans, it is expected that the Vivendi OPUS Canada Plans will be fully
redeemed prior to the Distribution being made.
For the Vivendi OPUS USA Plans, it is expected that the Vivendi OPUS USA Plans will either be fully
redeemed prior to the Distribution being made or converted to a cash-settled instrument. The treatment of theVivendi OPUS USA Plans remains subject to ongoing discussions with Société Générale S.A.
12.8.3

UMG Equity Incentive Plan

The Company intends to establish an equity-based long-term incentive plan (the Equity Incentive Plan)as part of its remuneration arrangements, which Equity Incentive Plan is expected to be placed before the-133-Shareholders for approval at the first annual General Meeting of the Company after Admission. The purpose of
establishing the Equity Incentive Plan is to ensure alignment of the interests of participating employees with thoseof Shareholders, promote enhanced employee engagement and performance and the creation of long-termsustainable value for the Group and its stakeholders.
Certain employees within the Group, including the Executive Directors and the Corporate Executives,
will be eligible to participate in the Equity Incentive Plan. The Company currently intends that awards granted
under the Equity Incentive Plan will have appropriate vesting periods and any such performance awards are
expected to be made subject to the achievement of applicable conditions to be further determined by the
Remuneration Committee. Further holding periods may apply following the vesting of awards under the Equity
Incentive Plan. In order to ensure alignment of interests, certain key employees of the Group may be expected tomeet minimum shareholding requirements to be established by the Company following Admission (to whichshares acquired pursuant to the vested awards under the Equity Incentive Plan may contribute).
Awards under the Equity Incentive Plan will be subject to any applicable regulatory remuneration rules.
12.9

Board Liability, Insurance and Indemnity

Executive Directors and Non-Executive Directors may be liable, under Dutch law, for damages in theevent of improper or negligent performance of their duties. They may be held liable for damages to the Company
and to third parties for infringement of certain provisions of Dutch law or the Articles of Association. Such liability
may be joint and several. In certain circumstances, they may also incur other specific civil and criminal liabilities.
Furthermore, the Articles of Association provide that the Company shall indemnify each current orformer Director in any anticipated or pending action, suit, proceeding or investigation for any claim against that
Director that such Director may derive from exercising his or her respective duties as a Director, for any and all:

costs and expenses, including but not limited to substantiated attorneys’ fees, reasonably
incurred in relation to that Director’s defences in the relevant action, suit, proceeding orinvestigation or a settlement thereof;liabilities, losses, damages, fines, penalties and other claims and/or financial effects ofjudgements against that Director, excluding any reputational damages and (other) immaterial
damages; andpayments by that Director and/or any other financial effects resulting from a settlement of suchaction, suit, proceeding or investigation, excluding any reputational damages and (other)immaterial damages, subject to prior written approval of such settlement by the Company (suchapproval not to be unreasonably withheld),provided he or she acted in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the Company or out of his or her mandate, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Any indemnification by the Company shall be made only upon a determination by the Board that theindemnification of the Director is proper under the circumstances because he or she had met the applicablestandard of conduct set forth above.
A Director, current or former, shall not be entitled to any indemnification by the Company if and to theextent:a competent court, a judicial tribunal or, in case of an arbitration, an arbitrator or arbitral panel
has established by final judgement that is not open to challenge or appeal, that the acts oromissions of the current or former Director can be considered intentional, wilfully reckless orseriously culpable, unless this would in the given circumstances be unacceptable according to
the standards of reasonableness and fairness;the costs or the decrease in assets of the current or former Director are/is covered by an insurance
and the insurer started payment of the costs or the decrease in assets; or

the Company and/or a company in the Group brought the procedure in question up before therelevant court, judicial tribunal or, in case of an arbitration, arbitrator or arbitral panel,-134-

in which event he or she shall immediately repay any amount paid to him or her (in advance, as the casemay be) by the Company.
Executive Directors, Non-Executive Directors and certain other members of the Company’s senior
management, to the extent they carry out responsibilities of the Board, are insured under a director’s and officer’s
liability insurance policy taken out by the Company against damages resulting from their conduct when acting intheir capacities as Directors or officers with coverage and terms customary for a publicly listed company of thesize of the Company.
12.10

Shareholders’ Agreement

The Restructuring Shareholders, the Pershing Entities, the Bolloré Entities and the Company are parties
to a shareholders’ agreement dated February 26, 2021, as amended on June 24, 2021 (the Shareholders
Agreement). The Shareholders Agreement contains inter alia arrangements between the Restructuring
Shareholders, the Pershing Entities, the Bolloré Entities and the Company regarding corporate governance, sharetransfer restrictions, pre-emptive rights and drag along- and tag along rights. The Shareholders Agreement isgoverned by Dutch law and will, except for certain provisions in relation to, inter alia, registration rights,
automatically terminate upon the occurrence of the Admission. Under the surviving provisions of the Shareholders
Agreement with respect to registration rights, the relevant parties are entitled to customary United States demandand shelf registration rights (where a shareholder can demand the Company to file a registration statement) and‘piggyback’ registration rights (where a shareholder is granted the right to register its unregistered stock to theextent that a registration is initiated by the Company) if the Company is registered under the relevant US securities
laws and the reasonably equivalent or analogous rights under the applicable law of the jurisdiction in which theCompany is listed. In connection with these rights, the Company is obliged to prepare and file a registration
statement (or the equivalent document under the law of the jurisdiction where the Company is listed), will bear
the expense of such preparation and filing (other than a selling shareholder’s selling expenses) and will indemnify
the selling shareholders for material misstatements or omissions in the registration statement (or equivalent
document). The registration rights will continue for five years from the date of Admission or the earlier date on
which, in the opinion of counsel, the share subject to the agreement may then be sold without registration in any
90-day period.
12.11

Relationship Agreement

On June 10, 2021, Compagnie de l’Odet and the Restructuring Shareholders entered into an agreement
relating to the governance of the Company, as amended on July 31, 2021 (the Governance Agreement), by virtueof which the Tencent-led Consortium, inter alia, approved the listing of the Company on Euronext Amsterdam(i.e. the Admission), subject to certain conditions set forth in the Governance Agreement.
On September 8, 2021, the Bolloré Entities and the Restructuring Shareholders entered into theRelationship Agreement as further described below, which superseded the Governance Agreement as per thatsame date, provided that certain provisions of the Governance Agreement regarding certain pre-Admission
resolutions will cease to be applicable at the date of the Admission. The Company is not a Party to the Relationship
Agreement, but has co-signed the Relationship Agreement for agreement and acknowledgement of certain
provisions, including those regarding the orderly sale of block trades of 5% or more, fully marketed offerings of
5% or more (see “Orderly market arrangements” below) and the Dividend Policy.
To give effect to the arrangements as reflected in the Relationship Agreement, Compagnie de l’Odet andCompagnie de Cornouaille became direct shareholders of the Company shortly prior to the Admission throughthe transfer of 2 Shares from Vivendi to Compagnie de l’Odet and 98 Shares from Vivendi to Compagnie deCornouaille, against payment of the fair market value as determined between Vivendi, Compagnie de l’Odet andCompagnie de Cornouaille.
Board composition and Dividend Policy
Two Non-Executive Directors have been appointed at the designation of the Tencent-led Consortium.
Under the Relationship Agreement, the Tencent-led Consortium has the right to maintain up to two Non-Executive
Directors on the Board until the annual General Meeting to be held in 2024, subject to it holding a certain minimum
interest. Moreover, the Bolloré Entities and the Restructuring Shareholders (and, if applicable, their specified
transferees that have executed an adherence letter to become a Party to the Relationship Agreement, together theParties) have agreed to vote in favor of the appointment of any individual designated by the Tencent-led
Consortium in case one of the Non-Executive Directors appointed at the designation of the Tencent-led
Consortium resigns, is otherwise dismissed or no longer serves as Non-Executive Director of the Company during-135-its two-year mandate period starting as from the Admission and ending with the annual General Meeting to beheld in 2024 and provided that the Tencent-led Consortium and their specified transferees collectively own atleast 181,324,116 Shares (as adjusted appropriately to reflect any subdivision, combination, consolidation, reverse
share split, reclassification of Shares and similar events of the share capital of the Company or any dividend or
distribution in Shares that may have occurred after the date of the Relationship Agreement, the Threshold Stake),
all in accordance with the terms of the Relationship Agreement. Should at any time during the two-year mandate
period ending with the annual General Meeting to be held in 2024, (i) the Tencent-led Consortium and their
specified transferees collectively own in the aggregate less than the Threshold Stake, but still 50% or more of theThreshold Stake, the Tencent-led Consortium shall procure that one of the Non-Executive Directors appointed at
the designation of the Tencent-led Consortium resigns and (ii) the Tencent-led Consortium and their specified
transferees collectively own in the aggregate less than 50% of the Threshold Stake, the Tencent-led Consortium
shall procure that all of the Non-Executive Directors appointed at the designation of the Tencent-led Consortium
resign, in each case effective within two days following such event. For the avoidance of doubt, any subsequentappointment of a Non-Executive Director designated by the Tencent-led Consortium during the two-year mandatereferred to above shall be for the period until the General Meeting to be held in 2024, unless otherwise agreed inwriting between the Parties.
Furthermore, the Parties have agreed upon the Dividend Policy as set out in Section 5 (Dividend Policy)
and to do such that is necessary in order to comply with the Dividend Policy as set out in the Relationship
Agreement. The Parties have agreed to undertake to vote with all the Shares they own at the time of such vote,following the Admission, in favor of all distribution resolutions complying with the Dividend Policy and against
any other dividend distribution proposal and agree that, to the extent required to give effect to the Dividend Policy,
subject to applicable law, each of them shall use their rights as Shareholder to put a distribution on the agenda of
the General Meeting that complies with the Dividend Policy and to vote in favor of such distribution. The
Company signed for acknowledgement and agreement with the Dividend Policy as set out in the Relationship
Agreement.
Consultation
For the purposes of forming and exercising, to the extent possible, a common view and vote on the itemson the agenda of any General Meeting in connection with the subjects included in and obligations of the Parties
under the Relationship Agreement in relation to the Dividend Policy and maintaining two Non-Executive
Directors appointed at the designation of the Tencent-led Consortium, the Parties will, as from the Admission,
consult with each other prior to each General Meeting.
Acting in concert
Each of the Bolloré Entities and the Restructuring Shareholders has acknowledged and agreed that theDutch public offer rules as laid down in the DFSA shall become applicable to the Company and its shareholders
as of the Admission. As the Bolloré Entities and the Restructuring Shareholders will continue to have a combined
voting interest in the Company of more than 30% (prior to and) at the time of the Admission, and the Bolloré
Entities and the Restructuring Shareholders have made the aforementioned agreements set out in the Relationship
Agreement, the Restructuring Shareholders and the Bolloré Entities have acknowledged and agreed that they will,
as concert parties (in overleg handelende personen) (each a Concert Party and together a Concert), be deemed tojointly have a significant influence (overwegende zeggenschap, Significant Influence) over the Company
exclusively within the meaning of article 1:1 DFSA as per the time of the Admission. On this basis, the Bolloré
Entities and the Restructuring Shareholders, as well as their ultimate controlling persons, benefit from theexemption from the Dutch mandatory offer requirement as laid down in article 5:71 sub 1(i) of the DFSA.
Each of the Parties shall notify the other Parties promptly if a third party obtains an interest or positionin such Party (whether directly or indirectly) which allows this third party to exercise control over how such Party
votes on its Shares.
For as long as the Parties are Concert Parties, none of the Parties shall and each Party shall procure thatnone of its direct or indirect shareholders, members or partners shall, do anything that creates a requirement for
any of the Parties to jointly or individually make a public offer (openbaar bod) for any equity securities in the
Company in accordance with the Dutch mandatory takeover rules or otherwise (the Mandatory Offer Prevention
Obligation).
In addition, for as long as the Parties are Concert Parties, each Party shall, upon the reasonable written
request of another Party (provided that such requesting Party has not breached the Mandatory Offer Prevention-136-

Obligation or any other provision of the Relationship Agreement), provide reasonable assistance to such
requesting Party in legal proceedings initiated by a third party against such requesting Party alleging that such
requesting Party is required to make a public offer for all Shares in accordance with the Dutch mandatory takeoverrules.
Orderly market arrangements
Each of the Parties may freely dispose of its Shares, in whole or in part, in the open market or through a
private sale or otherwise. Each of the Parties shall use reasonable commercial efforts to conduct any disposal of
Shares in an orderly market manner.
Upon written request by any of the Parties, observing a reasonable notice period and subject to applicablelaw, the Company will provide reasonable cooperation and assistance in connection with an offering of 5% ormore of all Shares by one or more Parties which entails the Company’s involvement in the form of a management
road show and/or the preparation of a prospectus or offering memorandum (a fully marketed offering), as further
set out in the Relationship Agreement. Such cooperation is limited to one fully marketed offering per 12-month
period, provided that if for whatever reason any of the Parties elects not to participate in such fully marketed
offering for which any other Party requested the Company’s cooperation in a certain 12-month period, such nonparticipating Party shall be entitled to request the Company, in the same 12-month period as the first request was
made, to provide cooperation with a second fully marketed offering in such 12-month period.
The Company shall also, upon written request by any of the Parties, observing a reasonable notice period
and subject to applicable law, cooperate with the Parties to optimize any sale of a block of Shares of 5% or moreof all Shares by such Party other than by way of a fully marketed offering as described above, including by
providing reasonable access to management and an opportunity to perform a limited due diligence investigation
by or on behalf of (a) a bookrunner or coordinator, (b) a reputable investment bank engaged to assist in such saleor (c) a bona fide, creditworthy potential purchaser of such Shares.
Information sharing
For as long as any of the Parties, directly or indirectly, holds at least 5% of all Shares, the Company shall,to the extent permitted by applicable law and upon timely request of such Party, share with such Party all financial
and other information necessary in order for such Party to (i) complete any tax return, compilation or filing as
required by applicable law or (ii) satisfy ongoing financial, audit or other reporting as required by applicable law.
Each of the Parties shall observe appropriate confidentiality, as further set out in the Relationship Agreement.
Termination
Except for certain specific continuing provisions, the Relationship Agreement shall terminate
immediately and be of no force and effect upon the earliest to occur of:(a)if the Transaction is consummated: the earlier of (i) the fifth anniversary of the first day of theAdmission or (ii) the date at which the Tencent-led Consortium and its specified transferees
collectively own less than 50% of the Threshold Stake; or(b)prior to the consummation of the Transaction: the earlier of (i) December 31, 2021 or (ii) a
public announcement is made by Vivendi to abandon the Transaction; or(c)mutual agreement of all Parties.

The Tencent-led Consortium may by written notice terminate immediately the relevant provisions of theRelationship Agreement in connection with the aforementioned subjects in relation to the Dividend Policy,
maintaining two Non-Executive Directors appointed at the designation of the Tencent-led Consortium, theconsultation prior to each General Meeting and acting in concert in case the Tencent-led Consortium determinesin good faith that a breach of the Mandatory Offer Prevention Obligation by any Party other than the Tencent-led
Consortium or any of its specified transferees has occurred or is imminent to occur, without prejudice to rights
and obligations accrued and liability for breaches having occurred prior to such termination.
Vivendi or any of the Bolloré Entities may by written notice terminate immediately the relevant
provisions of the Relationship Agreement in connection with the aforementioned subjects in relation to the
Dividend Policy, maintaining two Non-Executive Directors appointed at the designation of the Tencent-led
Consortium, the consultation prior to each General Meeting and acting in concert in case such party determines-137-

in good faith that a breach of the Mandatory Offer Prevention Obligation by any party of the Tencent-led
Consortium or any of their specified transferees has occurred or is imminent to occur, without prejudice to rights
and obligations accrued and liability for breaches having occurred prior to such termination.
Governing law
The Relationship Agreement is governed by Dutch law.
12.12

Conflicts of Interest and Related Party Transactions

In accordance with Dutch law, an Executive Director or Non-Executive Director shall not participate inany discussions and decision-making process if he or she has a direct or indirect personal interest conflicting with
the interests of the Company (or in the event of being involved in a related party transaction within the meaningof Section 2:169 paragraph 4 Dutch Civil Code). If there is such personal conflict of interest in respect of all
Directors (or in the event all Directors are involved in a related party transaction within the meaning of Section
2:169 paragraph 4 Dutch Civil Code), the decision shall nevertheless be taken by the Board.
Pursuant to the Board Rules, a Director having a conflict of interest shall immediately report any(potential) direct or indirect personal interest to the Chairman of the Board (and, in case of an Executive Director,
also to the other Directors) and shall provide all relevant information, including information concerning his or her
spouse, registered partner or other partner, foster child and relatives by blood or marriage up to the second degree
as defined under Dutch law. In the event that the Chairman of the Board has a (potential) conflict of interest, theChairman of the Board shall report such (potential) conflict of interest to the Vice- Chairman of the Board.
According to Dutch law, if a Director does not comply with the provisions on conflicts of interest, theresolution concerned is subject to nullification (vernietigbaar) and such Director may be held liable by theCompany. As a general rule, the existence of a (potential) conflict of interest does not affect the authority torepresent the Company as described under Section 12.3.1 (Powers, Responsibility and Function). Furthermore, asa general rule, agreements and transactions entered into by a company cannot be annulled on the grounds that adecision of its board of directors was adopted with the participation of conflicted member(s) of the board of
directors. However, under certain circumstances, a company may annul such an agreement or transaction if thecounterparty misused the relevant conflict of interest.
Pursuant to the Board Rules, a Director shall in any event be deemed to have a conflict of interest, if(a)he/she has a personal financial interest in a company with which the Company intends to enter
into a transaction;(b)he/she has a family law relationship (familierechtelijke verhouding) with a management board
member of a company with which the Company intends to enter into a transaction;(c)he/she is a member of the management or supervisory board of, or holds similar office with, acompany with which the Company intends to enter into a transaction;(d)under applicable law, including the rules of any exchange on which Shares may be listed, suchconflict of interest exists or is deemed to exist; or(e)

the Board has ruled that such conflict of interest exists or is deemed to exist, without the Director
concerned being present.

Dutch law stipulates that material transactions with related parties that are (a) not entered into in theordinary course of business of the Company or (b) that are not concluded on normal market terms, require approvalof the Board. Prior to Admission, the Board shall establish an internal procedure to periodically assess whether
transactions are concluded in the ordinary course of business and on normal market terms. Directors that are
involved in the related party transaction are prohibited from participating in the deliberations and voting on thematter. If, as a result, no Board resolution can be adopted, the Articles of Association provide that the resolution
can nevertheless be adopted by the Board.
Such material transactions must be made public by the Company at the time the transaction is enteredinto. Transactions with related parties are considered material if (i) information on the transaction qualifies as
inside information under the Market Abuse Regulation ((EU) No. 596/2014) (the Market Abuse Regulation orMAR) and (ii) such transaction is entered into with one or more holders of shares in the Company representing atleast 10% of issued share capital, or a member of the management board or supervisory board of the Company.
-138-

Transactions that are in itself non-material, but which are entered into with the same related party during the samefinancial year, are jointly considered material.
In addition, the Dutch Corporate Governance Code requires that transactions that are of a material
significance to the Company and/or to legal or natural persons who hold at least 10% of the Shares are publishedin the management report of the Board.
The Company should not grant Directors any personal loans, guarantees or the like unless in the normal
course of business and on terms applicable to the personnel as a whole, and after approval of the Non-Executive
Directors. No emission of loans should be granted.
12.13

Potential Conflicts of Interest of Directors and Corporate Executives

12.13.1 Directors
Other than as described below, no Director has a conflict of interest (actual or potential) between his or
her duties to the Company and his or her private interests and/or other duties:(a)as set out at Section 12.14.3 (Arrangements with Ten Thousand Projects), the Group has enteredinto certain agreements with Ten Thousand Projects or affiliates of Ten Thousand Projects,
which was founded by Elliot Grainge, the son of Sir Lucian Grainge. While these matters could
potentially result in a conflict of interests for Sir Lucian, (for example where he might
potentially be less inclined to opine in a positive manner on a decision which could have apositive impact on UMG but a negative impact on Ten Thousand Projects given his familial
relationship with Elliot Grainge), this relationship has been disclosed and appropriately
addressed in accordance with the Group’s policy on conflicts of interests with adequate
safeguards put in place to address any potential conflict of interest; and(b)James Mitchell and Manning Doherty (who were nominated for appointment as Directors byConcerto and Scherzo, which collectively hold an interest of more than 10% in the Company),and each of whom is therefore considered not independent for the purposes of the Dutch
Governance Code. Since each of James Mitchell and Manning Doherty has been designated byConcerto and Scherzo, and the interests of the Tencent-led Consortium may not be aligned with
the interests of the Company, a conflict of interest might arise. For example, a potential conflictof interest between the Company and each of James Mitchell and Manning Doherty could arise
where a decision that aims to contribute to the long-term and sustainable success of theCompany would impact the (short-term) share price of the Shares and thus the shareholding of
the Tencent-led Consortium or James Mitchell and Manning Doherty may be less inclined toagree or express themselves in a positive manner in relation to a decision which could have anegative impact on the Tencent-led Consortium when compared to the other, independent, NonExecutive Directors that are not affiliated with the Tencent-led Consortium.

The Board does not expect that the circumstances described above will cause any of the Directors to havea conflict with the duties they owe to the Company. However, the Board Rules include arrangements to ensurethat the Board will in each relevant situation handle and decide on any (potential) conflict of interest.
12.13.2 Corporate Executives
Other than as described below, none of the Corporate Executives have a conflict of interest (actual or
potential) between his or her duties to the Company and his or her private interests and/or other duties:(a)on September 27, 2017, UMPG entered into a worldwide administration agreement with Julian
Swirsky, the son of Jody Gerson, covering certain musical compositions written by Julian
Swirsky prior to the commencement of this worldwide administration agreement and songs
delivered during the term of the agreement. Julian Swirsky is also employed as a Senior Vice
President of A&R for Republic Records. In addition, Luke Swirsky, the son of Jody Gerson,
has been an independent contractor to Republic Records since 2020. While these matters could
potentially result in a conflict of interests for Jody Gerson (for example where she might
potentially be less inclined to opine in a positive manner on decision which could have a positive
impact on UMG but a negative impact on Julian Swirsky and/or Luke Swirsky given her familial
relationship with each of them), each of these relationships have been disclosed andappropriately addressed in accordance with the Group’s policy on conflicts of interests withadequate safeguards put in place to address any potential conflict of interest.
-139-12.14

Related Party Transactions and Agreements

12.14.1 Related Party Transaction Policy
The Board shall draw up a related party transaction policy in accordance with Dutch law, for the purposeof providing a procedure that prevents related parties from taking advantage of their position and provide adequate
protection for the interests of the Company and its stakeholders. A Director shall not participate in the discussions
and/or decision-making process on a subject or transaction in the event of being involved in a related party
transaction within the meaning of Section 2:169 paragraph 4 Dutch Civil Code. The related party transaction
policy provides procedures for members of the Board to notify a potential related party transaction. Potential
related party transactions shall be subject to review by the Board. The related party transaction policy stipulates
when a transaction qualifies as a related party transaction. No such related party transactions shall be undertaken
without the approval of the Board.
In the ordinary course of its business, from time to time, members of the Group enter into agreementswith other companies within the Group relating to the rendering of intra-group services. Similarly, while Group
formed part of the Vivendi Group, certain agreements between members of the Group and members of VivendiGroup were entered into. These agreements are negotiated and executed on an arm’s length basis and on the basisthat the terms of these transactions are comparable to those contracted with unrelated third-party suppliers andservice providers. Details of related party transactions entered into by members of the Group during the period
covered by the financial information included in this Prospectus and up to the date of this Prospectus include thosedescribed in Note 20 to the Combined Financial Statements and Note 13 to the Interim Financial Statements. In
addition, the Group has participated in transactions with other related parties which are not included in Note 20
to the Combined Financial Statements and Note 13 to the Interim Financial Statements, including its shareholders,
as described below:
12.14.2 Agreements with Vivendi in relation to the Distribution and separation of UMG from Vivendi
See Section 16.5 (Material Contracts) for details in relation to the Transition and Services Agreement.
As noted in Section 12.11 (Relationship Agreement), the Company has signed the Relationship Agreement toacknowledge certain mattes set out therein. Further details in relation to the Relationship Agreement are set out
in Section 12.11 (Relationship Agreement). Additionally, see Section 8.9.10 (Facilities Agreement and repaymentof Vivendi Loan Agreements) for further details in relation to the repayment of the Vivendi Loan Agreements.
12.14.3 Arrangements with Ten Thousand Projects
UMG has entered into a number of arrangements with Ten Thousand Projects LLC (Ten Thousand
Projects), or affiliates of Ten Thousand Projects, which was founded by Elliot Grainge, the son of Sir Lucian
Grainge. These arrangements include:on October 1, 2019, UMPG entered into an administration agreement with Ten Thousand Music
Publishing, LLC (Ten Thousand Publishing) covering all musical compositions written bysongwriters signed by Ten Thousand Publishing and/or its affiliates. UMPG’s administrationrights continue during the term of this agreement, which continues until the later of September
30, 2022 or the end of the quarter in which Ten Thousand Publishing’s royalty account hasrecouped all advances and costs. The total firm advance under this agreement is US$1,000,000
with a signing fund of up to US$1,500,000 per year for the first four contract years. Additionally,
UMPG and Ten Thousand Publishing entered into a separate co-publishing agreement, effective
as of October 1, 2019, covering those songs that are subject to an exclusive songwriter/copublishing agreement between UMPG, Ten Thousand Publishing and Iann Dior. There are no
advance payments under this agreement.

on July 3, 2019, Capitol Music Group (a division of UMG Recordings Inc.) (CMG) and Ten
Thousand Projects, entered into an assignment and assumption agreement in terms of which
CMG assigned the rights, title and interest over certain audio and audio-visual recordings by
the artist, Gnar, that are owned by CMG to Ten Thousand Projects. In exchange for theassignment to Ten Thousand Projects, CMG has the right to recoup Gnar’s unrecouped balancethat CMG was carrying in the amount of US$564,056.

on October 27, 2016, Caroline Records (a division of UMG Recordings Inc.) (Caroline) and
Ten Thousand Projects (then named Strainge Entertainment LLC) entered into a distributionagreement, which distribution agreement has been amended and restated a number of times and-140-most recently on July 3, 2019, in terms of which Caroline has obtained the exclusive right todistribute certain audio and audio-visual recordings of Ten Thousand Projects (the Ten
Thousand Projects Distribution Agreement) globally. The Ten Thousand Projects Distribution
Agreement is effective until March 31, 2022, subject to earlier termination in accordance with
its terms or an extended term in relation to specific recordings as provided for in certain
circumstances. Under the Ten Thousand Projects Distribution Agreement, Caroline is required
to pay advances to Ten Thousand Records for costs incurred in connection with its A&R,
marketing and promotion and overheads.
Pursuant to the arrangements with both Ten Thousand Projects and its affiliates, UMG received net
revenues of approximately: (i) US$ 5,023,000 for the six-month period ending June 30, 2021; (ii) US$ 8,975,000
for the year ended December 31, 2020; (iii) US$ 6,683,000 for the year ended December 31, 2019; and (iv) US$
9,650,000 for the year ended December 31, 2018. As of June 30, 2021, Ten Thousand Projects has yet to recoup
an outstanding balance of US$ (1,128,000). UMG had outstanding balances of earnings payable to Ten Thousand
Projects of: (i) US$ 5,557,000 as at December 31, 2020; (ii) US$ 1,198,000 as at December 31, 2019; and (iii)
US$ 3,862,000 as at December 31, 2018.
12.14.4 Executive management compensation
In addition to the disclosure set out at Note 20.1 to the Combined Financial Statements, the aggregatecompensation for the executive managers of the Company for the six month period ending June 30, 2021 was asfollows:(in millions of euros)
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Executive management compensation

2021
90.3
1.2
0.4
91.9

6 months ended June 30
2020
70.1
0.9
1.6
72.6

12.14.5 Reorganisation of UMG perimeter
Prior to completion of the Tencent-led Consortium’s acquisition of its initial stake in UMG, an internalreorganisation of UMG was undertaken, starting in late 2019 and completing in March 2020 in order to properlyalign the perimeter of UMG whereby, amongst other things, subsidiaries directly owned by Vivendi (through
UMG S.A.S) were sold to the Group after which UMG S.A.S was dissolved with universal transmission of its
property to Vivendi. In addition to a number of internal transfers of entities and shares within the Group, thisreorganisation included, amongst other things, the following steps:

UMG S.A.S sold all of the shares in UMGT S.A.S to UIM for a cash consideration of c. €388.1
million on February 3, 2020, in connection with which UIM borrowed an amount of c. €388.1
million from Vivendi to satisfy the cash consideration of the aforementioned purchase. On
February 3, 2020, UMG S.A.S lent an amount of c. €388.1 million to Vivendi under an existing
cash pooling agreement;

on February 6, 2020 Vivendi lent an amount of c. €857.5 million to UIM, to be used for the
repayment of certain existing loans owed by the Group to UMG S.A.S and Vivendi;



UMG S.A.S sold all of the shares in EMI Group Worldwide Holdings Ltd to UIM for a cash
consideration of c. €1,119.5 million on February 13, 2020, in connection with which UIM
borrowed an amount of c. €1,119.5 million from Vivendi on February 13, 2020 to satisfy the
cash consideration of the aforementioned purchase. On February 13, 2020, UMG S.A.S lent anamount of c. €1,119.5 million to Vivendi under an existing cash pooling agreement;on March 19, 2020 UMG S.A.S was merged into Vivendi, whereby UMG S.A.S was dissolved
without liquidation into Vivendi and all of the assets and liabilities of UMG S.A.S weretransferred to Vivendi; and

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

on March 26, 2020 Universal Music B.V. was merged into UIM.

The aforementioned arrangements were negotiated and executed on an arm’s length basis and on thebasis that the terms of these transactions are comparable to those contracted with unrelated third-party parties.
Following draw-down under the Facilities Agreement, the outstanding balances of the aforementioned loans
owing from the Group to Vivendi were repaid on July 7, 2021 and therefore ceased to exist. The Group no longer
owes any amounts to Vivendi or the Vivendi Group pursuant to any shareholder loans.
12.15

Employees

As of December 31, 2020, UMG employed approximately 9,183 persons worldwide, including full- andpart-time employees. As of such date, approximately 79 employees of UMG in the United States were subject toa collective bargaining agreement, although certain employees in its non-domestic companies were covered bynational labor agreements.
As of June 30, 2021, UMG headcount was 9,370. The following table details the average numbers of
UMG’s employees by region for June 30, 2021, and 2020, and the years ended December 31, 2020, 2019 and2018.
Headcount by
RegionAs at June 30

As at December 31

2021

2021
(%)

2020

2020
(%)

2020

2020
(%)

2019

2019
(%)

2018

2018
(%)

130

1%

105

1%

117

1%

96

221%

66

1%

Asia-Pacific ......................

1,438

15%

1,362

15%

1,408

15%

1,293

15%

1,212

15%

Europe ..............................

3,910

42%

3,821

42%

3,828

42%

3,796

43%

3,632

43%

North America ..................

3,502

38%

3,432

38%

3,448

38%

3,308

37%

3,052

37%

South and Central America..........................................
Total .................................

390

4%

378

4%

382

4%

372

4%

357

4%

9,370

100%

9,098

100%

9,183

100%

8,865

100%

8,319

100%

Africa ................................

The following table details the average numbers of UMG’s headcount by function for June 30, 2021, and2020, and the years ended December 31, 2020, 2019 and 2018.
Employees by function
As at June 30

As at December 31

2021

2020

2020

2019

2018

Music Recording ........................................................................
Music publishing ........................................................................
Merchandising ...........................................................................
Other...........................................................................................

8,256
871
243
0

8,008
849
241
0

8,101
842
240
0

7,817
823
221
4

7,346
760
206
7

Total...........................................................................................

9,370

9,098

9,183

8,865

8,319

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13. DESCRIPTION OF SHARE CAPITAL AND CORPORATE GOVERNANCE
Set out below is an overview of certain relevant information concerning the Company’s share capital andof certain significant provisions of Dutch law and the Articles of Association. It is based on relevant provisionsof Dutch law as in effect on the date of this Prospectus and the Articles of Association as these will be in effectultimately on Admission.
This overview does not purport to give a complete overview and should be read in conjunction with, andis qualified in its entirety by reference to the relevant provisions of Dutch law as in effect on the date of thisProspectus, the Articles of Association and the Board Rules, in each case as they will be in effect ultimately on
Admission. The Articles of Association in the governing Dutch language (and an unofficial English translation)
as well as the Board Rules in the English language are available on the Company’s website(https://universalmusic.com/Universal_Music_Group_N.V._-_Articles_of_Association). See also Section 12.1
(General).
The Company is a private company with limited liability (besloten vennootschap met beperkte
aansprakelijkheid) with the name Universal Music Group B.V. The commercial name is “Universal Music”. As
part of the terms of the Admission and in accordance with applicable law, the Company has undertaken to convert
to a public company (naamloze vennootschap) prior to the Admission. The Company’s statutory seat is in
Hilversum, the Netherlands (and will, upon the conversion, be in Amsterdam, the Netherlands). The telephone
number of the Company is +31 (0) 88 62 61 500. The registered office address of the Company is ‘sGravelandseweg 80, 1217 EW Hilversum, the Netherlands. The Company is registered with the trade register of
the Chamber of Commerce of the Netherlands (Kamer van Koophandel) under number 81106661. Its legal entity
identifier is 724500GJBUL3D9TW9Y18.
13.1

Corporate Objects
The Company’s corporate objectives are included in article 4 of the Articles of Association.
The objects of the Company are:(a)to incorporate, to participate in any way whatsoever in, to manage, to supervise businesses andcompanies;(b)

to finance businesses and companies;(c)to borrow, to lend and to raise funds, including the issue of bonds, promissory notes or othersecurities or evidence of indebtedness as well as to enter into agreements in connection withaforementioned activities;(d)to render advice and services to businesses and companies with which the Company forms agroup and to third parties;(e)to grant guarantees, to bind the Company and to pledge its assets for obligations of theCompany, its group companies and/or third parties;(f)to acquire alienate, manage and exploit registered property and items of property in general;(g)to trade in currencies, securities and items of property in general;(h)to develop and trade in patents, trademarks, licenses, know-how and other intellectual andindustrial property rights; and(i)to perform any and all activities of an industrial, financial or commercial nature,and to do all that is connected therewith or may be conducive thereto, all to be interpreted in the broadest
sense.
13.2

Authorized, Issued and Outstanding Share Capital
The Shares are subject to and have been created under Dutch law.

Under Dutch law, a company’s authorized share capital sets out the maximum amount and number ofshares that it may issue without amending its articles of association.

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The Articles of Association provide for an authorized share capital in an amount of €27,000,000,000(twenty-seven billion euro), divided into 2,700,000,000 (two billion seven hundred million) Shares with a nominal
value of €10.00 per Share.
As at the date of this Prospectus, the Company’s issued share capital is fully paid up and held by the
Existing Shareholders. The table below shows the expected number of issued and outstanding Shares immediately
prior to the Distribution, which number shall not be altered by the Distribution.
Number of Shares immediately prior to the Distribution
1,813,241,160

SharesAt the date of this Prospectus, the Company holds no Shares as treasury shares.
Following the Restructure, the Company had an issued share capital of 1,847,873,774 ordinary sharesand one priority share, which issued share capital was reduced to 1,813,241,159 ordinary shares and one priority
share on June 24, 2021. As noted above and in accordance with the Articles of Association, the issued share capitalof the Company will be 1,813,241,160 Shares immediately prior to the Distribution, which number shall not bealtered by the Distribution. For the avoidance of doubt, the issued share capital of the Company immediately prior
to the Distribution will only be constituted of Shares, with no kind of priority share.
13.3

Major Shareholders

The following table sets forth the shareholders of the Company which, to the Company’s knowledge as of
September 8, 2021 and based on the number of shares and voting rights comprising the share capital of Vivendi
published on September 1, 2021, will directly or indirectly have a notifiable interest in the Company’s capital andvoting rights within the meaning of the DFSA (i) immediately prior to the Distribution and (ii) immediately
following the Distribution.
Shares to be owned immediately
Shares to be owned immediately
prior to the Distribution
following the Distribution
Vivendi(1) ...........................
Concerto(2) .........................
Scherzo(2) ...........................
Pershing Entities jointly(3) .
Bolloré Entities jointly(4)(5)Société Générale(6)Amount1,269,268,713
181,324,116
181,324,116
181,324,115
100
0

%
70%
10%
10%
10%
0%
0%

Amountc. 183,582,493
181,324,116
181,324,116
181,324,115
326,507,033
59,556,315%
c.10.12% (7)
10%
10%
10%
18.01%
3.28%(1) Vivendi’s shares have been listed on Euronext Paris since 1995. No shareholder is controlling Vivendi within the meaning of article

(2)
(3)
(4)

(5)

(6)

(7)

L.233-3 of the French commercial code. Vivendi’s major shareholder is Bolloré Group (through the Bolloré Entities, Vincent Bolloré
and Cyrille Bolloré), representing jointly 29.46% of the share capital, 29.73% of the theoretical voting rights and 30.34% of theexercisable voting rights of Vivendi as of August 31, 2021, representing an indirect interest of 20.62% in the Shares of the Company.
Concerto LLC indirectly controls Concerto and Scherzo.
Pershing Entities refers collectively to entities advised by, or affiliated with, Pershing Square Capital Management, L.P. William A.
Ackman controls Pershing Square Capital Management, L.P.
Bolloré Entities collectively refers to Compagnie de Cornouaille and Compagnie de l’Odet. For more information, see Section 12.11.
Compagnie de Cornouaille is controlled by Compagnie de l’Odet, itself controlled by Sofibol, which is controlled at the highest level by
Bolloré Participations SE. Bolloré Participations SE is controlled by Vincent Bolloré, who holds, directly and indirectly 92.55% of theshare capital, 72.20% of the theoretical voting rights and 93.60% of the exercisable voting rights of Compagnie de l’Odet.
This percentage only reflects the shares held by the Bolloré Entities and does not take into account the Vivendi shares directly held by
M. Vincent Bolloré and M. Cyrille Bolloré, which represent together less than 0.01% of the total share capital and voting rights ofVivendi.
On August 24, 2021, the French Autorité des Marchés Financiers reported that, on August 19, 2021, Société Générale had crossed thethreshold of 5% of the share capital and voting rights of Vivendi. On September 7, 2021, Vivendi was informed by Société Générale
that, on September 2 and September 6, 2021, it had crossed the statutory threshold of 5.5% of the share capital and voting rights ofVivendi and that it held 59,556,315 shares in Vivendi, representing 5.37% of the share capital and 5.21% of the voting rights of Vivendi
as of August 31, 2021, representing an indirect interest of 3.76% in the Shares of the Company .
These figures include an estimate of the number of Shares to be transferred by Vivendi to the relevant Corporate Executives pursuant toan award by Vivendi to a limited number of senior managers of UMG, including certain of the Corporate Executives. The number of
Shares to be transferred to the relevant Corporate Executive will only be determinable closer to the date of listing and may vary depending
upon the expected trading price of the Shares, and the number of shares will be reduced to cover any required local payroll and income
withholding, and market capitalization of the Company. For more information, see Section 12.6.

.

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13.4

History of Share Capital

Other than the Shares issued upon the completion of the Restructure, which are held by the Existing
Shareholders, the Company has not issued any Shares prior to the date of this Prospectus.
13.5

Form and Transfer of Shares

Upon Admission, the Company’s issued share capital will be divided into 1,813,241,160 Shares. All
Shares are in registered form (op naam) and are only available in the form of an entry in the Company’s
shareholders’ register. No certificates (aandeelbewijzen) will be issued. The Shares are subject to the laws of theNetherlands.
On Distribution Date, Euroclear France will credit the Distribution Shares, as the case may be: (i) to theaccounts of the financial intermediaries with respect to the Distribution Shares distributed to beneficiaries holding
Vivendi shares in bearer form, or (ii) to the account of Euroclear France, with respect to the Distribution Shares
distributed to beneficiaries holding Vivendi shares in registered form. The delivery mechanism of the Distribution
Shares is further described in the Distribution Report.
Application has been made for the Shares to be accepted for clearance through the book-entry facilities
of Euroclear France. Euroclear France has its offices at 66 rue de la Victoire 75009 Paris, France.
13.6

The Company’s Shareholders’ Register

Subject to Dutch law and the Articles of Association, the Board must keep a shareholders’ register. The
Company’s shareholders’ register must be regularly updated. The shareholders’ register may be kept in several
copies and in several places.
Each Shareholder’s name, address and further information as required by law or considered appropriateby the Board are recorded in the shareholders’ register. Shareholders shall provide the Board with the necessary
particulars in a timely fashion. Any consequences of not, or incorrectly, notifying such particulars will be theresponsibility of the Shareholder concerned. The preceding sentences shall apply by analogy to holders of a rightof usufruct or right of pledge on one or more Shares, with the exception of a holder of a right of pledge created
without acknowledgement by or service of notice upon the Company.
If a Shareholder so requests, the Board shall provide the Shareholder, free of charge, with written
evidence of the information in the shareholders’ register concerning the Shares registered in the Shareholder’sname. The preceding sentence shall apply by analogy to holders of a right of usufruct or right of pledge on one ormore Shares, with the exception of a holder of a right of pledge created without acknowledgement by or service
of notice upon the Company.
13.7

Issue of Shares and Pre-emptive Rights

The General Meeting is authorized to issue Shares or to grant rights to subscribe for Shares and to restrict
and/or exclude statutory pre-emptive rights in relation to the issuance of Shares or the granting of rights to
subscribe for Shares. The General Meeting may designate the Board competent to issue Shares (or grant rights to
subscribe for Shares, but not to issue Shares to a person exercising a previously granted right to subscribe for
Shares) and to determine the issue price and other conditions of the issue for a specified period not exceeding five
years (which period can be extended from time to time for further periods not exceeding five years). Suchdesignation by the General Meeting must state the number of Shares that may be issued. The General Meetingshall, in addition to the Board, remain authorized to issue Shares if such is specifically stipulated in the resolution
authorizing the Board to issue Shares. A resolution of the General Meeting to issue shares (or grant rights to
subscribe for Shares, but not to issue Shares to a person exercising a previously granted right to subscribe for
Shares) and a resolution to designate the Board thereto can only be adopted at the proposal of the Board. A
resolution of the General Meeting to limit or exclude pre-emptive rights and a resolution to designate the Board
thereto, can only be adopted at the proposal of the Board and shall require a majority of at least two-thirds of thevotes cast if less than half of the issued capital of the Company is represented at the General Meeting. Shares may
not be issued at less than their nominal value and must be fully paid-up upon issue. The designation of the Boardby the General Meeting cannot be withdrawn unless determined otherwise at the time of designation. No resolution
is required for the issue of Shares pursuant to the exercise of a previously granted right to subscribe for Shares.
The Company may not subscribe for its own Shares.
Under Dutch law and the Articles of Association, each Shareholder has a pre-emptive right in proportion
to the aggregate amount of its Shares upon the issue of Shares (or the granting of rights to subscribe for Shares).
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This pre-emptive right does not apply to: (i) Shares issued to employees of the Company or a group company of
the Company as referred to in Section 2:24b Dutch Civil Code, (ii) Shares that are issued against payment otherthan in cash; and (iii) Shares issued to a person exercising a previously granted right to subscribe for Shares.
The pre-emptive rights in respect of newly issued Shares or the granting of rights to subscribe for Shares
may be restricted or excluded by a resolution of the General Meeting. Pre-emptive rights may also be limited or
excluded by a resolution of the Board if the Board has been designated thereto by the General Meeting for a
specified period not exceeding five years (which period can be extended from time to time for further periods notexceeding five years), and the Board has also been designated to issue Shares.
13.8

Acquisition of Own Shares

The Company cannot subscribe for Shares in its own capital. Subject to Dutch law and the Articles of
Association, the Company may acquire fully paid-up Shares either for no consideration or under universal title ofsuccession, or if, (i) its shareholders’ equity less the payment required to make the acquisition, does not fall below
the sum of called-up and paid-in share capital and any reserves to be maintained by Dutch law and/or the Articles
of Association, (ii) the Company and its subsidiaries would thereafter not hold Shares or hold a pledge over Shareswith an aggregate nominal value exceeding 50% of the Company’s issued share capital and (iii) the Board has
been authorized thereto by the General Meeting. Any acquisition by the Company of Shares that are not fully
paid-up shall be null and void.
The General Meeting’s authorisation to the Board to acquire own Shares is valid for a maximum of 18
months. As part of the authorisation, the General Meeting must specify the number of Shares that may be
repurchased, the manner in which the Shares may be acquired and the price range within which the Shares may
be acquired. The authorisation by the General Meeting is not required if the Company repurchases fully paid-up
Shares for the purpose of transferring these Shares to employees of the Company or a company that is a memberof the Group under any applicable equity compensation plan, provided that those Shares are quoted on an official
list of a stock exchange.
In calculating the amount of any distribution on Shares, Shares held by the Company shall be disregarded,
unless such Shares are encumbered with a right of usufruct or right of pledge. For the computation of the profit
distribution, the Shares held by the Company in its own capital shall not be included. The Board is authorized todispose of the Company's own Shares held by it.
Furthermore, no voting rights may be exercised for any of the Shares held by the Company or its
subsidiaries unless such Shares are subject to the right of usufruct or to a pledge in favor of a person other thanthe Company or its subsidiaries and the voting rights were vested in the pledgee or usufructuary before theCompany or its subsidiaries acquired such Shares. The Company or its subsidiaries may not exercise voting rights
in respect of Shares for which the Company or its subsidiaries have a right of usufruct or a pledge.
13.9

Transfer of Shares

A transfer of a share in the Company (not being, for the avoidance of doubt, a share held through thesystem of Euroclear France) or a restricted right thereto requires a deed of transfer drawn up for that purpose andthe acknowledgment by the Company of the transfer in writing. Such acknowledgement is not required if theCompany itself is a party to the transfer.
If a share is held in book-entry form, the transfer will be accepted by the intermediary concerned. If aregistered Share is transferred for inclusion in book-entry form, the transfer will be accepted by the central
institute, being Euroclear France.
There are no restrictions on the transferability of the Shares in the Articles of Association or under Dutch
law. However, the offering of Shares to persons located or resident in, or who are citizens of, or who have aregistered address in certain countries, and the transfer of Shares into certain jurisdictions, may be subject tospecific regulations or restrictions.
13.10

Reduction of Share Capital

The General Meeting may, only upon a proposal of the Board, resolve to reduce the issued share capitalby (i) cancelling Shares held by the Company itself or (ii) amending the Articles of Association to reduce thenominal value of the Shares. In either case, this reduction would be subject to provisions of Dutch law and the
Articles of Association. Under Dutch law, a resolution of the General Meeting to reduce the number of Sharesmust designate the Shares to which the resolution applies and must lay down rules for the implementation of the-146-resolution. A resolution to reduce the issued share capital requires a majority of at least two-thirds of the votes
cast, if less than half of the issued capital of the Company is present or represented at the General Meeting.
Pursuant to Dutch law, a reduction of the nominal value of the shares without repayment and without
release from the obligation to pay up the shares must be effectuated proportionally on shares of the same class(unless all shareholders concerned agree to a disproportionate reduction). A resolution that would result in a
reduction of capital requires approval of the meeting of each group of holders of shares of the same class whoserights are prejudiced by the reduction. In addition, a reduction of share capital involves a two-month waiting
period during which creditors have the right to object to a reduction of share capital under specified circumstances.
Certain aspects of taxation of a reduction of share capital are described in Section 15 (Taxation) of this Prospectus.
13.11

Annual Financial Reporting and Interim Financial Reporting

The financial year of the Company coincides with the calendar year. Annually within the statutory period(which is currently four months after the end of the financial year), the Board prepares the annual financial
reporting. Following Admission, the Company must prepare its financial statements in accordance with the Dutch
Financial Supervision Act (Wet op het financieel toezicht) (DFSA) and article 2:361 and article 2:392, paragraph
1 of the Dutch Civil Code, which means either under EU approved IFRS and subject to audit by a Dutch law
accredited auditor. Furthermore, the Board must prepare a board report in accordance with article 2:391 Dutch
Civil Code. The annual financial reporting comprising the financial statements, the responsibility statement, theboard report, and other information required under Dutch law must be made publicly available in the Netherlands
within four months of the end of the relevant accounting period and must simultaneously be filed with the AFM
and be kept publicly available for at least 10 years. When the financial statements have been adopted by theCompany’s annual general meeting, they must be filed with the AFM within five days following adoption.
The financial statements must be accompanied by an independent auditors’ report, a report by the Boardand certain other information required under Dutch law and the Dutch Corporate Governance Code. All Directors
sign the financial statements and if one of them does not so sign the financial statements, the reason for thisomission must be stated. The Board must make the financial statements, the report by the Board and otherinformation required under Dutch law available for inspection by the Shareholders and other persons entitled toattend and address the General Meetings at the offices of the Company from the day of the notice convening theannual General Meeting. The financial statements must be adopted by the General Meeting.
After the proposal to adopt the financial statements has been discussed, a proposal shall be made to theGeneral Meeting, in connection with the financial statements and the statements made regarding them at theGeneral Meeting, to discharge the Directors for their management and supervision in the last financial year.
Within three months after the end of the first six months of each financial year, the Board must prepareinterim financial reporting, including interim financial statements and an interim board report, and make thispublicly available and simultaneously file them with the AFM. The interim financial reporting must remain
publicly available for at least 10 years. If the interim financial statements are audited or reviewed, the independent
auditor’s report or independent auditor’s review report must be made publicly available together with the interim
financial statements. If the interim financial statements are unaudited or unreviewed, the interim board report
should state so.
13.12

Dividend and Other Distributions

13.12.1 General
Distribution of profits shall be made after the adoption of the financial statements from which it appears
that the distribution is allowed. The Company may only make distributions to the extent the Company’s equity
exceeds the sum of its paid-up and called-up part of its issued capital and the reserves which must be maintained
pursuant to the law. Distributions shall be made pro rata to the respective shareholdings. See Section 5 (Dividend
Policy) for a more detailed description regarding dividends. The Board or the General Meeting, at the proposal of
the Board, may resolve to make distributions from the share premium reserve or other distributable reserves
maintained by the Company.
13.12.2 Right to reserve
The Board may determine which part of the profits shall be reserved, with due observance of theCompany’s policy on reserves and dividends. The Company may have a policy on reserves and dividends to be
determined and amended by the Board. The General Meeting may resolve to distribute any part of the profits-147-

remaining after reservation. If the General Meeting does not resolve to distribute these profits in whole or in part,such profits (or any profits remaining after distribution) shall also be reserved.
13.12.3 Interim distribution
Subject to Dutch law and the Articles of Association of the Company, the Board may resolve to make aninterim distribution of profits provided that it appears from an interim statement of assets and liabilities signed by
the Board that the Company’s equity exceeds the sum of its paid up and called up part of its issued capital and thereserves which must be maintained pursuant to the law.
13.12.4 Distribution in kind
The Board, or the General Meeting, at the proposal of the Board, may resolve that a distribution on Sharesshall not be paid in whole or in part in cash but in kind or in the form of Shares (and with due observance of the
Articles of Association), and may determine the conditions under which such option can be given to theshareholders. The General Meeting may only resolve to distribute to the Shareholders a dividend in kind or in theform of Shares at the proposal of the Board.
13.12.5 Profit ranking of the Shares
All of the Shares issued and outstanding on the day following the Distribution Date will rank equally andwill be eligible for any profit or other payment that may be declared on the Shares.
13.12.6 Payment
Payment of any future dividend on Shares in cash will be made in euro or in another currency as
determined by the Board. Any dividends on Shares that are paid to shareholders through Euroclear France will be
automatically credited to the relevant shareholders’ accounts. Payment of dividends on the Shares not held throughEuroclear France will be made directly to the relevant shareholder using the information contained in the
Company’s shareholders’ register and records. There are no restrictions in relation to the payment of dividends
under Dutch law in respect of holders of Shares who are non-residents of the Netherlands. However, see Section
15 (Taxation) for a discussion of certain aspects of taxation of dividends paid on the Shares.
Payments of profit and other payments are announced in a notice by the Company and will be made on
the date determined by the Board. Distributions which have not been claimed upon the expiry of five years andone day after the date when they became payable will be forfeited to the Company and will be carried to thereserves.
13.13

Exchange Controls and other Provisions relating to non-Dutch Shareholders

Under the Dutch law, subject to the 1977 Sanction Act (Sanctiewet 1977) or otherwise by internationalsanctions, there are no exchange control restrictions on investments in, or payments on, Shares (except as to cash
amounts). There are no special restrictions in the Articles of Association or Dutch law that limit the right of
Shareholders who are not citizens or residents of the Netherlands to hold or vote Shares.
13.14

The General Meeting

13.14.1 Annual General Meetings
The annual General Meeting must be held within six months from the end of the preceding financial yearof the Company. Other General Meetings shall be held as often as the Board deems necessary. The purpose of theannual General Meeting is to discuss, amongst other things, the annual report, the adoption of the financial
statements, allocation of profits (including the proposal to distribute dividends), release of the Directors fromliability for their performance of their duties, filling of any vacancies and other proposals brought up for discussion
by the Board.
13.14.2 Extraordinary General Meetings
Extraordinary General Meetings may be held as often as the Board deems such necessary. In addition,
Shareholders representing alone or in aggregate at least 10% of the issued and outstanding share capital of theCompany may request that a General Meeting be convened, the request setting out in detail matters to beconsidered. If no General Meeting has been held within eight weeks of the Shareholder(s) making such request,
that/those Shareholder(s) will be authorized to request in summary proceedings a Dutch district court to convene
a General Meeting. In any event, a General Meeting will be held to discuss any requisite measures within three-148-months of it becoming apparent to the Board that the shareholders’ equity of the Company has decreased to an
amount equal to or lower than one-half of the issued and paid-up part of the capital.
13.14.3 Place of General Meetings
Pursuant to the Articles of Association, General Meetings will be held in Amsterdam, Rotterdam,
Hilversum or Haarlemmermeer (including Schiphol Airport).
13.14.4 Convocation Notice and Agenda
A General Meeting can be convened by the Board by a convening notice, which pursuant to Dutch law
must be given no later than the 42nd day before the date of the General Meeting. Such notice must include thelocation and the time of the meeting, an agenda indicating the items for discussion and any proposals forresolutions, the admission, participation and voting procedure, the record date, the address of the Company’s
website and such other information as may be required by Dutch law. All convocations, announcements,
notifications and communications to Shareholders have to be made in accordance with the relevant provisions of
Dutch law and the convocation and other notices may also occur by means of sending an electronically transmitted
legible and reproducible message to the address of those Shareholders which consented to this method of
convocation.
The agenda for the annual General Meeting must contain certain subjects, including, among other things,
the adoption of the Company’s financial statements, the discussion of any substantial change in the Company’s
corporate governance structure and the allocation of the profit, insofar as this is at the disposal of the General
Meeting. In addition, the agenda shall include such items as have been included therein by the Board or
Shareholders (with due observance of Dutch law as described below). If the agenda of the General Meeting
contains the item of granting discharge to the Executive Directors and Non-Executive Directors concerning theperformance of their duties in the financial year in question, the matter of the discharge shall be mentioned on theagenda as separate items for the Executive Directors and the Non-Executive Directors, respectively.
Under Dutch law, one or more Shareholders representing solely or jointly at least 3% of the Company’s
issued and outstanding share capital in value are entitled to request to include items on the agenda of the General
Meeting. The request (a) must be made in writing motivated and (b) must be received by the Company no later
than the 60th calendar day before the date of the General Meeting. In accordance with the Dutch Corporate
Governance Code, a Shareholder is expected to exercise the right of putting an item on the agenda only after
consulting the Board in that respect. If one or more Shareholders intend to request that an item be put on theagenda that may result in a change in the Company’s strategy, the Board may invoke a response time of a
maximum of 180 days from the moment the Board is informed of the request. No resolutions may be adopted on
items other than those that have been included in the agenda (unless the resolution would be adopted unanimously
during a meeting where the entire issued capital of the Company is present or represented).
On May 1, 2021, a new legislative amendment to the Dutch Civil Code entered into force pursuant towhich the Board may invoke a statutory cooling-off period of maximum 250 days (wettelijke bedenktijd).
For the Company this means that the new rules will apply in case:

Shareholders requesting the Board to have the General Meeting consider proposal for theappointment, suspension or dismissal of one or more Directors, or a proposal for the amendment
of one or more provisions in the Articles of Association relating thereto; orof a public offer for shares in the capital of the Company is announced or made without thebidder and the Company having been reached agreement about the offer; and

only if the Board also considers such the relevant situation to be substantially contrary to theinterests of the Company and its affiliated enterprises.

If the Board would invoke such cooling-off period, this causes the powers of the General Meeting toappoint, suspend or dismiss Directors (and to amend the Articles of Association in this respect) being suspended.
The Board must use the reflection period to obtain all necessary information for a careful determinationof policy it wishes to pursue in the given situation. The Board shall thereby, in any event, consult thoseShareholders that represent at least 3% of the issued capital at the time the cooling-off period is invoked and theworks council. The position of these Shareholders and the works council shall, but only with their approval, be
published on the Company’s website. The Board shall report on the course of events and the policy that has been
-149-pursued since the cooling-off period was invoked. No later than one week after the last day of the cooling-off
period, the Company shall have to publicly disclose the report. The report shall also be discussed at the first
General Meeting after the expiry of the cooling-off period.
The cooling-off period has a maximum term of 250 days, calculated from:the day after the latest date on which Shareholders may request item to be placed on the agendaof the next General Meeting (which is 60 days before the day of the meeting);the day after the day on which the public offer is made; orthe day the court in preliminary relief proceedings has granted authority to Shareholders holding
at least 10% of the issued share capital to convoke a General Meeting.

All Shareholders who solely or jointly hold 3% of the issued share capital, may request the Enterprise
Chamber of the Court of Appeal in Amsterdam (Ondernemingskamer van het Gerechtshof te Amsterdam) (theEnterprise Chamber) to terminate the cooling-off period. The Enterprise Chamber must rule in favor of therequest if the shareholders can demonstrate that:

the Board, in light of the circumstances at hand when the cooling-off period was invoked, could
not reasonably have concluded that the relevant proposal or hostile offer constituted a material
conflict with the interests of our company and its business;

the Board cannot reasonably believe that a continuation of the cooling-off period would
contribute to careful policy-making; orother defensive measures, having the same purpose, nature and scope as the cooling-off period,
have been activated during the cooling-off period and have not since been terminated orsuspended within a reasonable period at the relevant shareholders’ (i.e., no ‘stacking’ ofdefensive measures).

Shareholders who individually or with other Shareholders, hold Shares that represent at least 1% of theissued and outstanding share capital or a market value of at least €250,000, may request the Company todisseminate information that is prepared by them in connection with an agenda item for a General Meeting. The
Company can only refuse disseminating such information, if received less than seven Business Days prior to theGeneral Meeting, if the information gives or could give an incorrect of misleading signal or if, in light of thenature of the information, the Company cannot reasonably be required to disseminate it.
13.14.5 Admission and Registration
Pursuant to the Articles of Association, the General Meeting shall be presided over by the Chairman of
the Board or another Director designated for that purpose by the Board. If the Chairman of the Board is not present
at the meeting and no other Director has been designated by the Board to preside over the General Meeting, theGeneral Meeting itself shall appoint a chairperson. The chairperson will have all powers necessary to ensure theproper and orderly functioning of the General Meeting. Directors may attend a General Meeting. In these General
Meetings, they have an advisory vote. The external auditor of the Company is also authorized to attend the General
Meeting. The chairperson of the General Meeting may decide at his or her discretion to admit other persons to theGeneral Meeting. Minutes of the meetings shall be prepared.
All Shareholders, and each usufructuary and pledgee to whom the right to vote on Shares accrues, areentitled, in person or represented by a proxy authorized in writing, to attend and address the General Meeting andexercise voting rights pro rata to their shareholding. Shareholders may exercise their rights, if they are the holdersof Shares on the record date, which currently is the 28th day before the day of the General Meeting, and they ortheir proxy have notified the Company of their intention to attend the General Meeting in writing at the address
and by the date specified in the notice of the meeting. The convocation notice must then state the record date andthe manner in which the persons entitled to attend the General Meeting may register and exercise their rights.
The Board may decide that persons entitled to attend and vote at General Meetings may cast their voteelectronically or by post in a manner to be decided by the Board. Votes cast in accordance with the previous
sentence rank as equal to votes cast at the General Meeting.

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13.14.6 Voting Rights
Each Share confers the right on the holder to cast one vote at the General Meeting. The voting rights of
the holders of Shares will rank pari passu with each other and with all other Shares. The chairperson of the General
Meeting shall determine the manner of voting and whether voting may take place by acclamation, subject tocertain restrictions under the Articles of Association. Shares in respect of which the law determines that no votes
may be cast shall be disregarded for the purposes of determining the part of the issued share capital that is present
or represented at a General Meeting. Pursuant to the Articles of Association, no votes may be cast at a General
Meeting in respect of Shares which are held by the Company or any subsidiary, nor in respect of Shares for which
the Company or the subsidiary holds the depositary receipts. However, holders of a right of pledge or a right ofusufruct on Shares held by the Company or a subsidiary are not excluded from voting, if the right of pledge or theusufruct was created before the Share belonged to the Company or the subsidiary. The Company or the subsidiary
may not cast a vote in respect of a Share on which it holds a right of pledge or a right of usufruct.
In accordance with Dutch law, the Articles of Association provide that to the extent the law or the Articles
of Association do not require a qualified majority, all resolutions of the General Meeting shall be adopted by asimple majority of the votes cast. Some matters require a qualified majority, if less than half of the issued capitalof the Company is present or represented at the General Meeting.
The determination made by the chairperson of the General Meeting with regard to the results of a vote at
a General Meeting shall be decisive. However, where the accuracy of the chairperson’s determination is contested
immediately after it has been made, a new vote shall take place if the majority of the General Meeting so requires
or, where the original vote did not take place by response to a roll call or in writing, if any party with voting rights
present at the General Meeting so requires.
The Board will keep a record of the resolutions passed at each General Meeting. The record shall beavailable at the offices of the Company for inspection by any person entitled to attend General Meetings and uponrequest a copy of or extract from the record will be provided to such person at no more than the cost price.
13.15

Identity of Shareholders

The Company may request from Euroclear France, admitted institutions, intermediaries, institutions
abroad, and managers of investment institutions, to provide under the conditions provided for by applicable laws
and regulations, the identification of the Shareholders that have an immediate or future right to vote at the General
Meetings as well as the number of Shares held by each of the Shareholders and any restrictions applicable thereto.
Such request may only be made during a period of 60 days up to the day on which the General Meeting will beheld. No information will be given on Shareholders with an interest of less than 0.5% of the issued share capital.
A Shareholder who, individually or together with other Shareholders, holds an interest of at least 10% of theissued share capital may request the Company to establish the identity of the Shareholders. This request may only
be made during a period of 60 days until (and not including) the 42nd day before the day on which the General
Meeting will be held.
13.16

Dissolution and Liquidation

The General Meeting may only resolve to dissolve the Company at the proposal of the Board. If a
resolution to dissolve the Company is to be put to the General Meeting, this must in all cases be stated in thenotice convening the General Meeting. If the General Meeting has resolved to dissolve the Company, the Directors
will be charged with the liquidation of the business of the Company in accordance with Dutch law and the Articles
of Association, unless the General Meeting has designated other liquidators. During liquidation, the provisions of
the Articles of Association will remain in force as far as possible.
Any surplus remaining after settlement of all debts and liquidation costs will be distributed to the
Shareholders in proportion to the nominal value of their shareholdings.
13.17

Amendment of Articles of Association

The General Meeting may only resolve to amend the Articles of Association at the proposal of the Board.
A proposal to amend the Articles of Association must be included in the notice convening the General Meeting.
A copy of the proposal containing the verbatim text of the proposed amendment must be available at the Company
for inspection by every Shareholder and every holder of meeting rights until the end of the General Meeting.
Furthermore, a copy of the proposal will be made available free of charge to shareholders and other persons
holding meeting rights from the day it was deposited until the day of the meeting.

-151-13.18Dutch Financial Reporting Supervision Act

Pursuant to the Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving,
FRSA), the AFM has an independent right to (i) request an explanation from the Company regarding its
application of the applicable financial reporting standards if, based on publicly known facts or circumstances, it
has reason to doubt that the issuer’s financial reporting meets such standards and (ii) recommend the issuer tomake available further explanations. If the Company does not comply with such a request or recommendation, theAFM may request the Enterprise Chamber to order the Company to (A) provide an explanation of the way it hasapplied the applicable financial reporting standards to its financial reports or (B) prepare its financial reports inaccordance with the Enterprise Chamber’s instructions.
13.19

Dutch Corporate Governance CodeThe Dutch Corporate Governance Code, as amended, was published on December 8, 2016, entered into
force on January 1, 2017, and finds its statutory basis in Book 2 of the Dutch Civil Code. The Dutch Corporate
Governance Code applies to all companies which have their statutory seat in the Netherlands and which sharesare listed on a regulated market (such as Euronext Amsterdam), a multilateral trading facility or a comparable
system in a non-EEA member state. The Dutch Corporate Governance Code applies to the Company as theCompany has its registered office in the Netherlands and its Shares will be listed on Euronext Amsterdam.
The Dutch Corporate Governance Code contains principles and best practice provisions for the Board,
the Shareholders and the General Meeting, financial reporting, auditors, disclosure, compliance and enforcement
standards, and is based on a “comply or explain” principle. Accordingly, the Company will be required to disclosein the report of the Board of Directors whether or not it is in compliance with the various principles and provisionsof the Dutch Corporate Governance Code and, in the event that the Company deviates from a best practiceprovision in the Dutch Corporate Governance Code, the reason for such deviation must be properly explained in
its annual report in the report of the board of directors (bestuursverslag). A copy of the Dutch Corporate
Governance Code can be found on www.mccg.nl.
The Company acknowledges the importance of good corporate governance. The Company fully endorses
the underlying principles of the Dutch Corporate Governance Code and applies the Dutch Corporate Governance
Code as the guiding principles for its corporate governance policy. The Company complies with relevant bestpractice provisions of the Dutch Corporate Governance Code, other than as detailed below. The deviations fromthe Dutch Corporate Governance Code are noted below (or in the case of any future deviation, subject toexplanation thereof at the relevant time):Best practice provisions 2.1.7 item (ii) of the Dutch Corporate Governance Code(independence of the supervisory board).
o

Luc van Os was a member of the statutory management board of the Company as ofDecember 4, 2020. As such, the Company does not comply with best practice provision
2.1.7 item (ii) of the Dutch Corporate Governance Code. Since the Directors, including Luc
van Os, will be appointed for a two-year term, in principle this deviation continues for morethan one financial year and is not of a temporary nature.

oHowever, the Company deems that this deviation does not negatively impact the ability of
Luc van Os to perform his duties independently and critically, whether at the Board or as
member (chairperson) of the Audit Committee, given the short period that Luc van Os has
been involved in the management of the Company prior to the, and primarily in preparation
for, the Admission. As such, the Company believes that, from a practical perspective, it
complies with best practice provision 2.7.1 item (ii) of the Dutch Corporate Governance
Code.

Best practice provision 2.1.7 item (iii) of the Dutch Corporate Governance Code (independenceof the supervisory board).
o

Two Non-Executive Directors of the Company, being James Mitchell and Manning
Doherty, have been appointed at the designation of the Tencent-led Consortium. As agreed
upon in writing in the Relationship Agreement, and as elaborated on in Section 12.11(Relationship Agreement), the Bolloré Entities and the Restructuring Shareholders haveagreed to, as from the Admission, vote with all Shares they own at the time of such vote inorder to procure that two Non-Executive Directors designated by the Tencent-led-152-

consortium shall be appointed, subject to the Tencent-led Consortium holding a certain
minimum interest. James Mitchell and Manning Doherty can be considered to be affiliatedwith or representing a Shareholder, or group of affiliated Shareholders, who directly or
indirectly hold more than ten percent of the Shares and therefore, the Company does notcomply with best practice provision 2.7.1 item (iii) of the Dutch Corporate Governance
Code.
o



13.20

This deviation shall in principle continue for more than one financial year, however thisdeviation shall be of a temporary nature since James Mitchell and Manning Doherty shallbe appointed for a two-year mandate period starting from the Admission and ending withthe annual General Meeting to be held in 2024. Furthermore, the Tencent-led Consortium
has committed to procure that the Non-Executive Directors appointed at the designation of
the Tencent-led Consortium shall resign if the Tencent-led Consortium ceases to hold acertain minimum interest as described in more detail in Section 12.11 (Relationship
Agreement) above.

Best practice provision 2.3.4 of the Dutch Corporate Governance Code.
o

Luc van Os is the chairperson of the Audit Committee of the Company. Luc was a memberof the statutory management board of the Company as of December 4, 2020. As such theCompany does not comply with best practice provision 2.3.4 of the Dutch Corporate
Governance Code in respect of the recommendation that the audit committee shall not becomprised of members that are former management board members. Reference is made to
the explanation to the deviation of best practice provisions 2.1.7 item (ii) above.

o

The Audit Committee of the Company comprises of three non-executives of which Luc van
Os and Catia Lawson-Hall are not independent within the meaning of the Dutch Corporate
Governance Code and as such more than half of the Audit Committee is not independent
within the meaning of the Dutch Corporate Governance Code. This deviation continues formore than one financial year and is not of a temporary nature since the appointment of Luc
van Os has not been made for a specific period. However reference is made to the
explanation to the deviation of best practice provision 2.1.7 item (ii) above, as aconsequence of which the Company believes that the Audit Committee shall operate
independently and critically and duly fulfil its duties under the Dutch Corporate
Governance Code.

o

The Nomination Committee of the Company comprises of four non-executives of which
Luc van Os and James Mitchell are not independent within the meaning of the Dutch
Corporate Governance Code and as such more than half of the Nomination Committee notindependent within the meaning of the Dutch Corporate Governance Code. This deviation
continues for more than one financial year and is not of a temporary nature since theappointment of Luc van Os has not been made for a specific period. However, reference ismade to the explanation to the deviation of best practice provision 2.1.7 item (ii) above, asa consequence of which the Company believes that the Nomination Committee shall
operate independently and critically and duly fulfil its duties under the Dutch Corporate
Governance Code.

Obligations of Shareholders to Make a Public Offer and Squeeze Out Proceedings

13.20.1 Public Offer
Pursuant to Section 5:70 of the DFSA, and in accordance with European Directive 2004/25/EC, any
party, acting alone or in concert with others, that, directly or indirectly, acquires 30% or more of the Company’s
voting rights at the General Meeting will be obliged to launch a public takeover bid for all outstanding Shares.
Under the DFSA, “persons with whom a party is acting in concert” has been defined as natural persons, legal
persons or companies collaborating under a contract with the aim to acquire predominant control in a Dutch listedcompany or, if the target company is one of the collaborators, to frustrate the success of an announced public
takeover bid for that company. The following categories of natural persons, legal persons or companies are
deemed in any case to act in concert: (i) legal persons or companies which together form part of a group as referred
to in Section 2:24b of the Dutch Civil Code; and (ii) natural persons, legal persons or companies and theundertakings controlled by these persons or companies.

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Exceptions are made for, amongst others, Shareholders who, whether alone or acting in concert withothers (i) have an interest of at least 30% of the Company’s voting rights before the Shares are first admitted to
trading on Euronext Amsterdam and who still have such an interest after such first admittance to trading, and (ii)reduce their holding to below 30% of the voting rights within 30 days of the acquisition of the controlling interest
provided that (a) the reduction of their holding was not effected by a transfer of Shares to an exempted party and(b) during such period such Shareholders or group of Shareholders did not exercise their voting rights.
In addition, it is prohibited to launch a public takeover bid for shares of a listed company, such as the
Shares, unless an offer document has been approved by the AFM. A public takeover bid may only be launched by
way of publication of an approved offer document unless a company makes an offer for its shares. The public
takeover bid rules are intended to ensure that in the event of a public takeover bid, among others, sufficient
information will be made available to the holders of the shares, the holders of the shares will be treated equally,that there will be no abuse of inside information and that there will be a proper and timely offer period.
13.20.2 Squeeze out
Pursuant to Section 2:92a of the Dutch Civil Code, a Shareholder that, for its own account, holds at least
95% of the issued share capital of the Company may institute proceedings against the other Shareholders jointly
for the transfer of their Shares to it. The proceedings are held before the Enterprise Chamber and can be institutedby means of a writ of summons served upon each of the minority Shareholders in accordance with the provisionsof the Dutch Code of Civil Procedure. The Enterprise Chamber may grant the claim for the squeeze out in relation
to all minority Shareholders and will determine the price to be paid for the Shares, if necessary after appointmentof one or three experts who will offer an opinion to the Enterprise Chamber on the value to be paid for the Sharesof the minority Shareholders. Once the order to transfer becomes final before the Enterprise Chamber, the person
acquiring the Shares must give written notice of the date and place of payment and the price to the holders of the
Shares to be acquired whose addresses are known to it. Unless the addresses of all of them are known to it, it mustalso publish the same in a Dutch daily newspaper with a national circulation.
In addition, pursuant to Section 2:359c of the Dutch Civil Code, following a public offer, a holder of atleast 95% of the issued share capital and voting rights of the Company has the right to require the minority
Shareholders to sell their Shares to it. Conversely, pursuant to Section 2:359d of the Dutch Civil Code, eachminority Shareholder has the right to require the holder of at least 95% of the issued share capital and voting rightsof the Company to subscribe for or purchase its Shares in such case. Any such request must be filed with theEnterprise Chamber within three months after the end of the acceptance period of the public offer. The Enterprise
Chamber may grant the claim for the squeeze out in relation to all minority Shareholders and will determine theprice to be paid for the Shares, if necessary after appointment of one or three experts who will offer an opinion to
the Enterprise Chamber on the value to be paid for the Shares of the minority Shareholders. In principle, the offer
price is considered reasonable if at least 90% of the shares to which the offer related were acquired by the offeror.
13.21

Obligations of Shareholders, the Company and Directors to Notify Holdings of Shares and Voting
Rights13.21.1 Shareholders
Shareholders may be subject to notification obligations under the DFSA. Shareholders are advised toconsult with their own legal advisors to determine whether the notification obligations apply to them.
Pursuant to Chapter 5.3 of the DFSA, any person who, directly or indirectly, acquires or disposes of an
actual or potential capital interest and/or voting rights in the Company must immediately give written notice to
the AFM of such acquisition or disposal if, as a result of such acquisition or disposal, the percentage of capitalinterest and/or voting rights held by such person reaches, exceeds or falls below the following thresholds: 3%,
5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. Pursuant to a draft Dutch legislative proposal
published for consultation on May 23, 2019 (the consultation period of which ended on July 4, 2021), a thresholdof 2% may be added to this list, however, it is not yet clear if and when this change will enter into effect.
For the purpose of calculating the percentage of capital interest or voting rights, the following interests
must, inter alia, be taken into account: (i) Shares and/or voting rights directly held (or acquired or disposed of) by
any person; (ii) Shares and/or voting rights held (or acquired or disposed of) by such person’s controlled entities
or by a third party for such person’s account; (iii) voting rights held (or acquired or disposed of) by a third party
with whom such person has concluded an oral or written voting agreement; (iv) voting rights acquired pursuant
to an agreement providing for a temporary transfer of voting rights in consideration for a payment; (v) Shares
which such person (directly or indirectly), or any controlled entity or third party referred to above, may acquire-154-

pursuant to any option or other right to acquire Shares; (vi) Shares which determine the value of certain cash
settled financial instruments such as contracts for difference and total return swaps; (vii) Shares that must be
acquired upon exercise of a put option by a counterparty; and (viii) Shares which are the subject of another contract
creating an economic position similar to a direct or indirect holding in those Shares.
Controlled entities (“gecontroleerde ondernemingen” within the meaning of the DFSA) do notthemselves have notification obligations under the DFSA as their direct and indirect interests are attributed totheir (ultimate) parent. Any person may qualify as a parent for purposes of the DFSA, including an individual. If
a person who has a 3% or larger interest in the Company’s share capital or voting rights ceases to be a controlled
entity it must immediately notify the AFM and all notification obligations under the DFSA will become applicableto such former controlled entity.
Special attribution rules apply to the attribution of Shares and/or voting rights which are part of theproperty of a partnership or other form of joint ownership. A holder of a pledge or right of usufruct in respect ofShares can also be subject to notification obligations, if such person has, or can acquire, the right to vote on the
Shares. The acquisition of (conditional) voting rights by a pledgee or beneficial owner may also trigger notification
obligations as if the pledgee or beneficial owner were the legal holder of the Shares and/or voting rights.
For the same purpose, the following instruments qualify as “shares”: (a) shares, (b) depositary receipts
for shares (or negotiable instruments similar to such receipts), (c) negotiable instruments for acquiring the
instruments under (a) or (b) (such as convertible bonds), and (d) options for acquiring the instruments under (a)or (b).
Furthermore, when calculating the percentage of capital interest a person is also considered to be inpossession of Shares if (i) such person holds a financial instrument the value of which is (in part) determined by
the value of the Shares or any distributions associated therewith and which does not entitle such person to acquire
any Shares, (ii) such person may be obliged to subscribe for or purchase Shares on the basis of an option, or (iii)such person has concluded another contract whereby such person acquires an economic interest comparable tothat of holding Shares.
If a person’s capital interest and/or voting rights reaches, exceeds or falls below the above-mentioned
thresholds as a result of a change in the Company’s issued and outstanding share capital or voting rights, such
person is required to make a notification not later than on the fourth trading day after the AFM has published theCompany’s notification in relation to the Company’s issued and outstanding share capital or voting rights.
Every holder of 3% or more of the Company’s share capital or voting rights whose interest changes inrespect of the previous notification to the AFM by reaching or crossing any of the abovementioned thresholds asa consequence of a different composition by means of an exchange or conversion into shares or the exercise ofrights pursuant to an agreement to acquire voting rights, shall notify the AFM at the latest within four trading days
after the date on which the holder knows or should have known that his interest reaches, exceeds or falls below a
threshold.
13.21.2 The Company
Under the DFSA, the Company is required to notify the AFM promptly after Settlement of theCompany’s issued and outstanding share capital and voting rights. Thereafter the Company is required to notify
the AFM promptly of any change of 1% or more in the Company’s issued and outstanding share capital or voting
rights since the previous notification. Other changes in the Company’s issued and outstanding share capital or
voting rights must be notified to the AFM within eight days after the end of the quarter in which the change
occurred.
13.21.3 Directors
Furthermore, pursuant to Section 5:48 DFSA, each Director must notify the AFM (a) immediately after
Settlement the number of Shares he or she holds and the number of votes he or she is entitled to cast in respect of
the Company’s issued and outstanding share capital, and (b) subsequently of each change in the number of Shares
he or she holds and of each change in the number of votes he or she is entitled to cast in respect of the Company’s
issued and outstanding share capital, immediately after the relevant change.
If an Executive Director or Non-Executive Director has notified a transaction to the AFM under the
DFSA as described under “— Shareholders”, such notification is sufficient for purposes of the DFSA as describedin this paragraph.

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Furthermore, pursuant to the Market Abuse Regulation, persons discharging managerial responsibilities
must notify the AFM and the Company of any transactions conducted for his or her own account relating to Sharesor any debt instruments of the Company or to derivatives or other financial instruments linked thereto. Persons
discharging managerial responsibilities within the meaning of the Market Abuse Regulation include: (a) directors;or (b) members of the senior management who have regular access to inside information relating directly or
indirectly to that entity and the authority to take managerial decisions affecting the future developments andbusiness prospects of the Company.
In addition, pursuant to the Market Abuse Regulation and the regulations promulgated thereunder, certain
persons who are closely associated with persons discharging managerial responsibilities, are also required to notify
the AFM and the Company of any transactions conducted for their own account relating to Shares or any debt
instruments of the Company or to derivatives or other financial instruments linked thereto. The Market Abuse
Regulation and the regulations promulgated thereunder cover, inter alia, the following categories of persons: (i)the spouse or any partner considered by national law as equivalent to the spouse; (ii) dependent children; (iii)
other relatives who have shared the same household for at least one year at the relevant transaction date; and (iv)any legal person, trust or partnership, the managerial responsibilities of which are discharged by a person
discharging managerial responsibilities or by a person referred to under (i), (ii) or (iii) above, which is directly or
indirectly controlled by such a person, which is set up for the benefit of such a person, or the economic interest ofwhich are substantially equivalent to those of such a person.
These notification obligations under the Market Abuse Regulation apply when the total amount of thetransactions conducted by a person discharging managerial responsibilities or a person closely associated to aperson discharging managerial responsibilities reaches or exceeds the threshold of €5,000 within a calendar year
(calculated without netting). When calculating whether the threshold is reached or exceeded, persons discharging
managerial responsibilities must add any transactions conducted by persons closely associated with them to theirown transactions and vice versa. The first transaction reaching or exceeding the threshold must be notified as set
forth above. The notifications pursuant to the Market Abuse Regulation described above must be made to the
AFM and the Company no later than the third Business Day following the relevant transaction date.
13.21.4 Public registry
The AFM does not issue separate public announcements of the notifications. It does, however, keep apublic register of and publishes all notifications made pursuant to the DFSA at its website (www.afm.nl). Third
parties can request to be notified automatically by email of changes to the public register in relation to a particularcompany’s shares or a particular notifying party.
13.22

Short Positions

13.22.1 Net Short Position
Pursuant to Regulation (EU) No 236/2012, each person holding a net short position attaining 0.2% of theissued share capital of the Company must report it to the AFM. Each subsequent increase of this position by 0.1%
above 0.2% will also have to be reported. Each net short position equal to 0.5% of the issued share capital of theCompany and any subsequent increase of that position by 0.1% will be made public via the AFM short selling
register. To calculate whether a natural person or legal person has a net short position, their short positions andlong positions must be set off. A short transaction in a share can only be contracted if a reasonable case can bemade that the shares sold can actually be delivered, which requires confirmation of a third party that the shares
have been located. The notification shall be made no later than 15:30 CET on the following trading day.
13.22.2 Gross Short Position
Furthermore, each person holding a gross short position in relation to the issued share capital of theCompany that reaches, exceeds or falls below one of the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%,
30%, 40%, 50%, 60%, 75% and 95%, must immediately give written notice to the AFM.
If a person’s gross short position reaches, exceeds or falls below one of the above-mentioned thresholds
as a result of a change in the Company’s issued share capital, such person is required to make a notification notlater than on the fourth trading day after the AFM has published the Company’s notification in the public registerof the AFM.
The AFM keeps a public register of the short selling notifications. Shareholders are advised to consult
with their own legal advisors to determine whether any of the above short selling notification obligations apply to
them.
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13.22.3 Non-compliance with disclosure obligations
Non-compliance with these notification obligations is an economic offence (economisch delict) and maylead to the imposition of criminal fines, administrative fines, imprisonment or other sanctions. The AFM may
impose administrative sanctions or a cease-and-desist order under penalty for non-compliance, and the publication
thereof. If criminal charges are pressed, the AFM is no longer allowed to impose administrative penalties and viceversa, the AFM is no longer allowed to seek criminal prosecution if administrative penalties have been imposed.
In addition, a civil court can impose measures against any person who fails to notify or incorrectly notifies
the AFM of matters required to be notified. A claim requiring that such measures be imposed may be institutedby the Company, or by one or more Shareholders who alone or together with others represent at least 3% of theissued and outstanding share capital of the Company or voting rights. The measures that the civil court may impose
include:13.23

an order requiring the person with a duty to disclose to make the appropriate disclosure;

suspension of the right to exercise the voting rights by the person with a duty to disclose for aperiod of up to three years as determined by the court;

voiding a resolution adopted by the General Meeting, if the court determines that the resolution
would not have been adopted but for the exercise of the voting rights of the person with a duty
to disclose, or suspension of a resolution adopted by the General Meeting until the court makes
a decision about such voiding; andan order to the person with a duty to disclose to refrain, during a period of up to five years as
determined by the court, from acquiring Shares or voting rights in the Company.

Market Abuse Rules

The regulatory framework on market abuse is laid down in the Market Abuse Directive (2014/57/EU) as
implemented in Dutch law and the Market Abuse Regulation (no. 596/2014) which is directly applicable in the
Netherlands.
Pursuant to the Market Abuse Regulation, no natural or legal person is permitted to: (a) engage or attempt
to engage in insider dealing in financial instruments listed on a regulated market or for which a listing has beenrequested, such as the Shares, (b) recommend that another person engages in insider dealing or induce anotherperson to engage in insider dealing or (c) unlawfully disclose inside information relating to the Shares or theCompany. Furthermore, no person may engage in or attempt to engage in market manipulation.
Inside information is any information of a precise nature relating (directly or indirectly) to the Company,or to the Shares in the Company or other financial instruments, which information has not been made public andwhich, if it were made public, would be likely to have an effect on the price of the Shares or the other financial
instruments or on the price of related derivative financial instruments (i.e. information a reasonable investor would
be likely to use as part of the basis of his or her investment decision). An intermediate step in a protracted process
can also deemed to be inside information.
The Company will be under an obligation to make any inside information public as soon as possible andin a manner that enables fast access and complete, correct and timely assessment of the information. However,
the Company may defer the publication of inside information if it can guarantee the confidentiality of theinformation. Such deferral is only possible if the publication thereof could damage the Company’s legitimate
interests and if the deferral does not risk misleading the market. If the Company makes use of this deferral right,
it needs to inform the AFM thereof as soon as that information is made public. Upon request of the AFM, a written
explanation needs to be provided setting out why a delay of the publication was considered permitted. The
Company is required to post and maintain on its website all inside information for a period of at least five years.
A person discharging managerial responsibilities is not permitted to (directly or indirectly) conduct any
transactions on its own account or for the account of a third party, relating to Shares or debt instruments of theCompany or other financial instruments linked thereto, during a closed period of 30 calendar days before theannouncement of a half-yearly report or an annual report of the Company.

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13.24Non-compliance with the Market Abuse Rules

In accordance with the Market Abuse Regulation, the AFM has the power to take appropriate
administrative sanctions, such as fines, and/or other administrative measures in relation to possible infringements.
Non-compliance with the market abuse rules set out above could also constitute an economic offense and/or acrime (misdrijf) and could lead to the imposition of administrative fines by the AFM. The public prosecutor couldpress criminal charges resulting in fines or imprisonment. If criminal charges are pressed, it is no longer allowed
to impose administrative penalties and vice versa.
The AFM shall in principle also publish any decision imposing an administrative sanction or measure in
relation to an infringement of the Market Abuse Regulation.
The Company has adopted a code of conduct in respect of the reporting and regulation of transactions in
the Company’s securities by Directors and the Company’s employees, which will be effective as at the First
Trading Date.
The Company and any person acting on its behalf or on its account is obligated to draw up an insiders’list, to promptly update the insider list and provide the insider list to the AFM upon its request. The Company andany person acting on its behalf or on its account is obligated to take all reasonable steps to ensure that any personon the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions
applicable to insider dealing and unlawful disclosure of inside information.
13.25

Transparency Directive

The Netherlands is the Company’s home Member State for the purposes of Directive 2004/109/EC (asamended by Directive 2013/50/EU) as a consequence of which the Company will be subject to the DFSA in
respect of certain on-going transparency and disclosure obligations.

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14. THE DISTRIBUTION
14.1

The Distribution

14.1.1Introduction

The Restructuring Shareholders contributed their shares held in UMGI and UIM, representing all of theissued capital of both UMGI and UIM, to the Company in exchange for newly issued shares in the Company, asa consequence whereof the Company became the sole holding company of the Group (the Restructure). The
Restructure was completed on February 26, 2021.
Concurrently with the Admission, Vivendi envisages to distribute the Distribution Shares as a special
dividend in kind to the Vivendi Shareholders. All of the issued Shares of the Company, being 1,813,241,160
Shares, will be admitted to listing and trading on Euronext Amsterdam pursuant to the Admission. The
Distribution Shares will constitute up to 60% of the issued and outstanding Shares on the Distribution Date. The
Distribution Shares may constitute up to 1,087,944,696 Shares.
On March 29, 2021, Vivendi’s extraordinary general meeting approved an amendment to Vivendi’s bylaws to allow Vivendi’s general shareholders meeting to decide, in the event of the distribution of dividends,
reserves or premiums, that all or part of such distribution will be made by way of the delivery of assets in kind,including financial securities held by Vivendi. In the event of an interim dividend payment, this option would also
be available to Vivendi’s management board.
On June 22, 2021, Vivendi’s general meeting approved, in addition to the distribution of an ordinary
annual dividend of €0.60 per Vivendi share, the distribution of a special dividend in kind in the form of theDistribution Shares and listing with 99.9% voting in favor. At that time, the payment of such special dividend inkind remained subject to (i) the approval of the Prospectus by the AFM and (ii) Vivendi’s management board
decision to supplement such special dividend in kind with an interim dividend in kind (as described below).
On September 14, 2021, after the approval of the Prospectus by the AFM and the approval of the listingby Euronext Amsterdam, and subject to an interim statement of financial position certified by Vivendi’s statutory
auditors showing sufficient distributable earnings in the 2021 results, Vivendi’s management board will decide to
supplement the special dividend in kind approved by the Vivendi Shareholders with an interim dividend in kind.
Together, the special dividend in kind and the interim dividend in kind approved by the Vivendi’s
management board constitute the Distribution, which will be paid in a single transaction, in accordance with the
Allocation Ratio.
Following the Distribution: (i) Vivendi will hold such number of Shares, representing approximately
10% of the issued and outstanding share capital of the Company; (ii) Concerto will hold such number of Shares,
representing 10% of the issued and outstanding share capital of the Company; (iii) Scherzo will hold such numberof Shares, representing 10% of the issued and outstanding share capital of the Company; (iv) the Pershing Entities
will hold such number of Shares, representing 10% of the issued and outstanding share capital of the Company
and (v) it is expected that the Bolloré Entities will hold such number of Shares, representing approximately 18%of the issued and outstanding share capital of the Company.
14.1.2

Expected Distribution Timetable

Subject to acceleration or extension of the timetable for, or withdrawal of, the Distribution, the timetablebelow sets forth certain expected key dates for the Distribution. See Section 14.1.3 (Acceleration or Extension of
the Distribution).
Event

Time (CET) and date

Resolution of Vivendi’s management board to distribute an exceptional
interim dividend in kindEuronext Amsterdam notice announcing the Reference Price for the Shares
Admission and Distribution ex-date in respect of Distribution of Distribution
SharesCommencement of trading under the ticker symbol "UMG" on an "if-andwhen-delivered" (conditional upon delivery) basis
Distribution Record Date in respect of Distribution of Distribution Shares
Payment of the Distribution (delivery and book-entry of the Distribution
Shares allocated pursuant to the Distribution) (Distribution Date)

September 14, 2021

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September 20, 2021
September 21, 2021
September 21, 2021
September 22, 2021
September 23, 2021

Distribution Settlement

September 23, 2021

The Company and Vivendi may adjust the dates, times and periods given in the timetable and throughout
this Prospectus.
14.1.3

Acceleration or Extension of the Distribution

The Company and Vivendi may adjust the dates, times and periods given in the timetable and throughout
this Prospectus. If so decided, the Company will make this public through a press release, which will also be
posted on the Company’s website (www.universalmusic.com) or, regarding the Distribution, on Vivendi’s website(www.vivendi.com). Any other material alterations will also be published through a press release that will be
posted on the Company’s website (www.universalmusic.com) or, regarding the Distribution, on Vivendi’s website(www.vivendi.com) and (if required) in a supplement to this Prospectus that is subject to the approval of the AFM.
Any extension of the timetable for the Distribution will be published in a press release at least three hours before
00:00 CET on the Distribution Date, provided that any extension will be for a minimum of one full day. Any
acceleration of the timetable for the Distribution will be published in a press release at least three hours before the
newly proposed Distribution Date. In any event, the Distribution Date will be at least within two Business Daysof the Distribution Record Date.
14.1.4

Distribution Allocation Ratio

Subject to Adjustment of the Allocation Ratio (as defined below) by Vivendi’s management board, each
Vivendi Shareholder will be allotted one (1) Share for one (1) share which it holds in Vivendi on the Distribution
Record Date (the Allocation Ratio). The total number of Distribution Shares would be adjusted, upwards or
downwards, if the total number of Vivendi shares entitled to the Distribution differed from Vivendi’s expectations,
without affecting the percentage of the Company’s share capital distributed nor the Allocation Ratio.
The amount of the Distribution will be determined by multiplying the number of Distribution Shares by
the opening price of the Shares on the regulated market of Euronext Amsterdam on the First Trading Date.
In the unlikely event that the amount of the Distribution would exceed the sum of (i) the €5,312 million
approved by Vivendi’s the general meeting of June 22, 2021 to be allocated to the accounts for the fiscal year
ending December 31, 2020 as the special dividend in kind, and (ii) the €26,410 million Vivendi net earnings as ofJune 30, 2021, as shown in the interim statement of financial position certified by Vivendi’s statutory auditors(the Ceiling) (i.e. should the opening price of UMG shares on Euronext Amsterdam on Admission andDistribution ex-Date exceed €29.16 per Share resulting in a total market capitalization of UMG of €52.8 billion),
Vivendi's management board would have full powers to reduce the number of Shares distributed so that the amountof the Distribution is equal to the Ceiling (the Adjustment of the Allocation Ratio). In the event of Adjustment of
the Allocation Ratio, the adjusted Allocation Ratio would be less than one (1) Share for one (1) Vivendi share.
Vivendi will issue a press release on the Admission and Distribution ex-Date, once the opening price of
the Shares admitted to Euronext Amsterdam is known, to inform its shareholders of the final amount of theDistribution and confirm the final Allocation Ratio. In the event of Adjustment of the Allocation Ratio, the rights
forming fractional shares shall neither be negotiable or transferable. If the number of Shares to which a Vivendi
shareholder would be entitled by application of the Allocation Ratio does not correspond to a whole number of
Shares, the Vivendi Shareholder will receive the number of Shares immediately below this number, plus a cash
payment for the balance, the amount of which will be calculated based on opening price of the Shares on theregulated market of Euronext Amsterdam on the First Trading Date.
The Distribution of the Distribution Shares to the Vivendi Shareholders, according to the Allocation
Ratio, will be effected via Euroclear France on the Distribution Date (expected to be September 23, 2021).
All Vivendi Shareholders whose Vivendi shares are registered in their name at the end of the trading day
preceding the payment date, being September , 2021, (after taking into account orders executed during the dayof September , 2021, even if the settlement-delivery of such orders occurs after such date) would be entitled toreceive the Distribution. In the event of split ownership of shares, the beneficiary of the Distribution will be thelegal owner (nu-propriétaire) unless otherwise agreed. The treasury shares held by Vivendi would not be entitledto the Distribution.
Other information on the Distribution relevant for the Vivendi Shareholders, in particular the impact of
the Distribution on Vivendi’s consolidated equity, net earnings and net financial debt, as well as the tax treatmentof the Distribution for the Vivendi Shareholders, have been included in the Distribution Report, available onVivendi’s website.

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14.1.5

Delivery, Clearing and Settlement

Each Vivendi Shareholder entitled to the Distribution holding Vivendi shares in directly registered form
(au nominatif pur) will receive a letter per mail from Vivendi, through the Listing and Paying Agent, informing
the Vivendi Shareholder of the terms and conditions for the allocation of Distribution Shares to be credited to an
account opened in the Vivendi Shareholder’s name in the Company’s shareholders registers, which the Listing
and Paying Agent will maintain. Payment of the Distribution will be made by way of an allocation on theDistribution Date of one (1) Share for each Vivendi share held, based on the Vivendi Share positions duly
registered with Euroclear France at day-end closing on Distribution Record Date.
On the Distribution Date, Vivendi will credit Euroclear France with the total number of Distribution
Shares corresponding to the number of Vivendi Shares registered at day-end closing on Distribution Record Date.
On the Distribution Date, Euroclear France will credit the Distribution Shares received from Vivendi as
follows:

to the accounts of the financial intermediaries with respect to Distribution Shares distributed tobeneficiaries holding Vivendi Shares in bearer form (au porteur), orto the account of Euroclear France with respect to Distribution Shares distributed tobeneficiaries holding Vivendi Shares in registered form. Euroclear France would be responsible
for crediting these Distribution Shares (i) to the books of the financial intermediaries holding
the accounts of holders of administered registered (au nominatif administré) shares, or (ii) tothe Listing and Paying Agent, which has been appointed by Vivendi to hold the accounts ofbeneficiaries holding directly registered Vivendi shares.

The beneficiaries of the Distribution shall pay, as appropriate, to their authorized financial intermediaryor to Vivendi, through the Listing and Paying Agent, the social contributions and/or the non-final flat-rate
withholding or the withholding tax payable in respect of the Distribution. As applicable, the authorized financial
intermediary responsible for maintaining the bearer or administered registered share accounts, or Vivendi, throughthe Listing and Paying Agent, which is responsible for maintaining the bearer share accounts, may sell the number
of Distribution Shares necessary to pay the social security contributions and/or the withholding tax due in respectof the Distribution. As applicable, Vivendi Shareholders who wish to sell the Distribution Shares received in thecontext of the Distribution would need to contact their usual financial advisor and/or financial intermediaryholding their account.
Application has been made for the Shares to be accepted for clearance through the book-entry facilities
of Euroclear France. Euroclear France has its offices at 66 rue de la Victoire 75009 Paris, France.
14.2

Listing and Trading

Prior to the Admission, there has been no public market for the Shares. Application has been made to list
and admit all of the Shares to trading on Euronext Amsterdam under the symbol “UMG”. The ISIN is
NL0015000IY2 and the legal entity identifier is 724500GJBUL3D9TW9Y18.
Subject to acceleration or extension of the timetable for the Distribution or Admission, trading in the
Shares on Euronext Amsterdam is expected to commence on Admission. Trading in the Shares before Settlement
will take place on an ‘as-if-and-when-delivered’ basis.
14.3

Dilution and reduction of Vivendi’s Shareholding
There shall be no dilution of the shareholdings of the Existing Shareholders pursuant to the Distribution.

The shareholding of Vivendi will be reduced from 70% to approximately 10% as a result of theDistribution. Prior to the Distribution, Vivendi was the majority shareholder of the Company, having first acquired
an indirect interest in UMG in 2000, through the acquisition of Seagram (the then owner of UMG), whereafter
Vivendi gained full ownership of UMG in 2006, following which Vivendi has subsequently sold 20% of the issued
shares in UMG to the Tencent-led Consortium (the first tranche of 10% being in March 2020 and the second
tranche of 10% being sold in January 2021) and more recently sold 10% of the issued shares in UMG to thePershing Entities (the first tranche of 7.09% in August 2021 and the second tranche of 2.91% in September 2021).
The business address of Vivendi is 42 avenue de Friedland, 75380 Paris Cedex 08, France.

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14.4

Voting Rights

Each Share confers the right to cast one vote in the General Meeting, see Section 13.14.6 (Voting Rights).
The voting rights of the holders of Shares will rank pari passu with each other and with all other Shares. Major
shareholders, including the Existing Shareholders, do not have different voting rights.
14.5

Ranking and Dividends

The Distribution Shares will rank pari passu in all respects with the, at that time, outstanding Shares.
The Shares will carry dividend rights as of the date of issue. See Section 5 (Dividend Policy).
14.6

Listing and Paying Agent

BNP Paribas is the Listing Agent and BNP Paribas Securities Services is the Paying and Settlement
Agent with respect to the Shares on Euronext.
14.7

Expenses charged to investors

No expenses or fees will be charged by the Company or Vivendi to Vivendi Shareholders in relation to
the Admission and the Distribution. However, the beneficiaries of the Distribution would be required to pay, as
appropriate, to their authorized financial intermediary or to Vivendi, through BNP Paribas Securities Services, thesocial withholdings and/or the non-final withholding tax or the withholding tax payable in respect of theDistribution.
As the definitive amount of the Distribution will be determined, as described in Section 14.1.4(Distribution Allocation ratio), by multiplying the number of Distribution Shares by the opening price of the
Shares on the regulated market of Euronext Amsterdam on the First Trading Date, the maximum amount ofexpenses paid in relation to the Admission and Distribution cannot precisely be estimated as of the date of thisProspectus. However, the maximum amount expenses will in any case remain limited to a maximum of 0.5% of
the total amount of the Distribution.

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15. TAXATIONThe statements summarize the current position and are intended as a general guide only. Prospective
investors should be warned that the tax legislation of their country of citizenship, domicile or residency may havean impact on the income received from the Shares. Prospective investors who are in any doubt as to their tax
position or who may be subject to tax in a jurisdiction other than the Netherlands are strongly recommended toconsult their own professional advisers.
15.1

Dutch taxation

This overview solely addresses the principal Dutch tax consequences of the acquisition, ownership anddisposal of Shares and does not purport to describe every aspect of taxation that may be relevant to a particularholder. Tax matters are complex, and the tax consequences of the offer to a particular holder of Shares will dependin part on such holder's circumstances. Accordingly, a holder is urged to consult his or her own tax advisor for a
full understanding of the tax consequences of the acquisition, ownership and disposal of Shares to such holder,
including the applicability and effect of Dutch tax laws.
Where in this overview English terms and expressions are used to refer to Dutch concepts, the meaning
to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Dutch
concepts under Dutch tax law. Where in this overview the terms “the Netherlands” and “Dutch” are used, theserefer solely to the European part of the Kingdom of the Netherlands. This overview assumes that the Company
will remain organized, and that its business will be conducted, in the manner outlined in this Prospectus. A change
to such organizational structure or to the manner in which the Company conducts its business may invalidate thecontents of this overview, which may not be updated to reflect any such change.
This overview is based on the tax law of the Netherlands (unpublished case law not included) as it stands
at the date of this Prospectus. The tax law upon which this overview is based, is subject to changes, possibly withretroactive effect. Any such change may invalidate the contents of this overview, which will not be updated toreflect such change.
The overview in this Dutch taxation section does not address the Dutch tax consequences for a holder of
Shares who:

is a person who may be deemed an owner of Shares for Dutch tax purposes pursuant to specificstatutory attribution rules in Dutch tax law, such as Shares that are legally owned by a third
party such as a trustee, foundation or similar entity or arrangement, which may under certain
circumstances have to be allocated to the (deemed) settlor or, upon the death of such settlor,such settlor's beneficiaries in proportion to their entitlement to the estate of the settlor of such
trust or similar arrangement (afgezonderd particulier vermogen);is, although in principle subject to Dutch corporation tax, in whole or in part, is either fully or
partly exempt from Dutch corporation tax (e.g. pension funds) or specifically exempt from thattax in connection with income from Shares (e.g. due to the applicability of the participation
exemption, deelnemingsvrijstellling);is a qualifying investment institution (fiscale beleggingsinstelling) or exempt investment
institution (vrijgestelde beleggingsinstelling) as defined in the Dutch Corporation Tax Act 1969;

owns or has acquired Shares in connection with the (former) membership of a management
board or a supervisory board, an employment relationship, a deemed employment relationshipor a management role;

has a substantial interest in the Company or a deemed substantial interest in the Company for
Dutch tax purposes. Generally, a person holds a substantial interest if (a) such person - either
alone or, in the case of an individual, together with such individual's partner or any of suchindividual's relatives by blood or by marriage in the direct line (including foster-children) or of
those of such individual's partner for Dutch tax purposes - owns or is deemed to own, directly
or indirectly, 5% or more of the Shares or of any class of Shares, or rights to acquire, directly
or indirectly, such an interest in the Shares or profit participating certificates relating to 5% ormore of the annual profits or to 5% or more of the liquidation proceeds of the Company, or (b)such person's Shares, rights to acquire Shares or profit participating certificates in the Company-163-are held by such holder as part of a transaction that qualified for non-recognition of gain
treatment; or
15.1.1

is for Dutch tax purposes taxable as a corporate entity and resident of Aruba, Curaçao or Sint
Maarten.

Dividend withholding tax(a)GeneralThe Company is generally required to withhold Dutch dividend withholding tax at a rate of 15% on
dividends distributed by the Company, subject to possible relief under Dutch law or an applicable Dutch income
tax treaty depending on a particular holder of Shares’ individual circumstances.
The concept “dividends distributed by the Company” as used in this Dutch taxation paragraph includes,
but is not limited to, the following:

15.1.2

distributions in cash or in kind, deemed and constructive distributions and repayments of capitalnot recognized as paid-in for Dutch dividend withholding tax purposes;

liquidation proceeds and proceeds of repurchase or redemption of Shares in excess of theaverage capital recognized as paid-in for Dutch dividend withholding tax purposes;the par value of Shares issued by the Company to a holder of Shares or an increase of the parvalue of Shares, as the case may be, to the extent that it does not appear that a contribution,
recognized for Dutch dividend withholding tax purposes, has been made or will be made; andpartial repayment of capital, recognized as paid-in for Dutch dividend withholding tax purposes,
if and to the extent that there are net profits (zuivere winst), unless (a) the General Meeting of
the Company's shareholders has resolved in advance to make such repayment and (b) the parvalue of the Shares concerned has been reduced by an equal amount by way of an amendment
to the Company’s articles of association.

Taxes on income and capital gains
Resident holders of Shares

A holder of Shares who is resident or deemed to be resident in the Netherlands for Dutch tax purposes isfully subject to Dutch income tax on benefits derived or deemed to be derived from or in connection with Shares
if he is an individual or fully subject to Dutch corporation tax on benefits derived or deemed to be derived fromor in connection with Shares if it is a corporate entity, or an entity, including an association, a partnership or amutual fund, taxable as a corporate entity, as described in the overview below.
(a)Individuals deriving profits or deemed to be deriving profits from an enterprise

Any benefits derived or deemed to be derived from or in connection with Shares that are attributable toan enterprise from which an individual derives profits, whether as an entrepreneur or pursuant to a co-entitlement
to the net value of an enterprise, other than as a shareholder, are generally subject to Dutch income tax at
progressive rates up to 49.5%.
(b)

Individuals deriving benefits from miscellaneous activities

Any benefits derived or deemed to be derived from or in connection with Shares that constitute benefits
from miscellaneous activities by an individual are generally subject to Dutch income tax at progressive rates up
to 49.5%.
An individual may, inter alia, derive, or be deemed to derive, benefits from or in connection with Sharesthat are taxable as benefits from miscellaneous activities if such individual’s investment activities go beyond
regular active portfolio management.
(c)Other individuals

If a holder of Shares is an individual whose situation has not been described before in this Section(Resident holders of Shares), such individual will not be subject to income taxes on actual benefits derived from-164-

or in connection with Shares. Instead, such individual is generally taxed at a flat rate of 31% on deemed income
from “savings and investments”, which deemed income is determined on the basis of the value of such individual’s
Shares included in such individual’s yield basis determined at the beginning of a calendar year (minus a tax-freethreshold). The deemed income is determined on the basis of progressive rates starting from 1.9% up to 5.69%
per annum of this yield basis.
(d)Corporate entities

Any benefits derived or deemed to be derived from or in connection with Shares that are held by acorporate entity, or an entity, including an association, a partnership or a mutual fund, taxable as a corporate entity,
are generally subject to Dutch corporation tax, levied at a rate of 25% (15% over profits up to and including€245,000).
(e)

GeneralA holder of Shares will not be deemed to be resident in the Netherlands for Dutch tax purposes by reason
only of the execution and/or enforcement of the documents relating to the issue of Shares or the performance by
the Company of its obligations under such documents or under the Shares.
Non-resident holders of Shares(f)

Individuals

If a holder of Shares is an individual who is neither resident nor deemed to be resident in the Netherlands
for purposes of Dutch income tax, such individual will not be subject to Dutch income tax in respect of any
benefits derived or deemed to be derived from or in connection with Shares, except if:such individual derives profits from an enterprise, whether as an entrepreneur or pursuant to aco-entitlement to the net value of such enterprise, other than as a shareholder, and suchenterprise is carried on, in whole or in part, through a permanent establishment or a permanent
representative in the Netherlands, and such individual’s Shares are attributable to suchpermanent establishment or permanent representative;such individual derives benefits or is deemed to derive benefits from or in connection with
Shares that are taxable as benefits from miscellaneous activities performed in the Netherlands(as described under “Individuals deriving benefits from miscellaneous activities” above); or

such individual derives profits pursuant to the entitlement to a share in the profits of anenterprise, other than as a holder of securities, which is effectively managed in the Netherlands
and to which enterprise such individual’s Shares are attributable.

(g)

Corporate entities

If a holder of Shares is a corporate entity, or an entity including an association, a partnership or a mutual
fund, taxable as a corporate entity, which is neither resident, nor deemed to be resident in the Netherlands forpurposes of Dutch corporation tax, it will not be subject to Dutch corporation tax in respect of any benefits derived
or deemed to be derived from or in connection with Shares, except if:



it derives profits from an enterprise directly which is carried on, in whole or in part, through apermanent establishment or a permanent representative in the Netherlands, and to whichpermanent establishment or permanent representative its Shares are attributable; or

it derives profits pursuant to a co-entitlement to the net value of an enterprise which is managed
in the Netherlands, other than as a holder of securities, and to which enterprise its Shares are
attributable.

If one of the abovementioned conditions applies, any benefits derived or deemed to be derived from orin connection with Shares will generally be subject to Dutch corporation tax, levied at a rate of 25% (15% overprofits up to and including €245,000).

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(h)

GeneralIf a holder of Shares is neither resident nor deemed to be resident in the Netherlands, such holder will
for Dutch tax purposes not carry on or be deemed to carry on an enterprise, in whole or in part, through a permanentestablishment or a permanent representative in the Netherlands by reason only of the execution and/or enforcementof the documents relating to the issue of Shares or the performance by the Company of its obligations under such
documents or under the Shares.
15.1.3Gift and inheritance taxes
Resident holders of Shares

Dutch gift tax may be due with respect to an acquisition of the Shares by way of a gift by a holder of
Shares who is resident or deemed to be resident of the Netherlands at the time of the gift.
Dutch inheritance tax may be due with respect to an acquisition or deemed acquisition of the Shares by
way of an inheritance or bequest on the death of a holder of Shares who is resident or deemed to be resident of
the Netherlands.
For purposes of Dutch gift and inheritance tax, an individual with the Dutch nationality will be deemed
to be resident in the Netherlands if such individual has been resident in the Netherlands at any time during the ten
years preceding the date of the gift or such individual’s death. For purposes of Dutch gift tax, an individual not
holding the Dutch nationality will be deemed to be resident of the Netherlands if such individual has been resident
in the Netherlands at any time during the twelve months preceding the date of the gift.
Non-resident holders of Shares
No Dutch gift tax or Dutch inheritance tax will arise with respect to an acquisition or deemed acquisitionof Shares by way of gift by, or upon the death of, a holder of Shares who is neither resident nor deemed to beresident in the Netherlands for purposes of Dutch gift tax or Dutch inheritance tax except if, in the event of a giftof the Shares by an individual who at the date of the gift was not a resident nor a deemed resident in the Netherlands
for purposes of Dutch gift tax or Dutch inheritance tax, such holder of Shares becomes a resident or a deemed
resident in the Netherlands and dies within 180 days after the date of the gift.
For purposes of Dutch gift tax and Dutch inheritance tax, a gift of Shares made under a condition
precedent is deemed to be made at the time the condition precedent is satisfied. If the condition precedent isfulfilled after the death of the donor, the gift is deemed to be made upon the death of the donor.
15.1.4

Value added tax

No Dutch value added tax will be due by a holder of Shares as a result of or in connection with thesubscription, issue, placement, allotment or delivery of Shares.
15.1.5

Registration taxes and duties

No Dutch registration tax, transfer tax, stamp duty or any other similar documentary tax or duty, otherthan court fees, is payable in the Netherlands in respect of or in connection with the execution and/or enforcement(including by legal proceedings and including the enforcement of any foreign judgment in the courts of theNetherlands) of the documents relating to the issue of Shares, the performance by the Company of its obligations
under such documents, or the transfer of Shares.

-166-16. GENERAL INFORMATION ON THE COMPANY
16.1

Subsidiaries
The Company is the holding company of the Group.

The following structure chart illustrates the simplified structure of the Group as at the date of theProspectus and immediately prior to the implementation of the Distribution.*

Vivendi S.E

Pershing Entities

Tencent-Led Consortium

70%

10%

20%

The United States

FranceThe Netherlands

Universal Music Group B.V.
The Netherlands

100%

Universal International Music
B.V.

Universal Music Group, Inc.
U.S.

The Netherlands

100%South Korea

Japan

UK

Germany

FranceCanadaChina

Latin America

Australia

ROW* Does not illustrate Bollore Entities, which hold 100 Shares in the Company, representing less than 0.00000006%
of the Shares.

The following is a list of material subsidiaries, based on their contribution to the consolidated financial
performance and/or position of the Group as at June 30, 2021.
Name

Country of incorporation% of shares and voting
rights held

Universal Music Group, Inc
Universal Music Group Holding. Inc.
UMG Recordings, Inc.
Vevo, LLC
Universal International Music B.V.
Universal Music Entertainment GmbH
Universal Music LLC
Universal Music France S.A.S.
Universal Music Holdings Ltd.
EMI Group Worldwide Holding Ltd.
Universal Music Group Treasury S.A.S.

United States
United States
United States
United States
Netherlands
Germany
Japan
FranceUnited Kingdom
United Kingdom
France

100
100
100
49.2
100
100
100
100
100
100
100

-167-

16.2

Independent Auditors

The Combined Financial Statements, prepared in accordance with IFRS, have been jointly audited by
EY and Deloitte, independent auditors. EY and Deloitte issued an independent auditors’ report on the Combined
Financial Statements and the report includes the following emphasis of matter paragraph, titled “Emphasis ofmatter”: Without modifying our conclusion, we draw attention to the Note "Basis of preparation of the Combined
Financial Statements", in Section "Accounting conventions used when preparing the Combined Financial
Statements". Our opinion is not modified in respect of this matter. This ‘Emphasis of matter” has been noted by
the Joint Auditors in view of the fact that combined financial statements are less common than consolidated
financial statements and, taking into account that they comprise accounts of two different companies (as opposed
to an aggregate consolidated position of a parent company and its subsidiaries as is the case for consolidated
accounts) are more complex than consolidated financial statements. Therefore, the Joint Auditors deemed it
necessary and helpful to include an emphasis of matter paragraph in their Report on the Combined Financial
Statements to draw readers’ attention to the basis of preparation of these accounts, which basis is described in therelevant notes to the Combined Financials Statements.
The Interim Financial Statements, prepared in accordance with IAS 34, have been reviewed by EY andDeloitte, independent auditors. EY and Deloitte issued an independent auditor’s review report on the Interim
Financial Statements.
EY, with its address at Tour First, TSA 14444, 92037 Paris-La Défense Cedex, France. The auditors
signing the auditor's reports on behalf of EY are members of the Compagnie régionale des Commissaires aux
Comptes de Versailles et du Centre.
Deloitte, with its address at 6, place de la Pyramide, 92908 Paris-la Défense Cedex, France. The auditors
signing the auditor's reports on behalf of Deloitte are members of the Compagnie régionale des Commissaires aux
Comptes de Versailles et du Centre.
The Company has appointed Ernst & Young Accountants LLP, an independent registered public audit
firm with its principal place of business at Boompjes 258, 3011 XZ Rotterdam, The Netherlands, as its statutory
auditor starting with its financial statements as of and for the financial year ending December 31, 2021.
16.3

Properties

UMG owns studio and office facilities and leases certain facilities in the ordinary courses of business. It
has offices in approximately 60 territories and has its corporate headquarters in Santa Monica, California.
16.4

Environment

The Company believes that the Group does not have any material environmental compliance costs orenvironmental liabilities.
16.5

Material Contracts

The following contracts (not being contracts entered into in the ordinary course of business) have beenentered into by the Company or another member of the Group: (i) within two years immediately preceding thedate of this Prospectus which are, or may be, material to the Company or any member of the Group, or (ii) at any
time and contain provisions under which the Company or any member of the Group has an obligation orentitlement which is, or may be, material to the Company or any member of the Group as at the date of thisProspectus:
16.5.1

Transition and Services Agreement
16.5.1.1 Introduction and services

Vivendi and the Company intends to enter into a transition and services agreement in connection with
the Distribution (the Transition and Services Agreement) in connection with the separation pursuant to theDistribution in terms of which Vivendi and its subsidiaries will provide to UMG, and UMG will provide toVivendi and its subsidiaries, on an interim, transitional basis, various services, as applicable, including, but notlimited to: (i) a limited selection of treasury related services and applications; (ii) a limited selection of accounting
services and accounting software related services and applications; (iii) taxation related services; and (iv) certain
employee related principles in connection with the Distribution.

-168-

16.5.1.2 Charges
The agreed-upon charges for such services are generally intended to allow the servicing party to chargea price comprised of costs and expenses, including reasonably allocable overhead expenses. The party receiving
each transition service will be provided with reasonable information that supports the charges for the transition
services being provided.
16.5.1.3 Term
Subject to certain exceptions where appropriate, the services will commence on the Distribution Dateand will generally terminate no later than 12 months (or in certain cases, 18 months) following the Distribution
Date. The receiving party may terminate any services by giving prior written notice to the provider of such services
and paying any applicable wind-down charges.
16.5.1.4 Limitations
Subject to certain exceptions, the liabilities of each party under the Transition Services Agreement inrespect of such party’s provision of services will generally be limited to the aggregate charges actually paid or
payable to such party under the Transition Services Agreement. The Transition Services Agreement provides thatthe provider of a service will not be liable to the recipient of such service for any indirect, incidental, punitive,
exemplary, remote, speculative or similar damages in excess of compensatory damages.
16.5.2

Registration Rights Agreement

On June 20, 2021, the Company and Tontine entered into a registration rights agreement. In connection
with the Pershing Entities acquiring their stake in the Company, this registration rights agreement was amended
and restated on August 10, 2021, including, amongst other things, by the Pershing Entities becoming parties tothe registration rights agreement (such amended and restated registration rights agreement, the Registration
Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company granted the Pershing Entities certain rights,
including:
Underwritten Resale Demandto the extent that the Company has already become subject to the periodic reporting
requirements under the U.S. Securities Exchange Act of 1934 (the U.S. Exchange Act and theCompany being referred to as a U.S. Registrant to the extent that it is subject to the U.S.
Exchange Act reporting requirements), then the Pershing Entities shall be entitled to demandcertain registration rights, including by requiring the Company to file certain registration
documents with the United States Securities and Exchange Commission (the SEC), for one ormore SEC registered underwritten public offerings (an Underwritten Resale Demand). In such
event:othe Pershing Entities may select the lead underwriter(s) for any Underwritten Resale
Demand, which lead underwriter(s) must be reasonably acceptable to the Company
and the Company may select additional underwriter(s) which shall be reasonably
acceptable to the Pershing Entities;othe Company has undertaken to use commercially reasonable efforts to file the relevant
registration document with the SEC within prescribed reasonable time periods and tohave the relevant registration document declared effective as promptly as practicable
thereafter;othe Pershing Entities shall not exercise their rights for an Underwritten Resale Demand
more than twice in any 12-month period and any underwritten offering pursuant to an
Underwritten Resale Demand shall be for a minimum of gross proceeds to the Pershing
Entities of US$250 million, unless the lead underwriter recommends a lesser amount;andoa registration demand from the Pershing Entities will only constitute an Underwritten
Resale Demand if the Pershing Entities are able to register and sell at least 50% of thePershing Entities’ Shares.
-169-Resale Shelf Registration and Piggyback Rightsto the extent that the Company is a U.S. Registrant and the Pershing Entities are not permitted
to sell all of their Shares under Rule 144 of the U.S. Securities Act of 1933 (the U.S. Securities
Act) without regard to volume or manner of sale restrictions, the Pershing Entities shall beentitled to require the Company to file a shelf registration statement for the resale of the Pershing
Entities’ Shares. In such event the Company shall be required to use commercially reasonable
efforts to file such registration statement within prescribed reasonable time periods and to haveit declared effective (if necessary) as promptly as practicable thereafter;

if the Company at any time proposes to register the resale of Shares by shareholders of theCompany under the U.S. Securities Act (other than with respect to registrations (i) made inconnection with a business combination or exchange offer pursuant to Forms S-4 or F-4, or(ii) solely registering Shares issued pursuant to an employee equity incentive plan) or toconsummate an underwritten offering in which Shares of any other shareholder of the Company
are included, the Pershing Entities will be provided with the opportunity to register or offer forsale such number of Shares as the Pershing Entities may request in writing (subject to certain
reasonable limitations). The Company shall use its commercially reasonable efforts to cause allsuch Shares of the Pershing Entities to be included in the relevant registration document(s);U.S. IPO Registration Demandto the extent that on or after January 1, 2023 the Company is not already a U.S. Registrant, thenthe Pershing Entities shall have the right to require the Company to register an underwritten
offering to effect the sale of its Shares in the United States (a U.S. IPO Registration Demand);

a U.S. IPO Registration Demand must register a number of the Pershing Entities’ Sharesreasonably expected to result in gross proceeds of at least $500 million, unless the leadunderwriter recommends a lesser amount.



the Company shall select the underwriters for such offering (which shall be reasonably
acceptable to the Pershing Entities) and shall determine the pertinent details of the structure of
the offer, including whether to list on a stock exchange and on which exchange to list;the Company will use commercially reasonable efforts to file the relevant registration statement
within 120 days from such demand and to have it declared effective as promptly as practicable
thereafter;

the Company may also include its own Shares as a primary offering in any offering pursuant toa U.S. IPO Registration Demand; andthe Pershing Entities’ right to make a U.S. IPO Registration Demand will permanently terminate
at such time as the Pershing Entities hold fewer than 2.5% of the Company’s issued and thenoutstanding Shares.

Holdback Agreement



If at any time the Company registers Shares under the U.S. Securities Act in an underwritten
offering and the Pershing Entities have been provided an opportunity to participate but decline
to do so, the Pershing Entities have undertaken not to sell, make any short sale, grant any option
for the purchase of, or otherwise transfer Shares, without prior written consent of the Company,
for a period designated by the Company in writing to the Pershing Entities (which period shallnot begin more than ten days before the effectiveness of the applicable registration document
and shall not exceed 90 days after the effective date of such). Upon request by the leadunderwriter, the Pershing Entities shall also enter into lock-up agreements on customary terms.

Company’s Right to Defer Registration



If the filing of any registration document with respect to the Pershing Entities’ Shares at any
time would require the Company to make an “Adverse Disclosure” (as defined in theRegistration Rights Agreement and relating to disclosure of material non-public information),
the Company may delay the filing of such registration document for the shortest period of time-170-

(but in no event for more than 45 days) determined in good faith by the Company to benecessary.
Public Information Undertaking
To enable the Pershing Entities to use Rule 144 of the U.S. Securities Act for the resale of the Shares
held thereby without registration, the Company shall:

(x) in case the Company is not a U.S. Registrant, make and keep public information available,
as those terms are understood and defined in Rule 144, or (y) in case the Company is a U.S.
Registrant, use commercially reasonable efforts to file with the SEC all reports and otherdocuments required to be filed by the Company under the Securities Act and Exchange Act; andfurnish to the Pershing Entities, upon written request, a written statement by the Company as toits compliance with the public information requirements of Rule 144 and reporting
requirements, if any, under the Securities Act and Exchange Act.

Termination
The Registration Rights Agreement, including the Pershing Entities’ rights described above, willterminate on the later of: (i) August 9, 2025, and (ii) the date on which all Shares held by the Pershing Entities
have been sold or all such Shares may be sold without volume and manner of sale restrictions pursuant to Rule 144
under the U.S. Securities Act.
Governing law
The Registration Rights Agreement is governed by the laws of the State of New York.
16.5.3

Facilities Agreement

On April 26, 2021, the Company as original borrower and original guarantor and UMGI as US borrower
entered into a facilities agreement with, inter alia, BNP Paribas, Crédit Agricole Corporate and Investment Bank,
Natixis, Société Générale, Banco Santander, S.A., Bank of America Europe Designated Activity Company, ING
Bank N.V. Intesa SanPaolo S.p.A., Paris Branch, Mediobanca International (Luxembourg) S.A., Mizuho Bank,
Ltd and Morgan Stanley Bank N.A. as mandated lead arrangers, the financial institutions named therein as original
lenders and Crédit Agricole Corporate and Investment Bank as facility agent (such agreement as amended,
amended and restated and/or replaced from time to time, the Facilities Agreement). The Facilities Agreement isgoverned by French law.
The Facilities Agreement provides for borrowings up to an aggregate principal amount of €3 billion on
a committed basis, comprising of €2 billion under the revolving credit facility in EUR or USD (including theswingline facility in EUR) and €1 billion under the term facility in EUR.
Subject to certain customary exceptions (including, a limit on the number of outstanding loans, minimum
amounts and notice periods), the revolving credit facility loans may be borrowed, repaid and re-borrowed at any
time. The borrowings under the revolving credit facility will be available to be used towards the general corporate
purposes of the Group, including without limitation the refinancing of the intercompany loans outstanding
between the Group and Vivendi and the repayment of existing bank debt by UMGI. The borrowings under theterm loan facility will be available to be used towards the refinancing of the intercompany loans outstanding
between the Group and Vivendi (for information about the intercompany loans outstanding between the Groupand Vivendi, see Section 8.9.10 (Facilities Agreement and repayment of Vivendi Loan Agreements)). The
borrowings under the swingline facility will be available to be used towards the general corporate purposes of theGroup, including without limitation, the refinancing of any note or other instrument maturing under a euro
commercial paper program of a member of the Group. The swingline facility is not independent of the revolving
credit facility, it operates within the revolving credit facility as the revolving credit facility may be used by way
of swingline facility loans.
16.5.3.1 Maturity and repayment
The revolving credit facility (including the swingline facility) matures on April 26, 2026 (being five
years after the signing of the Facilities Agreement), subject to two one-year extension options (at the Company’s
request, subject to the lenders’ discretion). The term facility matures on October 26, 2026. The Company shall
repay the term loan in five yearly instalments beginning on October 26, 2022.
-171-16.5.3.2 Interest rate and fees
The interest rate on the term loan facility and the revolving credit facility is the percentage rate per annum
equal to the aggregate of the applicable margin and EURIBOR or in relation to any loan that is not in euro, LIBOR(subject to a zero floor) (or if LIBOR is not available for that currency, the reference rate used in the relevantinterbank market for that currency as approved by the facility agent). The interest rate on the swingline facility
for each day is the percentage rate per annum equal to the aggregate of €STR and EONIA €STR spread for thatday and the applicable margin. The initial margin at the date of the Facilities Agreement was 0.45% per annum inrespect of a revolving credit facility loan in euros, 0.55% per annum in respect of a revolving credit facility loan
in USD, 0.45% per annum in respect of a swingline facility loan, and 0.80% per annum in respect of a term loan.
The margin applicable to each of the term loan, revolving credit facility loan and the swingline facility loan shallbe adjusted annually by reference to the leverage ratio as indicated in the most recent audited Combined Financial
Statements of the Group. The Company may select an interest period of three or six months regarding a term loan,
an interest period of one, three or six months regarding a revolving credit facility loan, and an interest period of
not more than seven Business Days regarding a swingline facility loan.
A ticking fee is payable on the aggregate undrawn and uncanceled amount of the term facility from April
26, 2021 until the earlier of, the date of first utilization of the term loan, and July 26, 2021, of an amount equal to
20% of the then applicable margin for the term loan facility, and thereafter until the date of first utilization of theteam loan, of an amount equal to 35% of the then applicable margin for the term loan facility (calculated on thebasis of the actual number of days elapsed and a 360-day year).
A commitment fee is payable on the aggregate undrawn and uncanceled amount of the revolving credit
facility from April 26, 2021 until the earlier of the first utilization of the revolving credit facility, and July 26,
2021 of an amount equal to 20% of the then applicable margin for the revolving credit facility, and thereafter until
the end of the availability period applicable to the revolving credit facility 35% of the then applicable margin for
the revolving credit facility. The commitment fee is payable quarterly in arrears.
A utilization fee is payable on the amount of any loans drawn at a rate between 0.10% and 0.40%,
depending on the percentage drawn against the revolving credit facility. The utilization fee is payable quarterly inarrears.
For each extension of the termination date of the revolving credit facility loan, an extension fee is payableof an amount equal to 0.025% of the lenders’ extended commitments under the revolving credit facility.
Default interest is calculated as an additional 2% on the overdue amount.
Customary agency fees, documentation agent fees, syndication agent fees and swingline agent fees will
also be payable to Crédit Agricole Corporate and Investment Bank (as swingline agent and facility agent), BNP
Paribas (as documentation agent), and Natixis (as syndication agent) respectively.
16.5.3.3 Security
The Company irrevocably and unconditionally guarantees to the facility agent and lenders the payment
in due time of the secured obligations of UMGI under the Facilities Agreement in an initial maximum principal
amount of €2,000,000,000 increased by any interest, default interest, fees arising in connection therewith.
16.5.3.4 Covenants
For so long as the Company does not have a rating for its long term unsecured and non-credit enhanced
debt obligations of at least BBB by S&P or Fitch or at least Baa2 by Moody’s or a comparable rating from aninternationally recognized credit rating agency located in a member country of the OECD, its leverage ratio shallbe equal to or below 4.0x. The leverage ratio is the ratio of financial net debt of the Company and its subsidiaries
to EBITDA (as defined in accordance with the Facilities Agreement) of the Company and its subsidiaries. As at
the date of the Prospectus, the Company would not be in breach of this leverage ratio if it were to be measured onsuch date.
The Facilities Agreement contains a number of customary covenants which, among other things, restrict
the ability of the Company and its subsidiaries to:create or incur security over any of its assets;

make disposals;
-172-



merge with other entities;change its business;enter into cash pooling agreements with Vivendi; andbreach sanctions restrictions.

However, each of these covenants is subject to customary exceptions and qualifications, including forexample liens arising by operation of law in the ordinary course of business, security interests arising out of title
retention provisions in a supplier’s terms and conditions, disposals with net proceeds of less than 10% of thecontent assets owned by the Group or if such threshold is exceeded, where 100% of the disposal proceeds are
reinvested in content assets within 12 months.
The Facilities Agreement also contains customary affirmative covenants, including mandatory periodic
reporting of financial information, notice upon the occurrence of events of default and certain other events(including conversion of the Company into a public company (naamloze vennootschap)), compliance with laws
and the maintenance of certain insurance coverage. The borrower and guarantors must also ensure that their
payment obligations under the facilities at all times rank at least pari passu with all their other present and future
unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies
generally.
There are customary prepayment requirements in the Facilities Agreement, including an individual rightfor each lender to be prepaid on a change of control (provided that if the Bolloré Entities and/or Vivendi alone orin concert, gain control of the Company following the Distribution, it shall not constitute a change of control).
Further, the Facilities Agreement contains certain events of default (including for example, non-payment, breachof financial covenants, misrepresentation, insolvency), which are subject to customary materiality or otherqualifications, exceptions and baskets.
16.5.4Vivendi Counter Guarantee

In connection with the separation of the Group’s treasury function from Vivendi’s treasury function in
anticipation of the Distribution, the Company and Vivendi entered into a counter guarantee on July 8, 2021 (theVivendi Counter Guarantee).
Under the Vivendi Counter Guarantee, the Company irrevocably and unconditionally undertook, fromthe date of the Distribution, to pay, as its own primary obligation, any amounts due and owing by Vivendi to any
beneficiaries from time to time under certain guarantees and a surety which were previously provided by Vivendi
on behalf of the Group, including:a letter of credit of US$6.384.423 to the benefit of AIG and certain affiliates of AIG, a part ofwhich covers the employees of the Company

guarantees provided to The Beatles, Yoko Ono, certain Apple entities, George Harrison andRichard Starkey, capped at £100,000,000, which provide security notably for royalty payments
to the “Apple parties”;

guarantees provided to subsidiaries of the Company established in the United Kingdom under
Section 479A of the UK Companies Act 2006 in connection with the application of certain audit
exemptions, which guarantees cover all liabilities outstanding on the balance sheets of thesubsidiary companies as of December 31, 2020, until such obligations are settled in full; and

so-called 403 statements under Section 403 of Book 2 of the Dutch Civil Code in connection
with the application of certain audit exemptions for the Dutch subsidiaries of the Company inrespect of which the Company shall be liable until the moment of withdrawal of the 403
statements by Vivendi, until the moment of termination of the residual liability (overblijvende
aansprakelijkheid) in accordance with Section 404 of Book 2 of the Dutch Civil Code; anda surety to PRI Pension Garanti established in Sweden, capped at SEK 60.000.000 and expiringon March 31, 2022.

-173-

16.5.5

Shareholders Agreement

The Shareholders Agreement is described at Section 12.10 (Shareholders’ Agreement), however, thisagreement will, except for certain provisions in relation to, inter alia, registration rights, automatically terminate
upon the occurrence of the Admission.
16.5.6

Greater China Business Agreement

As part of the Tencent -led Consortium’s acquisition of its stake in UMG, on March 31, 2020, UIM andTencent Music Entertainment entered into an agreement (the Greater China Option Agreement) pursuant towhich UIM granted Tencent Music Entertainment the Call Option (defined below), which can be exercised at any
point prior to April 1, 2022 (the Exercise Period).
Amongst other things, UIM granted Tencent Music Entertainment a one-time right (the Call Option) toacquire up to 25% (but no less than 20%) of the share capital of the holding company which controls UIM’s
Greater China operations (the Tencent Call Shares). Subject to necessary approvals from relevant governmental
authorities, Tencent Music Entertainment may exercise the Call Option during the Exercise Period. UIM andTencent Music Entertainment shall agree on the purchase price for the Tencent Call Shares, which shall be based
upon an agreed EBITDA multiple (and subject to certain adjustments).
16.6

Significant Change since June 30, 2021.

As at the date of the Prospectus, there have been no significant changes in the financial performance orin the financial position of the Group since June 30, 2021.
16.7

Litigation and arbitration proceedings

As disclosed at Section 11.14 (Litigation), the Group is party to various legal proceedings from time totime arising in the ordinary course of business. Save for those matters disclosed at Section 11.14 (Litigation),
there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or
threatened of which the Company or the Group is aware) during the previous 12 months which may have, or have
had in the past, significant effects on the Company or the Group’s financial position or profitability.
16.8

Corporate Resolutions

The Company will prior to the Admission obtain all necessary consents, approvals and authorizations in
the Netherlands in connection with the Admission.
16.9

Options or Preferential Rights in respect of Shares

Save as disclosed in Section 12.6 (Equity Holdings of Directors and Corporate Executives), the Company
is not party to any contract or arrangement (or proposed contract or arrangement), whereby an option or
preferential right of any kind is (or is proposed to be) given to any person to subscribe for any securities in the
Company.
16.10

No Incorporation of Website

Prospective Investors should only rely on the information that is provided in this Prospectus orincorporated by reference into this Prospectus. No other documents or information, including the contents of theCompany’s website, or of websites accessible from hyperlinks on that website, form part of, or are incorporated
by reference into, this Prospectus.
16.11

Availability of Documents and Available Information

The Articles of Association, in Dutch, are available and can be obtained free of charge from theCompany’s website (https://investors.universalmusic.com/governance).
Subject to any applicable selling and transfer restrictions, copies of this Prospectus and any supplement
to this Prospectus may be obtained free of charge from the Company’s website (www.universalmusic.com) for aperiod of 10 years following the date of this Prospectus (or such other shorter period as may be allowed pursuant
the Prospectus Regulation or other applicable law).

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The posting of this Prospectus on the internet does not constitute an offer to sell or a solicitation of an
offer to buy any of the Shares to or from any person in any jurisdiction in which it is unlawful to make such offer
or solicitation to such person. The electronic version may not be copied, made available or printed for distribution.

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17. DEFINITIONS AND GLOSSARY
The following definitions apply throughout this Prospectus unless the context requires otherwise:
Term

Definition

A&R ................................................................

artist and repertoire

Adjustment of the Allocation Ratio ................

the adjustment of the Allocation Ratio to be decided byVivendi’s management board should the Distribution exceed
the Ceiling

Admission ........................................................

admission to listing and trading of the Shares on Euronext
Amsterdam

AFM ................................................................

the Netherlands Authority for the Financial Markets(Stichting Autoriteit Financiële Markten)

Allocation Ratio ..............................................

the ratio of Distribution Shares to be received by each
Vivendi Shareholder for each Share held on the Distribution
Record Date

Articles of Association ....................................

the articles of association of the Company as they will readupon Admission after amendment of the existing articles ofassociation

ASCAP ............................................................

American Society of Composers, Authors and Publishers

Audit Committee .............................................

the audit committee of the Company

Beneficiaries ...................................................

for purposes of Dutch income and corporate income tax, thebeneficiaries of the Settlor

BMI .................................................................

Broadcast Music, Inc.

Board ...............................................................

the board of directors of the Company, consisting of the
Executive Directors and the Non-Executive Directors

Board Rules ....................................................

the rules governing the Board’s principles and best practices
and further procedures of holding meetings, decision making
and functioning of the Board, as amended from time to time

Bolloré Entities ...............................................

Compagnie de Cornouaille, together with Compagnie del’OdetBusiness Day ...................................................

one full day on which banks are generally open for businessin the Netherlands

Caroline ..........................................................

Caroline Records

CEO or Chief Executive Officer ....................

the chief executive officer of the Company

CET

Central European Time

Chairman of the Board...................................

the Non-Executive Director that is appointed as chairman of
the Board

CMG ................................................................

Capitol Music Group

-176-

Term

Definition

Combined Financial Statements ....................

the audited combined financial statements of Universal Music
Group as at and for the years ended December 31, 2018, 2019and 2020, included in this Prospectus

Compagnie de Cornouaille ...........................

Compagnie de Cornouaille SAS a simplified stock
corporation (société par actions simplifiée)Compagnie de l’Odet ......................................

Compagnie de l’Odet SE, a corporation (société européenne)

Company .........................................................

Universal Music Group B.V. (to be converted to a publiccompany (naamloze vennootschap) prior to the Admission)Company Secretary .........................................

the company secretary of the Company, appointed anddismissed by the Board from outside its members

Concert and each party thereto a Concert
Party ................................................................

the Bolloré Entities and the Restructuring Shareholders, forthe reasons described in Section 12.11 (Relationship
Agreement).

Concerto ..........................................................

Concerto Investment B.V.

Copyright Directive .........................................

Directive on Copyright in the Digital Single Market adopted
by the European Union

Corporate Executives ......................................

the members of the executive management team of the Group,comprising the individuals named in Section 12.4 (Corporate
Executives).

COVID-19 pandemic ......................................

the global pandemic of a new strain of coronavirus, COVID19

Deloitte ............................................................

Deloitte & Associés

Deputy CEO or Deputy Chief Executive
Officer .............................................................

an executive Director that is responsible for supporting the
Chairman & Chief Executive Officer

DFSA ..............................................................

the Dutch Financial Supervision Act

Director ...........................................................

an Executive Directors or Non-Executive Directors on the
Board

Distribution .....................................................

the distribution of the Distribution Shares to the Vivendi
Shareholders described in Section 14 (The Distribution).

Distribution Date ............................................

on or about September 23, 2021, or such other date as may be
notified by the Company and Vivendi

Distribution ex-Date .......................................

on or about September 21, 2021, or such other date as may be
notified by the Company and Vivendi

Distribution Record Date................................

on or about September 22, 2021, or such other date as may be
notified by the Company and Vivendi

-177-

Term

Definition

Distribution Report .........................................

means the report on the special dividend in kind and on thespecial interim dividend in kind prepared by Vivendi andprovided to its shareholders on May 12, 2021

Distribution Settlement ...................................

delivery of the Distribution Shares

Distribution Shares .........................................

up to 60% of the issued and outstanding shares held byVivendi prior to the implementation of the Distribution in thecapital of the Company, which shares shall be distributed to
the Vivendi Shareholders pursuant to the Distribution

Dividend Policy ..............................................

the dividend policy of the Company as set out in Section 5(Dividend Policy)

DOJ .................................................................

Department of JusticeDutch Civil Code ...........................................

Dutch Civil Code (Burgerlijk Wetboek)

Dutch Corporate Governance Code ...............

Corporate Governance Code of the Netherlands

EEA .................................................................

European Economic Area

Enterprise Chamber .......................................

the Enterprise Chamber of the Court of Appeal of Amsterdam

Equity Incentive Plan .....................................

the equity-based long term incentive plan intended to beestablished by the Company post Admission

EU ...................................................................

European Union

Euroclear France ...........................................

Euroclear France S.A.

Euronext Amsterdam ......................................

a regulated market operated by Euronext Amsterdam N.V.

Executive Director ..........................................

an executive member of the Board

Existing Shareholders ....................................

Vivendi, the Bolloré Entities, the Tencent-led Consortiumand the Pershing Entities

EY ....................................................................

Ernst & Young et Autres

Facilities Agreement .......................................

the facilities agreement entered into on April 26, 2021,
between the Company as original borrower and original
guarantor and UMGI as US borrower entered into a facilities
agreement with, inter alia, BNP Paribas, Crédit Agricole
Corporate and Investment Bank, Natixis, Société Générale,
Banco Santander, S.A., Bank of America Europe DesignatedActivity Company, ING Bank N.V. Intesa SanPaolo S.p.A.,
Paris Branch, Mediobanca International (Luxembourg) S.A.,
Mizuho Bank, Ltd and Morgan Stanley Bank N.A. as
mandated lead arrangers, the financial institutions named
therein as original lenders and Crédit Agricole Corporate andInvestment Bank as facility agent

-178-

Term

Definition

Financial Co-Advisors ....................................

Banque Hottinguer, Messier et Associés, CIC, Rothschild,
Bank of America, ING, Intesa Sanpaolo S.p.A., Lazard,
Mizuho Securities and Banco SantanderFirst Trading Date ..........................................

on or about September 21, 2021

FRSA ...............................................................

the Dutch Financial Reporting Supervision Act (Wet toezicht
financiële verslaggeving)

FTC .................................................................

the Federal Trade Commission

GDPR ..............................................................

the General Data Protection Regulation (Regulation (EU)2016/679)

General Meeting .............................................

the Company’s general meetingGroup or UMG ...............................................

the Company and each of its subsidiaries from time to time

IFPI .................................................................

International Federation of the Phonographic Industry

IFPI Global Music Report 2021.....................

the Global Music Report 2021 issued by IFPI issued in March
2021

IFRS ................................................................

International Financial Reporting Standards, as endorsed in
the European Union

Ingrooves ........................................................

Ingrooves Music GroupInterim Financial Statements.........................

the interim financial statements for the Company for the sixmonth period ended June 30, 2021

ISIN .................................................................

International Security Identification Number

Lead Equity Capital Markets Advisors ..........

each of the Lead Financial Advisors, the Co-Advisors and the
Other Financial Advisors

Lead Financial Advisors ................................

BNP Paribas, Crédit Agricole Corporate and Investment
Bank, Morgan Stanley, Natixis and Société Générale

Listing and Paying Agent ...............................

BNP Paribas is the Listing Agent and BNP Paribas Securities
Services is the Paying and Settlement Agent with respect to
the Shares on Euronext.

Mandatory Offer Prevention Obligation

has the meaning as given thereto in Section 12.11(Relationship Agreement)

Market Abuse Regulation or MAR ................

Regulation (EU) 596/2014

MCA ................................................................

Music Corporation of America Inc.

Member State ..................................................

a member state of the European Union

Nielsen ............................................................

Nielsen Corporation

Nomination Committee...................................

the nomination committee of the Company

-179-

Term

Definition

Non-Executive Director ..................................

a non-executive member of the Board

NRI ..................................................................

Non-Recorded Income

Other Financial Advisors ...............................

Bank of China and Goldman Sachs Bank Europe SE

Parties .............................................................

has the meaning given thereto in Section 12.11 (Relationship
Agreement)

PCI DSS ..........................................................

the Payment Card Industry Data Security Standard

Pershing Entities .............................................. collectively, Pershing Square Holdings, Ltd., Pershing Square
L.P., Pershing Square International Ltd. and PS VII Master,
L.P.
Prospectus .......................................................

this document

Prospectus Regulation ....................................

Regulation (EU) 2017/1129 of the European Parliament andof the Council of the European Union of 14 June 2017

RCF Intercompany Loan Agreement.............

the revolving credit facility intercompany loan agreement
entered into between the Company, as lender, and UIM, asborrower, on July 7, 2021, in connection with the repaymentof the Vivendi Loan Agreements by the Company on behalfof UIM

Recording Funds ............................................

advances and recording costs

Reference Price ...............................................

the technical reference price for the Shares, to be announced
by Euronext Amsterdam

Relationship Agreement .................................

the relationship agreement dated September 8, 2021 between
Bolloré Entities and the Restructuring Shareholders

Remuneration Committee...............................

the remuneration committee of the Company

Restructure ......................................................

the contribution by the Restructuring Shareholders of all of
the issued shares in the share capital of both UMGI and UIM
to the Company in exchange for newly issued shares in the
Company, as a consequence whereof the Company became
the sole holding company of the Group, such restructure
being completed on February 26, 2021

Restructuring Shareholders ...........................

Vivendi and the Tencent-led Consortium

RIAA ...............................................................

Recording Industry Association of America

SAMR ..............................................................

the State Administration for Market Regulation

Scherzo ............................................................

Scherzo Investment B.V.

SEC .................................................................

the US Securities and Exchange Commission

Section 2855 ....................................................

California Labor Code Section 2855

-180-

Term

Definition

SESAC ............................................................

Society of European Stage Authors and Composers

Settlement ........................................................

delivery of the Distribution Shares

Settlor ..............................................................

for purposes of Dutch income and corporate income tax, the(deemed) settlor, grantor or similar originator

Shareholders ...................................................

holders of Shares

Shareholders Agreement ................................

has the meaning given(Shareholders’ Agreement)

Shares..............................................................

ordinary shares with a nominal value of €10.00 each in thecapital of the Company

Significant Influence

has the meaning given thereto in Section 12.11 (Relationship
Agreement)

Ten Thousand Projects Distribution
Agreement .......................................................

the distribution agreement pursuant to which Caroline has
obtained the exclusive right to distribute certain audio andaudio-visual recordings of Ten Thousand Projects

Tencent-led Consortium .................................

collectively, Concerto and Scherzo

Term Loan Intercompany Agreement ............

the term loan intercompany agreement entered into between
the Company, as lender, and UIM, as borrower, on July 7,
2021, in connection with the repayment of the Vivendi Loan
Agreements by the Company on behalf of UIM

Third Party ......................................................

for purposes of Dutch income and corporate income tax, athird party such as a trustee, foundation or similar entity or
arrangement

Threshold Stake ..............................................

has the meaning given thereto in Section 12.11 (Relationship
Agreement)

theretoin

Section

12.10

Tontine .............................................................. Pershing Square Tontine Holdings, Ltd.
Transaction .....................................................

collectively, the Distribution and the Admission

Transition and Services Agreement ...............

the Transition and Services Agreement intended to be enteredinto by UMG and Vivendi in connection with the Distribution

Treasury Carve-Out ........................................

the carve-out of the Group’s treasury function from thetreasury function of the Vivendi Group in anticipation of theDistribution

UIM .................................................................

Universal International Music B.V.

UMG Financial Statements............................

the Combined Financial Statements and the Interim Financial
Statements

UMG S.A.S......................................................

Universal Music Group S.A.S

UMGI ..............................................................

Universal Music Group, Inc.

-181-

Term

Definition

UMPG .............................................................

Universal Music Publishing Group

Universal Music Group ..................................

when referred to in the Combined Financial Statements
means, collectively, UMGI and UIM, collectively, and eachof their respective subsidiaries

US Copyright Act ............................................

US Copyright Act of 1976, as amended

US Securities Act ............................................

the US Securities Act of 1933, as amended

Vice-Chairman of the Board ..........................

the Non-Executive Director designated by the Board as its
vice-chairman

Vivendi ............................................................

Vivendi SE

Vivendi AGM ..................................................

the annual general meeting of Vivendi Shareholders held on
June 22, 2021

Vivendi Counter Guarantee ...........................

the counter guarantee entered into between the Company andVivendi on July 8, 2021

Vivendi Loan Agreements .............................

collectively:a loan agreement entered into by UIM and Vivendi on May
3, 2021a loan agreement entered into by UIM and Vivendi on May
6, 2021a loan agreement entered into by UIM and Vivendi on May
13, 2021

Vivendi Shareholders .....................................

any and all holders of any issued and outstanding ordinary
share(s) in the capital of Vivendi on the Distribution Record
Date

-182-

18. HISTORICAL FINANCIAL INFORMATION
Page
Unaudited consolidated condensed financial statements for the first half year ended June30, 2021.......................................................................................................................................
Independent Auditor’s Review Report ........................................................................................
Consolidated Condensed Statement of Earnings .........................................................................
Consolidated Condensed Statement of Comprehensive Income .................................................
Consolidated Condensed Statement of Financial Position ..........................................................
Consolidated Condensed Statement of Cash Flows ....................................................................
Consolidated Condensed Statement of Changes in Equity..........................................................
Notes to the consolidated condensed financial statements ..........................................................

F-3
F-1 – F-2
F-5
F-6
F-7
F-8
F-9 – F11
F-12 – F-55

Audited combined financial statements of December 31, 2020 as at and for the three years
ended December 31, 2018, 2019 and 2020 ................................................................................
Independent Auditor’s Report .....................................................................................................
Combined Statements of Earnings ..............................................................................................
Combined Statements of Comprehensive Income ......................................................................
Combined Statements of Financial Position................................................................................
Combined Statements of Cash Flows ..........................................................................................
Combined Statements of Changes in Equity ...............................................................................
Notes to the combined financial statements ................................................................................

F-59
F-56 – F-58
F-61
F-62
F-63
F-64
F-65 – F-67
F-68 – F-118-183-

The Company
Universal Music Group N.V.
‘s-Gravelandseweg 80
1217 EW Hilversum
The Netherlands
Legal Adviser to the Company
Freshfields Bruckhaus Deringer LLP
as to Dutch law
Strawinskylaan 101077 XZ Amsterdam
The Netherlands

as to US law
601 Lexington Ave
New York, NY 10022
United States
Legal Advisor to Vivendi

as to Dutch law
Loyens & Loeff N.V.
Parnassusweg 300
1081 LC Amsterdam
The Netherlands

as to French law
Cabinet Bompoint
48 Avenue Victor Hugo
75116 Paris
FranceLead Financial Advisors

BNP Paribas SA

16 Boulevard des Italiens
75009 Paris, France

Crédit Agricole Corporate andInvestment Bank
12 place des Etats-Unis
CS 70052
92547 Montrouge Cedex
FranceNatixis30 avenue Pierre Mendès-France
75013 Paris

Grosse Gallusstrasse 18
60312 Frankfurt, Germany

Société Générale

29 Boulevard Haussmann, 75009
Paris, France

Banque HOTTINGUER

Financial Co-Advisors
Messier et Associés

63 Rue de la Victoire
75009 Paris, France

73 rue de Miromesnil
75008 Paris, France

Rothschild & Co
23 bis avenue de Messine
75008 Paris, France
ING Bank N.V.
Bijlmerdreef 106
1102 CT Amsterdam,
The Netherlands

Morgan Stanley Europe SE

Crédit Industriel et Commercial
S.A.
6 avenue de Provence
75009 Paris, France
Bank of America Europe DAC,
Paris Branch
51 rue La Boétie 75008 Paris, France

Intesa Sanpaolo S.p.A.
Piazza S. Carlo 156
10121 Turin, Italy

Mizuho Securities Europe GmbH
Taunustor 1, 60310 Frankfurt am
Main, Germany

Lazard SAS
175 boulevard Haussmann
75008 Paris, France

Banco Santander, S.A.
Paseo de Pereda, 9-12
39004 Santander, Spain
Other Financial Advisors

Bank of China
23-25 avenue de la Grande Armée
75116 Paris, FranceGoldman Sachs Bank Europe SE
Marienturm
Taunusanlage 9-1060329 Frankfurt am Main,
Germany

Legal Adviser to the Lead Equity Capital Markets Advisors
as to Dutch law
Allen & Overy LLP
Apollolaan 15 1077 AB Amsterdam
The Netherlands

as to French law
Allen & Overy LLP
52, avenue Hoche, 75008 Paris
Franceas to US law
Allen & Overy LLP
One Bishop Square London E1 6AD
United Kingdom

Listing Agent
BNP Paribas SA, Netherlands
BranchHerengracht 595
1017CE, Amsterdam,
The Netherlands

Settlement and Paying Agent
BNP Paribas Securities Services
3 rue d’Antin
75002 Paris, France

Independent Auditors to theCompany
Ernst & Young et Autres
Tour First, TSA 14444, 92037
Paris-La Défense Cedex, France

Deloitte & Associés (Deloitte)
6, place de la Pyramide, 92908 Paris-laDéfense Cedex, FranceERNST & YOUNG et Autres
Tour First – TSA 14444
92037 Paris-La Défense cedex
S.A.S. à capital variable
438 476 913 R.C.S. Nanterre

Deloitte & Associés
6, place de la Pyramide
92908 Paris-La Défense Cedex
S.A.S. au capital de 2 188 160 €572 028 041 RCS Nanterre

UNIVERSAL MUSIC GROUP B.V.
Private limited liability company
Gravelandseweg 80,
1217 EW - Hilversum - NETHERLANDS_______________________________
Universal Music Group B.V.’s Independent Auditors’ report on the review of thehalf-yearly unaudited consolidated condensed Financial Statements

July 28, 2021_______________________________To the Management Board of Universal Music Group B.V.,

Introduction
We have reviewed the accompanying half-yearly unaudited consolidated condensed Financial Statements (“Financial
Statements”) of Universal Music Group B.V. (“UMG”) as at June 30, 2021.
Due to the global crisis related to the Covid-19 pandemic, the Financial Statements have been prepared and reviewed
under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary
emergency have had numerous consequences for companies, particularly on their operations and their financing, andhave led to greater uncertainties on their future prospects. Those measures, such as travel restrictions and remote
working, have also had an impact on the companies' internal organization and the performance of our review
procedures.

F-1

F-2

Half yearly unaudited* consolidated condensed financial statements
for the first-half year ended June 30, 2021

* The consolidated condensed financial statements for the half-year ended June 30, 2021 were subject to a limited
review by UMG’s independent auditors. The auditors’ report follows the consolidated condensed financial
statements.

F-3

UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - JUNE 30, 2021 ......................................... 3
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS .................................................................................. 3
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME .......................................................... 4
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION .................................................................. 5
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS .............................................................................. 6
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY ................................................................... 7
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ............................................................ 10
ACCOUNTING POLICIES AND VALUATION METHODS ...........................................................................................10
SEGMENT DATA...........................................................................................................................................34
FINANCIAL CHARGES AND INCOME ..................................................................................................................35
INCOME TAXES ............................................................................................................................................36
EARNINGS PER SHARE ...................................................................................................................................37
CHARGES AND INCOME DIRECTLY RECOGNIZED IN EQUITY ...................................................................................38
GOODWILL .................................................................................................................................................39
CONTENT ASSETS AND COMMITMENTS ............................................................................................................40
LEASES ......................................................................................................................................................41
INVESTMENTS IN EQUITY AFFILIATES ..............................................................................................................42
FINANCIAL ASSETS......................................................................................................................................42
CASH POSITION AND BORROWINGS ...............................................................................................................43
EQUITY ....................................................................................................................................................45
PROVISIONS..............................................................................................................................................46
SHARE-BASED COMPENSATION PLANS ...........................................................................................................47
RELATED PARTIES.......................................................................................................................................47
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS ................................................................................49
LITIGATION ...............................................................................................................................................51
LIST OF CONSOLIDATED ENTITIES ..................................................................................................................53
SUBSEQUENT EVENTS .................................................................................................................................53

Universal Music Group / 2

F-4

Unaudited consolidated condensed financial
statements - June 30, 2021
Consolidated Condensed Statement of Earnings
Six months ended June 30,

Year ended
December 31,(unaudited)(in millions of euros)
Revenues

Note
2

2021

2020

2020

3,831

3,459 d7,432

Cost of revenues(2,047)(1,820)(3,917)

Selling, general and administrative expenses(1,090)(1,104)(2,265)

(9)

(8)

(20)

Restructuring charges
Impairment losses on intangible assets acquired through business combinations

2

-

-

-

Income from equity affiliates - operational

10

(1)

(11)

(9)

684

516 -

1,221

Earnings before interest and income taxes (EBIT)Interest

3

(9)

(6)

(15)

Income from investments

3

-

-

-

Other financial income

3

105

453

603

Other financial charges

3

(183)

(13)

(28)

(87)

434 -

560

597

950 -

1,781

(144)

(214)

(412)

Earnings from continuing operations

453

736

1,369

Earnings from discontinued operations

-

-

-

Earnings before provision for income taxes
Provision for income taxes

4

Earnings

453

736 -

1,369

452

735 -

1,366

1

1

3

Basic, earnings for the period attributable to ordinary equity holders of the parent

0.25

0.41

0.75

Diluted earnings for the period attributable to ordinary equity holders of the parent

0.25

0.41

0.75

Of which
Earnings attributable to shareowners
Non-controlling interests
Earnings per share

5

Universal Music Group / 3

F-5

Consolidated Condensed Statement of Comprehensive
IncomeFor the six months ended June 30,

Year ended
December 31,(unaudited)(in millions of euros)

Note

Earnings

2021

2020

2020

453

736

1,369

-

1

6

Financial assets at fair value through other comprehensive income

-

-

2

Comprehensive income from equity affiliates, net

-

-

-

Items not subsequently reclassified to profit or loss

-

1

8

24

(24)

(194)

1

(1)

(6)

Other impacts, net

-)

-

-

Items to be subsequently reclassified to profit or loss

25

(25)

(200)

25

(24)

(192)

478

712

1,177

477

711

1,174

1

1

2

Actuarial gains/(losses) related to employee defined benefit plans, net

Foreign currency translation adjustments
Comprehensive income from equity affiliates, net

Charges and income directly recognized in equity
Total comprehensive income

106

Of which
Total comprehensive income attributable to shareowners
Total comprehensive income attributable to non-controlling interests

Universal Music Group / 4

F-6

Consolidated Condensed Statement of Financial
Position
June 30, 2021
(unaudited)

December 31,
2020

1,386)
3,523)
-)
247)
406)
95)
1,782)
369)
7,808)

1,369
3,512
1
254
416
72
1,962
414
8,000

85)
3)
729)
1,112)
35)
901)
2,865)

79
1
677
1,088
1
1,141
2,987

TOTAL ASSETS

10,673)

10,987

EQUITY AND LIABILITIESShare capital
Additional paid-in capital
Retained earnings
Of which earnings attributable to shareowners
Non-controlling interests
Total equity

18,132)
14,868)(31,513)452)-)
1,487)

na
na
1,432
1,366
1,432

(in millions of euros)
ASSETS
Goodwill
Non-current content assets
Other intangible assets
Property, plant and equipment
Rights-of-use relating to leases
Investments in equity affiliates
Non-current financial assets
Deferred tax assets
Non-current assets
Inventories
Current tax receivables
Current content assets
Trade accounts receivable and other
Current financial assets
Cash and cash equivalents
Current assets

Note
7
8

9
10
11

8

12

1, 13

Non-current provisions
Long-term borrowings and other financial liabilities
Shareowners borrowings
Deferred tax liabilities
Long-term lease liabilities
Other non-current liabilities
Non-current liabilities

14
12
12,16

342)
1)
-)
774)
440)
751)
2,308)

335
1
2,368
828
447
851
4,830

Current provisions
Short-term borrowings and other financial liabilities
Short-term borrowings with Vivendi SE
Trade accounts payable and other
Short-term lease liabilities
Current tax payables
Current liabilities14
12
12, 1698)549)
2,368)
3,741)
78)
44)
6,878)

137
640
3,843
78
27
4,725

Total liabilities

9,186)

9,555

TOTAL EQUITY AND LIABILITIES

10,673)

10,987

9

na: not applicable

Universal Music Group / 5

F-7

Consolidated Condensed Statement of Cash Flows
For the six months ended June 30,

For the year
ended
December 31,
2020(unaudited)(in millions of euros)
Operating activities
EBIT
Adjustments
Content investments, net
Gross cash provided by operating activities before income tax paid
Other changes in net working capital
Net cash provided by operating activities before income tax paid
Income tax (paid)/received, net
Net cash provided by operating activities
Investing activities
Capital expenditures
Purchases of consolidated companies, after acquired cash
Investments in equity affiliates
Increase in financial assets
Investments
Proceeds from sales of property, plant, equipment and intangible assets
Proceeds from sales of consolidated companies, after divested cash
Disposal of equity affiliates
Decrease in financial assets
Divestitures
Dividends received from equity affiliates
Dividends received from unconsolidated companies
Net cash provided by/(used for) investing activities

Note

8

10
11
3
11
10

2021

2020
684
88
(173)
599
(172)
427
(118)
309

516
94
(352)
258
(118)
140
(64)
76

1,221
213
(1,517)
(83)
287
204
(207)
(3)

(23)
(2)
(23)
(47)
(95)
5
117
122
1
1

(37)
(1)
(1)
(39)
1
1
1

(66)
(4)
(2)
(3)
(75)
11
1
15
27
2
-

29

(37)

(46)

(422)
(1)
(423)
-

(11)
(3)
(14)
-

(283)
(11)
(5)
(299)
-

Financing activities
Distributions to shareowners
Other transactions with shareowners
Dividends paid by consolidated companies to their non-controlling interests
Transactions with shareowners
Setting up of long-term borrowings and increase in other long-term financial liabilities
Principal payment on long-term borrowings and decrease in other long-term financial
liabilities
Principal payment on short-term borrowings
Other changes in short-term borrowings and other financial liabilities
Interest paid, net
Other cash items related to financial activities
Transactions on borrowings and other financial liabilities
Repayment of lease liabilities and related interest expenses
Net cash provided by/(used for) financing activities

13
2

12

3, 9

Foreign currency translation adjustments of continuing operations
Change in cash and cash equivalents

-

-

-

(103)
(9)
(9)
(121)
(40)

149
(6)
(1)
142
(43)

-

625
(15)
(3)
607
(91)

(584)

85

217

6

(20)

(35)

(240)

104

133

Cash and cash equivalents

At beginning of the period

12

1,141

1,008

1,008

At end of the period

12

901

1,112

1,141

Universal Music Group / 6

F-8

Consolidated Condensed Statement of Changes in Equity
Six months ended June 30, 2021 (unaudited)(in millions of euros, except number of shares)

BALANCE AS OF DECEMBER 31, 2020

Capital
Number ofshares (inthousands)

Share capital

Retained earnings and other
Additional
paid-in
capital

Other
comprehensive
incomeRetainedearnings

Subtotal

Total equity

Subtotal

-

-

-

-

1,915

(483)

1,432

1,432

Attributable to Universal Music Group

-

-

-

-

1,914

(482)

1,432

1,432

Attributable to non-controlling interests

-

-

-

-

1

(1)

-

-

1,813,241

18,132

14,86833,000(33,422)-(33,422)(422)

Dividends paid by UMG B.V. – Vivendi SE

-

-

-

-

(338)

-

(338)

(338)

Dividends paid by UMG B.V. – Concerto and Scherzo

-

-

-

-

(84)

-

(84)

(84)

1,847,874

18,47914,52133,000(33,000)-(33,000)-)(34,633)

(346)

346

-

-

-

-

-)

-

-

-

-

-

-

-

-)

1,813,241

18,132

14,86833,000(33,422)-(33,422)(422)

Contributions by/distributions to shareowners

Contributions by shareowners of their UIM B.V. and UMG Inc. shares to UMG B.V. (refer Note 1)
Reduction in number of shares and effective capital contribution
Changes in UMG ownership interest in subsidiaries that do not result in a loss of control
CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)Contributions by (distributions to) non-controlling interests

-

-

-

-

(1)

-

(1)

(1)

Dividends paid by subsidiaries to non-controlling interests

-

-

-

-

(1)

-

(1)

(1)

-

-

-

-

(1)

-

(1)

(1)

Earnings

-

-

-

-

453

-

453

453

Charges and income directly recognized in equity

-

-

-

-

-

25

25

25

TOTAL COMPREHENSIVE INCOME (C)

-

-

-

453

25

478

478

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)TOTAL CHANGES OVER THE PERIOD (A+B+C)
Attributable to Universal Music Group Shareowners
Attributable to non-controlling interests
BALANCE AS OF JUNE 30, 2021
Attributable to Universal Music Group Shareowners
Attributable to non-controlling interests

1,813,241

18,132

14,86833,000(32,970)25(32,945)55

1,813,241

18,132

14,86833,000(32,970)25(32,945)

55

-

-

-

-

-

-

-

-

1,813,241

18,132

14,86833,000(31,055)(458)(31,513)1,487

1,813,241

18,132

14,86833,000(31,056)(457)(31,513)

1,487

-

-

-

-

1

(1)

-

-

Universal Music Group / 7

F-9

Six months ended June 30, 2020 (unaudited)(in millions of euros, except number of shares)

BALANCE AS OF DECEMBER 31, 2019

Capital
Number ofshares (inthousands)

Additional
paid-in
capitalShare capital-

Retained earnings and other

-

-

Other
comprehensive
incomeRetainedearnings

Subtotal

Total equity

Subtotal

-

3,275

(291)

2,984

2,984

Attributable to Universal Music Group

-

-

-

-

3,272

(290)

2,982

2,982

Attributable to non-controlling interests

-

-

-

-

3

(1)

2

2

Contributions by/distributions to shareowners

-

--

--

-

-

(2,428)-(2,428)(2,428)

-

-

-

-

(2,428)-(2,428)(2,428)Changes in UMG ownership interest in subsidiaries that do not result in a loss of control

-

-

-

-

(12)

-

(12)

(12)

CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)

-

-

-

-

(2,440)-(2,440)(2,440)Contributions by (distributions to) non-controlling interests

-

-

-

-

(3)

-

(3)

(3)

Dividends paid by subsidiaries to non-controlling interests

-

-

-

-

(3)

-

(3)

(3)

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)

-

-

-

-

(3)

-

(3)

(3)

Earnings

-

-

-

-

736

-

736

736

Charges and income directly recognized in equity

-

-

-

-

-

(24)

(24)

(24)

TOTAL COMPREHENSIVE INCOME (C)

-

-

-

-

736

(24)

712

712

TOTAL CHANGES OVER THE PERIOD (A+B+C)

-

-

-

-

(1,707)(24)(1,731)(1,731)Attributable to Universal Music Group Shareowners

-

-

-

-

(1,705)(24)(1,729)(1,729)Attributable to non-controlling interests

-

-

-

-

(2)

-

(2)

(2)

-

-

-

-

1,568

(315)

1,253

1,253

Attributable to Universal Music Group Shareowners

-

-

-

-

1,567

(314)

1,253

1,253

Attributable to non-controlling interests

-

-

-

-

1

(1)

-

-

Universal Music Group S.A.S. transferred to Vivendi SE

BALANCE AS OF JUNE 30, 2020-

Universal Music Group / 8

F-10

Year ended December 31, 2020
(in millions of euros, except number of shares)

BALANCE AS OF DECEMBER 31, 2019

Capital
Number ofshares (inthousands)

Share capital

Retained earnings and other

Additional
paid-in
capital

Other
comprehensive
incomeRetainedearnings

Subtotal

Total equity

Subtotal

-

-

-

-

3,275

(291)

2,984

2,984

Attributable to Universal Music Group

-

-

-

-

3,272

(290)

2,982

2,982

Attributable to non-controlling interests

-

-

-

-

3

(1)

2

2

Contributions by/distributions to shareowners

-

-

-

-

(2,711)-(2,711)(2,711)---(2,428)-(2,428)(2,428)

(283)

-

(283)

(283)

Universal Music Group S.A.S. transferred to Vivendi SE---

Distribution by Universal International Music B.V. paid to shareowners
Changes in UMG ownership interest in subsidiaries that do not result in a loss of control

-

-

-

-

(13)

-

(13)

(13)

CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)

-

-

-

-

(2,734)-(2,724)(2,724)Contributions by (distributions to) non-controlling interests

-

-

-

-

(5)

-

(5)

(5)

-

-

-

-

(5)

-

(5)

(5)

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Dividends paid by subsidiaries to non-controlling interests

-

-

-

-

(5)

-

(5)

(5)

Earnings

-

-

-

-

1,369

-

1,369

1,369

-

Charges and income directly recognized in equity--

TOTAL COMPREHENSIVE INCOME (C)--TOTAL CHANGES OVER THE PERIOD (A+B+C)

-

-

-

-

(192)

(192)

(192)

-

1,369

(192)

1,177

1,177

-

-

(1,360)(192)(1,552)(1,552)Attributable to Universal Music Group Shareowners

-

-

-

-

(1,358)(192)(1,550)(1,550)Attributable to non-controlling interests

-

-

-

-

(2)

-)

(2)

(2)

-

-

-

-

1,915

(483)

1,432

1,432

Attributable to Universal Music Group Shareowners

-

-

-

-

1,914

(482)

1,432

1,432

Attributable to non-controlling interests

-

-

-

-

1

(1)

-

-

BALANCE AS OF DECEMBER 31, 2020

Universal Music Group / 9

F-11

Notes to the Consolidated Condensed Financial
Statements
Accounting policies and valuation methods
Basis of preparation of the Unaudited Consolidated Condensed Financial Statements

1.1

The Unaudited Consolidated Condensed Financial Statements of Universal Music Group (as defined below) for thehalf-year ended June 30, 2021 have been prepared by Universal Music Group B.V. (“UMG B.V.”).
On February 26, 2021, Vivendi and the consortium led by Tencent contributed their respective 80% and 20%
shares in both UMG Inc. and UIM B.V. share capital to UMG B.V. Following this contribution, Vivendi and Tencent
respectively own 80% and 20% of UMG B.V., which owns 100% of UIM B.V. and 100% of UMG Inc.
The Consolidated Condensed Financial Statements of UMG have been drawn up based on the accounting data of
UMG B.V. and its subsidiaries for the half-year ended June 30, 2021. They are presented and have been preparedin accordance with IAS 34 – Interim Financial Reporting as endorsed by the European Union (EU) and published by
the IASB, with mandatory application as of June 30, 2021.
Amendments to IFRS standards applicable as from January 1, 2021, had no material impact on UMG’s
Consolidated Condensed Financial Statements, notably the amendments to the IFRS 9 – Financial Instruments,
IFRS 7 – Financial Instruments: Disclosures, and IFRS 16 – Leases standards which relate to the Interest Rate
Benchmark Reform (Phase 2).
As a reminder, UMG applied IFRS 16 with retrospective effect as from January 1, 2019 without restatingcomparative periods in the combined financial statements. In accordance with IFRS 16, the impact of the changeof accounting standard was recorded by UMG in the opening balance sheet as of January 1, 2019; moreover,
UMG applied this change of accounting standard to the Statement of Financial Position, Statement of Earnings
and Statement of Cash Flows in 2019.
As a reminder, in 2018, UMG applied two new accounting standards:


IFRS 15 – Revenue from contracts with customers: in accordance with IFRS 15, as from 2017, UMG applied
this change of accounting standard to revenues; andIFRS 9 – Financial instruments: in accordance with IFRS 9, as from 2018, UMG applied this change ofaccounting standard to the Statement of Earnings and Statement of Comprehensive Income restating its
opening balance sheet as of January 1, 2018.

UMG B.V. is a private limited company having its official seat in the Netherlands, which since February 26, 2021, issubject to the provisions of the Dutch commercial company law that are applicable to it in the Netherlands.
Context
Sale of 20% of Universal Music Group’s share capital to a Tencent-led consortium
On December 31, 2019, Vivendi and a Tencent-led consortium, which includes Tencent Music Entertainment andother financial co-investors, entered into an agreement for a planned equity investment in Universal Music Group(UMG). This agreement provides for:

the purchase by this consortium of 10% of UMG’s share capital, based on an enterprise value of€30 billion for 100% of UMG’s share capital; andUniversal Music Group / 10

F-12



an option for this consortium to acquire, on the same valuation basis, an additional interest of up to 10%
of UMG’s share capital until January 15, 2021.

On March 31, 2020, Vivendi completed the sale of 10% of UMG’s share capital to a Tencent-led consortium.
On December 17, 2020, the consortium decided to exercise the option to acquire an additional 10% of UMG.
On January 29, 2021, Vivendi completed the sale of the additional 10% of UMG’s share capital to a Tencent-led
consortium, based on an enterprise value of €30 billion for 100% of UMG’s share capital.
As from this date, the Tencent-led consortium owns 20% of UMG. In addition, a separate agreement was enteredinto on March 31, 2020, enabling Tencent Music Entertainment to acquire a minority interest in the share capitalof the UMG’s subsidiary that owns its operations China.
Planned sale of 10% of Universal Music Group’s share capital to Pershing Square investment funds
On June 4, 2021, Vivendi and Pershing Square Tontine Holdings, Ltd. (PSTH) entered into discussions regarding thesale by Vivendi of 10% UMG’s share capital to PSTH, prior to the distribution of 60% of UMG’s share capital and its
stock market listing.
This transaction would be based on an enterprise value of €35 billion for 100% of UMG’s share capital, following
the authorization given by Vivendi’s shareholders at the General Shareholders’ Meeting held on June 22, 2021, to
distribute 60% of UMG’s share capital and list the company.
On June 20, 2021, Vivendi announced that it had entered into an agreement with PSTH for the sale of 10% of theshare capital of Universal Music Group B.V. (UMG B.V.). Closing of this transaction is subject to the non-exerciseof withdrawal rights by PSTH shareholders and completion of U.S regulatory processes. The transaction was
expected to be completed in the coming weeks, by September 15, 2021 at the latest.
On July 19, 2021, Pershing Square Tontine Holdings Ltd. (PSTH) informed Vivendi that it intends to assign its rights
and obligations to acquire 10% of the share capital of Universal Music Group (UMG) under the agreements
announced on June 20, 2021 to investment funds with significant economic interests or management positions
held by Mr. William Ackman (“Pershing Square investment funds”). Vivendi decided to approve such request.
The condition regarding the exercise by PSTH shareholders of their redemption rights is no longer applicable tothe amended transaction, which will only be contingent on the approval of US regulatory authorizations.
The equity interest in UMG eventually acquired will now be between 5 and 10%. Should it be less than 10%,Vivendi intends to sell the shortfall to other investors before the distribution of 60% of the share capital of UMG
to Vivendi’s shareholders, the payment of which is expected to occur on September 23, 2021.
Planned distribution of 60% of Universal Music Group’s share capital and its listing on the stock market
On February 13, 2021, Vivendi announced that it will study the planned distribution of 60% of UMG’s share capitaland its listing by the end of 2021. This distribution, exclusively in kind, would take the form of an exceptional
distribution (“special dividend”). The listing of UMG’s shares, issued by its holding company, would be applied foron the regulated market of Euronext NV in Amsterdam, in a country that has been one of UMG’s historical homes.
On February 26, 2021, Vivendi and the consortium led by Tencent contributed their respective 80% and 20%
shares in both UIM B.V. and UMG Inc. to a unique holding UMG B.V., based on an equity value of €33 billion for
100% of UMG. This internal reorganization of the shareholding structure of UMG was scheduled as part of theagreement signed in December 2019 by Vivendi and the Tencent-led consortium, a prerequisite for thecompany’s planned listing on the stock market. On March 29, 2021, a Vivendi Extraordinary Shareholders’Meeting was called to modify the company’s by-laws and make this distribution in kind possible and pursue thisproject. Following the approval by 99.98% positive votes at the Vivendi’s Extraordinary General Meeting of March
Universal Music Group / 11

F-13

29, 2021, of an amendment to the company's by-laws, which now allows Vivendi to distribute dividends orinterim dividends, reserves or premiums by way of the delivery of assets in kind, including financial securities.
On May 18, 2021, Vivendi announced that it will propose to set up a governance structure for Universal Music
Group (UMG) N.V., which could be expected to list its shares on the Euronext Amsterdam stock exchange,
consistent with the best policies and standards.
On June 22, 2021, in accordance with the recommendation of the Autorité des marchés financiers (“AMF”, theFrench securities regulator) on the sale and acquisition of significant assets and of the AFEP-MEDEF Code,Vivendi’s General Shareholders’ Meeting was asked and issued a favorable opinion on the planned special
distribution in kind of 60% of UMG’s share capital to Vivendi’s shareholders.
On June 22, 2021, the General Shareholders’ Meeting approved in principle, the planned distribution of 60% of
UMG and UMG N.V.’s listing on the Euronext Amsterdam stock exchange.
Scope of combination/consolidation
Until February 26, 2021, the arrangement that constituted the combined UMG group was not a legal entity in its
own right and was made up of entities under the common control of Vivendi. Until this date, UMG’s scope of
combination principally comprised the entities held directly and indirectly by UMG Inc. and UIM B.V.
On February 26, 2021, Vivendi and the consortium led by Tencent contributed their respective 80% and 20%
shares in both. UMG Inc. and UIM B.V. share capital to UMG B.V. based on an equity value of €33 billion for 100%of UMG. Following this contribution, Vivendi and the consortium led by Tencent respectively own 80% and 20% of
UMG B.V. share capital, which owns 100% of UMG Inc. and 100% of UIM B.V. share capital without any change on
UMG’s scope of combination/consolidation.
The reorganization of its shareholding structure having no impact on UMG’s scope of combination/consolidation,
starting with the first quarter ended March 31, 2021, UMG’s consolidated financial statements combine the same
like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries
in both the combined financial statements before this transaction and the consolidated financial statements after
this transaction, in accordance with IFRS 10.B86(a).
Therefore, UMG’s net equity remains unchanged before and after the contribution. As such, following theprinciple of continuity of financial statements, on February 26, 2021, in UMG B.V.’s consolidated financial
statements, the contribution of €33 billion was directly recorded as an increase in equity attributable to UMG B.V.
shareowners (€18.5 billion in share capital and €14.5 billion in additional paid-in capital), and the contribution of€33 billion was fully neutralized in UMG B.V.’s retained earnings.
The combination/consolidation scope is presented in Note 19 “List of combined entities”.
Core Business
UMG is the worldwide leader in music, engaged in recorded music, music publishing and merchandising. It owns
more than 50 labels covering all music genres. UMG is home to the greatest local and international artists of alltime, including The Beatles, Rolling Stones, U2, Andrea Bocelli, Lady Gaga, Helene Fischer and more, as well as
many of the biggest artists of the year, such as The Weeknd, Billie Eilish, Post Malone, and Taylor Swift.
The recorded music business discovers and develops recording artists, marketing and promoting theirmusic across a wide array of formats and platforms. Its activities also extend to other areas, such as live
events, sponsorship, film and television.

Universal Music Group / 12

F-14



The music publishing business discovers and develops songwriters and owns and administers the
copyright for musical compositions used in recordings, public performances and related uses, such asfilms and advertisements.



The merchandising business produces and sells artist-branded and other branded products throughmultiple sales channels, including fashion retail, concert touring and the Internet. Its activities also extend
to other areas, such as brand rights management.

Accounting conventions used when preparing the historical combined financial statements
As a reminder, as a first-time adopter, Combined Financial Statements were prepared for UMG for the fiscal years
ended December 31, 2018, 2017 and 2016 in accordance with IFRS 1 – First-Time Adoption of International
Financial Reporting Standards. In accordance with IFRS 1.D16, if a subsidiary adopts IFRS later than its parent
company, the assets and liabilities in the subsidiary’s opening balance sheet may be measured as either:

the carrying amounts based on the subsidiary’s contribution to the parent company’s historicalconsolidated financial statements, after restating adjustments relating to the consolidation procedures
and to the accounting for the business combination in which the parent acquired the subsidiary; or

the carrying amounts as determined in accordance with IFRS 1, applied at the date of the subsidiary’s
transition to IFRS. In this case, the options in IFRS 1 applied by the subsidiary may differ from those
applied by the parent.

Pursuant to the option provided in IFRS 1, UMG’s first IFRS combined financial statements were prepared bymeasuring its assets and liabilities at the carrying amounts, based on UMG’s contribution to Vivendi’s historicalfinancial statements, after eliminating adjustments relating to its consolidation by the Vivendi Group and to theimpacts of accounting for the business combinations pursuant to which Vivendi acquired interests in UMG Inc.
and UIM B.V. and their subsidiaries. As of January 1, 2016, the net book value of the goodwill arising from
Vivendi’s acquisition of UMG in December 2000 (€3,756 million) as well as the related cumulative translation
adjustment (CTA) as of December 31, 2016, 2017 and 2018 (+€177 million, -€328 million and -€156 million,
respectively), and as of December 31, 2019 and 2020 (-€70 million and -€417 million, respectively) and as of June30, 2020 and 2021 (-€119 million and -€387 million, respectively), were reversed through adjustments to retained
earnings.
The scope of combination excludes as from January 1, 2016 Vivendi Holding I LLC (“VH I”), which was whollyowned by UMG Inc. until the end of 2018 but had no impact on UMG’s contribution to Vivendi’s Statement of
Financial Position. Therefore, these Combined Financial Statements eliminate the statement of income impacts
for the years ended December 31, 2018, and 2017 relating to:the interest expense on a borrowing granted by VH I to UMG Inc.; andthe related income tax effects, if any.

The scope of combination also excludes as from March 19, 2020 Universal Music Group S.A.S. (“UMG S.A.S.”),
which was merged into Vivendi S.E. as of that date.
Regarding the treatment of the change from combined group to consolidated group, the requirement of IAS 33.64
is applicable. The new legal entity represents the combination for all periods presented, as if it has always existed.
Combined Financial Statements become retrospectively Consolidated Financial Statements for all period
presented.

Universal Music Group / 13

F-15

Intercompany transactions between UMG and other Vivendi Group’s entities
Balances pertaining to current transactions between UMG entities and other entities in the Vivendi Group havebeen presented on the balance sheet as third-party assets or liabilities in the Consolidated Condensed Financial
Statements. All loans and borrowings between UMG entities and other Vivendi Group entities have beenpresented as financial assets or liabilities in the Consolidated Condensed Financial Statements.
In accordance with IAS 24 – Related Party Disclosures, transactions between UMG and other Vivendi Group
entities are presented in Note 16 “Related parties”.
Earnings per share
Until February 26, 2021, as the combined group was not a legal entity, the number of shares outstanding was notdeterminable. Consequently, no earning per share data was presented.
Following the contribution by Vivendi and the consortium led by Tencent to UMG B.V on February 26, 2021, thenumber of shares outstanding is determinable.
In accordance with IAS 33.64, the number of ordinary or potential ordinary shares outstanding increasing as aresult of the contribution, the calculation of basic and diluted earnings per share shall be adjusted retrospectively,
for all periods presented. The calculation of earnings per share is presented in Note 5 “Earnings per share”.
Translation of financial statements of foreign companies
Pursuant to IFRS 1.D13, in the Combined Financial Statements, the cumulative translation adjustment (CTA)
accounted for in other comprehensive income (to be subsequently reclassified to profit or loss) was set to zero asof January 1, 2016. Therefore, the gain or loss on a subsequent disposal of any foreign operation of theconsolidated UMG only includes translation differences recorded since January 1, 2016.
Except as described above, no adjustment was made in UMG’s Consolidated Condensed Financial Statements to
UMG’s contribution to Vivendi’s historical financial statements.

1.2

Compliance with accounting standards

The Consolidated Condensed Financial Statements of UMG for the half-year ended June 30, 2021 have been
prepared in accordance with IAS 34 – Interim Financial Reporting as endorsed by the European Union (EU) andpublished by the IASB, with mandatory application as of June 30, 2021. As a result, the following provisions wereapplied: provisions for income taxes have been calculated on the basis of the estimated effective annual tax rateapplied to pre-tax earnings; and compensation costs recorded for share-based compensation plans, employee benefits and profit-sharing
have been included on a pro-rata basis of the estimated cost for the year, adjusted, if necessary, for any nonrecurring events which occurred over the period.
Amendments to IFRS standards applicable as from January 1, 2021, had no material impact on UMG’s
Consolidated Condensed Financial Statements, notably the amendments to the IFRS 9 – Financial Instruments,
IFRS 7 – Financial Instruments: Disclosures, and IFRS 16 – Leases standards which relate to the Interest Rate
Benchmark Reform (Phase 2).

Universal Music Group / 14

F-16

1.3

Presentation of the Consolidated Financial Statements

1.3.1

Consolidated condensed Statement of Earnings

The main line items presented in UMG’s Consolidated Condensed Statement of Earnings are revenues, income
from equity affiliates, interest, provision for income taxes, net earnings from discontinued or held for sale
operations, and net earnings. The Consolidated Statement of Earnings presents a subtotal of Earnings Before
Interest and Tax (EBIT) equal to the difference between charges and income (excluding financing activities,
discontinued or held for sale operations, and income taxes).
The charges and income relating to financing activities consist of interest, income from investments, as well asother financial charges and income as presented in Note 3.
1.3.2

Consolidated condensed Statement of Cash FlowsNet cash provided by operating activities
Net cash provided by operating activities is calculated using the indirect method based on EBIT. EBIT is adjusted
for non-cash items and changes in net working capital. Net cash provided by operating activities excludes the cash
impact of financial charges and income and net changes in working capital related to property, plant andequipment, and intangible assets.
Net cash used for investing activities
Net cash used for investing activities includes changes in net working capital related to property, plant andequipment, and intangible assets as well as cash from investments (particularly dividends received from equity
affiliates). It also includes any cash flows arising from the gain or loss of control of subsidiaries.
Net cash used for financing activities
Net cash used for financing activities includes net interest paid on borrowings, cash and cash equivalents, bankoverdrafts, the cash impact of other items related to financing activities such as premiums from the early
redemption of borrowings and the settlement of derivative instruments, as well as the cash payments for the
principal amount of the lease liability and any interest thereon. It also includes cash flows from changes inownership interests in a subsidiary that do not result in a loss of control (including increases in ownershipinterests).
1.3.3

Operating performance of each operating segment and the group

UMG considers Adjusted Earnings Before Interest and Tax (EBITA), Earnings Before Interest and Tax, Depreciation
and Amortization (EBITDA) and Cash Flow From Operations (CFFO), all non-GAAP measures, to be relevant
indicators of the group’s operating and financial performance.
EBITA
UMG considers EBITA, a non-GAAP measure, to be a relevant measure to assess the performance of its operating
segments as reported in the segment data. It enables UMG to compare the operating performance of operating
segments regardless of whether their performance is driven by the operating segment’s organic growth or byacquisitions. To calculate EBITA, the accounting impact of the following items is excluded from the income fromEBIT: the amortization of intangible assets acquired through business combinations as well as other rights catalogs
acquired;
Universal Music Group / 15

F-17

 impairment losses on goodwill, other intangibles acquired through business combinations and other rights
catalogs acquired; and other income and charges related to transactions with shareowners (except when directly recognized inequity).
EBITDA
UMG considers EBITDA, a non-GAAP measure, to be a relevant measure to assess the performance of its
operating segments as reported in the segment data. It enables UMG to compare the operating performance of
operating segments regardless of whether their performance is driven by the operating segment’s organic growthor by acquisitions. To calculate EBITDA, the accounting impact of the following items is excluded from the income
from EBIT: the depreciation of tangible, intangible and right of use assets;
 gains/(losses) on the sale of tangible, intangible and right of use assets;
 the amortization of intangible assets acquired through business combinations as well as other rights catalogs
acquired; impairment losses on goodwill, other intangibles acquired through business combinations and other rights
catalogs acquired; income from equity affiliates having similar operating activities; and restructuring charges, and other non-recurring items.
EBIT
UMG defines EBIT, as earnings, excluding taxes, interest, income from investments, and other financial income or
expenses. EBIT is shown on the face of the Statement of Earnings.
Cash Flow from Operations (CFFO)
UMG considers cash flow from operations (CFFO), a non-GAAP measure, to be a relevant measure to assess thegroup’s operating and financial performance. CFFO includes net cash provided by operating activities, before
income tax paid, as presented in the Statement of Cash Flows, dividends received from equity affiliates andunconsolidated companies, as well as cash payments for the principal of the lease liability and any interest
thereon, which are presented as financing activities in the consolidated statement of cash flows. It also includes
capital expenditures, net that relate to cash used for capital expenditures, net of proceeds from sales of property,
plant and equipment, and intangible assets, which are included in net cash used for investing activities, as well as
income tax paid.
Net cash provided by operating activities of discontinued operations are excluded from CFFO.
Net Working Capital
UMG defines net working capital, as the movement in inventories, trade accounts and other receivables, tradeaccounts and other payables (including royalty payables) and other non-current liabilities. Net working capital
excludes any content investments. Net Working Capital is shown on the face of the Statement of Cash Flows.

Universal Music Group / 16

F-18

1.3.4

Consolidated Condensed Statement of Financial Position

Assets and liabilities that are expected to be realized, or intended for sale or consumption, within the entity’s
normal operating cycle (generally 12 months), are recorded as current assets or liabilities. If their maturity
exceeds this period, they are recorded as non-current assets or liabilities.
Principles governing the preparation of the Consolidated Condensed Financial Statements

1.4

Pursuant to IFRS principles, the Consolidated Condensed Financial Statements have been prepared on a going
concern basis, and on a historical cost basis, with the exception of certain assets and liabilities, for which IFRS 13 –Fair Value Measurement relating to measurement and disclosures applies. Relevant categories are detailed
below.
The Consolidated Condensed Financial Statements include the financial statements of UMG and its subsidiaries
after eliminating intragroup items and transactions.
Acquired subsidiaries are included in the Consolidated Condensed Financial Statements of the group as of thedate of acquisition.
1.4.1

Use of estimates

The preparation of Consolidated Condensed Financial Statements in compliance with IFRS requires the group’s
management to make certain estimates and assumptions that they consider reasonable and realistic. Althoughthese estimates and assumptions are regularly reviewed by Management, based, in particular, on past or
anticipated achievements, facts and circumstances may lead to changes in these estimates and assumptions
which could have an impact on the reported amount of group assets, liabilities, equity or earnings.
The main estimates and assumptions relate to the measurement of: revenue: estimates of provisions for returns and price guarantees (please refer to Note 14);
 goodwill and other intangible assets: valuation methods used to identify intangible assets acquired throughbusiness combinations (please refer to Note 7);
 goodwill, intangible assets with indefinite useful lives and assets in progress: assumptions relating to
impairment tests performed on each of the group’s cash-generating units (CGUs), future cash flows anddiscount rates are updated annually (please refer to Note 7);
 UMG content assets: estimates of the future performance of beneficiaries who received advances arerecognized in the Statement of Financial Position (please refer to Note 8);
 provisions: risk estimates, performed on an individual basis, noting that the occurrence of events during thecourse of procedures may lead to a risk reassessment at any time (please refer to Note 14); share-based compensation: assumptions are updated annually, such as the estimated term, volatility and theestimated dividend yield (please refer to Note 15);
 lease liabilities and right-of-use assets, at the commencement date of each lease contract (please refer toNote 9):-assessing the lease term that relates to the non-cancellable period of the lease, taking into account all
options to extend the lease that UMG is reasonably certain to exercise and all options to terminate thelease that UMG is reasonably certain not to exercise; andUniversal Music Group / 17

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-

estimating the lessee’s incremental borrowing rate, taking into account their residual lease term andtheir duration to reflect the interest rate of a loan with a similar payment profile to the lease payments.

 deferred taxes: estimates used for the recognition of deferred tax assets are updated annually with factors
such as expected tax rates and future tax results of the group (please refer to Note 4); and certain financial instruments: valuation method at fair value is defined according to the three followingclassification levels (please refer to Note 11):-

Level 1: fair value measurement based on quoted prices in active markets for identical assets or liabilities;-

Level 2: fair value measurement based on observable market data (other than quoted prices included
under Level 1); and-Level 3: fair value measurement based on valuation techniques using inputs for the asset or liability thatare not based on observable market data.

The fair value of trade accounts receivable and other, cash and cash equivalents, and trade accounts
payable is a reasonable estimate of fair value, due to the short maturity of these instruments.
1.4.2

Principles of consolidation

For a list of UMG’s major subsidiaries, joint ventures and associated entities, please refer to Note 19.
Consolidation
All companies in which UMG has a controlling interest, namely those in which it has the power to govern financial
and operational policies to obtain benefits from their operations, are fully consolidated.
Control, as defined by IFRS 10 – Consolidated Financial Statements, is based on the three criteria below to be
fulfilled cumulatively to assess if the parent company exercises control: a parent company has power over a subsidiary when the parent company has existing rights that give it thecurrent ability to direct the relevant activities of the subsidiary, i.e., the activities that significantly affect thesubsidiary’s returns. Power may arise from existing or potential voting rights or contractual arrangements.
Voting rights must be substantial, i.e., exercisable at any time without limitation, particularly during decisionmaking processes related to significant activities. Assessment of the exercise of power depends on the natureof the subsidiary’s relevant activities, the internal decision-making process, and the allocation of rights
among the subsidiary’s other shareowners; the parent company is exposed, or has rights, to variable returns from its involvement with the subsidiary
which may vary as a result of the subsidiary’s performance. The concept of returns is broadly defined andincludes, among other things, dividends and other economic benefit distributions, changes in the value ofthe investment in the subsidiary, economies of scale, and business synergies; and the parent company has the ability to use its power to affect the returns. Exercising power without having
any impact on returns does not qualify as control.
Consolidated Financial Statements of a group are presented as if the group was a single economic entity with two
categories of owners: (i) the owners of the parent company (UMG shareowners) and (ii) the owners of noncontrolling interests (minority shareholders of the subsidiaries). A non-controlling interest is defined as theinterest in a subsidiary that is not attributable, whether directly or indirectly, to a parent company. As a result,changes to a parent company’s ownership interest in a subsidiary that do not result in a loss of control only
impact equity, as control of the economic entity does not change. Hence, in the event of the acquisition of anadditional interest in a consolidated entity after January 1, 2009, UMG recognizes the difference between the
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acquisition price and the carrying value of non-controlling interests acquired as a change in equity attributable to
UMG shareowners. Conversely, any acquisition of control achieved in stages or a loss of control gives rise to profit
or loss in the statement of earnings.
Accounting for joint arrangements
IFRS 11 – Joint Arrangements establishes principles for financial reporting by parties to a joint arrangement.
In a joint arrangement, parties are bound by a contractual arrangement giving these parties joint control of thearrangement. An entity that is a party to an arrangement shall assess whether the contractual arrangement gives
all the parties or a group of the parties control of the arrangement collectively. Once it has been established that
all the parties or a group of the parties collectively control the arrangement, joint control exists only when
decisions about the relevant activities require the unanimous consent of the parties that collectively control thearrangement.
Joint arrangements are classified into two categories:
 joint operations: these are joint arrangements whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties arecalled joint operators. A joint operator shall recognize 100% of wholly-owned assets/liabilities,
expenses/revenues of the joint operation, and its share of any of those items held jointly; and joint ventures: these are joint arrangements whereby the parties that have joint control of the arrangement
have rights to the net assets of the arrangement. Those parties are called joint venturers. Each joint venturer
shall recognize its interest in a joint venture as an investment and shall account for that investment using theequity method in accordance with IAS 28 – Investments in Associates and Joint Ventures (please refer below).
Equity accounting
Entities over which UMG exercises significant influence as well as joint ventures are accounted for under theequity method.
Significant influence is deemed to exist when UMG holds, whether directly or indirectly, at least 20% of the voting
rights in an entity unless it can be clearly established that UMG does not exercise a significant influence.
Significant influence can be evidenced through further criteria, such as representation on the entity’s board of
directors or equivalent governing body, participation in policy-making of financial and operational processes,
material transactions with the entity or the interchange of managerial personnel.
1.4.3

Foreign currency translation

The Consolidated Condensed Financial Statements are presented in millions of euros. The presentation currencyof UMG is the euro.
Foreign currency transactions
Foreign currency transactions are initially recorded in the functional currency of the entity at the exchange rate
prevailing at the date of the transaction. At the closing date, foreign currency monetary assets and liabilities aretranslated into the entity’s functional currency at the exchange rate prevailing on that date. All foreign currency
differences are expensed, with the exception of differences resulting from borrowings in foreign currencies,
which constitute a hedge of the net investment in a foreign entity. These differences are allocated directly tocharges and income directly recognized in equity until the divestiture of the net investment.

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Financial statements denominated in a foreign currency
Except in cases of significant exchange rate fluctuation, financial statements of subsidiaries, joint ventures orother associated entities for which the functional currency is not the euro are translated into euros as follows: theConsolidated Statement of Financial Position is translated at the exchange rate at the end of the period, and theConsolidated Statement of Earnings and the Consolidated Statement of Cash Flows are translated using averagemonthly exchange rates for the period. The resulting translation gains and losses are recorded as foreign currencytranslation differences in charges and income directly recognized in equity. In accordance with IFRS 1, UMG
elected to reverse the accumulated foreign currency translation differences against retained earnings as ofJanuary 1, 2016. These foreign currency translation differences resulted from the translation into euros of thefinancial statements of subsidiaries that use foreign currencies as their functional currencies. Consequently, theseadjustments are not applied to earnings on the subsequent divestiture of subsidiaries, joint ventures or associates
whose functional currency is not the euro.
1.4.4

Revenues and associated costs

Revenues from contracts with customers are recorded when performance obligations promised in the contract
are satisfied, and for an amount for which it is highly probable that a significant reversal in the amount of
cumulative revenue recognized will not occur. Revenues are reported net of discounts.
UMG has made the accounting of intellectual property licensing revenues a major point of attention.
Intellectual property licensing (musical works)
These licenses transfer to a customer either a right to use an entity’s intellectual property as it exists at the point
in time at which the license is granted (static license), or a right to access an entity’s intellectual property as itexists throughout the license period (dynamic license).
Revenues are accounted for when the performance obligation promised in the contract is satisfied (static license)or over time upon satisfaction (dynamic license), i.e., when the seller transfers the risks and rewards of the rightto use/access the intellectual property and the customer obtains control of the use/access of that license.
Consequently, revenues from static licenses are recognized at the point in time when the license is transferred
and the customer is able to use and benefit from the license. Revenues from dynamic licenses are accounted forover time, over the license period from the date the customer is able to use and benefit from the license.
Analysis of the Agent/Principal relationship in sales transactions involving a third party
If the nature of the entity’s undertaking is a performance obligation to provide the specified goods or services
itself, then the entity acts on its own behalf and it is “principal” in the sale transaction: it accounts for revenue thegross amount of consideration to which it expects to be entitled in exchange for the goods or services provided,
and the commission due to the third-party as cost of revenues. If the entity arranges for a third-party to provide
the goods or services specified in the contract, then it recognizes as revenues the net amount of consideration towhich it expects to be entitled in exchange for the goods or services provided.
1.4.4.1

Revenue recognition by business segment

Recorded Music
The sales of recorded music (physical, digital downloading or streaming) are intellectual property licenses grantedby UMG to distributors or digital platforms and which give them certain rights over the company’s musical works.
In its relationship with the distributor/digital platform and the end customer, UMG cannot be “principal”, as the
distributor or the digital platform is responsible for setting the transfer of control conditions of the right of use

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granted by the license to the end customer (broadcasting, price setting and conditions for reselling the physicaldevices).
Physical sales of recorded music (CDs, DVDs and Vinyls)
These intellectual property licenses are static licenses transferring to the customer a right to use UMG‘srecordings as they exist at the point in time at which the license is granted, i.e., on the physical device sold.
Revenues from the physical sales of recorded music, net of a provision for estimated returns (please refer to Note
1.4.4.2) and rebates, if any, are accounted for, either: (i) upon the sale to the distributor, at the shipping point for
products sold free on board (FOB) or on delivery for products sold free on destination; or (ii) upon the sale to thefinal customer for consignment sales.
Digital sales of recorded music, via downloading or streaming by subscription or free of charge
These intellectual property licenses are generally dynamic licenses providing a right to access the entire catalog ofrecorded music as it exists throughout the license period considering potential add-ons to, or withdrawals from,the catalog during that period.
The consideration paid by the digital platform is variable in the form of a sales-based or a usage-based royalty.
Revenues are then accounted for when these subsequent sales or usages occur. Revenues from digital sales ofrecorded music, for which UMG has sufficient, accurate, and reliable data from digital platforms, are recognizedat the end of the month in which the sale or usage is made by the end customer. If such data is not available,
revenues are recognized when the digital platform notifies UMG of the sale or usage by the end customer.
For digital sales of recorded music streaming by subscription or free of charge, certain contracts may include a
non-refundable minimum guarantee which is generally recoupable and is in substance an advance payment. In
the case of a dynamic license, the minimum guarantee is spread over the period to which it relates and takes into
account the amount of royalties that are actually recoupable. The minimum guarantee is hence apportioned inaccordance with the accounting for these royalties.
Music publishingMusic publishing relates to the use by a third party of the copyrights on musical works owned or administered by
UMG, which are intellectual property licenses that UMG grants to the third party and which provides a right toaccess a catalog of recorded music, as these intellectual property licenses are dynamic licenses.
The consideration paid by the third-party, notably a collection society (e.g., a company for the collective
management of intellectual property rights) is variable in the form of a royalty based on the usage by the third
party. The variable consideration being accounted for when these subsequent usages occur, revenues from music
publishing are accounted for when the collection society notifies UMG of the usage by the end customer andcollectability is assured.
Merchandising
Revenues from merchandising are recognized either upon sale to the end customer, from direct sales during
touring, concessions and over the internet; on delivery for sales by a third-party distributor; when a contract issigned; or when an invoice has been issued and the collectability is assured for sales of rights attached tomerchandising products.

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1.4.4.2

Other

Provisions for estimated returns and price guarantees are deducted from sales of products to customers throughdistributors. The provisions are estimated based on past sales statistics and take into account the economic
environment and product sales forecast to final customers.
Selling, general and administrative expenses primarily include salaries and employee benefits, consulting andservice fees, insurance costs, travel and entertainment expenses, administrative department costs, provisions forreceivables and other operating expenses.
Advertising costs are expensed when incurred.
Slotting fees and cooperative advertising expenses are recorded as a reduction in revenues. However,cooperative advertising is treated as a marketing expense and expensed when its expected benefit isindividualized and can be estimated.
1.4.5

Assets

1.4.5.1

Goodwill and business combinations

Pursuant to IFRS 1, UMG elected not to restate business combinations that occurred prior to January 1, 2016.
Business combinations are recorded using the acquisition method. Under this method, upon the initialconsolidation of an entity over which the group has acquired exclusive control: the identifiable assets acquired, and the liabilities assumed are recognized at their fair value on theacquisition date; and non-controlling interests are measured either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets. This option is available on a transaction-by-transaction basis.
On the acquisition date, goodwill is initially measured as the difference between:(i) the fair value of the consideration transferred, plus the amount of non-controlling interests in the acquiree
and, in a business combination achieved in stages, the acquisition-date fair value of the previously held equity
interest in the acquiree; and(ii) the net fair value of the identifiable assets and liabilities assumed on the acquisition date.
The measurement of non-controlling interests at fair value results in an increase in goodwill up to the extent
attributable to these interests, thereby leading to the recognition of a “full goodwill”. The purchase priceallocation shall be performed within 12 months after the acquisition date. If goodwill is negative, it is recognizedin the Statement of Earnings. Subsequent to the acquisition date, goodwill is measured at its initial amount lessrecorded accumulated impairment losses (please refer to Note 7).
In addition, the following principles are applied to business combinations: on the acquisition date, to the extent possible, goodwill is allocated to each cash-generating unit likely tobenefit from the business combination;
 contingent consideration in a business combination is recorded at fair value on the acquisition date, and any
subsequent adjustment occurring after the purchase price allocation period is recognized in the Statementsof Earnings;
 acquisition-related costs are recognized as expenses when incurred;

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 in the event of the acquisition of an additional interest in a subsidiary, UMG recognizes the difference
between the acquisition price and the carrying value of non-controlling interests acquired as a change inequity attributable to UMG shareowners; and goodwill is not amortized.
1.4.5.2

Content assets

Royalty advances to artists, songwriters, and co-publishers are capitalized as an asset when their current
popularity and past performances provide a reasonable basis to conclude that the probable future recoupment ofsuch royalty advances against earnings otherwise payable to them is reasonably assured. Royalty advances arerecognized as an expense as subsequent royalties are earned by the artist, songwriter or co-publisher. Any
portion of capitalized royalty advances not deemed to be recoverable against future royalties is expensed during
the period in which the loss becomes evident. These expenses are recorded in cost of revenues.
Royalties earned by artists, songwriters, and co-publishers are recognized as an expense in the period during
which the sale of the product occurs, less a provision for estimated returns.
1.4.5.3

Research and development costs

Research costs are expensed when incurred. Development expenses are capitalized when the feasibility and, inparticular, profitability of the project can reasonably be considered certain.
Cost of internal use software
Direct internal and external costs incurred for the development of computer software for internal use, including
website development costs, are capitalized during the application development stage. Application development
stage costs generally include software configuration, coding, installation and testing. Costs of significant upgrades
and enhancements resulting in additional functionality are also capitalized. These capitalized costs are amortizedover 5 to 10 years. Maintenance, minor upgrades, and enhancement costs are expensed as they are incurred.
1.4.5.4

Other intangible assets

Intangible assets separately acquired are recorded at cost, and intangible assets acquired in connection with abusiness combination are recorded at their fair value at the acquisition date. The historical cost model is applied
to intangible assets after they have been recognized. Assets with an indefinite useful life are not amortized but
are subject to an annual impairment test. Amortization is accrued for assets with a finite useful life. Useful life isreviewed at the end of each reporting period.
Other intangible assets include trade names, customer bases and licenses. By contrast, music catalogs, trade
names, subscribers’ bases and market shares generated internally are not recognized as intangible assets.
1.4.5.5

Property, plant and equipment

Property, plant and equipment are carried at historical cost less any accumulated depreciation and impairment
losses. Historical cost includes the acquisition cost or production cost, costs directly attributable to transporting
an asset to its physical location and preparing it for its operational use, the estimated costs relating to thedemolition and the collection of property, plant and equipment, and the rehabilitation of the physical location
resulting from the incurred obligation.
When property, plant and equipment include significant components with different useful lives, they arerecorded and amortized separately. Amortization is calculated using the straight-line method based on the

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estimated useful life of the assets. Useful lives of the main components are reviewed at the end of each reporting
period and are as follows: buildings: 5 to 40 years;
 equipment and machinery: 3 to 8 years; and other: 2 to 10 years.
After initial recognition, the cost model is applied to property, plant and equipment.
UMG has elected not to apply the option available under IFRS 1, involving the remeasurement of certain property,
plant and equipment at their fair value as of January 1, 2016.
1.4.5.6

Leases

UMG applies IFRS 16 with retrospective effect as from January 1, 2019 without restating comparative periods inthe consolidated financial statements.
As licenses of intellectual property granted by a lessor and rights held by a lessee under licensing agreements
being excluded from the scope of IFRS 16, the main lease contracts for UMG correspond to real estate leases forwhich UMG is the lessee.
Real estate leases for which UMG is the lessee are recorded at the commencement date and result in therecognition of a lease liability equal to the present value of future lease payments against a right-of-use asset
relating to leases.
Please refer to Note 10 ‘Leases’ to UMG’s Combined Financial Statements for the years ended December 31,
2020, 2019 and 2018. The determination of the lease liability as of January 1, 2019 was made by:1) analyzing operating leases for which contractual obligations were disclosed as off-balance sheet
commitments until December 31, 2018;2) assessing the lease term that relates to the non-cancellable period of the lease, and taking into
account all options to extend the lease which UMG is reasonably certain to exercise and all options
to terminate the lease which UMG is reasonably certain not to exercise. UMG determined that realestate lease terms in France are generally nine years; and3) estimating the incremental borrowing rate as of January 1, 2019 of each lease contract, taking into
account their residual lease term at this date and their duration to reflect the interest rate of a loan
with a similar payment profile to the lease payments.
As of January 1, 2019, regarding the main impacts, it is specified that:

for some leases, as permitted by IFRS 16, at the date of transition, UMG used hindsight; andUMG has applied the practical expedient provided by IFRS 16 to exclude initial direct costs from themeasurement of the right-of-use asset at the date of initial application.

For each lease, the lease term assessment and incremental borrowing rate estimate are determined at thecommencement date.
After initial recognition, the liability is: increased by the effect of undiscounting (interest expense on lease liabilities); decreased by the cash out for lease payments; and reassessed in the event of an amendment to the lease contract.
The right-of-use asset is recognized at cost at the effective date. The cost of the right-of-use asset includes:
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





the lease liability;
the initial direct costs (incremental costs of obtaining the lease);
payments made prior to the commencement date less lease incentives received from the lessor;
dismantling and restoration costs (measured and recognized in accordance with IAS 37); andthe amortization period used is the lease term.

The lease liability is a current or non-current operating liability excluded from the calculation of Financial Net
Debt. Depreciation of right-of-use assets is included in Adjusted Earnings Before Interest and Income Taxes(EBITA) and excluded from earnings before interest and tax depreciation and amortization (EBITDA). The effect ofundiscounting the lease liability (interest expense on lease liabilities) is included in other financial charges. Cashpayments for the principal of the lease liability and any interest thereon, which are presented as financing
activities in the condensed statement of cash flows, impact Cash Flow From Operations (CFFO).
1.4.5.7

Asset impairment

Each time events or changes in the economic environment indicate a risk of impairment of goodwill, otherintangible assets, property, plant and equipment, and assets in progress, UMG re-examines the value of theseassets. In addition, in accordance with applicable accounting standards, goodwill, other intangible assets with anindefinite useful life, and intangible assets in progress are all subject to an annual impairment test undertaken in
the fourth quarter of each fiscal year. This impairment test is performed to compare the recoverable amount ofeach Cash Generating Unit (CGU) or, if necessary, group of CGUs to the carrying value of the corresponding assets(including goodwill). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. UMG operates through different media
and content businesses. Each business offers different products and services that are marketed through various
channels. CGUs are independently defined at each business level, corresponding to the group operating
segments. For a description of UMG’s CGUs and groups of CGUs, please refer to Note 7.
The recoverable amount is determined for each individual asset as the higher of: (i) its value in use; and (ii) its fairvalue (less costs to sell) as described hereafter. If the asset does not generate cash inflows that are largely
independent of other assets or groups of assets, the recoverable amount is determined for the group of assets. In
particular, an impairment test is performed by UMG for each CGU or group of CGUs, depending on the level atwhich UMG Management measures return on operations.
The value in use of each asset or group of assets is determined, subject to exceptions, as the discounted value of
future cash flows (Discounted Cash Flow method (DCF) by using cash flow projections consistent with the budgetof the following year and the most recent forecasts prepared by the operating segments.
Applied discount rates are determined by reference to available external sources of information, usually based on
financial institutions’ benchmarks, and reflect the current assessment by UMG of the time value of money andrisks specific to each asset or group of assets.
Perpetual growth rates used for the evaluation are those used to prepare budgets for each CGU or group of CGUs,
and beyond the period covered, are consistent with growth rates estimated by the business by extrapolating
growth rates used in the budgets, without exceeding the long-term average growth rate for the markets in which
the group operates.
The fair value (less costs to sell) is the price that would be received from the sale of an asset or group of assets inan orderly transaction between market participants at the measurement date, less costs to sell. These values are
generally determined based on market data (stock market prices or comparison with similar listed companies,
with the value attributed to similar assets or companies in recent transactions) or, in the absence of such data,
based on discontinued cash flows.
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If the recoverable amount is lower than the carrying value of an asset or group of assets, an impairment loss
equal to the difference is recognized in EBIT. In the case of a group of assets, this impairment loss is first recorded
against goodwill.
The impairment losses recognized in respect of property, plant and equipment, and intangible assets (other than
goodwill) may be reversed in a later period if the recoverable amount becomes greater than the carrying value,
within the limit of impairment losses previously recognized. Impairment losses recognized in respect of goodwill
cannot be reversed at a later date.
1.4.5.8

Financial assets

Financial assets are initially recognized at fair value corresponding, in general, to the consideration paid, which isbest evidenced by the acquisition cost (including associated acquisition costs, if any). Thereafter, financial assets
are measured at fair value or at amortized cost depending on which financial asset category they belong to.
From January 1, 2018, financial assets are classified into the accounting categories “financial assets at amortizedcost”, “financial assets at fair value through other comprehensive income” and “financial assets at fair value
through profit or loss”.
This classification depends on the entity‘s business model for managing the financial assets and on contractual
terms enabling to determine whether the cash flows are solely payments of principal and interest (SPPI). The
financial assets that contain an embedded derivative should be considered in full to determine whether their cash
flows are SPPI.
Financial assets at fair value
These include financial assets at fair value through other comprehensive income, derivative financial instrumentswith a positive value (please refer to Note 11) and other financial assets measured at fair value through profit orloss. Most of these financial assets are actively traded in organized financial markets, as their fair value iscalculated by reference to the published market price at the period end. Fair value is estimated for financial
assets which do not have a published market price on an active market. As a last resort, when a reliable estimateof fair value cannot be made using valuation techniques in the absence of an active market, the group values
financial assets at historical cost, less any impairment losses.
Financial assets at fair value through other comprehensive income include:

Unconsolidated companies that are not held for trading: UMG elected to classify these into the category“fair value through other comprehensive income”. Unrealized gains and losses on financial assets at fairvalue through other comprehensive income are recognized in charges and income directly recognized inequity until the financial asset is sold, collected or removed from the Statement of Financial Position inanother way, at which time the accumulated gain or loss previously reported in charges and income directly
recognized in equity is transferred to retained earnings and never reclassified to profit or loss. Dividends
and interest received from unconsolidated companies are recognized in profit or loss.



Debt instruments held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets, and whose contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding. Unrealized
gains and losses on financial assets at fair value through other comprehensive income are recognized incharges and income directly recognized in equity until the financial asset is sold, collected or removed fromthe Statement of Financial Position in other ways, at which time the accumulated gain or loss previously
reported in charges and income directly recognized in equity is expensed in other financial charges andincome.
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Other financial assets measured at fair value through profit or loss mainly consist of assets held for trading which
UMG intends to sell in the near future (primarily marketable securities) and other financial assets unless it ismeasured at amortized cost or at fair value through other comprehensive income. Unrealized gains and losses onthese assets are recognized in other financial charges and income.
Financial assets at amortized cost
Financial assets at amortized cost consist of debt instruments held within a business model whose objective is tohold financial assets to collect contractual cash flows that are solely payments of principal and interest on theprincipal amount outstanding. At the end of each period, these assets are measured at amortized cost using theeffective interest method. If there is objective evidence that an impairment loss has been incurred, the amount of
this loss, measured as the difference between the financial asset’s carrying value and its recoverable amount(equal to the present value of estimated future cash flows discounted at the financial asset’s initial effective
interest rate), is recognized in profit or loss. Impairment losses may be reversed if the recoverable amount of theasset subsequently increases in the future.
Impairment of financial assets
UMG assesses the expected credit loss associated with its financial assets recognized at amortized cost and debt
instruments recognized at fair value through other comprehensive income on a prospective basis. A loss
allowance for expected credit loss based on probability of default is recognized at initial recognition. The loss
allowance is updated for changes in these expected credit losses at each reporting date to reflect changes incredit risk since initial recognition.
To assess whether there has been a significant increase in credit risk, UMG compares the credit risk at thereporting date with the credit risk at the date of initial recognition based on reasonable forward-looking
information and events, including credit ratings if available, significant adverse economic changes (actual or
expected), financial or business environment that are expected to result in a material change in the borrower's
ability to meet its obligations.
1.4.5.9

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost comprises purchase costs, production
costs and other supply and packaging costs. These are usually calculated using the weighted average cost method.
Net realizable value is the estimated selling price in the normal course of business, less estimated completion
costs and selling costs.
1.4.5.10 Trade accounts receivable

Trade accounts receivable are initially recognized at fair value, which is generally equal to their nominal value.
Expected loss rates on trade receivables are calculated by the relevant operating entities over their lifetime frominitial recognition and are based on historical data that also incorporates forward-looking information. In
addition, account receivables from customers subject to insolvency proceedings or customers with whom UMG is
involved in litigation or a dispute are generally impaired in full.
1.4.5.11 Cash and cash equivalents

The “cash and cash equivalents” category, defined in accordance with IAS 7, consists, on the one hand, of cash inbanks and remunerated or unremunerated demand deposits which corresponds to cash, and, on the other handmonetary UCITS and other highly liquid investments with initial maturities of generally three months or less whichcorrespond to cash equivalents.

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Investments in securities, investments with initial maturities of more than three months without an earlytermination option and bank accounts subject to restrictions (blocked accounts), other than restrictions due toregulations specific to a country or activity sector (e.g., exchange controls), are not classified as cash equivalents
but as financial assets.
Moreover, the historical performances of the investments are monitored regularly to confirm their cash
equivalents accounting classification.
1.4.6

Assets held for sale and discontinued operations

A non-current asset or a group of assets and liabilities is held for sale when its carrying value may be recovered
principally through its divestiture and not by its continued utilization. To meet this definition, the asset must be
available for immediate sale and the divestiture must be highly probable. These assets and liabilities arerecognized as assets held for sale and liabilities associated with assets held for sale, without offset. The related
assets recorded as assets held for sale are valued at the lowest value between the fair value (net of divestiturefees) and the carrying value (i.e., at their cost less accumulated depreciation and impairment losses), and they are
no longer depreciated.
An operation is qualified as discontinued when it represents a separate major line of business and the criteria forclassification as an asset held for sale have been met or when UMG has sold the asset. Discontinued operations
are reported on a single line of the Statement of Earnings for the periods reported, comprising the earnings after
tax of discontinued operations until divestiture and the gain or loss after tax on sale or fair value measurement,
less costs to divest the assets and liabilities of the discontinued operations. In addition, cash flows generated bydiscontinued operations are reported on a separate line of the Statement of Consolidated Cash Flows for the
relevant periods.
1.4.7

Financial liabilities

Long-term and short-term borrowings and other financial liabilities include: bonds and credit facilities, as well as various other borrowings (including commercial paper and debt related
to finance leases) and related accrued interest;
 obligations arising out of commitments to purchase non-controlling interests;
 bank overdrafts; and the negative value of other derivative financial instruments. Derivatives with positive values are recorded as
financial assets in the Statement of Financial Position.
Borrowings
All borrowings are initially accounted for at fair value net of transaction costs directly attributable to theborrowing. Borrowings bearing interest are subsequently valued at amortized cost, applying the effective interest
method. The effective interest rate is the internal yield rate that discounts future cash flows over the term of theborrowing. In addition, where the borrowing comprises an embedded derivative (e.g., an exchangeable bond) oran equity instrument (e.g., a convertible bond), the amortized cost is calculated for the debt component only,
after separation of the embedded derivative or equity instrument. In the event of a change in expected future
cash flows (e.g., redemption occurs earlier than initially expected), the amortized cost is adjusted against earnings
to reflect the value of the new expected cash flows, discounted at the initial effective interest rate.
Derivative financial instruments
UMG uses derivative financial instruments to manage and reduce its exposure to fluctuations in interest rates,
and foreign currency exchange rates. All instruments are either listed on organized markets or traded over-theUniversal Music Group / 28

F-30

counter with highly-rated counterparties. These instruments include interest rate and currency swaps, andforward exchange contracts. All these derivative financial instruments are used for hedging purposes. At the
inception of the hedging relationship there is the formal designation and documentation of the hedging
relationship and the entity’s risk management objective and strategy for undertaking the hedge.
Derivatives are initially measured at fair value on the settlement date and are subsequently remeasured at fairvalue on each succeeding reporting date. The recognition of subsequent changes in fair value depends onwhether the derivative is designated as a hedging instrument and, if applicable, the nature of the hedged item
and the type of hedging relationship designated. When these contracts qualify as hedges for accounting purposes,
gains and losses arising on these contracts are offset in earnings against the gains and losses relating to thehedged item.
When forward contracts are used as hedging instruments, UMG only qualifies as hedging instruments the change
in the fair value of the forward contract related to the variation of the spot exchange rate. Changes in the forward
points are excluded from the hedging relationship and are recognized in the financial result.
Fair value hedge
When the derivative financial instrument hedges exposures to fluctuations in the fair value of an asset or aliability recognized in the Statement of Financial Position or of a firm commitment which is not recognized in theStatement of Financial Position, it is a fair value hedge. The instrument is remeasured at fair value in earnings,
with the gains or losses arising on remeasurement of the hedged portion of the hedged item offset on the sameline of the Statement of Earnings, or, as part of a forecasted transaction relating to a non-financial asset or
liability, at the initial cost of the asset or liability.
Cash flow hedge
When the derivative financial instrument hedges cash flows, it is a cash flow hedge. The hedging instrument isremeasured at fair value and the portion of the gain or loss that is determined to be an effective hedge isrecognized through charges and income directly recognized in equity, whereas its ineffective portion is recognizedin earnings; when the hedged item is realized, accumulated gains and losses recognized in equity are released to
the Statement of Earnings and recorded on the same line as the hedged item; as part of a forecasted transaction
on a non-financial asset or liability, they are recognized at the initial cost of the asset or liability.
Net investment hedge
When the derivative financial instrument hedges a net investment in a foreign operation, it is recognized in thesame way as a cash flow hedge. Derivative financial instruments which do not qualify as a hedge for accounting
purposes are remeasured at fair value and resulting gains and losses are recognized directly in earnings, without
remeasurement of the underlying instrument.
Furthermore, income and expenses relating to foreign currency instruments used to hedge highly probablebudget exposures and firm commitments contracted pursuant to the acquisition of editorial content rights(including sports, audiovisual and film rights) are recognized in EBIT. In all other cases, gains and losses arising on
the fair value remeasurement of instruments are recognized in other financial charges and income.
1.4.8

Other liabilities

Provisions
Provisions are recognized when, at the end of the reporting period, UMG has a legal obligation (statutory,
regulatory or contractual) or a constructive obligation, as a result of past events, and it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and the obligation canbe reliably estimated. Where the effect of the time value of money is material, provisions are discounted to their
Universal Music Group / 29

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present value using a pre-tax discount rate that reflects current market assessments of the time value of money.
If the amount of the obligation cannot be reliably estimated, no provision is recorded and a disclosure is made in
the Notes to the Consolidated Financial Statements.
Employee benefit plans
In accordance with the laws and practices of each country in which it operates, UMG participates in, or maintains,
employee benefit plans providing retirement pensions, post-retirement health care, life insurance and postemployment benefits to eligible employees, former employees, retirees and such of their beneficiaries who meetthe required conditions. Retirement pensions are provided for substantially all employees through defined
contribution plans, which are integrated with local social security and multi-employer plans, or defined benefit
plans, which are generally managed via group pension plans. The plan funding policy implemented by the group is
consistent with applicable government funding requirements and regulations.
Defined contribution plans
Contributions to defined contribution and multi-employer plans are expensed during the year.
Defined benefit plans
Defined benefit plans may be funded by investments in various instruments such as insurance contracts or equity
and debt investment securities, excluding shares in any UMG entity or debt instruments.
Pension expenses and defined benefit obligations are calculated by independent actuaries using the projected
unit credit method. This method is based on annually updated assumptions, which include the probability of
employees remaining with UMG until retirement, expected changes in future compensation and an appropriate
discount rate for each country in which UMG maintains a pension plan. The assumptions adopted, and the meansof determining these assumptions, are presented in Note 17 of the 2020 Combined Financial Statements. A
provision is recorded in the Statement of Financial Position equal to the difference between the actuarial value ofthe related benefits (actuarial liability) and the fair value of any associated plan assets, and this includes past
service costs and actuarial gains and losses.
The cost of defined benefit plans consists of three components recognized as follows: the service cost is included in selling, general and administrative expenses. It comprises current service cost,
past service cost resulting from a plan amendment or a curtailment, immediately recognized in profit andloss, and gains and losses on settlement; the financial component, recorded in other financial charges and income, consists of the undiscounting of
the obligation, less the expected return on plan assets determined using the discount rate retained for thevaluation of the benefit obligation; and the remeasurements of the net defined benefit liability (asset), recognized in items of other comprehensive
income not reclassified as profit and loss, mainly consist of actuarial gains and losses, i.e., changes in thepresent value of the defined benefit obligation and plan assets resulting from changes in actuarial
assumptions and experience adjustments (representing the differences between the expected effect of someactuarial assumptions applied to previous valuations and the effective impact).
Where the value of plan assets exceeds benefit obligations, a financial asset is recognized up to the present valueof future refunds and the expected reduction in future contributions.

Universal Music Group / 30

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Some other post-employment benefits, such as life insurance and medical coverage (mainly in the United States)
are subject to provisions which are assessed through an actuarial calculation comparable to the method used forpension provisions.
1.4.9

Deferred taxes

Differences existing at closing between the tax base value of assets and liabilities and their carrying value in theConsolidated Statement of Financial Position give rise to temporary differences. Pursuant to the liability method,these temporary differences result in the accounting of: deferred tax assets, when the tax base value is greater than the carrying value (expected future tax saving);and deferred tax liabilities, when the tax base value is lower than the carrying value (expected future tax
expense).
Deferred tax assets and liabilities are measured at the expected tax rates for the year during which the asset will
be realized or the liability settled, based on tax rates (and tax regulations) enacted or substantially enacted by theclosing date. They are reviewed at the end of each year, in line with any changes in applicable tax rates.
Deferred tax assets are recognized for all deductible temporary differences, tax loss carry-forwards and unused
tax credits, insofar as it is probable that a taxable profit will be available, or when a current tax liability exists tomake use of those deductible temporary differences, tax loss carry-forwards and unused tax credits, except
where the deferred tax asset associated with the deductible temporary difference is generated by initialrecognition of an asset or liability in a transaction which is not a business combination, and that, at thetransaction date, does not impact earnings, nor tax income or loss.
For deductible temporary differences resulting from investments in subsidiaries, joint ventures and otherassociated entities, deferred tax assets are recorded to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and that a taxable profit will be available against which thetemporary difference can be utilized.
The carrying value of deferred tax assets is reviewed at each closing date, and revalued or reduced to the extent
that it is more or less probable that a taxable profit will be available to allow the deferred tax asset to be utilized.
When assessing the probability of a taxable profit being available, account is taken, primarily, of prior years’
results, forecasted future results, non-recurring items unlikely to occur in the future and the tax strategy. As such,the assessment of the group’s ability to utilize tax losses carried forward is to a large extent judgment-based. If
the future taxable results of the group proved to differ significantly from those expected, the group would be
required to increase or decrease the carrying value of deferred tax assets with a potentially material impact on
the group’s Statement of Financial Position and Statement of Earnings.
Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability
results from goodwill or initial recognition of an asset or liability in a transaction which is not a businesscombination, and that, at the transaction date, does not impact earnings, tax income or loss.
For taxable temporary differences resulting from investments in subsidiaries, joint ventures and other associatedentities, deferred tax liabilities are recorded except to the extent that both of the following conditions are
satisfied: the parent, investor or venturer is able to control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not be reversed in the foreseeable future.
Current tax and deferred tax shall be charged or credited directly to equity, and not earnings, if the tax relates toitems that ae credited or charged directly to equity.

Universal Music Group / 31

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Share-based compensation
With the aim of aligning the interests of executive management and employees of Vivendi and its subsidiaries, ofwhich some UMG’s employees, with its shareholders’ interests by providing them with an additional incentive toimprove the company’s performance and increase its share price on a long-term basis, Vivendi maintains several
share-based compensation plans (share purchase plans, performance share plans and bonus share plans) or other
equity instruments based on the value of the Vivendi share price (stock options), which are settled either in
equity instruments or in cash. Grants under these plans are approved by Vivendi’s Management and Supervisory
Boards. In addition, the definitive grant of stock options and performance shares is contingent upon theachievement of specific performance objectives set by Vivendi’s Management and Supervisory Boards. Moreover,all granted plans are conditional upon active employment at the vesting date.
Share-based compensation is recognized as a personnel cost at the fair value of the equity instruments granted.
This expense is spread over the vesting period, i.e., three years for stock option plans and for performance shareplans (two years for performance shares granted before June 24, 2014), and two years for Vivendi’s bonus shareplans, other than in specific cases.
The cost of share-based compensation is allocated to UMG, pro rata to the number of equity instruments orequivalent instruments granted to their employees and recharged by Vivendi.
Vivendi uses a binomial model to assess the fair value of such instruments. This method relies on assumptions
updated at the valuation date such as the calculated volatility of the relevant shares, the discount rate
corresponding to the risk-free interest rate, the expected dividend yield, and the probability of relevant managers
and employees remaining employed within the group until the exercise of their rights.
However, depending on whether the instruments granted are equity-settled or cash-settled, the valuation andrecognition of the expense will differ:
Equity-settled instruments:the expected term of the option granted is deemed to be the mid-point between the vesting date and theend of the contractual term;

the value of the instruments granted is estimated and fixed at grant date; andthe expense is recognized with a corresponding increase in equity.

Cash-settled instruments:the expected term of the instruments granted is deemed to be equal to one-half of the residual
contractual term of the instrument for vested rights, and to the average of the residual vesting period at
the remeasurement date and the residual contractual term of the instrument for unvested rights;

the value of instruments granted is initially estimated at grant date and is then re-estimated at eachreporting date until the payment date and the expense is adjusted pro rata taking into account the vested
rights at each such reporting date;the expense is recognized as a provision; andmoreover, as plans settled in cash are primarily denominated in US dollars, the value fluctuates based on
the EUR/USD exchange rate.

Universal Music Group / 32

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1.5

Related parties

UMG’s related parties are those companies over which UMG exercises exclusive control, joint control orsignificant influence, UMG shareowners exercising joint control over joint ventures, non-controlling interests
exercising significant influence over UMG subsidiaries, UMG corporate officers, management and directors andcompanies over which the latter exercise exclusive control, joint control, or significant influence.
The transactions with subsidiaries over which UMG exercises control are eliminated within the intersegment
transactions (a list of UMG’s major consolidated entities is set out in Note 19). Moreover, commercial
relationships among UMG subsidiaries, aggregated in operating segments, are conducted on an arm’s length basis
on terms and conditions similar to those which would be offered by third parties. A portion of the operating costsof Vivendi SE’s headquarters is allocated to UMG.

1.6

Contractual obligations and contingent assets and liabilities

Once a year, UMG and its subsidiaries prepare detailed reports on all contractual obligations, commercial andfinancial commitments and contingent obligations, for which they are jointly and severally liable and that arematerial to the group. These detailed reports are updated by the relevant departments and reviewed by senior
management on a regular basis. To ensure completeness, accuracy and consistency of these reports, somededicated internal control procedures are carried out, including (but not limited to) the review of: minutes of meetings of the shareholders, board and executive and other relevant committee meetings in
respect of matters such as contracts, litigation, and authorizations of asset acquisitions or divestitures;
 pledges and guarantees with banks and financial institutions; pending litigation, claims (in dispute) and environmental matters as well as related assessments forunrecorded contingencies with internal and/or external legal counsels;
 tax examiner’s reports and, if applicable, notices of reassessments and tax expense analyses for prior years;
 insurance coverage for unrecorded contingencies with the risk management department and insurance
agents and brokers with whom the group contracted;
 related-party transactions for guarantees and other given or received commitments; and more generally,major contracts and agreements.

1.7

COVID-19 pandemic impacts

Although the COVID-19 pandemic is having a more significant impact on certain countries or businesses thanothers, in the first half of 2021, UMG has demonstrated resilience in adapting its activities to continue to best
serve and entertain its customers, while reducing costs to preserve its margins.
UMG continually monitors the current and potential consequences of the crisis. It is difficult at this time todetermine how it will impact UMG’s results in 2021. UMG continues to make every effort to ensure the continuityof its activities, as well as to best serve and entertain its customers and audiences while complying with theguidelines of authorities in each country where it operates.
A review of the value of assets with an indefinite life, in particular the goodwill, was performed. Taking into
account the performance achieved during the first half of the year, UMG did not identify any indications of adecrease in the recoverable amount compared to December 31, 2020.

Universal Music Group / 33

F-35

Segment data
Operating segment data
The group management evaluates the performance of its business segments and allocates necessary resources tothem based on certain operating performance indicators (segment earnings and cash flow from operations).
EBITDA and EBITA reflect the earnings of each business segment, as defined in Note 1.2.3 to the 2020 Combined
Financial Statements.
Intersegment commercial operations are conducted on an arm’s-length basis on terms and conditions similar to
those which would be offered by third parties.
Main aggregates of the Statement of Earnings
Corporate
centerEliminationof intersegment transactions

138

-)

(8)

3,831

-

(61)

-)

822

127

(1)

(78)

-)

753

2,771

573

121

-)

(6)

3,459

590

132

1

(74)

-)

649

541

126

(0)

(100)

-)

567

Revenues

5,967

1,186

292

-)

(13)

7,432

EBITDA

1,360

269

21

(163)

-)

1,487

EBITA

1,259

257

19

(206)

-)

1,329

Recorded
music

Music
publishing

Merchandis-ing andother

Revenues

3,137

564

EBITDA

749

134

EBITA

705

Revenues
EBITDAEBITA(in millions of euros)

Total

Six months ended 30 June 2021

Six months ended 30 June 2020

Year ended December 31, 2020

Reconciliation of EBIT to EBITA and to EBITDA
Year ended
December 31,

Six months ended June 30,(in millions of euros)

EBIT (a)

2021

2020

2020

684

516

1,221

69

51

108

Impairment losses on intangible assets acquired through business combinations

-

-

-

Other charges and income

-

-

-

753

567

1,329

9

8

20

Adjustments
Amortization of intangible assets acquired through business combinations

EBITA
Adjustments
Restructuring charges
Sale of tangible and intangible assets

(3)

1

1

Right-of-use - Depreciation of tangible assets

34

35

69

Depreciation

32

28

59

Other non-recurring items including income from equity affiliates

(3)

10

9

822

649

1,487

EBITDA

Universal Music Group / 34

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a.

As reported in the consolidated condensed statement of earnings and as defined in Note 1.3.3

Recorded music revenues by geographic area
Recorded music revenues broken down by customer location:
Six months ended June 30,(in millions of euros)

North America
EuropeAsia
Latin America
Rest of the world
Recorded music revenues

2021
1,554
920
428
107
128
3,137

Year ended December 31,
2020

50%
29%
14%
3%
4%
100%

2020

1,396
838
382
95
60
2,771

51%
30%
14%
3%
2%
100%

2,940
1,789
801
181
256
5,967

49%
30%
14%
3%
4%
100%

Segment assets and liabilities
Segment assets by geographic area
Segment assets include goodwill, content assets, other intangible assets, property, plant and equipment, rightsof-use relating to leases, equity affiliates, financial assets, inventories, shareowners loans and trade accounts
receivable and other.
June 30, 2021

(in millions of euros)

North America
EuropeAsia/Pacific
Latin America
Rest of the world
Total segment assets

5,721
3,423
314
74
14
9,546

December 31, 2020
60%
36%
3%
1%
100%

5,669
4,214
305
46
12
10,246

55%
41%
3%
1%
100%

Segment liabilities
Segment liabilities include provisions, other non-current liabilities, short-term and long-term lease liabilities andtrade accounts payable and other. Segment liabilities amounted to €5,450 million as of June 30, 2021, comparedto €5,691 million as of December 31, 2020.

Financial charges and income
Interest(in millions of euros)

Six months ended June 30,(Charge)/Income
Interest expense on borrowings net (a)Interest income from cash, cash equivalents and investments

2021

Interesta.

Year ended
December 31,

2020

2020

(11)
2)

(9)
3)

(20)
5)

(9)

(6)

(15)

Notably included net interest expense on borrowings from Vivendi SE, please refer to Note 12.

Universal Music Group / 35

F-37

Other financial income and charges
Year ended
December 31,

Six months ended June 30,(in millions of euros)

Capital gain on financial investments (a)Effect of undiscounting assets
Expected return on plan assets related to employee benefit plans
Foreign exchange gain
Other
Other financial income
Capital losses on financial investments (a)Downside adjustment on financial investments
Effect of undiscounting liabilities
Interest cost related to employee benefit plans
Interest expenses on lease liabilities
Foreign exchange loss
Other
Other financial charges
Net total

a.

2021
102)
-)
1)
1)
1)
105)
(170)
-)
-)
(2)
(8)
-)
(3)
(183)
(78)

2020

2020
449)
-)
1)
2)
1)
453)
-)
-)
(1)
(2)
(9)
-)
(2)
(14)
439)

591)
-)
3)
-)
9)
603)
-)
-)
(1)
(5)
(18)
-)
(4)
(28)
575)

Included the loss on revaluation of the interests in Spotify and Tencent Music Entertainment for a net amountof €(170) million (compared to a gain of €449 million for the first half-year 2020). Also included a gain on
disposal of UMG’s interest in Alamo Records LLC for €100 million.

Income taxes
UMG’s income tax expense recognized in the Statement of Earnings for the first half of 2021 was €144m
compared to €214 million for the first half of 2020 and €412 million for the full year 2020. The deferred tax
income related to the revaluation through profit or loss of the interests in Spotify and other equity holdings is an
income of €30 million for the first half of 2021, compared to an expense of €(110) million for the first half of 2020and €(142) million for the full year 2020.

Universal Music Group / 36

F-38

Earnings per share
UMG B.V’s consolidated earnings per share is presented below.
Until February 26, 2021, as the combined group was not a legal entity, the number of shares outstanding was notdeterminable. Consequently, no earning per share data was presented.
Following the contribution by Vivendi and the consortium led by Tencent to UMG B.V on February 26, 2021, thenumber of shares outstanding is determinable.
In accordance with IAS 33.64, the number of ordinary or potential ordinary shares outstanding increasing as aresult of the contribution, the calculation of basic and diluted earnings per share shall be adjusted retrospectively,
for all periods presented.
Six months ended June 30,(in millions of euros)

Earnings attributable to UMG shareowners
Earnings from continuing operations
Earnings from discontinuing operations
Earnings
Number of shares (in millions)
Weighted average number of shares outstanding
Potential dilutive effects related to share-based compensation
Adjusted weighted average number of shares

2021
Basic
Diluted
452
452

2020
Basic
Diluted
735
735

-

-

-

-

452

452

735

735

Basic
1,813

Diluted
1,813

Basic
1,813

Diluted
1,813

-

-

-

-

1,813

1,813

1,813

1,813

0.25

0.25

0.41

0.41

-

-

-

-

0.25

0.25

0.41

0.41

Earnings per share (in euros)
Earnings from continuing operations attributable to UMG shareowners per share
Earnings from discontinuing operations attributable to UMG shareowners per share
Earnings attributable to UMG shareowners per share

Universal Music Group / 37

F-39

(in millions of euros)

2020
Earnings attributable to UMG shareowners
Earnings from continuing operations

Basic
1,366

Earnings from discontinuing operations

Year ended December 31,
2019
Diluted
Basic
Diluted
1,366
972
972

2018
Basic
Diluted
897
897

-

-

-

-

-

-

Earnings

1,366

1,366

735

972

897

897

Weighted average number of shares outstanding

1,813

1,813

1,813

1,813

1,813

1,813

Potential dilutive effects related to share-based
compensation

-

-

-

-

-

-

Adjusted weighted average number of shares

1,813

1,813

1,813

1,813

1,813

1,813

0.75

0.75

0.54

0.54

0.49

0.49

Earnings from discontinuing operations attributable to
UMG shareowners per share

-

-

-

-

-

-

Earnings attributable to UMG shareowners per share

0.75

0.75

0.54

0.54

0.49

0.49

Earnings per share (in euros)
Earnings from continuing operations attributable to
UMG shareowners per share

Charges and income directly recognized in equity
Details of changes in equity related to other comprehensive income

Items not subsequently
reclassified to profit or loss

Items to be subsequently reclassified
to profit or loss

Actuarial
gains/(losses)
related to
employeedefined benefit
plans

Financialassets at fairvalue throughothercomprehensive income

Foreign currencytranslation
adjustments

Other
comprehensiv
e income fromequityaffiliates, net

Othercomprehensive
income

(42)

(15)

(418)

(8)

(483)

Charges and income directly recognized in equity

-)

-)

24)

1)

25

Items to be reclassified to profit or loss

-)

-)

-)

-)

-)

Tax effect

-)

-)

-)

-)

-)

(42)

(15)

(394)

(7)

(458)

(in millions of euros)
Balance as of December 31, 2020

Balance as of June 30, 2021

Universal Music Group / 38

F-40

Goodwill(in millions of euros)

June 30, 2021

December 31, 2020

Goodwill, gross

1,468)

1,451)

Impairment losses

(82)

(82)

1,386)

1,369)

Goodwill(in millions of euros)

Recorded Music
Publishing
Merchandising & Other
Closing balance

June 30, 2021

December 31, 2020

608
680
98

601
674
94

1,386

1,369

Changes in goodwill(in millions of euros)

June 30, 2021

December 31, 2020

Opening balance
Impairment losses
Business combinations
Changes in foreign currency translation adjustments

1,369
2
15

1,488
7
(126)

Closing balance

1,386

1,369

UMG’s financial reporting is managed at the level of operating segments consistent across the music industry(recorded music, music publishing, and merchandising).
Prior to February 26, 2021 Vivendi tested goodwill at the level of UMG. After the reorganization as disclosed in
Note 1, UMG allocated goodwill in 2021 to groups of cash-generating units (sale of recorded music; exploitationof music publishing rights; merchandising) within UMG that are the lowest level within UMG at which goodwill ismonitored for UMG’s internal management purposes. Goodwill is therefore tested at the level of UMG’soperating segments in 2021.
In 2019 and 2020, UMG was tested for impairment by comparing its carrying amount (including goodwill) with its
recoverable amount. The recoverable amount is determined as the higher of the value in use determined by thediscounted value of future cash flows (Discounted Cash Flow method (DCF)) and the fair value (less costs to sell),determined on the basis of market data (stock market prices, comparable listed companies, comparison with thevalue attributed to similar assets or companies in recent acquisition transactions). For a description of themethods used for the impairment test, please refer to Note 1.4.5.1.
During the fourth quarter of each year, the goodwill impairment test was performed at each CGU level based on
valuations of recoverable amounts determined: in 2020 and 2019, referring to a recent transaction (please referto the precision below). As a result, the Management concluded that, as of December 31, 2019 and 2020, therecoverable amount tested at each CGU level, significantly exceeded its carrying value.
As of June 30, 2021, the Management assessed whether there was any indication that any of the cash generating
units (“CGU”) may have become impaired during the first half of 2021.
On March 31, 2020, Vivendi sold 10% of UMG’s share capital to the Tencent-led consortium based on an
enterprise value of €30 billion for 100% of UMG’s share capital.
Universal Music Group / 39

F-41

On January 29, 2021, Vivendi sold an additional 10% of UMG’s share capital to the Tencent-led consortium basedon the same enterprise value of €30 billion for 100% of UMG’s share capital.
On July 19, 2021, Pershing Square Tontine Holdings Ltd. (PSTH) informed Vivendi that it intends to assign its rights
and obligations to acquire 10% of the share capital of UMG B.V under the agreements announced on June 20,
2021 to investment funds with significant economic interests or management positions held by Mr. William
Ackman. Vivendi has decided to approve such request. This transaction is based on an enterprise value of €35
billion for 100% of the UMG BV share capital.
Notwithstanding the uncertainties created by the COVID-19 pandemic, the Management concluded that there
were no triggering events that would indicate any reduction in the value of any CGU or group of CGUs, compared
to December 31, 2020 and that any limited decrease in operating performances of the Merchandising CGU in
2020 and the first half of 2021 is unlikely to be lasting and should not affect its long-term outlook. In addition, anannual impairment test of the carrying value of goodwill and other intangible assets will be performed during thefourth quarter of 2021.

Content assets and commitments
Content assets
June 30, 2021

Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Content assets
Deduction of current content assets

4,424)
1,930)
21)
6,375)(729)

Accumulated
amortization andimpairment losses(2,102)-)(21)(2,123)-)

Non-current content assets

5,646)(2,123)(in millions of euros)

Content assets,
gross

December 31, 2020
Content assets

Content assets

2,322)
1,930)-)
4,252)(729)

2,330)
1,859)-)
4,189)(677)

3,523)

3,512)

Contractual content commitments
Commitments given recorded in the Statement of Financial Position: content liabilities(in millions of euros)

June 30,

December 31,

2021

2020

Music royalties to artists and repertoire owners
Creative talent and employment agreements and others
Total content liabilities

2,379
387
2,766

2,315
456
2,771

Content liabilities are mainly recorded in “Trade accounts payable and other” or in “Other non-current liabilities”
whether they are current or non-current, as applicable.
Off-balance sheet commitments: creative talent, employment agreements and others
Universal Music Group (UMG) routinely commits to pay agreed amounts to artists and other parties upon deliveryof content or other products (“Creative talent and employment agreements”). Until the artist or the other party
has delivered his or her content or until the repayment of an advance, UMG discloses its obligation as an offbalance sheet given commitment. While the artist or the other party is obligated to deliver content or anotherproduct to UMG (these arrangements are generally exclusive), this counterpart cannot be reliably determined
and, thus, is not reported in received commitments.
Universal Music Group / 40

F-42

Leases
Rights-of-use relating to leases
As of June 30, 2021 the rights-of-use relating to leases amounted to €406 million (€416 million as of December 31,2020) less the accumulated amortization and impairment losses for €365 million as of June 30, 2021 (€329 million
as of December 31, 2020. These rights-of-use relate to real estate leases.
Changes in the rights-of-use(in millions of euros)

Opening balance
Depreciation
Acquisitions/increase
Sales/decrease
Business combinations
Foreign currency translations and other
Closing balance

June 30, 2021

December 31, 2020

416)
(34)
24)
-)
-)
-)
406)

472)
(69)
39)
-)
-)
(26)
416)

Maturity of lease liabilities(in millions of euros)

June 30, 2021

December 31, 2020

Maturity< 1 year
Between 1 and 5 years> 5 years

78
255
185

78
265
182

Lease liabilities

518

525

Lease-related expenses
The net lease-related expenses recorded in the Statement of Earnings amounted to €39 million for the first half of2021 (compared to €45 million for the first half of 2020).

Universal Music Group / 41

F-43

Investments in equity affiliates
As of June 30, 2021 and December 31, 2020 the main company accounted for by Universal Music Group under theequity method was Vevo (a premium music video and entertainment platform).

Voting interest(in millions of euros)

Vevo
Other

Voting interest
December 31,
2020

June 30, 2021
49.2%
n/a

Net carrying value of equity affiliates
June 30, 2021

49.4%
n/a

December 31, 2020
62
33
95

62
10
72

Change in value of investments in equity affiliates
June 30, 2021

(in millions of euros)

Opening balance
Acquisitions
Business combinations
Income from equity affiliates
Change in other comprehensive income
Dividends received
Other
Closing balance

December 31, 2020
72)
23)
-)
(1)
1)
-)
-)
95)

88)
1)
-)
(9)
(6)
(2)
-)
72

Financial assets
June 30, 2021
(in millions of euros)

Total

December 31, 2020
Noncurrent

Current

Total

Current

Non-current

Financial assets at fair value through profit or loss
Term deposits
Level 1 - Listed equity securities
Level 2Unlisted equity securities
Derivative financial instruments
Level 3 - Other financial assets

1,631

-

1,631

1,862

-

1,862

43
19
-

-)
-

43
19
-

43
-

-

43
-

35
35

14
75
1,782

14
44
1,963

1
1

14
43
1,962

Financial assets at fair value through other comprehensive income
Level 1 - Listed equity securities
Level 2 - Unlisted equity securities
Level 3 - Unlisted equity securities
14
Financial assets at amortized cost
110
Financial assets
1,817

The three classification levels for the measurement of financial assets at fair value are defined in Note 1.4.1.

Universal Music Group / 42

F-44

Listed equity portfolio
June 30, 2021
Number ofshares held

Ownership
interest(in thousands)

Averagepurchaseprice (a)Stockmarketprice

Carryingvalue(€/share)

Change invalue overthe period

Cumulative
unrealized
capitalgain/(loss)

Sensitivity at+/-10 pts

(in millions of euros)

Spotify (b)

6,487

3.35%

6.58

227.28

1,475

(195)

1,432

+147/147

Tencent MusicEntertainment (c)12,246

0.73%

na

12.77

156

(36)

156

+16/-16

-

-

-

-

-

-)

-

-

1,631

(231)

1,588

Change invalue overthe period

Cumulative
unrealized
capitalgain/(loss)

Other
Total

December 31, 2020
Number ofshares held

Ownership
interest

Averagepurchaseprice (a)(in thousands)

Stockmarketprice

Carryingvalue(€/share)Sensitivity at+/-10 pts

(in millions of euros)

Spotify (b)

6,487

3.37%

6.58

257.34

1,669

798)

1,627

+167/-167

Tencent MusicEntertainment (c)12,246

0.74%

na

15.74

193

64)

193

+19/-19

Other

-

(1)

-

Total

1,862

861)

1,820

na: not applicable.
a.

Includes acquisition fees and taxes.

b.

Spotify shares have been listed since April 3, 2018.

c.

Tencent Music Entertainment shares have been listed since December 12, 2018.

Cash position and borrowings
Cash position
Universal Music Group (UMG)’s cash position comprises cash and cash equivalents, as well as loans to Vivendi. As
defined by UMG, money market funds relate to financial investments, which satisfy the ANC’s and AMF’s decision
released in November 2018.

Universal Music Group / 43

F-45

June 30, 2021

(in millions of euros)

Loans to Vivendi SEof which
Universal Music Group Treasury with Vivendi
Cash and cash equivalentsof whichcash equivalents
cash
Cash position

December 31, 2020
146
146
755
301
454
901

815
815
326
220
106
1,141

Borrowings and other financial liabilities(in millions of euros)

Total

June 30, 2021
Longterm

Shortterm

December 31, 2020
LongShortTotal
term
term

Vivendi SE borrowings (a)Credit lines drawn by UMG Inc. (b)Bank overdrafts
Other
Borrowings at amortized cost
Derivative financial instruments

2,368
546
2
2
2,918
-

0
1
1
-

2,368
546
2
1
2,917
-

2,368
635
5
1
3,009
-

2,368
1
2,369
-

635
5
640
-

Borrowings and other financial liabilities

2,918

1

2,917

3,009

2,369

640

Corresponds to Universal International Music B.V.’s borrowing from Vivendi SE, to be settled on July 7, 2021,
see below for more details.
b. Corresponds to credit lines drawn by UMG Inc. for €330 million (December 31, 2020: €213 million) on UMG
Inc. credit lines and €216 million (December 31, 2020: €422 million) on Vivendi SE credit lines.
c. Refer to Note 17 for details on maturity of borrowings.
a.

In the context of the planned distribution of 60% of UMG’s share capital to Vivendi’s shareholders and the listingof UMG’s shares on the Euronext Amsterdam stock exchange, on March 24, 2021, UMG entered into anagreement concerning the setting up of a five-year €3 billion syndicated bank credit facility: a revolving credit
facility of €2 billion and a term loan of €1 billion. UMG’s ability to draw on these bank credit facilities wasconditional upon its strict ring fencing from Vivendi, in particular the termination of UMG’s cash poolingagreement with Vivendi, UMG Inc.’s inability to draw on Vivendi SE’s bilateral credit facilities, and the repayment
of UIM B.V.’s intra-group debt from Vivendi. On July 7, 2021, Vivendi and UMG completely separated their cash
pooling and financing arrangements.
As a reminder, since 2020, UMG Inc. has been an additional borrower under five of Vivendi SE’s eight bilateralcredit facilities up to the aggregate limit of €750 million as of December 31, 2020, which was reduced to€450 million as of June 30, 2021. As of June 30, 2021, three of these credit facilities were drawn by UMG for€216 million.
In addition, UMG Inc. had its own credit facilities maturing in 2021 for an aggregate amount of $570 million, i.e.,€470 million as of June 30, 2021, including a committed credit facility of €247 million maturing in September
2021. As of June 30, 2021, UMG Inc. had drawn on these credit facilities for an amount of €330 million, and on
July 7, 2021, it repaid and cancelled them.
On March 24, 2021, UMG B.V. and UMG Inc. reached an agreement for a syndicated revolving bank credit facilityof €2 billion (drawings made in euros for UMG B.V. and in US dollars for UMG Inc.) for a five-year period, with two
one-year extension options.
On the same date, UMG B.V. entered into a term loan of €1 billion maturing in October 2026. The ability for UMG
to draw on these bank credit facilities was conditional upon its strict ring fencing from Vivendi. On July 7, 2021,
Universal Music Group / 44

F-46

Vivendi and UMG completely separated their cash pooling and financing arrangements after the following
transactions were implemented:

the termination of UMGT S.A.S.’s cash pooling agreement with Vivendi SE, with Vivendi SE returning thedeposited amount of €146 million as of June 30, 2021;
the repayment by UMG Inc. of its drawings on Vivendi SE’s bilateral bank credit facilities for €216 million
as of June 30, 2021; andthe repayment by UIM B.V. of its intra-group borrowing from Vivendi SE, for €2,368 million.

On July 7, 2021, to finance the repayment of UIM B.V.’s intra-group borrowing from Vivendi SE, UMG B.V. drew
on its term loan of €1 billion, as well as on the revolving credit facility for €1.24 billion. In addition, UMG Inc. drewon the same credit facility for $500 million, i.e., €416 million.
UMG borrowings and intra-group investments with Vivendi
UMG’s intra-group borrowings and deposit positions with Vivendi SE were as follows:(in millions of euros)

Vivendi SE borrowings
Loans to Vivendi SE from UMG Treasury
Net total

July 7, 2021

June 30, 2021-

(2,368)146(2,222)

December 31,
2020(2,368)815(1,553)EquityUniversal Music Group (UMG) distributes its cash surpluses to shareowners through dividends and share capital
reductions:
June 30, 2021

December 31, 2020

Contributions by/distribution to shareowners
Contributions by shareowners of their UIM B.V. and UMG Inc. shares to UMG B.V. (c)Distribution by UMG B.V. paid to Vivendi SE (d)Distribution by UMG B.V. paid to Concerto and Scherzo (d)of which Universal Music Group S.A.S. transferred to Vivendi SE (a)Distribution by Universal International Music B.V. paid to shareowners (b)Changes in UMG ownership interest in subsidiaries that do not result in a loss of control

422
338
84
-

2,711
2,428
283
13

Changes in equity attributable to Universal Music Group

422

2,724

(in millions of euros)a.

On March 19, 2020, Universal Music Group S.A.S. was dissolved, with universal transmission of its property toVivendi S.E.

b.

Dividends distributed by UIM BV to Vivendi SE for €255 million and to Concerto for €28 million on September
23, 2020.

c.

As described in Note 1, on February 26, 2021, Vivendi and the consortium led by Tencent contributed theirrespective 80% and 20% shares in both UIM B.V. and UMG Inc. to UMG B.V. based on an equity value of €33
billion for 100% of UMG’s share capital. Following this contribution, Vivendi and Tencent respectively own
80% and 20% of UMG B.V. which own 100% of UIM B.V. and 100% of UMG Inc. without any change on UMG’s
scope of combination/consolidation and without any change in total equity. Therefore, UMG’s net equity
remains unchanged before and after the contribution. As such, following the principle of continuity offinancial statements, on February 26, 2021, in UMG B.V.’s consolidated financial statements, the contribution
Universal Music Group / 45

F-47

of €33 billion was directly recorded as an increase in equity attributable to UMG B.V. shareowners (€18.5
billion in share capital and €14.5 billion in additional paid-in capital), and the contribution of €33 billion was
fully neutralized in UMG B.V.’s retained earnings.
d.

Dividends distributed by UMG BV to Vivendi SE for €338 million and to Concerto and Scherzo for a combined€84 million on April 29, 2021.

Provisions(in millions of euros)

Employee benefits (a)Restructuring costs
Litigations
Other (b)Provisions

Note

June 30, 2021

18

Deduction of current provisions
Non-current provisions

December 31, 2020

255
9
4
172
440

258
11
4
199
472

(98)
342

(137)
335

a.

Included deferred employee compensation as well as provisions for defined employee benefit plans, but
excluded employee termination reserves recorded under restructuring costs.

b.

Notably included litigation provisions for which the amount and nature are not detailed because suchdisclosure could be prejudicial to Universal Music Group.

Changes in provisions(in millions of euros)

Opening balance
Addition
Utilization
ReversalBusiness combinations
Divestitures, changes in foreign currency translation and other
Closing balance

June 30, 2021

December 31, 2020

472
32
(64)
(8)
0

500
85
(74)
(43)
-)

8

4)

440

472

Universal Music Group / 46

F-48

Share-based compensation plans
In 2021, no changes were made regarding UMG employee’s participation in Vivendi’s share-based compensationplans. No stock options of performance shares were granted in 2021 to UMG employees and senior executives in
the first half-year of 2021.

Related parties
UMG’s related parties are the key executive managers and other related parties including: companies fully consolidated by UMG. The transactions between these companies have been eliminatedfor the preparation of UMG’s Interim Financial Statements;
 companies over which UMG exercises a significant influence;
 all companies in which key executive managers or their close relatives hold significant voting rights;
 minority shareholders exercising a significant influence over UMG’s subsidiaries; Vivendi Corporate and its consolidated entities (the “Vivendi Group”), as well as its related parties; and Bolloré Group and its related parties, given that Vivendi has been fully consolidated by Bolloré Group sinceApril 26, 2017.
For the reorganization in 2021 and the main transactions by shareholders reference is made to Note 1 Basis ofpreparation of the unaudited consolidated condensed financial statements. For UMG’s borrowings to Vivendi
reference is made to Note 12. UMG distributes its cash surpluses to shareowners through dividends and sharecapital reductions (please refer to Note 13).
UMG’s other related parties include companies over which UMG exercises a significant influence (e.g., Vevo andDuzy Dom). They also include Vivendi Corporate, its consolidated entities (e.g., Canal+ Group and Havas Group)
and its related parties (e.g., Telecom Italia and Banijay Group Holding), as well as Bolloré Group, its subsidiaries
and its related parties.

Universal Music Group / 47

F-49

June 30, 2021

(in millions of euros)

December 31, 2020

AssetsShareowners loans
Trade accounts receivable and otherOf which Vevo
Duzy Dom
Telecom Italia
Havas Group
ULive
Vivendi Corporate

146
46
34
8
1
3

815
61
31
8
1
19

Current financial assets
Of which Vivendi Corporate--

Liabilities
Shareowners borrowings
Non-operating liabilities
Of which Vivendi Corporate

2,368
-

2,368
-

Trade accounts payable and otherOf which Havas Group
Vivendi Corporate
Bolloré Group
Canal+ Group

1
1
-

1
1
-

Income tax payable
Of which Vivendi Corporate--

Year ended
December 31,

Six months ended June 30,
2021

2020

2020

Statement of earnings
Operating income
Of which Vevo
Duzy Dom
Telecom Italia
Canal+ Group
Havas Group
Vivendi Corporate
Other

112
100
5
1
1
3
2

81)
69)
6)
1)
-)
3)
1)
1)

191)
164)
13)
1)
1)
7)
1)
-)

Financial income
Of which Vivendi Corporate

(8)
(8)

(8)
(8)

(17)
(17)

Operating expenses
Of which Havas Group
Canal+ Group
Vivendi Corporate
Bolloré Group
Vivendi Village
Banijay Group Holding
Ingrooves Music Group
Other

(6)
(2)
-)
(4)
-)
-)

(19)
(4)
-)
(13)
(2)
-)
-))
-)
-)

(48)
(11)
-))
(30)
(5)
-)
-)
na)
-))

na: not applicable.

Universal Music Group / 48

F-50

Services billed by Vivendi Corporate
Six months ended June 30,(in millions of euros)

2021

Year ended
December 31,

2020

2020

Management fees
Share-based compensation plans

-)
(3)

(7)
(7)

(15)
(10)

Other

3

1)

(10)

Services billed by Vivendi Corporate

0

(13)

(35)

Contractual obligations and other commitments
Universal Music Group (UMG)’s material contractual obligations and contingent assets and liabilities include: certain contractual obligations relating to the group’s business operations, such as content commitments(please refer to Note 8), contractual obligations and commercial commitments recorded in the Statementof Financial Position, including leases and off-balance sheet commercial commitments, such as long-term
service contracts and purchase or investment commitments;
 commitments related to UMG’s consolidation scope made under acquisitions or divestitures such as sharepurchase or sale commitments, contingent assets and liabilities subsequent to given or received
commitments related to the divestiture or acquisition of shares, commitments under shareholders’agreements and collateral and pledges granted to third parties over UMG’s assets;
 commitments related to UMG’s financing: undrawn confirmed bank credit facilities as well as the
management of interest rate, foreign currency and liquidity risks; and contingent assets and liabilities resulting from legal proceedings in which UMG and/or its subsidiaries areeither plaintiff or defendant (please refer to Note 18).
Contractual obligations and commercial commitments
Minimum future payments as of June 30, 2021

Total minimum
futurepayments as ofPayments due inAfter 5years

December 31,
2020(in millions of euros)

Note

Borrowings and other financial liabilities
Lease liabilities

12
9

2,918
518

2,917
78

1
255

185

3,009
525

Content liabilities

8

2,766

2,531

233

2

2,771

Consolidated statement of financial
position items

6,202

5,526

489

187

Contractual content commitments
Commercial commitments
Net off-balance sheet commitments

1,501(4,919)(3,418)745(1,610)(865)

723(3,309)(2,586)

33
33

1,337
(3,975)(2,638)

na

na

na

na

na

2,784

4,661

(2,097)

220

3,667

Operating leases and subleases
Total

Total

1 year

2-5 years

6,305

na: not applicable.

Universal Music Group / 49

F-51

Off-balance sheet commercial commitments
Minimum future payments as of June 30, 2021

Total
minimum
futurepayments asof

Due in(in millions of euros)

Given commercial commitments

a.

Total

1 year

2-5 years

After 5 years

December 31,
2020

43

32

11

-

46

Received commercial commitments (a)(4,962)(1,642)(3,320)-(4,021)

Net total(4,919)(1,610)(3,309)-(3,975)

Includes minimum guarantees to be received by UMG pursuant to distribution agreements entered into withthird parties, notably digital platforms.

Universal Music Group / 50

F-52

Litigation
In the normal course of its business, Universal Music Group is subject to various lawsuits, arbitrations andgovernmental, administrative or other proceedings (collectively referred to herein as “Legal Proceedings”).
The costs which may result from these Legal Proceedings are only recognized as provisions when they are likely to
be incurred and when the obligation can reasonably be quantified or estimated, in which case, the amount of theprovision represents UMG’s best estimate of the risk and is based on a case-by-case assessment of the risk level,
provided that UMG may, at any time, reassess such risk if events occur during such proceedings. Provisions
recorded by UMG for all claims and litigation were €4m as of June 31, 2021 and €4 million as of December 31,
2020, (please refer to Note 14).
To the company’s knowledge, there are no Legal Proceedings or any facts of an exceptional nature (including any
pending or threatened proceedings in which it is a defendant), which may have or have had in the previous 6months a material effect on the company and on its group’s financial position, profit, business and property,
other than those described herein.
The status of proceedings disclosed hereunder is described as of July 26, 2021.
Soundgarden, Hole, Steve Earle and the estates of Tom Petty and Tupac Shakur against UMG
On June 21, 2019, the groups Soundgarden and Hole, Steve Earle, Tom Petty's ex-wife and Tupac Shakur's estate
filed a class action lawsuit against UMG in the Central District Court of California relating to a 2008 fire that
allegedly destroyed thousands of archived recordings.
The plaintiffs alleged that UMG breached the terms of the contracts with the artists by failing to adequately
protect the recordings. It is also argued that the Group should have shared the settlement proceeds received as aresult of its negotiations with the insurance companies and NBC Universal. On July 17, 2019, UMG filed a motion
to dismiss the lawsuit. On August 16, 2019, the plaintiffs filed an amended complaint removing Hole as a plaintiff
and adding a number of claims. On September 6, 2019, UMG filed a new motion to dismiss. On March 13 and 23,
2020, most of the plaintiffs withdrew from the case, leaving Jane Petty (Tom Petty's ex-wife) as the only
remaining plaintiff. On April 6, 2020, the Court granted UMG's motion to dismiss and dismissed Jane Petty's
claims.
However, Jane Petty sought to pursue the case. On April 16, 2020, she filed an application for class certification,
and, on April 27, 2020, she filed a second amended complaint. On May 18, 2020, UMG filed a motion to dismiss,which was granted on March 29, 2021, for lack of the plaintiff's standing, thereby closing this case.
John Waite, Syd Straw, The Dickies, Kasim Sulton and The Dream Syndicate against UMG Recordings, Inc.
On February 5, 2019, a class action lawsuit was filed against UMG Recordings, Inc. on behalf of a putative class of
all recording artists who had requested the termination of their contracts with UMG pursuant to Section 203 of
the Copyright Act which allows, under certain conditions, a creator who has contractually transferred the rights to
his or her work to a third party to terminate such contract after 35 years. The complaint seeks to have the Court
recognize the termination of the contracts of the artists involved in the litigation and also alleges copyright
infringement, as UMG continued to use the recordings after the purported end date of the contract. On May 3,
2019, UMG Recordings filed a motion to dismiss. On June 15, 2019, the plaintiffs filed a First Amended Complaint
adding artists Syd Straw, Kasim Sulton and The Dickies as additional plaintiffs. On August 31, 2020, a second
Amended Complaint was filed, adding the Dream Syndicate as an additional plaintiff. On September 30, 2020,
UMG and Capitol filed a response in which they made a counterclaim against plaintiffs Joe Ely and Syd Straw,
alleging that they had exploited certain recordings without authorization. On November 18, 2020, following a

Universal Music Group / 51

F-53

settlement reached between UMG and Joe Ely, the Court acknowledged Joe Ely's withdrawal from theproceedings.
UMG Recordings, Inc. and Universal Music Publishing Group (along with the other major labels and publishers)
against Cox Communications, Inc. and CoxCom LLC
On July 31, 2018, a complaint for copyright infringement was filed by UMG Recordings, Inc. and Universal Music
Publishing Group (along with the other major labels and publishers including Sony and Warner) against Cox
Communications, an Internet access and service provider, and its parent company CoxCom, for knowingly
inducing and supporting copyright infringement by its customers, contrary to the provisions of the Digital
Millennium Copyright Act (DMCA), which requires an Internet service provider to implement a termination policy
against its repeat infringing customers. At the end of the trial, which took place in December 2019, the jury
awarded the plaintiffs $1 billion in damages. Cox filed a motion seeking to reduce the amount of damages
awarded to the plaintiffs. On January 21, 2021, the motion was dismissed, and the judge upheld the jury's verdictin the amount of $1 billion. Cox has indicated that it will appeal against this decision and has posted security tostay the execution of the judgment pending the appeal.
David Marks against UMG Recordings, Inc.
On May 13, 2021, David Marks, a former member of the Beach Boys, filed a class action lawsuit against UMG
Recordings, Inc. in the U.S. District Court for the Central District of California for breach of contract and fraud. He
alleges that UMG has understated the amount of royalties owed to him for streaming outside the United States.
On July 7, 2021, UMG Recordings filed a motion to dismiss. On July 21, 2021, the plaintiff filed an amended
complaint.

Universal Music Group / 52

F-54

List of consolidated entities
The number of legal entities consolidated or accounted for under the equity method by UMG is 470 as of June 30,
2021 (388 as of December 31, 2020). The major entities are presented in the table below.

June 30, 2021

Ownership
Interest

Country

Accounting
MethodUniversal Music Group B.V.

Netherlands

C

Universal Music Group, Inc.

United States

C

100%

100%

Universal Music Group Holdings, Inc.
UMG Recordings, Inc.
Vevo
Universal International Music B.V.

United States
United States
United States
Netherlands

C
C
E
C

100%
100%
49.2%
100%

100%
100%
49.2%
100%

Universal Music Entertainment GmbH
Universal Music LLC
Universal Music France S.A.S.
Universal Music Holdings Ltd.
EMI Group Worldwide Holding Ltd.
Universal Music Group Treasury S.A.S.

Germany
Japan
FranceUnited Kingdom
United Kingdom
France

C
C
C
C
C
C

100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%

Voting Interest

Parent entity – see Note 1

C: consolidated; E: equity affiliates.

Subsequent events
The significant event that occurred between the closing date as of June 30, 2021 and July 28, 2021 (the date of
UMG’s Management Board meeting that approved the Consolidated condensed financial statements for the halfyear ended June 30, 2021) was as follows:
On July 7, 2021, UMG entered into various treasury operations aimed at repaying its debt to Vivendi SE. Pleaserefer to Note 12 for details.

Universal Music Group / 53

F-55

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ERNST & YOUNG et Autres
Tour FirstTSA 14444
92037 Paris-La Défense Cedex
S.A.S. à capital variable
438 476 913 R.C.S. Nanterre

Commissaire aux Comptes
Membre de la compagnie
régionale de Versailles et du Centre

Commissaire aux Comptes
Membre de la compagnie
régionale de Versailles et du Centre

Universal Music GroupYears ended December 31, 2020, 2019 and 2018

Vivendi SE’s statutory auditors’ report on Universal Music Group’s combined financial statements

To the Management Board of Vivendi SE,

OpinionIn our capacity as statutory auditors of Vivendi SE and in accordance with Regulation (EU) 2017/1129 completedwith Commission Delegated Regulation (EU) 2019/980 in the context of the first admission to listing and trading of
all the ordinary shares of Universal Music Group on Euronext Amsterdam, we have audited the combined financial
statements of Universal Music Group (“UMG”) prepared for the purpose of inclusion in the prospectus underInternational Financial Reporting Standards (IFRS) as adopted by the EU and in accordance with IFRS published by
the International Accounting Standards Board (IASB) as at December 31, 2020, 2019 and 2018 (thereafter the «Combined Financial Statements »). These Combined Financial Statements comprise the combined statement offinancial position as at December 31, 2020, 2019 and 2018, and the combined statement of earnings, thecombined statement of comprehensive income, the combined statement of changes in equity and the combined
statement of cash flows for the years then ended, and notes to the combined financial statements, including asummary of significant accounting policies.
Due to the global crisis related to the Covid-19 pandemic, the Combined Financial Statements have been prepared
and audited under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of thestate of sanitary emergency have had numerous consequences for companies, particularly on their operations andtheir financing, and have led to greater uncertainties on their future prospects. Those measures, such as travel
restrictions and remote working, have also had an impact on the companies' internal organization and theperformance of the audits.
These Combined Financial Statements were examined on March 1, 2021 by the Management Board of Vivendi SE,
and approved on March 3, 2021 by two empowered members of the Management Board of Vivendi SE.
In our opinion, the accompanying Combined Financial Statements give a true and fair view of the combined
financial position of UMG as at December 31, 2020, 2019 and 2018 and of its combined financial performance andcombined cash flows for the years then ended, in accordance with International Financial Reporting Standards(IFRS) as adopted by the EU and in accordance with IFRS published by the International Accounting Standards
Board (IASB).

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Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Combined Financial
Statements section of our report. We are independent of UMG and Vivendi SE in accordance with theInternational Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA
Code) together with the ethical requirements that are relevant to our audit of the Combined Financial Statements
in France, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Emphasis of matter
We draw attention to the Note “Basis of preparation of the Combined Financial Statements”, in “Accounting
conventions used when preparing the Combined Financial Statements” section. Our opinion is not modified in
respect of this matter.
Responsibilities of Vivendi SE’s Management Board and Those Charged with Governance for the Combined
Financial Statements
Vivendi SE’s Management Board is responsible for the preparation and fair presentation of the combined financial
statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and inaccordance with IFRS published by the International Accounting Standards Board (IASB), and for such internal
control as management determines is necessary to enable the preparation of combined financial statements thatare free from material misstatement, whether due to fraud or error.
In preparing the Combined Financial Statements, management is responsible for assessing UMG’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate UMG or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing Vivendi Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Combined Financial Statements
Our objectives are to obtain reasonable assurance about whether the Combined Financial Statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these Combined Financial Statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:

Universal Music Group

2

F-57

•

Identify and assess the risks of material misstatement of the Combined Financial Statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
UMG’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on UMG’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
Combined Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditors’ report. However, future events orconditions may cause UMG to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the Combined Financial Statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within UMG to express an opinion on the Combined Financial Statements. We are responsible forthe direction, supervision and performance of the audit of UMG. We remain solely responsible for our audit
opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of UMG’s audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.

Paris-La Défense, September 13, 2021
The Statutory Auditors
DELOITTE & ASSOCIES
Thierry Quéron

Universal Music Group

Géraldine Segond

ERNST & YOUNG et Autres
Claire Pajona

3

F-58

Audited Combined Financial Statements for the years ended December 31,
2020, 2019 and 2018
Wednesday, March 03, 2021

F-59

Wednesday March 03, 2021
AUDITED COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 ............................... 3
COMBINED STATEMENT OF EARNINGS ............................................................................................................................................................... 3
COMBINED STATEMENT OF COMPREHENSIVE INCOME ................................................................................................................................. 4
COMBINED STATEMENT OF FINANCIAL POSITION .......................................................................................................................................... 5
COMBINED STATEMENT OF CASH FLOWS .......................................................................................................................................................... 6
COMBINED STATEMENTS OF CHANGES IN EQUITY ......................................................................................................................................... 7
NOTES TO THE COMBINED FINANCIAL STATEMENTS ................................................................................................................................... 10
BASIS OF PREPARATION OF THE COMBINED FINANCIAL STATEMENTS ................................................................................................................................. 10
NOTE 1
ACCOUNTING POLICIES AND VALUATION METHODS ...................................................................................................................................... 13
NOTE 2
SEGMENT DATA ...................................................................................................................................................................................... 28
NOTE 3
EBIT ...................................................................................................................................................................................................... 29
NOTE 4
FINANCIAL CHARGES AND INCOME ............................................................................................................................................................ 30
NOTE 5
INCOME TAXES ........................................................................................................................................................................................ 31
NOTE 6EARNINGS PER SHARE .............................................................................................................................................................................. 34
NOTE 7
CHARGES AND INCOME DIRECTLY RECOGNIZED IN EQUITY............................................................................................................................. 34
NOTE 8GOODWILL .............................................................................................................................................................................................. 35
NOTE 9CONTENT ASSETS AND COMMITMENTS ..................................................................................................................................................... 36
NOTE 10LEASES................................................................................................................................................................................................... 38
NOTE 11INVESTMENTS IN EQUITY AFFILIATES .......................................................................................................................................................... 39
NOTE 12FINANCIAL ASSETS .................................................................................................................................................................................. 40
NOTE 13
NET WORKING CAPITAL ............................................................................................................................................................................ 42
NOTE 14
CASH POSITION, BORROWINGS AND FINANCIAL RISK MANAGEMENT ............................................................................................................. 43
NOTE 15
EQUITY ................................................................................................................................................................................................... 45
NOTE 16PROVISIONS ............................................................................................................................................................................................ 45
NOTE 17EMPLOYEE BENEFITS ................................................................................................................................................................................ 46
NOTE 18
SHARE-BASED COMPENSATION PLANS ....................................................................................................................................................... 52
NOTE 19
CASH FLOW STATEMENT ......................................................................................................................................................................... 54
NOTE 20
RELATED PARTIES..................................................................................................................................................................................... 55
NOTE 21
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS ............................................................................................................................ 57
NOTE 22
LITIGATION.............................................................................................................................................................................................. 59
NOTE 23
LIST OF COMBINED ENTITIES ...................................................................................................................................................................... 60

Universal Music Group / 2

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Wednesday March 03, 2021

Audited Combined Financial Statements for the years
ended December 31, 2020, 2019 and 2018
Combined Statement of Earnings(in millions of euros)

Revenues
Cost of revenues
Selling, general and administrative expenses
Restructuring charges
Impairment losses on intangible assets acquired through business combinations
Income from equity affiliates - operational
Earnings before interest and income taxes (EBIT)Interest
Income from investments
Other financial income
Other financial charges
Earnings before provision for income taxes
Provision for income taxes
Earnings from continuing operations
Earnings from discontinued operations
Earnings
Of which
Earnings attributable to shareowners
Non-controlling interests

Note
2

2
2
11
3
4
4
4

5

2020

Year ended December 31,
2019
7,432
7,159
(3,917)(3,818)(2,265)(2,276)
(20)
(24)
- (9)
(2)
1,221
1,039 (15)
14
603
174
(28)
(57)
560
131 1,781
1,170 (412)
(195)
1,369
975 - 1,369
975 1,366
3

2018
6,023
(3,110)(2,062)
(29)
(1)
821
27
1
333
(29)
332
1,153
(251)
902
902

972 3

897
5

The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 3

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Wednesday March 03, 2021

Combined Statement of Comprehensive Income
Note(in millions of euros)

Year ended December 31,
2019

2020

2018

1,369

975

902

6
2
8

(24)
(2)
(26)

-

(194)
(6)
(200)

44
2
(7)
39

113
4
12
129

(192)

13

129

Total comprehensive income

1,177

988

1,031

Of which
Total comprehensive income attributable to shareowners
Total comprehensive income attributable to non-controlling interests

1,174
2

985
3

1,025
6

Earnings
Actuarial gains/(losses) related to employee defined benefit plans, net
Financial assets at fair value through other comprehensive income
Comprehensive income from equity affiliates, net
Items not subsequently reclassified to profit or loss
Foreign currency translation adjustments
Comprehensive income from equity affiliates, net
Other impacts, net
Items to be subsequently reclassified to profit or loss
Charges and income directly recognized in equity

117

The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 4

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Wednesday March 03, 2021

Combined Statement of Financial Position
December 31,
2020

December 31,
2019

January, 1
2019

December 31,
2018

1,369
3,512
1
254
416
72
1,962
414
8,000

1,488
2,269
1
267
472
88
1,103
367
6,055

1,378
1,808
1
243
454
97
873
353
5,207

1,378
1,808
1
262
na
97
873
330
4,749

79
1
677
1,088
1
815
326
2,987

90
591
1,058
28
672
336
2,775

84
601
994
30
1,260
276
3,245

84
601
997
30
1,260
276
3,248

TOTAL ASSETS

10,987

8,830

8,452

7,997

EQUITY AND LIABILITIES
Combined retained earningsof which earnings attributable to shareowners
Non-controlling interests
Total equity

1,432
1,366
1,432

2,981
972
3
2,984

2,999
897
3
3,002

3,074
897
3
3,077

Note

(in millions of euros)

ASSETS
Goodwill
Non-current content assets
Other intangible assets
Property, plant and equipment
Rights-of-use relating to leases
Investments in equity affiliates
Non-current financial assets
Deferred tax assets
Non-current assets
Inventories
Current tax receivables
Current content assets
Trade accounts receivable and other
Current financial assets
Shareowners loans
Cash and cash equivalents
Current assets

8
9

10
11
12
5

9
13
12
14
14

15

Non-current provisions
Long-term borrowings and other financial liabilities
Shareowners borrowings
Deferred tax liabilities
Long-term lease liabilities
Other non-current liabilities
Non-current liabilities

16
14
14
5
10
13

335
1
2,368
828
447
851
4,830

437
1
659
510
106
1,713

366
1
608
493
135
1,603

370
1
608
na
159
1,138

Current provisions
Short-term borrowings and other financial liabilities
Trade accounts payable and other
Short-term lease liabilities
Current tax payables
Current liabilities

16
14
13
10

137
640
3,843
78
27
4,725

63
15
3,981
86
(12)
4,133

79
17
3,613
90
48
3,847

79
17
3,638
na
48
3,782

Total liabilities

9,555

5,846

5,450

4,920

TOTAL EQUITY AND LIABILITIES

10,987

8,830

8,452

7,997

na: not applicable.
The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 5

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Wednesday March 03, 2021

Combined Statement of Cash Flows(in millions of euros)
Operating activities
EBIT
Adjustments
Content investments, net
Gross cash provided by operating activities before income tax paid
Other changes in net working capital
Net cash provided by operating activities before income tax paid
Income tax (paid)/received, net
Net cash provided by operating activities
Investing activities
Capital expenditures
Purchases of consolidated companies, after acquired cash
Investments in equity affiliates
Increase in financial assets
Investments
Proceeds from sales of property, plant, equipment and intangible assets
Proceeds from sales of consolidated companies, after divested cash
Disposal of equity affiliates
Decrease in financial assets
Divestitures
Dividends received from equity affiliates
Dividends received from unconsolidated companies
Net cash provided by/(used for) investing activities
Financing activities
Distributions to shareowners
Other transactions with shareowners
Dividends paid by consolidated companies to their non-controlling interests
Transactions with shareowners
Setting up of long-term borrowings and increase in other long-term financial liabilities
Principal payment on long-term borrowings and decrease in other long-term financial liabilities
Principal payment on short-term borrowings
Other changes in short-term borrowings and other financial liabilities
Interest paid, net
Other cash items related to financial activities
Transactions on borrowings and other financial liabilities
Repayment of lease liabilities and related interest expenses
Net cash provided by/(used for) financing activities

Note
2
19.1

1,039
201
(465)
775
82
857
(172)
685

821
106
(161)
766
179
945
(198)
747

(66)
(4)
(2)
(3)
(75)
11
1
15
27
2
(46)

(75)
(50)
(13)
(138)
3
(2)
6
7
2
(129)

(110)
(12)
(12)
(134)
1
19
20
2
1
(111)

(283)
(11)
(5)
(299)
625
(15)
(3)
607
(91)
217

(1,002)(5)(1,007)
2
14
(2)
14
(83)
(1,076)(981)(1,414)(5)(2,400)
(57)
46
27
(3)
13
na
(2,387)

(35)
133

(8)
(528)

(19)
(1,770)

14

1,008

1,536

3,306

14

1,141

1,008

1,536

672

1,260

3,059

815

672

1,260

336

276

247

326

336

276

5.1

11
12

2
12
11

15
2

4

10 ; 4Foreign currency translation adjustments of continuing operations

At end of the periodof which Shareowners loans
At beginning of the period
At end of the periodof which Cash and cash equivalent
At beginning of the period
At end of the period

2018

1,221
213
(1,517)
(83)
287
204
(207)
(3)

Change in cash and cash equivalents and shareowners loans
Cash and cash equivalents and shareowners loans
At beginning of the period

Year ended December 31,
2019

2020

na: not applicable.
The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 6

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Wednesday March 03, 2021

Combined Statements of Changes in Equity
Year ended December 31, 2020

Retained earnings and other
Retained earnings(in millions of euros)

Other comprehensive income

Total equity

BALANCE AS OF DECEMBER 31, 2019
Attributable to Universal Music Group
Attributable to non-controlling interests

3,275
3,272
3

(291)
(290)
(1)

2,984
2,982
2

Contributions by/distributions to shareownersof which Universal Music Group S.A.S. transferred to Vivendi SEof whichDistribution by Universal International Music BV paid to shareowners
Changes in UMG ownership interest in subsidiaries that do not result in a loss of control
CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)(2,711)(2,428)(283)(13)(2,724)-(2,711)(2,428)(283)(13)(2,724)

(5)
(5)
(5)

--

(5)
(5)
(5)

Contributions by (distributions to) non-controlling interests
Dividends paid by subsidiaries to non-controlling interests
CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Earnings
Charges and income directly recognized in equity
TOTAL COMPREHENSIVE INCOME (C)

1,369
1,369

(192)
(192)

1,369
(192)
1,177

TOTAL CHANGES OVER THE PERIOD (A+B+C)
Attributable to Universal Music Group
Attributable to non-controlling interests(1,360)(1,358)
(2)

(192)
(192)
-

(1,552)(1,550)(2)

BALANCE AS OF DECEMBER 31, 2020
Attributable to Universal Music Group
Attributable to non-controlling interests

1,915
1,914
1

(483)
(482)
(1)

1,432
1,432
-

The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 7

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Wednesday March 03, 2021
Year ended December 31, 2019

Retained earnings and other
Retained earnings(in millions of euros)

BALANCE AS OF DECEMBER 31, 2018
Attributable to Universal Music Group
Attributable to non-controlling interests

Other comprehensive income

Total equity

3,389
3,385
4

(312)
(311)
(1)

3,077
3,074
3

(75)
(75)
-

-

(75)
(75)
-

BALANCE AS OF JANUARY 1, 2019
Attributable to Universal Music Group
Attributable to non-controlling interests

3,314
3,310
4

(312)
(311)
(1)

3,002
2,999
3

Contributions by/distributions to shareowners
Distribution by Universal Music Group Inc. and Universal Music Group S.A.S. to Vivendi SE
CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)(1,002)(1,002)(1,002)-(1,002)(1,002)(1,002)

(5)
(5)
(5)

--

(5)
(5)
(5)

Restatements related to the application of IFRS 16
Attributable to shareowners
Attributable to non-controlling interests

Contributions by/distributions to non-controlling interests
Dividends paid by subsidiaries to non-controlling interests
CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Earnings
Charges and income directly recognized in equity
TOTAL COMPREHENSIVE INCOME (C)

975
(7)
968

21
21

975
14
989

TOTAL CHANGES OVER THE PERIOD (A+B+C)
Attributable to Universal Music Group
Attributable to non-controlling interests

(39)
(38)
(1)

21
21
-

(18)
(17)
(1)

BALANCE AS OF DECEMBER 31, 2019
Attributable to Universal Music Group
Attributable to non-controlling interests

3,275
3,272
3

(291)
(290)
(1)

2,984
2,982
2

The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 8

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Wednesday March 03, 2021
Year ended December 31, 2018

Retained earnings and other
Retained earnings(in millions of euros, except number of shares)

BALANCE AS OF DECEMBER 31, 2017
Attributable to Vivendi SA shareowners
Attributable to non-controlling interests

Other comprehensive income

Total equity

4,933
4,929
4

(487)
(486)
(1)

4,446
4,443
3

(58)
(58)
-

58
58
-

-

BALANCE AS OF JANUARY 1, 2018
Attributable to Universal Music Group
Attributable to non-controlling interests

4,875
4,871
4

(429)
(428)
(1)

4,446
4,443
3

Contributions by/distributions to shareowners
Universal Music Group S.A.S. share capital reduction
Distribution by Universal Music Group Inc. and Universal Music Group S.A.S.
CHANGES IN EQUITY ATTRIBUTABLE TO UNIVERSAL MUSIC GROUP (A)Contributions by/distributions to non-controlling interests
Dividends paid by subsidiaries to non-controlling interests
CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Earnings
Charges and income directly recognized in equity
TOTAL COMPREHENSIVE INCOME (C)TOTAL CHANGES OVER THE PERIOD (A+B+C)
Attributable to Universal Music Group
Attributable to non-controlling interests(2,395)(1,414)(981)(2,395)
(5)
(5)
(5)
902
12
914
(1,486)(1,486)
-

117
117
117
117
-

(2,395)(1,414)(981)(2,395)
(5)
(5)
(5)
902
129
1,031
(1,369)(1,369)-BALANCE AS OF DECEMBER 31, 2018
Attributable to Universal Music Group
Attributable to non-controlling interests

3,389
3,385
4

(312)
(311)
(1)

3,077
3,074
3

Restatements related to the application of IFRS 9, net of income taxes
Attributable to shareowners
Attributable to non-controlling interests

The accompanying notes are an integral part of the Combined Financial Statements.

Universal Music Group / 9

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Wednesday March 03, 2021

Notes to the Combined Financial Statements
Universal Music Group (UMG) is the world leader in music-based entertainment, with a broad array of businesses engaged in recorded
music, music publishing, merchandising and audiovisual content in more than 60 countries. Featuring the most comprehensive catalog ofrecordings and songs across every musical genre, UMG identifies and develops artists and produces and distributes the most criticallyacclaimed and commercially successful music in the world. Committed to artistry, innovation and entrepreneurship, UMG fosters thedevelopment of services, platforms and business models in order to broaden artistic and commercial opportunities for its artists and create
new experiences for fans.
The Combined Financial Statements present the financial and accounting situation of UMG together with interests in equity affiliates.
Amounts are reported in euros and all values are rounded to the nearest million.
On March 1, 2021, Vivendi’s Management Board examined UMG’s Combined Financial Statements for the years ended December 31, 2020,2019 and 2018, and granted power to two of its members to approve such Combined Financial Statements. On March 3, 2021, UMG’s
Combined Financial Statements for the years ended December 31, 2020, 2019 and 2018 were approved by those members of Vivendi’s
Management Board.

Basis of preparation of the Combined Financial Statements
The Combined Financial Statements of Universal Music Group (as defined below) for the fiscal years ended December 31, 2020 have been
prepared by Vivendi SE (“Vivendi”) in its capacity as the controlling shareholder of Universal Music Group Inc. (“UMG Inc.”) and Universal
International Music B.V. (“UIM B.V.”) and their respective subsidiaries (UMG Inc. and UIM B.V. are collectively referred to herein as,“Universal Music Group” or “UMG”), pursuant to Section 7.04. Information and Inspection Rights. of UIM B.V. Shareholders Agreement.
They have been drawn up based on the accounting data of UMG Inc. and UIM B.V. and their respective subsidiaries for the fiscal years endedon December 31, 2020, 2019 and 2018, as approved, and compiled for the preparation of the Vivendi Group’s Consolidated Financial
Statements for the relevant fiscal years. UMG’s Combined Financial Statements for the fiscal years ended December 31, 2020, 2019 and2018 have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) andin accordance with IFRS published by the International Accounting Standards Board (IASB), with mandatory application as of December 31,
2020. Amendments to IFRS standards applicable as from January 1, 2020, had no material impact on UMG’s Combined Financial Statements.
As a reminder, UMG applied IFRS 16 with retrospective effect as from January 1, 2019 without restating comparative periods in the
consolidated financial statements. In accordance with IFRS 16, the impact of the change of accounting standard was recorded by UMG in the
opening balance sheet as of January 1, 2019; moreover, UMG applied this change of accounting standard to the Statement of Financial
Position, Statement of Earnings and Statement of Cash Flows in 2019.
As a reminder, in 2018, UMG applied two new accounting standards:• IFRS 15 – Revenue from contracts with customers: in accordance with IFRS 15, as from 2017, UMG applied this change ofaccounting standard to revenues; and• IFRS 9 – Financial instruments: in accordance with IFRS 9, as from 2018, UMG applied this change of accounting standard to theStatement of Earnings and Statement of Comprehensive Income restating its opening balance sheet as of January 1, 2018.
Vivendi is a European company, which since January 7, 2020, has been subject to the provisions of French commercial company law that are
applicable to it in France, including the Council Regulation EC No. 2157/2001 of October 8, 2001 on the statute for a European company andthe French Commercial Code (Code de commerce).

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Context
On December 31, 2019, Vivendi and a Tencent-led consortium, which includes Tencent Music Entertainment and other financial co-investors,
entered into an agreement for a planned equity investment in Universal Music Group (UMG). This agreement provides for:••the purchase by this consortium of 10% of UMG’s share capital, based on an enterprise value of €30 billion for 100% of UMG’sshare capital; andan option for this consortium to acquire, on the same valuation basis, an additional interest of up to 10% of UMG’s share capital
until January 15, 2021.

Sale of a first tranche of 10% of Universal Music Group’s share capital
On March 31, 2020, Vivendi completed the sale of 10% of UMG’s share capital to a Tencent-led consortium. This transaction resulted in acash inflow of €2,842 million for Vivendi.
As a reminder, on March 31, 2020, the sale of 10% of UMG’s share capital to a Tencent-led consortium was recorded, in accordance withIFRS standards, as a sale of non-controlling interests and therefore has not impacted the Consolidated Financial Statement of Earnings. In
Vivendi’s Consolidated Financial Statements, in accordance with IFRS 10, the capital gain on the sale of 10% of UMG’s share capital, equal
to the difference between the sale price of €2,842 million and the value of sold non-controlling interests in the Consolidated Financial
Statements of €457 million, was directly recorded as an increase in equity attributable to Vivendi SE shareowners for €2,385 million.
Sale of a second tranche of 10% of Universal Music Group’s share capital
On December 17, 2020, the consortium decided to exercise the option to acquire an additional 10% of UMG.
On January 29, 2021, Vivendi completed the sale of the additional 10% of UMG’s share capital to a Tencent-led consortium, based on an
enterprise value of €30 billion for 100% of UMG’s share capital. This transaction resulted in a cash inflow of €2,847 million for Vivendi.
For information, on January 29, 2021, the sale of an additional 10% of UMG’s share capital to a Tencent-led consortium will be recorded, in
accordance with IFRS standards, as a sale of non-controlling interests and therefore will not impact the Consolidated Financial Statement ofEarnings. In Vivendi’s Consolidated Financial Statements, in accordance with IFRS 10, the capital gain on the sale will be directly recorded as
an increase in equity attributable to Vivendi SE shareowners.
As from this date, the Tencent-led consortium owns 20% of UMG.
The cash generated by these transactions may be used by Vivendi to reduce its financial debt and to finance acquisitions.
Planned distribution of 60% of Universal Music Group’s share capital and its listing on the stock market
On February 13, 2021, Vivendi announced that it will study the planned distribution of 60% of UMG’s share capital and its listing by the endof 2021. This distribution, exclusively in kind, would take the form of an exceptional distribution (“special dividend”). The listing of UMG’sshares, issued by its holding company, would be applied for on the regulated market of Euronext NV in Amsterdam, in a country that has
been one of UMG’s historical homes.
A Vivendi Extraordinary Shareholders’ Meeting will be called for March 29, 2021, to modify the company’s by-laws and make the principle ofthis distribution in kind possible and pursue this project. Subject to a favorable shareholder vote, a Shareholders’ Meeting could be called
before the end of 2021 to vote on this distribution of UMG shares.
Minority interest in Universal Music Group’s operations in China
In addition, a separate agreement was entered into on March 31, 2020, enabling Tencent Music Entertainment to acquire a minority interestin the share capital of the UMG’s subsidiary that owns its Greater China operations.
Scope of combination
The arrangement that constitutes the combined UMG group is not a legal entity in its own right and is made up of entities under the common
control of Vivendi. As of December 31, 2020, UMG principally comprised the entities held directly and indirectly by UMG Inc. and UIM B.V.
The combination scope is presented in Note 23 “List of Combined entities”.
Core Business
UMG is the worldwide leader in music, engaged in recorded music, music publishing and merchandising. It owns more than 50 labels
covering all music genres. UMG is home to the greatest local and international artists of all time, including The Beatles, Rolling Stones, U2,
Andrea Bocelli, Lady Gaga, Helene Fischer and more, as well as many of the biggest artists of the year, such as The Weeknd, Billie Eilish,
Post Malone, and Taylor Swift.

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• The recorded music business discovers and develops recording artists, marketing and promoting their music across a wide array offormats and platforms. Its activities also extend to other areas, such as live events, sponsorship, film and television.
• The music publishing business discovers and develops songwriters and owns and administers the copyright for musical compositions
used in recordings, public performances and related uses, such as films and advertisements.
• The merchandising business produces and sells artist-branded and other branded products through multiple sales channels, including
fashion retail, concert touring and the Internet. Its activities also extend to other areas, such as brand rights management.
Accounting conventions used when preparing the combined financial statements
As a reminder, as a first-time adopter, Combined Financial Statements were prepared for UMG for the fiscal years ended December 31,
2018, 2017 and 2016 in accordance with IFRS 1 – First-Time Adoption of International Financial Reporting Standards. In accordance withIFRS 1.D16, if a subsidiary adopts IFRS later than its parent company, the assets and liabilities in the subsidiary’s opening balance sheet may
be measured as either:• the carrying amounts based on the subsidiary’s contribution to the parent company’s historical consolidated financial statements,
after restating adjustments relating to the consolidation procedures and to the accounting for the business combination in which theparent acquired the subsidiary; or• the carrying amounts as determined in accordance with IFRS 1, applied at the date of the subsidiary’s transition to IFRS. In this case,the options in IFRS 1 applied by the subsidiary may differ from those applied by the parent.
Pursuant to the option provided in IFRS 1, UMG’s first IFRS combined financial statements were prepared by measuring its assets andliabilities at the carrying amounts, based on UMG’s contribution to Vivendi’s historical financial statements, after eliminating adjustments
relating to its consolidation by the Vivendi Group and to the impacts of accounting for the business combinations pursuant to which Vivendi
acquired interests in UMG Inc. and UIM B.V. and their subsidiaries. As of January 1, 2016, the net book value of the goodwill arising from
Vivendi’s acquisition of UMG in December 2000 (€3,756 million) as well as the related cumulative translation adjustment (CTA) as ofDecember 31, 2016, 2017 and 2018 (+€177 million, -€328 million and -€156 million, respectively), and as of December 31, 2019 and 2020 (€70 million and -€417 million, respectively), were reversed through adjustments to retained earnings.
The scope of combination excludes as from January 1, 2016 Vivendi Holding I LLC (“VH I”), which was wholly-owned by UMG Inc. until theend of 2018 but had no impact on UMG’s contribution to Vivendi’s Statement of Financial Position. Therefore, these Combined Financial
Statements eliminate the statement of income impacts for the years ended December 31, 2018, and 2017 relating to:• the interest expense on a borrowing granted by VH I to UMG Inc.; and• the related income tax effects, if any.
The scope of combination also excludes as from March 19, 2020 Universal Music Group S.A.S. (“UMG S.A.S.”), which was merged into
Vivendi S.E. as of that date.
Intercompany transactions between UMG and other Vivendi Group’s entities
Balances pertaining to current transactions between UMG entities and other entities in the Vivendi Group have been presented on thebalance sheet as third-party assets or liabilities in the Combined Financial Statements. All loans and borrowings between UMG entities andother Vivendi Group entities have been presented as financial assets or liabilities in the Combined Financial Statements.
In accordance with IAS 24 – Related Party Disclosures, transactions between UMG and other Vivendi Group entities are presented in
Note 20 “Related Parties”.
Earnings per share
As the combined UMG is not a legal entity, the number of shares outstanding is not determinable. Consequently, no earnings per share data
is presented in the Combined Financial Statements.
Translation of financial statements of foreign companies
Pursuant to IFRS 1.D13, in the Combined Financial Statements, the cumulative translation adjustment (CTA) accounted for in othercomprehensive income (to be subsequently reclassified to profit or loss) was set to zero as of January 1, 2016. Therefore, the gain or loss on
a subsequent disposal of any foreign operation of the combined UMG only includes translation differences recorded since January 1, 2016.
Except as described above, no adjustment was made in UMG’s Combined Financial Statements to UMG’s contribution to Vivendi’s historicalfinancial statements.

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Note 1
1.1

Accounting policies and valuation methods

Compliance with accounting standards

The 2020 UMG’s Combined Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as endorsed by the European Union (EU), and in accordance with IFRS published by the International Accounting Standards Board (IASB) withmandatory application as of December 31, 2020.
Amendments to IFRS standards applicable as from January 1, 2020, had no material impact on UMG’s Combined Financial Statements.

1.2

Presentation of the Combined Financial Statements

1.2.1

Combined Statement of Earnings

The main line items presented in UMG’s Combined Statement of Earnings are revenues, income from equity affiliates, interest, provision forincome taxes, net earnings from discontinued or held for sale operations, and net earnings. The Combined Statement of Earnings presents a
subtotal of Earnings Before Interest and Tax (EBIT) equal to the difference between charges and income (excluding financing activities,
discontinued or held for sale operations, and income taxes).
The charges and income relating to financing activities consist of interest, income from investments, as well as other financial charges andincome as presented in Note 4.
1.2.2

Combined Statement of Cash FlowsNet cash provided by operating activities
Net cash provided by operating activities is calculated using the indirect method based on EBIT. EBIT is adjusted for non-cash items andchanges in net working capital. Net cash provided by operating activities excludes the cash impact of financial charges and income and net
changes in working capital related to property, plant and equipment, and intangible assets.
Net cash used for investing activities
Net cash used for investing activities includes changes in net working capital related to property, plant and equipment, and intangible assets
as well as cash from investments (particularly dividends received from equity affiliates). It also includes any cash flows arising from the gainor loss of control of subsidiaries.
Net cash used for financing activities
Net cash used for financing activities includes net interest paid on borrowings, cash and cash equivalents, bank overdrafts, the cash impactof other items related to financing activities such as premiums from the early redemption of borrowings and the settlement of derivative
instruments, as well as the cash payments for the principal amount of the lease liability and any interest thereon. It also includes cash flows
from changes in ownership interests in a subsidiary that do not result in a loss of control (including increases in ownership interests).
1.2.3

Operating performance of each operating segment and the group

UMG considers Adjusted Earnings Before Interest and Tax (EBITA), Earnings Before Interest and Tax, Depreciation and Amortization (EBITDA)
and Cash Flow From Operations (CFF0), all non-GAAP measures, to be relevant indicators of the group’s operating and financial performance.
EBITA
UMG considers EBITA, a non-GAAP measure, to be a relevant measure to assess the performance of its operating segments as reported in
the segment data. It enables UMG to compare the operating performance of operating segments regardless of whether their performance isdriven by the operating segment’s organic growth or by acquisitions. To calculate EBITA, the accounting impact of the following items is
excluded from the income from EBIT:• the amortization of intangible assets acquired through business combinations as well as other rights catalogs acquired;• impairment losses on goodwill, other intangibles acquired through business combinations and other rights catalogs acquired; and• other income and charges related to transactions with shareowners (except when directly recognized in equity).

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EBITDA
UMG considers EBITDA, a non-GAAP measure, to be a relevant measure to assess the performance of its operating segments as reported in
the segment data. It enables UMG to compare the operating performance of operating segments regardless of whether their performance isdriven by the operating segment’s organic growth or by acquisitions. To calculate EBITDA, the accounting impact of the following items is
excluded from the income from EBIT:• the depreciation of tangible, intangible and right of use assets;• gains/(losses) on the sale of tangible, intangible and right of use assets;• the amortization of intangible assets acquired through business combinations as well as other rights catalogs acquired;• impairment losses on goodwill, other intangibles acquired through business combinations and other rights catalogs acquired;• income from equity affiliates having similar operating activities; and• restructuring charges, and other non-recurring items.
Cash Flow from Operations (CFFO)
UMG considers cash flow from operations (CFFO), a non-GAAP measure, to be a relevant measure to assess the group’s operating andfinancial performance. CFFO includes net cash provided by operating activities, before income tax paid, as presented in the Statement of
Cash Flows, dividends received from equity affiliates and unconsolidated companies, as well as cash payments for the principal of the leaseliability and any interest thereon, which are presented as financing activities in the combined statement of cash flows. It also includes
capital expenditures, net that relate to cash used for capital expenditures, net of proceeds from sales of property, plant and equipment, andintangible assets, which are included in net cash used for investing activities, as well as income tax paid.
Net cash provided by operating activities of discontinued operations are excluded from CFFO.
1.2.4

Combined Statement of Financial Position

Assets and liabilities that are expected to be realized, or intended for sale or consumption, within the entity’s normal operating cycle(generally 12 months), are recorded as current assets or liabilities. If their maturity exceeds this period, they are recorded as non-current
assets or liabilities. Moreover, certain reclassifications were made to the 2019 and 2018 Combined Statement of Financial Position to
conform to the presentation of the 2020 and 2019 Combined Financial Statements.

1.3

Principles governing the preparation of the Combined Financial Statements

Pursuant to IFRS principles, the Combined Financial Statements have been prepared on a going concern basis, and on a historical cost basis,
with the exception of certain assets and liabilities, for which IFRS 13 – Fair Value Measurement relating to measurement and disclosuresapplies. Relevant categories are detailed below.
The Combined Financial Statements include the financial statements of UMG and its subsidiaries after eliminating intragroup items andtransactions. UMG has a December 31st year-end. Subsidiaries that do not have a December 31st year-end prepare interim financial
statements as of that date, except when their year-end falls within the three months preceding December 31st.
Acquired subsidiaries are included in the Combined Financial Statements of the group as of the date of acquisition.
1.3.1

Use of estimates

The preparation of Combined Financial Statements in compliance with IFRS requires the group’s management to make certain estimates andassumptions that they consider reasonable and realistic. Although these estimates and assumptions are regularly reviewed by UMG’s
Management, based, in particular, on past or anticipated achievements, facts and circumstances may lead to changes in these estimates andassumptions which could have an impact on the reported amount of group assets, liabilities, equity or earnings.
The main estimates and assumptions relate to the measurement of:• revenue: estimates of provisions for returns and price guarantees (please refer to Note 1.3.4.2);• goodwill and other intangible assets: valuation methods used to identify intangible assets acquired through business combinations(please refer to Note 1.3.5.1);• goodwill, intangible assets with indefinite useful lives and assets in progress: assumptions relating to impairment tests performedon each of the group’s cash-generating units (CGUs), future cash flows and discount rates are updated annually (please refer toNotes 1.3.5.7 and 8);• UMG content assets: estimates of the future performance of beneficiaries who received advances are recognized in the Statement of
Financial Position (please refer to Notes 1.3.5.2 and 9);• provisions: risk estimates, performed on an individual basis, noting that the occurrence of events during the course of procedures
may lead to a risk reassessment at any time (please refer to Notes 1.3.8 and 16);
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• employee benefits: assumptions are updated annually, such as the probability of employees remaining within the group until
retirement, expected changes in future compensation, the discount rate and the inflation rate (please refer to Notes 1.3.8 and 17);
• share-based compensation: assumptions are updated annually, such as the estimated term, volatility and the estimated dividend
yield (please refer to Notes 1.3.10 and 18);
• lease liabilities and right-of-use assets, at the commencement date of each lease contract (please refer to Notes 1.3.5.6 and 10):assessing the lease term that relates to the non-cancellable period of the lease, taking into account all options to extend thelease that UMG is reasonably certain to exercise and all options to terminate the lease that UMG is reasonably certain not toexercise; andestimating the lessee’s incremental borrowing rate, taking into account their residual lease term and their duration to reflect
the interest rate of a loan with a similar payment profile to the lease payments.
• deferred taxes: estimates used for the recognition of deferred tax assets are updated annually with factors such as expected tax
rates and future tax results of the group (please refer to Notes 1.3.9 and 5); and• certain financial instruments: valuation method at fair value is defined according to the three following classification levels (pleaserefer to Notes 1.3.5.8, 1.3.7, 12 and 14):
- Level 1: fair value measurement based on quoted prices in active markets for identical assets or liabilities;- Level 2: fair value measurement based on observable market data (other than quoted prices included under Level 1); and- Level 3: fair value measurement based on valuation techniques using inputs for the asset or liability that are not based on
observable market data.
The fair value of trade accounts receivable and other, cash and cash equivalents, and trade accounts payable is a reasonableestimate of fair value, due to the short maturity of these instruments.
1.3.2

Principles of combination

For a list of UMG’s major subsidiaries, joint ventures and associated entities, please refer to Note 23.
Consolidation
All companies in which UMG has a controlling interest, namely those in which it has the power to govern financial and operational policies
to obtain benefits from their operations, are fully consolidated.
Control, as defined by IFRS 10 – Consolidated Financial Statements, is based on the three criteria below to be fulfilled cumulatively to assess
if the parent company exercises control:• a parent company has power over a subsidiary when the parent company has existing rights that give it the current ability to direct
the relevant activities of the subsidiary, i.e., the activities that significantly affect the subsidiary’s returns. Power may arise fromexisting or potential voting rights or contractual arrangements. Voting rights must be substantial, i.e., exercisable at any time without
limitation, particularly during decision-making processes related to significant activities. Assessment of the exercise of power
depends on the nature of the subsidiary’s relevant activities, the internal decision-making process, and the allocation of rights among
the subsidiary’s other shareowners;• the parent company is exposed, or has rights, to variable returns from its involvement with the subsidiary which may vary as a resultof the subsidiary’s performance. The concept of returns is broadly defined and includes, among other things, dividends and othereconomic benefit distributions, changes in the value of the investment in the subsidiary, economies of scale, and business synergies;
and• the parent company has the ability to use its power to affect the returns. Exercising power without having any impact on returns
does not qualify as control.
Consolidated Financial Statements of a group are presented as if the group was a single economic entity with two categories of owners:(i) the owners of the parent company (UMG shareowners) and (ii) the owners of non-controlling interests (minority shareholders of thesubsidiaries). A non-controlling interest is defined as the interest in a subsidiary that is not attributable, whether directly or indirectly, to aparent company. As a result, changes to a parent company’s ownership interest in a subsidiary that do not result in a loss of control only
impact equity, as control of the economic entity does not change. Hence, in the event of the acquisition of an additional interest in aconsolidated entity after January 1, 2009, UMG recognizes the difference between the acquisition price and the carrying value of noncontrolling interests acquired as a change in equity attributable to UMG shareowners. Conversely, any acquisition of control achieved instages or a loss of control gives rise to profit or loss in the statement of earnings.
Accounting for joint arrangements
IFRS 11 – Joint Arrangements establishes principles for financial reporting by parties to a joint arrangement.
In a joint arrangement, parties are bound by a contractual arrangement giving these parties joint control of the arrangement. An entity that isa party to an arrangement shall assess whether the contractual arrangement gives all the parties or a group of the parties control of thearrangement collectively. Once it has been established that all the parties or a group of the parties collectively control the arrangement, joint
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control exists only when decisions about the relevant activities require the unanimous consent of the parties that collectively control thearrangement.
Joint arrangements are classified into two categories:• joint operations: these are joint arrangements whereby the parties that have joint control of the arrangement have rights to theassets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. A joint operator shallrecognize 100% of wholly-owned assets/liabilities, expenses/revenues of the joint operation, and its share of any of those items
held jointly; and• joint ventures: these are joint arrangements whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. Those parties are called joint venturers. Each joint venturer shall recognize its interest in a joint venture
as an investment and shall account for that investment using the equity method in accordance with IAS 28 – Investments in
Associates and Joint Ventures (please refer below).
Equity accounting
Entities over which UMG exercises significant influence as well as joint ventures are accounted for under the equity method.
Significant influence is deemed to exist when UMG holds, whether directly or indirectly, at least 20% of the voting rights in an entity unless
it can be clearly established that UMG does not exercise a significant influence. Significant influence can be evidenced through further
criteria, such as representation on the entity’s board of directors or equivalent governing body, participation in policy-making of financial andoperational processes, material transactions with the entity or the interchange of managerial personnel.
1.3.3

Foreign currency translation

The Combined Financial Statements are presented in millions of euros. The presentation currency of UMG is the euro.
Foreign currency transactions
Foreign currency transactions are initially recorded in the functional currency of the entity at the exchange rate prevailing at the date of thetransaction. At the closing date, foreign currency monetary assets and liabilities are translated into the entity’s functional currency at theexchange rate prevailing on that date. All foreign currency differences are expensed, with the exception of differences resulting fromborrowings in foreign currencies which constitute a hedge of the net investment in a foreign entity. These differences are allocated directly
to charges and income directly recognized in equity until the divestiture of the net investment.
Financial statements denominated in a foreign currency
Except in cases of significant exchange rate fluctuation, financial statements of subsidiaries, joint ventures or other associated entities forwhich the functional currency is not the euro are translated into euros as follows: the Combined Statement of Financial Position is translated
at the exchange rate at the end of the period, and the Combined Statement of Earnings and the Combined Statement of Cash Flows aretranslated using average monthly exchange rates for the period. The resulting translation gains and losses are recorded as foreign currencytranslation differences in charges and income directly recognized in equity. In accordance with IFRS 1, UMG elected to reverse theaccumulated foreign currency translation differences against retained earnings as of January 1, 2016. These foreign currency translationdifferences resulted from the translation into euros of the financial statements of subsidiaries that use foreign currencies as their functional
currencies. Consequently, these adjustments are not applied to earnings on the subsequent divestiture of subsidiaries, joint ventures or
associates whose functional currency is not the euro.
1.3.4

Revenues and associated costs

Revenues from contracts with customers are recorded when performance obligations promised in the contract are satisfied, and for an
amount for which it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Revenues
are reported net of discounts.
UMG has made the accounting of intellectual property licensing revenues a major point of attention.
Intellectual property licensing (musical works)
These licenses transfer to a customer either a right to use an entity’s intellectual property as it exists at the point in time at which thelicense is granted (static license), or a right to access an entity’s intellectual property as it exists throughout the license period (dynamic
license).
Revenues are accounted for when the performance obligation promised in the contract is satisfied (static license) or over time uponsatisfaction (dynamic license), i.e., when the seller transfers the risks and rewards of the right to use/access the intellectual property and thecustomer obtains control of the use/access of that license. Consequently, revenues from static licenses are recognized at the point in time
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when the license is transferred and the customer is able to use and benefit from the license. Revenues from dynamic licenses are accounted
for over time, over the license period from the date the customer is able to use and benefit from the license.
Analysis of the Agent/Principal relationship in sales transactions involving a third party
If the nature of the entity’s undertaking is a performance obligation to provide the specified goods or services itself, then the entity acts on
its own behalf and it is “principal” in the sale transaction: it accounts for revenue the gross amount of consideration to which it expects to beentitled in exchange for the goods or services provided, and the commission due to the third-party as cost of revenues. If the entity arranges
for a third-party to provide the goods or services specified in the contract, then it recognizes as revenues the net amount of consideration towhich it expects to be entitled in exchange for the goods or services provided.
1.3.4.1 Revenue recognition by business segment
Recorded Music
The sales of recorded music (physical, digital downloading or streaming) are intellectual property licenses granted by UMG to distributors ordigital platforms and which give them certain rights over the company’s musical works. In its relationship with the distributor/digitalplatform and the end customer, UMG cannot be “principal”, as the distributor or the digital platform is responsible for setting the transfer ofcontrol conditions of the right of use granted by the license to the end customer (broadcasting, price setting and conditions for reselling thephysical devices).
Physical sales of recorded music (CDs, DVDs and Vinyls)
These intellectual property licenses are static licenses transferring to the customer a right to use UMG‘s recordings as they exist at the point
in time at which the license is granted, i.e., on the physical device sold.
Revenues from the physical sales of recorded music, net of a provision for estimated returns (please refer to Note 1.3.4.2) and rebates, if any,
are accounted for, either: (i) upon the sale to the distributor, at the shipping point for products sold free on board (FOB) or on delivery for
products sold free on destination; or (ii) upon the sale to the final customer for consignment sales.
Digital sales of recorded music, via downloading or streaming by subscription or free of charge
These intellectual property licenses are generally dynamic licenses providing a right to access the entire catalog of recorded music as itexists throughout the license period considering potential add-ons to, or withdrawals from, the catalog during that period.
The consideration paid by the digital platform is variable in the form of a sales-based or a usage-based royalty. Revenues are then accounted
for when these subsequent sales or usages occur. Revenues from digital sales of recorded music, for which UMG has sufficient, accurate,
and reliable data from digital platforms, are recognized at the end of the month in which the sale or usage is made by the end customer. If
such data is not available, revenues are recognized when the digital platform notifies UMG of the sale or usage by the end customer.
For digital sales of recorded music streaming by subscription or free of charge, certain contracts may include a non-refundable minimum
guarantee which is generally recoupable and is in substance an advance payment. In the case of a dynamic license, the minimum guarantee
is spread over the period to which it relates and takes into account the amount of royalties that are actually recoupable. The minimum
guarantee is hence apportioned in accordance with the accounting for these royalties.
Music publishingMusic publishing relates to the use by a third party of the copyrights on musical works owned or administered by UMG, which areintellectual property licenses that UMG grants to the third party and which provides a right to access a catalog of recorded music, as these
intellectual property licenses are dynamic licenses.
The consideration paid by the third-party, notably a collection society (e.g., a company for the collective management of intellectual property
rights) is variable in the form of a royalty based on the usage by the third party. The variable consideration being accounted for when these
subsequent usages occur, revenues from music publishing are accounted for when the collection society notifies UMG of the usage by theend customer and collectability is assured.
Merchandising
Revenues from merchandising are recognized either upon sale to the end customer, from direct sales during touring, concessions and overthe internet; on delivery for sales by a third-party distributor; when a contract is signed; or when an invoice has been issued and thecollectability is assured for sales of rights attached to merchandising products.

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1.3.4.2 Other
Provisions for estimated returns and price guarantees are deducted from sales of products to customers through distributors. The
provisions are estimated based on past sales statistics and take into account the economic environment and product sales forecast to final
customers.
Selling, general and administrative expenses primarily include salaries and employee benefits, consulting and service fees, insurance
costs, travel and entertainment expenses, administrative department costs, provisions for receivables and other operating expenses.
Advertising costs are expensed when incurred.
Slotting fees and cooperative advertising expenses are recorded as a reduction in revenues. However, cooperative advertising istreated as a marketing expense and expensed when its expected benefit is individualized and can be estimated.
1.3.5

Assets

1.3.5.1 Goodwill and business combinations
Business combinations from January 1, 2009
Pursuant to IFRS 1, UMG elected not to restate business combinations that occurred prior to January 1, 2016. Business combinations arerecorded using the acquisition method. Under this method, upon the initial consolidation of an entity over which the group has acquired
exclusive control:• the identifiable assets acquired, and the liabilities assumed are recognized at their fair value on the acquisition date; and• non-controlling interests are measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s
net identifiable assets. This option is available on a transaction-by-transaction basis.
On the acquisition date, goodwill is initially measured as the difference between:(i) the fair value of the consideration transferred, plus the amount of non-controlling interests in the acquiree and, in a businesscombination achieved in stages, the acquisition-date fair value of the previously held equity interest in the acquiree; and(ii) the net fair value of the identifiable assets and liabilities assumed on the acquisition date.
The measurement of non-controlling interests at fair value results in an increase in goodwill up to the extent attributable to these interests,
thereby leading to the recognition of a “full goodwill”. The purchase price allocation shall be performed within 12 months after theacquisition date. If goodwill is negative, it is recognized in the Statement of Earnings. Subsequent to the acquisition date, goodwill ismeasured at its initial amount less recorded accumulated impairment losses (please refer to Note 1.3.5.7 below).
In addition, the following principles are applied to business combinations:• on the acquisition date, to the extent possible, goodwill is allocated to each cash-generating unit likely to benefit from the businesscombination;• contingent consideration in a business combination is recorded at fair value on the acquisition date, and any subsequent adjustment
occurring after the purchase price allocation period is recognized in the Statements of Earnings;• acquisition-related costs are recognized as expenses when incurred;• in the event of the acquisition of an additional interest in a subsidiary, UMG recognizes the difference between the acquisition priceand the carrying value of non-controlling interests acquired as a change in equity attributable to UMG shareowners; and• goodwill is not amortized.
Business combinations prior to January 1, 2009IFRS 3, as published by the IASB in March 2004, retained the acquisition method. However, its provisions differed from those of its revised
standard in respect of the following main items:• minority interests were measured at their proportionate share of the acquiree’s net identifiable assets as there was no option formeasurement at fair value;• contingent consideration was recognized in the cost of acquisition only if the payment was likely to occur and the amounts could be
reliably measured;• transaction costs that were directly attributable to the acquisition formed part of acquisition costs; and• in the event of the acquisition of an additional interest in a subsidiary, the difference between the acquisition cost and the carrying
value of minority interests acquired was recognized as goodwill.

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1.3.5.2 Content assets
Royalty advances to artists, songwriters, and co-publishers are capitalized as an asset when their current popularity and past performances
provide a reasonable basis to conclude that the probable future recoupment of such royalty advances against earnings otherwise payable tothem is reasonably assured. Royalty advances are recognized as an expense as subsequent royalties are earned by the artist, songwriter or
co-publisher. Any portion of capitalized royalty advances not deemed to be recoverable against future royalties is expensed during the period
in which the loss becomes evident. These expenses are recorded in cost of revenues.
Royalties earned by artists, songwriters, and co-publishers are recognized as an expense in the period during which the sale of the productoccurs, less a provision for estimated returns.
Music rights and catalogs include music catalogs, artists’ contracts and music publishing rights acquired. The annual review of the value ofthe intangible assets, undertaken by UMG at year-end 2016 led to a change in the amortization method of music rights and catalogs as fromJanuary 1, 2017, which notably resulted in an extension of the amortization period from 15 to 20 years.
1.3.5.3 Research and development costs
Research costs are expensed when incurred. Development expenses are capitalized when the feasibility and, in particular, profitability of the
project can reasonably be considered certain.
Cost of internal use software
Direct internal and external costs incurred for the development of computer software for internal use, including website development costs,
are capitalized during the application development stage. Application development stage costs generally include software configuration,coding, installation and testing. Costs of significant upgrades and enhancements resulting in additional functionality are also capitalized.
These capitalized costs are amortized over 5 to 10 years. Maintenance, minor upgrades, and enhancement costs are expensed as they are
incurred.
1.3.5.4 Other intangible assets
Intangible assets separately acquired are recorded at cost, and intangible assets acquired in connection with a business combination arerecorded at their fair value at the acquisition date. The historical cost model is applied to intangible assets after they have been recognized.
Assets with an indefinite useful life are not amortized but are subject to an annual impairment test. Amortization is accrued for assets with afinite useful life. Useful life is reviewed at the end of each reporting period.
Other intangible assets include trade names, customer bases and licenses. By contrast, music catalogs, trade names, subscribers’ bases andmarket shares generated internally are not recognized as intangible assets.
1.3.5.5 Property, plant and equipment
Property, plant and equipment are carried at historical cost less any accumulated depreciation and impairment losses. Historical cost
includes the acquisition cost or production cost, costs directly attributable to transporting an asset to its physical location and preparing it for
its operational use, the estimated costs relating to the demolition and the collection of property, plant and equipment, and the rehabilitationof the physical location resulting from the incurred obligation.
When property, plant and equipment include significant components with different useful lives, they are recorded and amortized separately.
Amortization is calculated using the straight-line method based on the estimated useful life of the assets. Useful lives of the main
components are reviewed at the end of each reporting period and are as follows:• buildings: 5 to 40 years;• equipment and machinery: 3 to 8 years; and• other: 2 to 10 years.
After initial recognition, the cost model is applied to property, plant and equipment.
UMG has elected not to apply the option available under IFRS 1, involving the remeasurement of certain property, plant and equipment attheir fair value as of January 1, 2016.

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1.3.5.6 Leases
UMG applies IFRS 16 with retrospective effect as from January 1, 2019 without restating comparative periods in the combined financial
statements.
As licenses of intellectual property granted by a lessor and rights held by a lessee under licensing agreements being excluded from the scopeof IFRS 16, the main lease contracts for UMG correspond to real estate leases for which UMG is the lessee.
Real estate leases for which UMG is the lessee are recorded at the commencement date and result in the recognition of a lease liability
equal to the present value of future lease payments against a right-of-use asset relating to leases.
The determination of the lease liability as of January 1, 2019 was made by:
1)

2)

3)

analyzing operating leases for which contractual obligations were disclosed as off-balance sheet commitments until
December 31, 2018 (please refer to Note 21 “Contractual obligations and other commitments” to UMG’s Combined
Financial Statements for the fiscal years ended December 31, 2018, 2017 and 2016, pages 51 and 52);
assessing the lease term that relates to the non-cancellable period of the lease, and taking into account all options toextend the lease which UMG is reasonably certain to exercise and all options to terminate the lease which UMG isreasonably certain not to exercise. UMG determined that real estate lease terms in France are generally nine years; andestimating the incremental borrowing rate as of January 1, 2019 of each lease contract, taking into account their residual
lease term at this date and their duration to reflect the interest rate of a loan with a similar payment profile to the lease
payments.

As of January 1, 2019, regarding the main impacts, it is specified that:• for some leases, as permitted by IFRS 16, at the date of transition, UMG used hindsight; and• UMG has applied the practical expedient provided by IFRS 16 to exclude initial direct costs from the measurement of the right-ofuse asset at the date of initial application.
For each lease, the lease term assessment and incremental borrowing rate estimate are determined at the commencement date.
After initial recognition, the liability is:• increased by the effect of undiscounting (interest expense on lease liabilities);• decreased by the cash out for lease payments; and• reassessed in the event of an amendment to the lease contract.
The right-of-use asset is recognized at cost at the effective date. The cost of the right-of-use asset includes:• the lease liability;• the initial direct costs (incremental costs of obtaining the lease);• payments made prior to the commencement date less lease incentives received from the lessor;• dismantling and restoration costs (measured and recognized in accordance with IAS 37); and• the amortization period used is the lease term.
The lease liability is a current or non-current operating liability excluded from the calculation of Financial Net Debt. Depreciation of right-ofuse assets is included in Adjusted Earnings Before Interest and Income Taxes (EBITA) and excluded from earnings before interest and tax
depreciation and amortization (EBITDA). The effect of undiscounting the lease liability (interest expense on lease liabilities) is included inother financial charges. Cash payments for the principal of the lease liability and any interest thereon, which are presented as financing
activities in the condensed statement of cash flows, impact Cash Flow From Operations (CFFO).
1.3.5.7 Asset impairment
Each time events or changes in the economic environment indicate a risk of impairment of goodwill, other intangible assets, property, plantand equipment, and assets in progress, UMG re-examines the value of these assets. In addition, in accordance with applicable accounting
standards, goodwill, other intangible assets with an indefinite useful life, and intangible assets in progress are all subject to an annual
impairment test undertaken in the fourth quarter of each fiscal year. This impairment test is performed to compare the recoverable amount ofeach Cash Generating Unit (CGU) or, if necessary, group of CGUs to the carrying value of the corresponding assets (including goodwill). A
CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from otherassets or groups of assets. UMG operates through different media and content businesses. Each business offers different products andservices that are marketed through various channels. CGUs are independently defined at each business level, corresponding to the group
operating segments. For a description of UMG’s CGUs and groups of CGUs, please refer to Note 8.
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The recoverable amount is determined for each individual asset as the higher of: (i) its value in use; and (ii) its fair value (less costs to sell) as
described hereafter. If the asset does not generate cash inflows that are largely independent of other assets or groups of assets, therecoverable amount is determined for the group of assets. In particular, an impairment test is performed by UMG for each CGU or group of
CGUs, depending on the level at which UMG Management measures return on operations.
The value in use of each asset or group of assets is determined, subject to exceptions, as the discounted value of future cash flows(Discounted Cash Flow method (DCF) by using cash flow projections consistent with the budget of the following year and the most recent
forecasts prepared by the operating segments.
Applied discount rates are determined by reference to available external sources of information, usually based on financial institutions’benchmarks, and reflect the current assessment by UMG of the time value of money and risks specific to each asset or group of assets.
Perpetual growth rates used for the evaluation are those used to prepare budgets for each CGU or group of CGUs, and beyond the period
covered, are consistent with growth rates estimated by the business by extrapolating growth rates used in the budgets, without exceeding
the long-term average growth rate for the markets in which the group operates.
The fair value (less costs to sell) is the price that would be received from the sale of an asset or group of assets in an orderly transaction
between market participants at the measurement date, less costs to sell. These values are generally determined based on market data (stock
market prices or comparison with similar listed companies, with the value attributed to similar assets or companies in recent transactions)or, in the absence of such data, based on discontinued cash flows.
If the recoverable amount is lower than the carrying value of an asset or group of assets, an impairment loss equal to the difference isrecognized in EBIT. In the case of a group of assets, this impairment loss is first recorded against goodwill.
The impairment losses recognized in respect of property, plant and equipment, and intangible assets (other than goodwill) may be reversed ina later period if the recoverable amount becomes greater than the carrying value, within the limit of impairment losses previously recognized.
Impairment losses recognized in respect of goodwill cannot be reversed at a later date.
1.3.5.8 Financial assets
Financial assets are initially recognized at fair value corresponding, in general, to the consideration paid, which is best evidenced by theacquisition cost (including associated acquisition costs, if any). Thereafter, financial assets are measured at fair value or at amortized costdepending on which financial asset category they belong to.
From January 1, 2018, financial assets are classified into the accounting categories “financial assets at amortized cost”, “financial assets atfair value through other comprehensive income” and “financial assets at fair value through profit or loss”.
This classification depends on the entity‘s business model for managing the financial assets and on contractual terms enabling to determine
whether the cash flows are solely payments of principal and interest (SPPI). The financial assets that contain an embedded derivative should
be considered in full to determine whether their cash flows are SPPI.
Financial assets at fair value
These include financial assets at fair value through other comprehensive income, derivative financial instruments with a positive value(please refer to Note 1.3.7) and other financial assets measured at fair value through profit or loss. Most of these financial assets areactively traded in organized financial markets, as their fair value is calculated by reference to the published market price at the period end.
Fair value is estimated for financial assets which do not have a published market price on an active market. As a last resort, when a reliable
estimate of fair value cannot be made using valuation techniques in the absence of an active market, the group values financial assets at
historical cost, less any impairment losses.
Financial assets at fair value through other comprehensive income include:•

Unconsolidated companies that are not held for trading: UMG elected to classify these into the category “fair value through othercomprehensive income”. Unrealized gains and losses on financial assets at fair value through other comprehensive income arerecognized in charges and income directly recognized in equity until the financial asset is sold, collected or removed from theStatement of Financial Position in another way, at which time the accumulated gain or loss previously reported in charges andincome directly recognized in equity is transferred to retained earnings and never reclassified to profit or loss. Dividends andinterest received from unconsolidated companies are recognized in profit or loss.

•

Debt instruments held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets, and whose contractual terms give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding. Unrealized gains and losses on financial assets at fair value through othercomprehensive income are recognized in charges and income directly recognized in equity until the financial asset is sold, collected

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or removed from the Statement of Financial Position in other ways, at which time the accumulated gain or loss previously reported
in charges and income directly recognized in equity is expensed in other financial charges and income.
Other financial assets measured at fair value through profit or loss mainly consist of assets held for trading which UMG intends to sell in thenear future (primarily marketable securities) and other financial assets unless it is measured at amortized cost or at fair value through othercomprehensive income. Unrealized gains and losses on these assets are recognized in other financial charges and income.
Financial assets at amortized cost
Financial assets at amortized cost consist of debt instruments held within a business model whose objective is to hold financial assets tocollect contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. At the end of eachperiod, these assets are measured at amortized cost using the effective interest method. If there is objective evidence that an impairment
loss has been incurred, the amount of this loss, measured as the difference between the financial asset’s carrying value and its recoverable
amount (equal to the present value of estimated future cash flows discounted at the financial asset’s initial effective interest rate), is
recognized in profit or loss. Impairment losses may be reversed if the recoverable amount of the asset subsequently increases in the future.
Impairment of financial assets
UMG assesses the expected credit loss associated with its financial assets recognized at amortized cost and debt instruments recognized atfair value through other comprehensive income on a prospective basis. A loss allowance for expected credit loss based on probability ofdefault is recognized at initial recognition. The loss allowance is updated for changes in these expected credit losses at each reporting date
to reflect changes in credit risk since initial recognition.
To assess whether there has been a significant increase in credit risk, UMG compares the credit risk at the reporting date with the credit risk
at the date of initial recognition based on reasonable forward-looking information and events, including credit ratings if available, significant
adverse economic changes (actual or expected), financial or business environment that are expected to result in a material change in the
borrower's ability to meet its obligations.
1.3.5.9 Inventories
Inventories are valued at the lower of cost or net realizable value. Cost comprises purchase costs, production costs and other supply andpackaging costs. These are usually calculated using the weighted average cost method. Net realizable value is the estimated selling price inthe normal course of business, less estimated completion costs and selling costs.
1.3.5.10 Trade accounts receivable
Trade accounts receivable are initially recognized at fair value, which is generally equal to their nominal value. Expected loss rates on tradereceivables are calculated by the relevant operating entities over their lifetime from initial recognition and are based on historical data that
also incorporates forward-looking information. In addition, account receivables from customers subject to insolvency proceedings orcustomers with whom UMG is involved in litigation or a dispute are generally impaired in full.
1.3.5.11 Cash and cash equivalents
The “cash and cash equivalents” category, defined in accordance with IAS 7, consists, on the one hand, of cash in banks and remunerated or
unremunerated demand deposits which corresponds to cash, and, on the other hand monetary UCITS and other highly liquid investmentswith initial maturities of generally three months or less which correspond to cash equivalents.
Investments in securities, investments with initial maturities of more than three months without an early termination option and bankaccounts subject to restrictions (blocked accounts), other than restrictions due to regulations specific to a country or activity sector (e.g.,exchange controls), are not classified as cash equivalents but as financial assets.
Moreover, the historical performances of the investments are monitored regularly to confirm their cash equivalents accounting classification.
1.3.6

Assets held for sale and discontinued operations

A non-current asset or a group of assets and liabilities is held for sale when its carrying value may be recovered principally through its
divestiture and not by its continued utilization. To meet this definition, the asset must be available for immediate sale and the divestituremust be highly probable. These assets and liabilities are recognized as assets held for sale and liabilities associated with assets held for
sale, without offset. The related assets recorded as assets held for sale are valued at the lowest value between the fair value (net ofdivestiture fees) and the carrying value (i.e., at their cost less accumulated depreciation and impairment losses), and they are no longer
depreciated.
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An operation is qualified as discontinued when it represents a separate major line of business and the criteria for classification as an asset
held for sale have been met or when UMG has sold the asset. Discontinued operations are reported on a single line of the Statement ofEarnings for the periods reported, comprising the earnings after tax of discontinued operations until divestiture and the gain or loss after tax
on sale or fair value measurement, less costs to divest the assets and liabilities of the discontinued operations. In addition, cash flows
generated by discontinued operations are reported on a separate line of the Statement of Combined Cash Flows for the relevant periods.
1.3.7

Financial liabilities

Long-term and short-term borrowings and other financial liabilities include:• bonds and credit facilities, as well as various other borrowings (including commercial paper and debt related to finance leases) andrelated accrued interest;• obligations arising out of commitments to purchase non-controlling interests;• bank overdrafts; and• the negative value of other derivative financial instruments. Derivatives with positive values are recorded as financial assets in theStatement of Financial Position.
Borrowings
All borrowings are initially accounted for at fair value net of transaction costs directly attributable to the borrowing. Borrowings bearing
interest are subsequently valued at amortized cost, applying the effective interest method. The effective interest rate is the internal yieldrate that discounts future cash flows over the term of the borrowing. In addition, where the borrowing comprises an embedded derivative(e.g., an exchangeable bond) or an equity instrument (e.g., a convertible bond), the amortized cost is calculated for the debt component only,
after separation of the embedded derivative or equity instrument. In the event of a change in expected future cash flows (e.g., redemption
occurs earlier than initially expected), the amortized cost is adjusted against earnings to reflect the value of the new expected cash flows,
discounted at the initial effective interest rate.
Commitments to purchase non-controlling interests
UMG may have committed to purchase the non-controlling interests of some of the minority shareowners of its fully consolidated
subsidiaries. These purchase commitments may be optional (e.g., put options) or mandatory (e.g., forward purchase contracts).
The following accounting treatment has been applied in respect of commitments made on or after January 1, 2009:• upon initial recognition, the commitment to purchase non-controlling interests is recognized as a financial liability for the present
value of the purchase price under the put option or forward purchase contract, mainly offset by the book value of non-controllinginterests and the remaining balance through equity attributable to UMG shareowners;• subsequent changes to the value of the commitment are recognized as a financial liability through an adjustment to equity
attributable to UMG shareowners; and• upon maturity of the commitment, if the non-controlling interests are not purchased, the previously recognized entries are reversed; if
the non-controlling interests are purchased, the amount recognized in financial liabilities is reversed, offset by the cash outflow
relating to the purchase of the non-controlling interests.
Derivative financial instruments
UMG uses derivative financial instruments to manage and reduce its exposure to fluctuations in interest rates, and foreign currency
exchange rates. All instruments are either listed on organized markets or traded over-the-counter with highly-rated counterparties. These
instruments include interest rate and currency swaps, and forward exchange contracts. All these derivative financial instruments are used
for hedging purposes. At the inception of the hedging relationship there is the formal designation and documentation of the hedging
relationship and the entity’s risk management objective and strategy for undertaking the hedge.
Derivatives are initially measured at fair value on the settlement date and are subsequently remeasured at fair value on each succeeding
reporting date. The recognition of subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument
and, if applicable, the nature of the hedged item and the type of hedging relationship designated. When these contracts qualify as hedges
for accounting purposes, gains and losses arising on these contracts are offset in earnings against the gains and losses relating to thehedged item.
When forward contracts are used as hedging instruments, UMG only qualifies as hedging instruments the change in the fair value of theforward contract related to the variation of the spot exchange rate. Changes in the forward points are excluded from the hedging relationshipand are recognized in the financial result.

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Fair value hedge
When the derivative financial instrument hedges exposures to fluctuations in the fair value of an asset or a liability recognized in theStatement of Financial Position or of a firm commitment which is not recognized in the Statement of Financial Position, it is a fair value
hedge. The instrument is remeasured at fair value in earnings, with the gains or losses arising on remeasurement of the hedged portion of
the hedged item offset on the same line of the Statement of Earnings, or, as part of a forecasted transaction relating to a non-financial asset
or liability, at the initial cost of the asset or liability.
Cash flow hedge
When the derivative financial instrument hedges cash flows, it is a cash flow hedge. The hedging instrument is remeasured at fair value andthe portion of the gain or loss that is determined to be an effective hedge is recognized through charges and income directly recognized inequity, whereas its ineffective portion is recognized in earnings; when the hedged item is realized, accumulated gains and losses recognizedin equity are released to the Statement of Earnings and recorded on the same line as the hedged item; as part of a forecasted transaction ona non-financial asset or liability, they are recognized at the initial cost of the asset or liability.
Net investment hedge
When the derivative financial instrument hedges a net investment in a foreign operation, it is recognized in the same way as a cash flow
hedge. Derivative financial instruments which do not qualify as a hedge for accounting purposes are remeasured at fair value and resulting
gains and losses are recognized directly in earnings, without remeasurement of the underlying instrument.
Furthermore, income and expenses relating to foreign currency instruments used to hedge highly probable budget exposures and firm
commitments contracted pursuant to the acquisition of editorial content rights (including sports, audiovisual and film rights) are recognized in
EBIT. In all other cases, gains and losses arising on the fair value remeasurement of instruments are recognized in other financial charges
and income.
1.3.8

Other liabilities

Provisions
Provisions are recognized when, at the end of the reporting period, UMG has a legal obligation (statutory, regulatory or contractual) or aconstructive obligation, as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and the obligation can be reliably estimated. Where the effect of the time value of money is material,
provisions are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value ofmoney. If the amount of the obligation cannot be reliably estimated, no provision is recorded and a disclosure is made in the Notes to the
Combined Financial Statements.
Employee benefit plans
In accordance with the laws and practices of each country in which it operates, UMG participates in, or maintains, employee benefit plansproviding retirement pensions, post-retirement health care, life insurance and post-employment benefits to eligible employees, former
employees, retirees and such of their beneficiaries who meet the required conditions. Retirement pensions are provided for substantially all
employees through defined contribution plans, which are integrated with local social security and multi-employer plans, or defined benefit
plans, which are generally managed via group pension plans. The plan funding policy implemented by the group is consistent with applicablegovernment funding requirements and regulations.
Defined contribution plans
Contributions to defined contribution and multi-employer plans are expensed during the year.
Defined benefit plans
Defined benefit plans may be funded by investments in various instruments such as insurance contracts or equity and debt investment
securities, excluding shares in any UMG entity or debt instruments.
Pension expenses and defined benefit obligations are calculated by independent actuaries using the projected unit credit method. Thismethod is based on annually updated assumptions, which include the probability of employees remaining with UMG until retirement,
expected changes in future compensation and an appropriate discount rate for each country in which UMG maintains a pension plan. The
assumptions adopted, and the means of determining these assumptions, are presented in Note 17. A provision is recorded in the Statementof Financial Position equal to the difference between the actuarial value of the related benefits (actuarial liability) and the fair value of any
associated plan assets, and this includes past service costs and actuarial gains and losses.

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The cost of defined benefit plans consists of three components recognized as follows:• the service cost is included in selling, general and administrative expenses. It comprises current service cost, past service cost
resulting from a plan amendment or a curtailment, immediately recognized in profit and loss, and gains and losses on settlement;• the financial component, recorded in other financial charges and income, consists of the undiscounting of the obligation, less the
expected return on plan assets determined using the discount rate retained for the valuation of the benefit obligation; and• the remeasurements of the net defined benefit liability (asset), recognized in items of other comprehensive income not reclassified
as profit and loss, mainly consist of actuarial gains and losses, i.e., changes in the present value of the defined benefit obligation andplan assets resulting from changes in actuarial assumptions and experience adjustments (representing the differences between the
expected effect of some actuarial assumptions applied to previous valuations and the effective impact).
Where the value of plan assets exceeds benefit obligations, a financial asset is recognized up to the present value of future refunds and the
expected reduction in future contributions.
Some other post-employment benefits, such as life insurance and medical coverage (mainly in the United States) are subject to provisions
which are assessed through an actuarial calculation comparable to the method used for pension provisions.
1.3.9

Deferred taxes

Differences existing at closing between the tax base value of assets and liabilities and their carrying value in the Combined Statement of
Financial Position give rise to temporary differences. Pursuant to the liability method, these temporary differences result in the accounting of:• deferred tax assets, when the tax base value is greater than the carrying value (expected future tax saving); and• deferred tax liabilities, when the tax base value is lower than the carrying value (expected future tax expense).
Deferred tax assets and liabilities are measured at the expected tax rates for the year during which the asset will be realized or the liability
settled, based on tax rates (and tax regulations) enacted or substantially enacted by the closing date. They are reviewed at the end of eachyear, in line with any changes in applicable tax rates.
Deferred tax assets are recognized for all deductible temporary differences, tax loss carry-forwards and unused tax credits, insofar as it isprobable that a taxable profit will be available, or when a current tax liability exists to make use of those deductible temporary differences,
tax loss carry-forwards and unused tax credits, except where the deferred tax asset associated with the deductible temporary difference isgenerated by initial recognition of an asset or liability in a transaction which is not a business combination, and that, at the transaction date,does not impact earnings, nor tax income or loss.
For deductible temporary differences resulting from investments in subsidiaries, joint ventures and other associated entities, deferred tax
assets are recorded to the extent that it is probable that the temporary difference will reverse in the foreseeable future and that a taxable
profit will be available against which the temporary difference can be utilized.
The carrying value of deferred tax assets is reviewed at each closing date, and revalued or reduced to the extent that it is more or lessprobable that a taxable profit will be available to allow the deferred tax asset to be utilized. When assessing the probability of a taxable
profit being available, account is taken, primarily, of prior years’ results, forecasted future results, non-recurring items unlikely to occur in the
future and the tax strategy. As such, the assessment of the group’s ability to utilize tax losses carried forward is to a large extent judgmentbased. If the future taxable results of the group proved to differ significantly from those expected, the group would be required to increase or
decrease the carrying value of deferred tax assets with a potentially material impact on the group’s Statement of Financial Position andStatement of Earnings.
Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability results from goodwill or
initial recognition of an asset or liability in a transaction which is not a business combination, and that, at the transaction date, does not
impact earnings, tax income or loss.
For taxable temporary differences resulting from investments in subsidiaries, joint ventures and other associated entities, deferred tax
liabilities are recorded except to the extent that both of the following conditions are satisfied: the parent, investor or venturer is able tocontrol the timing of the reversal of the temporary difference and it is probable that the temporary difference will not be reversed in theforeseeable future.
Current tax and deferred tax shall be charged or credited directly to equity, and not earnings, if the tax relates to items that are credited or
charged directly to equity.

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1.3.10Share-based compensation

With the aim of aligning the interests of executive management and employees of Vivendi with its shareholders’ interests by providing themwith an additional incentive to improve Vivendi’s performance and increase its share price on a long-term basis, Vivendi maintains several
share-based compensation plans (share purchase plans, performance share plans and bonus share plans) or other equity instruments basedon the value of the Vivendi share price (stock options), which are settled either in equity instruments or in cash. Grants under these plans areapproved by Vivendi’s Management and Supervisory Boards. In addition, the definitive grant of stock options and performance shares is
contingent upon the achievement of specific performance objectives set by Vivendi’s Management and Supervisory Boards. Moreover, all
granted plans are conditional upon active employment at the vesting date.
In addition, Dailymotion set up a long-term incentive plan for certain key executives of Vivendi and certain of its subsidiaries, including UMG,
for a five year period until June 30, 2020.
Please refer to Note 18 for details of the features of these plans.
Share-based compensation is recognized as a personnel cost at the fair value of the equity instruments granted. This expense is spread overthe vesting period, i.e., three years for stock option plans and for performance share plans (two years for performance shares granted before
June 24, 2014), and two years for Vivendi’s bonus share plans, other than in specific cases.
Vivendi uses a binomial model to assess the fair value of such instruments. This method relies on assumptions updated at the valuation datesuch as the calculated volatility of the relevant shares, the discount rate corresponding to the risk-free interest rate, the expected dividend
yield, and the probability of relevant managers and employees remaining employed within the group until the exercise of their rights.
However, depending on whether the instruments granted are equity-settled or cash-settled, the valuation and recognition of the expense will
differ:Equity-settled instruments:• the expected term of the option granted is deemed to be the mid-point between the vesting date and the end of the contractual term;• the value of the instruments granted is estimated and fixed at grant date; and• the expense is recognized with a corresponding increase in equity.
Cash-settled instruments:• the expected term of the instruments granted is deemed to be equal to one-half of the residual contractual term of the instrument forvested rights, and to the average of the residual vesting period at the remeasurement date and the residual contractual term of the
instrument for unvested rights;• the value of instruments granted is initially estimated at grant date and is then re-estimated at each reporting date until the payment
date and the expense is adjusted pro rata taking into account the vested rights at each such reporting date;• the expense is recognized as a provision; and• moreover, as plans settled in cash are primarily denominated in US dollars, the value fluctuates based on the EUR/USD exchange
rate.
The cost of share-based compensation is allocated to UMG, pro rata to the number of equity instruments or equivalent instruments granted
to their managers and employees.

1.4

Related parties

UMG’s related parties are those companies over which UMG exercises exclusive control, joint control or significant influence, UMG
shareowners exercising joint control over joint ventures, non-controlling interests exercising significant influence over UMG subsidiaries,
UMG corporate officers, management and directors and companies over which the latter exercise exclusive control, joint control, or
significant influence.
The transactions with subsidiaries over which UMG exercises control are eliminated within the intersegment transactions (a list of UMG’smajor consolidated entities is set out in Note 23). Moreover, commercial relationships among UMG subsidiaries, aggregated in operating
segments, are conducted on an arm’s length basis on terms and conditions similar to those which would be offered by third parties. A portionof the operating costs of Vivendi SE’s headquarters is allocated to UMG.

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1.5

Contractual obligations and contingent assets and liabilities

Once a year, UMG and its subsidiaries prepare detailed reports on all contractual obligations, commercial and financial commitments andcontingent obligations, for which they are jointly and severally liable and that are material to the group. These detailed reports are updated
by the relevant departments and reviewed by senior management on a regular basis. To ensure completeness, accuracy and consistency ofthese reports, some dedicated internal control procedures are carried out, including (but not limited to) the review of:• minutes of meetings of the shareholders, board and executive and other relevant committee meetings in respect of matters such as
contracts, litigation, and authorizations of asset acquisitions or divestitures;• pledges and guarantees with banks and financial institutions;• pending litigation, claims (in dispute) and environmental matters as well as related assessments for unrecorded contingencies withinternal and/or external legal counsels;• tax examiner’s reports and, if applicable, notices of reassessments and tax expense analyses for prior years;• insurance coverage for unrecorded contingencies with the risk management department and insurance agents and brokers withwhom the group contracted;• related-party transactions for guarantees and other given or received commitments; and• more generally, major contracts and agreements.

1.6

New IFRS standards and IFRIC interpretations that have been published but are not yet effective

Among IFRS standards and IFRIC interpretations issued by the IASB/IFRS IC and endorsed by the European Union as of the date of approvalof these Combined Financial Statements, that are not yet effective, and which UMG has not elected for early adoption, the main standards
which may have an impact on UMG are the amendments to the IFRS 9 – Financial Instruments, IFRS 7 – Financial Instruments: Disclosuresand IFRS 16 – Leases standards which relate to the Interest Rate Benchmark Reform (Phase 2). These amendments which apply mandatorily
from January 1, 2021, were issued by the IASB on August 27, 2020, endorsed by the EU on January 13, 2021, and published in the Official
Journal of the EU on January 14, 2021.
UMG is currently assessing the potential impact of applying these amendments to the Statement of Earnings, the aggregate comprehensive
income, the Statement of Financial Position, the Statement of Cash Flows, and the content of the Notes to UMG’s Combined Financial
Statements.

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Note 22.1

Segment data

Operating segment data

The group management evaluates the performance of its business segments and allocates necessary resources to them based on certain
operating performance indicators (segment earnings and cash flow from operations). EBITDA and EBITA reflect the earnings of each businesssegment, as defined in Note 1.2.3.
Intersegment commercial operations are conducted on an arm’s-length basis on terms and conditions similar to those which would beoffered by third parties.
Main aggregates of the Statement of Earnings
Corporate center

Elimination ofintersegment
transactions

292

-

(13)

21

(163)

1,487

257

19

(206)

1,329

5,634

1,052

489

-

1,156

250

25

(164)

1,267

1,057

239

24

(196)

1,124

Revenues

4,828

941

273

-

EBITDA

873

214

15

(123)

979

EBITA

823

209

15

(145)

902

2020

Year ended December 31,
2019
1,221
1,039

Recorded music

Music publishing

Merchandisingand otherYear ended December 31, 2020
Revenues

5,967

1,186

EBITDA

1,360

269

EBITA

1,259

Revenues
EBITDAEBITA(in millions of euros)

Total

7,432

Year ended December 31, 2019
7,159

(16)

Year ended December 31, 2018
6,023

(19)

Reconciliation of EBIT to EBITA and to EBITDA(in millions of euros)

EBIT (a)Adjustments
Amortization of intangible assets acquired through business combinations
Impairment losses on intangible assets acquired through business combinations (a)Other charges and income
EBITA
Adjustments
Restructuring charges (a)Sale of tangible and intangible assets
Right-of-use - Depreciation of tangible assets
Depreciation
Other non-recurring items
EBITDA

2018
821

108
1,329

85
1,124

80
1
902

20
1
69
59
9
1,487

24
64
53
2
1,267

29
1
na
46
1
979

na: not applicable.
a.

As reported in the Combined Statement of Earnings.

Recorded music revenues by geographic area
Recorded music revenues broken down by customer location:(in millions of euros)

North America
EuropeAsia
Latin America
Rest of the world
Recorded music revenues

2020
2,940
1,789
801
181
256
5,967

49%
30%
14%
3%
4%
100%

Year ended December 31,
2019
2,636
47%
1,742
31%
771
14%
184
3%
301
5%
5,634
100%

2018
2,224
1,580
618
153
253
4,828

46%
33%
13%
3%
5%
100%

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2.2

Segment assets and liabilities

Segment assets by geographic area
Segment assets include goodwill, content assets, other intangible assets, property, plant and equipment, rights-of-use relating to leases,
equity affiliates, financial assets, inventories, shareowners loans and trade accounts receivable and other.
(in millions of euros)

North America
EuropeAsia/Pacific
Latin America
Rest of the world
Total segment assets

December 31, 2020
5,669
55%
4,214
41%
305
3%
46
1%
12
10,246100%

December 31, 2019
4,406
54%
3,367
41%
292
4%
50
1%
13
8,128
100%

December 31, 2018
3,891
53%
3,192
43%
246
3%
54
1%
9
7,392
100%

Segment liabilities
Segment liabilities include provisions, other non-current liabilities, short-term and long-term lease liabilities and trade accounts payable andother. Segment liabilities amounted to €5,691 million as of December 31, 2020, compared to €5,184 million as of December 31, 2019,€4,775 million as of January 1, 2019 and €4,246 million as of December 31, 2018.

Note 3

EBIT

Personnel costs and average employee numbers(in millions of euros)

Salaries
Social security and other employment charges
Wages and expenses
Share-based compensation plans
Employee benefit plans
Other
Personnel costs
Annual average number of full-time equivalent employees (in thousands)

Note

18
17

2020
1,059
139
1,198
10
39
14
1,261
8.8

Year ended December 31,
2019
984
127
1,111
5
37
15
1,168
8.4

2018
876
119
995
4
32
18
1,049
7.9

Additional information on operating expenses
Advertising costs amounted to €143 million in 2020, €156 million in 2019 and €139 million in 2018.
LeviesLevies amounted to €17 million in 2020, €11 million in 2019 and €13 million in 2018.

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Note 4

Financial charges and income

Interest(in millions of euros)(Charge)/Income
Interest expense on borrowings
Interest income from cash, cash equivalents and investments
Interesta.

2020

Year ended December 31,2019(20) (a)
5
14
(15)
14

2018
27
27

Notably included interest expense on borrowings from Vivendi SE, please refer to Note 14.

Other financial income and charges(in millions of euros)

Capital gain on financial investments (a)Effect of undiscounting assets (b)Expected return on plan assets related to employee benefit plans
Foreign exchange gain
Other
Other financial income
Capital losses on financial investments (a)Downside adjustment on financial investments
Effect of undiscounting liabilities (b)Interest cost related to employee benefit plans
Interest expenses on lease liabilities
Foreign exchange loss
Other
Other financial charges
Net total

Note

17.2

17.2

2020
591
3
9
603
(1)
(5)
(18)
(4)
(28)
575

Year ended December 31,
2019
168
4
2
174
(15)
(11)
(1)
(7)
(19)
(1)
(3)
(57)
117

2018
312
18
3
333
(1)
(19)
(7)
na
(1)
(1)
(29)
304

na: not applicable.
b.

Included the revaluation of the interests in Spotify and Tencent Music Entertainment for a net amount of €591 million (compared to€139 million in 2019 and €312 million in 2018).

c.

In accordance with applicable accounting standards, where the effect of the time value of money is material, assets and liabilities are
initially recorded in the Statement of Financial Position in an amount relating to the present value of the expected revenues andexpenses. At the end of each subsequent period, the present value of such assets and liabilities is adjusted to account for the passageof time.

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Note 5
5.1

Income taxes

Provision for income taxes and income tax paid by geographic area

Provision for income taxes(in millions of euros)(Charge)/Income
Current
United States
FranceRest of Europe
Rest of the world
DeferredUnited States
FranceRest of Europe (a)Rest of the world
Provision for income taxesa.

Year ended December 31,
2019

2020

2018

(105)
(17)
(61)
(96)
(279)

(50)
(27)
(7)
(71)
(155)

(81)
(18)
(49)
(63)
(211)

7
2
(144)
2
(133)
(412)

22
(4)
(61)
3
(40)
(195)

38
1
(81)
2
(40)
(251)

Included the deferred tax charge relating to the revaluation gain recorded through profit or loss related to the investments in Spotify andTencent Music Entertainment for an aggregate amount of -€142 million in 2020, compared to -€36 million in 2019 and -€72 million in
2018.

Income tax paid(in millions of euros)

United States
France (b)Rest of Europe
Rest of the world
Income tax (paid)/collected

2020
(80)
(17)
(59)
(51)
(207)

Year ended December 31,
2019
(76)
(20)
(37)
(39)
(172)

2018
(69) (a)(22)(57) (c)
(50)
(198)

a.

Included payments in the United States to Vivendi and its subsidiaries for prior periods for -€38 million.

b.

Included payments in France to Vivendi related to the French tax group for -€13 million paid in 2020, -€16 million paid in 2019 and-€18 million paid in 2018. Following the sale of 10% of UMG by Vivendi on March 31, 2020, French entities of UMG exited Vivendi’s
French tax group with retroactive effect as of January 1, 2020. Starting in 2021, French entities of UMG will pay their income taxes to
French tax authorities.

c.

Included payments in the United Kingdom to Vivendi and its subsidiaries for prior periods for -€33 million.

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5.2

Effective tax rate2020

(in millions of euros, except %)Year ended December 31,
2019
1,369
975

2018

Earnings (before non-controlling interests)
Eliminations
Income from equity affiliates
Provision for income taxes
Earnings from continuing operations before provision for income taxes
French statutory tax rate
Theoretical provision for income taxes based on French statutory tax rate

902

9
412
1,790
32,02%
(573)

2
195
1,172
34.43%
(404)

1
251
1,154
34.43%(397)

Reconciliation of the theoretical and effective provision for income taxes
Earnings tax rates differences
Impacts of the changes in tax rates
Use or recognition of tax losses
Adjustments to tax expense from previous years
Withholding taxes
Other
Provision for income taxes

161
4
9
10
(37)
14
(412)

164
(8)
32
63
(35)
(7)
(195)

184
(3)
19
3
(40)
(17)
(251)

Effective tax rate

23.0%

16.6%

21.7%

Excluding previous years’ adjustments to income tax expense, the effective tax rate would have been 23.6% in 2020, 22.0% in 2019 and22.0% in 2018.

5.3

Deferred tax assets and liabilities

Changes in deferred tax assets/(liabilities), net(in millions of euros)

Opening balance of deferred tax assets/(liabilities), net
Provision for income taxes
Charges and income directly recorded in equity
Other business combinations
Changes in foreign currency translation adjustments and other
Closing balance of deferred tax assets/(liabilities), net

2020
(292)
(133)
(3)
(1)
15
(414)

Year ended December 31,2019(255) (a)
(40)
9
(2)
(4)
(292)

2018
(201)
(40)
(37) (b)(278)

a.

As of January 1, 2019, deferred tax assets included the impact of the restatements related to the application of the new accounting
standard IFRS 16 – Leases for +€23 million.

b.

Certain reclassifications were made to the Combined Financial Statements for the year ended December 31, 2018 to conform to thepresentation of the Combined Financial Statements for the year ended December 31, 2019.

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Components of deferred tax assets and liabilities(in millions of euros)

December 31,
2020

December 31,
2019

January 1,
2019

Deferred tax assets
Recognizable deferred taxes
Tax attributes (a)Of which Universal Music US and its subsidiaries (b)Universal Music UK and its subsidiaries
Universal Music France and its subsidiaries
Universal Music and its subsidiaries in the rest of Europe
Universal Music and its subsidiaries in the rest of the world
Other
Of which non-deductible provisions
Of which employee benefits
Of which working capital
Total gross deferred tax assets
Deferred taxes, unrecognized
Tax attributes (a)Of which Universal Music US and its subsidiaries (b)Universal Music UK and its subsidiaries
Universal Music France and its subsidiaries
Universal Music and its subsidiaries in the rest of Europe
Universal Music and its subsidiaries in the rest of the world
Other
Total deferred tax assets, unrecognized
Recorded deferred tax assets

188
95
46
3
23
21
429
44
32
161
617

240
139
47
3
25
26
385
69
33
142
625

336
214
50
4
27
41
395
72
26
146
731

(179)
(95)
(43)
(3)
(17)
(21)
(24)
(203)
414

(229)
(139)
(43)
(3)
(18)
(26)
(29)
(258)
367

(328)
(214)
(46)
(4)
(23)
(41)
(50)
(378)
353

Deferred tax liabilities
Asset revaluations (c)Working capital
Financial Instruments (d)OtherRecorded deferred tax liabilities
Deferred tax assets/(liabilities), net

(201)
(129)
(434)
(64)
(828)
(414)

(240)
(128)
(221)
(70)
(659)
(292)

(236)
(132)
(171)
(69)
(608)
(255)

a.

As shown in this table, the amounts of tax attributes were estimated at the end of the relevant fiscal years. As a result, the amount oftax attributes shown in this table and the amount reported to tax authorities at the time of the filing of the tax returns may differ, and if
necessary, may need to be adjusted in this table at the end of the following year.

b.

Primarily related to deferred tax assets recognizable in respect of tax credits carried forward by UMG Inc. in the United States as headof the US tax group, i.e., $114 million as of December 31, 2020 (compared to $154 million as of December 31, 2019, and $244 million asof December 31, 2018), taking into account the estimated impact (-$40 million) of transactions for the year 2020, but before taking into
account the final contingent outcome of ongoing tax audits.

c.

These tax liabilities, stemming from asset revaluations and resulting from the purchase price allocation of entities acquired by UMG,
are cancelled upon amortization or divestiture of the related assets and do not and will not generate any current tax liabilities.

d.

Primarily related to the deferred tax liabilities stemming from the revaluation of the investments in Spotify and Tencent MusicEntertainment.

5.4

Tax litigation

In the normal course of their business, UMG is subject to tax audits by the relevant tax authorities in the countries in which it conducts or
has conducted business. Various tax authorities have proposed adjustments to the financial results reported by UMG for fiscal year 2019 andprior years, under statutes of limitation applicable to UMG. In litigation situations, UMG's policy is to pay the taxes it intends to contest, andto seek a refund through appropriate legal proceedings. Regarding ongoing tax audits, no provision is recorded where the impact that could
result from an unfavorable outcome cannot be reliably assessed. To date, UMG believes that these tax audits are unlikely to have a material
impact on the group’s financial position or liquidity.

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Note 6

Earnings per share

As the combined group was not a legal entity constituted as of December 31, 2020, 2019 and 2018, the number of shares outstanding is notdeterminable. Consequently, no earnings per share data is presented in the Combined Financial Statements.

Note 7

Charges and income directly recognized in equity

Details of changes in equity related to other comprehensive income(in millions of euros)

Balance as of January 1, 2018
Charges and income directly recognized in equity
Items to be reclassified to profit or loss
Tax effectBalance as of December 31, 2018
Charges and income directly recognized in equity
Items to be reclassified to profit or loss
Tax effectBalance as of December 31, 2019
Charges and income directly recognized in equity
Items to be reclassified to profit or loss
Tax effectBalance as of December 31, 2020a.

Items not subsequently reclassified
to profit or loss

Items to be
subsequently
reclassified to profit
or loss

Actuarial
gains/(losses)
related to
employee defined
benefit plans (a)Financialassets at fairvalue throughothercomprehensive
incomeForeign currencytranslation
adjustments

(25)
na
(25)
(32)
9
(48)
8
(2)
(42)

(15)
(15)
(2)
(17)
3
(1)
(15)

(381)
113
(268)
44
(224)
(194)
(418)

Other
comprehensive
income fromequityaffiliates, net

Othercomprehensive
income

(8)
4
(4)
2
(2)
(6)
(8)

(429)
117
(312)
12
9
(291)
(189)
(3)
(483)

Please refer to Note 17.

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Note 8Goodwill(in millions of euros)

Goodwill, gross
Impairment losses
Goodwill

8.1

December 31, 2020
1,451
(82)
1,369

December 31, 2019
1,577
(89)
1,488

December 31, 2018
1,466
(88)
1,378

December 31, 2020
1,488
7
(126)
1,369

December 31, 2019
1,378
76 (a)
34
1,488

December 31, 2018
1,308
14
56
1,378

Changes in goodwill(in millions of euros)

Opening balance
Impairment losses
Business combinations
Changes in foreign currency translation adjustments and other (b)Closing balancea.

Notably included the provisional goodwill attributable to Ingrooves consolidated by Universal Music Group (UMG) as from March 15,
2019.

b.

Notably included the foreign currency translation of the dollar (USD) against the euro.

8.2

Goodwill impairment test

Goodwill cannot be allocated on a non-arbitrary basis to UMG’s individual cash-generating units (sale of recorded music; exploitation ofmusic publishing rights; merchandising and artist services), but only to a group of cash-generating units. As a result, the lowest level within
UMG at which goodwill is monitored for internal management purposes comprises a portion of the cash-generating units to which the
goodwill relates, but to which it cannot be allocated. Goodwill is therefore tested at the level of UMG.
In 2018, 2019 and 2020, UMG was tested for impairment by comparing its carrying amount (including goodwill) with its recoverable amount.
The recoverable amount is determined as the higher of the value in use determined by the discounted value of future cash flows (Discounted
Cash Flow method (DCF)) and the fair value (less costs to sell), determined on the basis of market data (stock market prices, comparable
listed companies, comparison with the value attributed to similar assets or companies in recent acquisition transactions). For a description of
the methods used for the impairment test, please refer to Note 1.3.5.7.
During the fourth quarter of each year, the goodwill impairment test was performed based on valuations of recoverable amounts determined:
in 2020 and 2019, referring to a recent transaction (please refer to the precision below) and in 2018 through internal valuations. As a result,the Management concluded that, as of December 31, 2018, 2019 and 2020, the recoverable amount tested significantly exceeded its carrying
value.
Presentation of key assumptions used for the determination of recoverable amounts
In 2018, the Management ensured that the recoverable amount exceeded the carrying value on the basis of market data only, as a businessplan was not available at the time of the re-examination of the value of goodwill. To achieve the highest possible valuation for UMG, given
the favorable change in the international music market, driven in particular by the strong development of subscription streaming services,
Vivendi stated in 2018 that it is willing to sell up to 50% of UMG’s share capital to one or more strategic partners and that such process
could be completed within an 18-month timeframe.
On December 31, 2019, Vivendi and a consortium of investors led by Tencent entered into an agreement providing the sale of 10% of UMG’sshare capital, based on an enterprise value of €30 billion for 100% of UMG’s share capital, with the option to acquire, until January 15,
2021, on the same valuation basis, an additional amount of up to 10% of UMG’s share capital. On March 31, 2020, Vivendi sold 10% of
UMG’s share capital to the Tencent-led consortium. On December 17, 2020, the consortium exercised the option to acquire an additional
10% of UMG. On January 29, 2021, Vivendi sold an additional 10% of UMG’s share capital to the Tencent-led consortium based on the same
enterprise value of €30 billion for 100% of UMG’s share capital.
On this basis, the Management ensured that the recoverable amount exceeded the carrying value.

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Note 99.1

Content assets and commitments

Content assets(in millions of euros)

Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Content assets
Deduction of current content assets
Non-current content assets

Content assets,
gross
4,345
1,859
20
6,224
(677)
5,547

December 31, 2020
Accumulated amortizationand impairment losses(2,015)(20)(2,035)(2,035)

Content assets
2,330
1,859
4,189
(677)
3,512

December 31, 2019(in millions of euros)

Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Content assets
Deduction of current content assets
Non-current content assets(in millions of euros)

Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Content assets
Deduction of current content assets
Non-current content assets

Content assets,
gross

Accumulated amortizationand impairment losses

3,670
1,266
22
4,958
(591)
4,367

(2,076)(22)(2,098)(2,098)Content assets,
gross
3,312
1,045
20
4,377

December 31, 2018
Accumulated amortizationand impairment losses(1,948)(20)(1,968)

(601)
3,776

(1,968)Content assets
1,594
1,266
2,860
(591)
2,269

Content assets
1,364
1,045
2,409
(601)
1,808

Changes in content assets(in millions of euros)

Opening balance
Amortization of content assets acquired through business combinations
Impairment losses on content assets acquired through business combinations
Increase
Decrease
Business combinations
Changes in foreign currency translation adjustments and other
Closing balanceYear ended December 31,
2020
2019
2,860
2,409
(108)
(84)
2,541
1,483
(1,024)(1,018)
23
(80)
47
4,189
2,860

2018
2,042
(79)
974
(812)
3
281
2,409

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9.2

Contractual content commitments

Commitments given recorded in the Statement of Financial Position: content liabilities
Content liabilities are mainly recorded in “Trade accounts payable and other” or in “Other non-current liabilities” whether they are current or
non-current, as applicable.

(in millions of euros)

Music royalties to artists and repertoire owners
Creative talent, employment agreements and others
Content liabilities

Minimum future payments as of December 31, 2020
Due inTotal
2021
2022 - 2025 After 2025
2,315
2,305
10
456
204
247
5
2,771
2,509
257
5

Total minimum future payments as ofDecember 31, 2019
2,264
288
2,552

December 31, 2018
2,049
283
2,332

Off-balance sheet commitments: creative talent, employment agreements and others
Universal Music Group (UMG) routinely commits to pay agreed amounts to artists and other parties upon delivery of content or otherproducts (“Creative talent and employment agreements”). Until the artist or the other party has delivered his or her content or until the
repayment of an advance, UMG discloses its obligation as an off-balance sheet given commitment. While the artist or the other party is
obligated to deliver content or another product to UMG (these arrangements are generally exclusive), this counterpart cannot be reliably
determined and, thus, is not reported in received commitments.

(in millions of euros)

Given content commitments
Received content commitments
Total net

Minimum future payments as of December 31, 2020
Due inTotal
2021
2022 - 2025
After 2025
1,337
732
578
27
na
na
na
na
1,337
732
578
27

Total minimum future payments as ofDecember 31, 2019
1,329
na
1,329

December 31, 2018
1,172
na
1,172

na: not available.

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Note 10

Leases

As from January 1, 2019, Universal Music Group (UMG) applies the new accounting standard IFRS 16 – Leases. In accordance with IFRS 16,
the impact of the change of accounting standard was recorded in the opening balance sheet as of January 1, 2019. For a detailed
description, please refer to Note 1.3.5.6

10.1

Rights-of-use relating to leases

As of December 31, 2020, the rights-of-use relating to leases amounted to €416 million (€472 million as of December 31, 2019 and€454 million as of January 1, 2019) less the accumulated amortization and impairment losses for €329 million as of December 31, 2020(€287 million as of December 31, 2019 and €222 million as of January 1, 2019). These rights-of-use relate to real estate leases.
Changes in the rights-of-use
Year ended December 31,
2020
2019
472
(69)
39
(26)
416

(in millions of euros)

Opening balance
Depreciation
Acquisitions/increase
Sales/decrease
Business combinations
Foreign currency translations and other
Closing balance

10.2

454
(64)
59
23
472

Lease liabilities

Reconciliation between off-balance sheet leases as of December 31, 2018 and lease liabilities as of January 1, 2019(in millions of euros)

Off-balance sheet leases as of December 31, 2018
Lease with a remaining lease term of less than 12 months (short-term lease)
Leases of low-value assets
Variable lease payments (excluding indexed leases)
Reasonably certain renewal/extension and termination options
Others
Undiscounted lease payments as of January 1, 2019
Effect of discounting
Residual value guarantee
Non-lease components
Operating lease liabilities as of January 1, 2019
Financing lease liabilities
Total of lease liabilities as of January 1, 2019

671
(7)
36
(21)
679
(96)
583
583

Maturity of lease liabilities
The maturity of lease liabilities is based on assumptions, notably made upon the initial application of IFRS 16.
(in millions of euros)

Maturity< 1 year
Between 1 and 5 years> 5 years
Lease liabilities

10.3

December 31, 2020

December 31, 2019

January 1, 2019

78
265
182
525

86
315
195
596

90
334
159
583

Lease-related expenses

Lease-related expenses recorded in the Statement of Earnings amounted to €88 million in 2020 (compared to €83 million in 2019 and€67 million in 2018 relating to operating leases under IAS 17).

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Note 11

Investments in equity affiliates

As of December 31, 2020, 2019 and 2018, the main company accounted for by Universal Music Group under the equity method was Vevo (apremium music video and entertainment platform).
(in millions of euros)

Vevo
Ingrooves Music Group (a)Other

Voting interest
December 31, 2020 and 2019
49.4%
100%
na

Voting interest
December 31, 2018
49.4%
22.9%
na

Net carrying value of equity affiliates
December 31, 2020 December 31, 2019 December 31, 2018
62
78
81
na
na
6
10
10
10
72
88
97

na: not applicable.
a.

On March 15, 2019, UMG acquired the remaining interest in Ingrooves Music Group, an innovative music distribution and marketingcompany which complements UMG’s existing relationships with the global independent music community.

Change in value of investments in equity affiliates(in millions of euros)

Opening balance
Acquisitions
Business combinations
Income from equity affiliates
Change in other comprehensive income
Dividends received
Other
Closing balance

a.

2020

Year ended December 31,
2019
88
97
1
(9)
(2)
(6)
2
(2)
(2)
(7) (a)
72
88

2018
96
(1)
4
(2)
97

On March 15, 2019, UMG acquired the remaining interest in Ingrooves Music Group.

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Note 12(in millions of euros)

Financial assets
Total

Financial assets at fair value through profit or loss
Term deposits
Level 1 - Listed equity securities
1,862
Level 2Unlisted equity securities
43
Derivative financial instruments
Level 3 - Other financial assets
Financial assets at fair value through other comprehensive income
Level 1 - Listed equity securities
Level 2 - Unlisted equity securities
Level 3 - Unlisted equity securities
14
Financial assets at amortized cost
44
Financial assets
1,963(in millions of euros)

Total

Financial assets at fair value through profit or loss
Term deposits
Level 1 - Listed equity securities
789
Level 2Unlisted equity securities
Derivative financial instruments
20
Level 3 - Other financial assets
Financial assets at fair value through other comprehensive income
Level 1 - Listed equity securities
2
Level 2 - Unlisted equity securities
Level 3 - Unlisted equity securities
23
Financial assets at amortized cost
69
Financial assets
903

December 31, 2020
Current
Non-current

December 31, 2019
Current
Non-current

Total

-

1,862

1,000

-

1,000

-

43
-

43
1
-

1
-

43
-

1
1

14
43
1,962

1
14
72
1,131

27
28

1
14
45
1,103

December 31, 2018
Current
Non-current
-

789

-

20
-

30
30

2
23
39
873

The three classification levels for the measurement of financial assets at fair value are defined in Note 1.3.1.

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Listed equity portfolio
December 31, 2020
Number ofshares held

Ownership
interest

Averagepurchaseprice (a)

3.37%
0.74%

6.58
na

(in thousands)

Spotify (b)Tencent Music Entertainment (c)
Other
Total

6,487
12,246Stockmarketprice

Carryingvalue(€/share)

Change invalue over theperiodCumulative
unrealized
capitalgain/(loss)

Sensitivity
at +/-10 pts(in millions of euros)

257.34
15.74

1,669
193
1,862

798
64
(1)
861

1,627
193
1,820

Change invalue over theperiodCumulative
unrealized
capitalgain/(loss)+167/-167+19/-19

December 31, 2019
Number ofshares held

Ownership
interest

Averagepurchaseprice (a)

3.62%
0.82%

6.58
na

(in thousands)

Spotify (b)Tencent Music Entertainment (c)
Other
Total

6,487
12,246Stockmarketprice

Carryingvalue(€/share)134.36
10.55

Sensitivity
at +/-10 pts(in millions of euros)

871
129
1
1,001

225
(13)
(2)
210

829
129
1
959

+87/-87+13/-13nanaChange invalue over theperiodCumulative
unrealized
capitalgain/(loss)

Sensitivity
at +/-10 pts

December 31, 2018
Number ofshares held

Ownership
interest

Averagepurchaseprice (a)(in thousands)

Spotify (b)Tencent Music Entertainment (c)
Other
Total

6,487
12,246Stockmarketprice

Carryingvalue(€/share)

3.59%
0.82%

6.58
na

99.70
11.61

(in millions of euros)

647
142
2
791

344
97
441

604
142
3
749

+65/-65+14/-14na
na

na: not applicable.
a.

Includes acquisition fees and taxes.

b.

Spotify shares have been listed since April 3, 2018.

c.

Tencent Music Entertainment shares have been listed since December 12, 2018.

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Note 13

Net working capital

Changes in net working capital
December 31,
2019

Changes inoperatingworking
capital (a)Business
combinations

90
1,058
507
(42)
1,148
3,981
106
4,087
(2,939)

(6)
133
62
(8)
127
413
1
414
(287)

2
1
2
(1)
6
5
(3)

(in millions of euros)

Inventories
Trade accounts receivable and otherOf which trade accounts receivable
trade accounts receivable write-offs
Working capital assets
Trade accounts payable and other
Other non-current liabilities
Working capital liabilities
Net working capital

January 1,
2019 (d)(in millions of euros)

Inventories
Trade accounts receivable and otherOf which trade accounts receivable
trade accounts receivable write-offs
Working capital assets
Trade accounts payable and other
Other non-current liabilities
Working capital liabilities
Net working capital

84
994
548
(52)
1,078
3,613
135
3,748
(2,670)Business
combinations

4
31
(49)
11
35
118
118
(83)

9
11
9
50
(1)
49
(40)

December 31,
2017

Changes inoperatingworking
capital (a)Business
combinations

71
919
524
(46)
990
3,023
111
3,134
(2,144)

14
(1)
(30)
(7)
13
181
11
192
(179)

4
3
4
12
12
(8)

(in millions of euros)

Inventories
Trade accounts receivable and otherOf which trade accounts receivable
trade accounts receivable write-offs
Working capital assets
Trade accounts payable and other
Other non-current liabilities
Working capital liabilities
Net working capital

Changes inoperatingworking
capital (a)Changes inforeigncurrencytranslation
adjustments
(5)
(54)
(20)
3
(59)
(241)
(17)
(258)
199
Changes inforeigncurrencytranslation
adjustments
2
14
4
(1)
16
68
2
70
(54)
Changes inforeigncurrencytranslation
adjustments
2
13
4
1
15
48
4
52
(37)

December 31,
2020

Other (b)

(51)
(12)
(15)
(51)
(309) (c)755 (c)446(497)

December 31,
2019

Other (b)

10
(7)
10
132 (c)
(30)
102
(92)

Other (b)

(3)
62
47
1
59
374 (c)
33
407
(348)

79
1,088
538
(62)
1,167
3,843
851
4,694
(3,527)

90
1,058
507
(42)
1,148
3,981
106
4,087
(2,939)December 31,
2018
84
997
548
(52)
1,081
3,638
159
3,797
(2,716)a.

Excludes content investments.

b.

Mainly includes the change in net working capital relating to content investments, capital expenditures and other investments.

c.

Included royalties provisions for €279 million as of December 31, 2020, €83 million as of December 31, 2019 and €130 million as ofDecember 31, 2018.

d.

As from January 1, 2019, Vivendi applies the new accounting standard IFRS 16 – Leases.

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Trade accounts receivable and otherCredit risk
Universal Music Group does not consider there to be a significant risk of non-recovery of trade accounts receivables for its businesssegments: the large individual customer base, the broad variety of customers and markets, as well as the geographic diversity of its businesssegments enable UMG to minimize the risk of credit concentration related to trade accounts receivable.
Trade accounts payable and otherNote(in millions of euros)

Trade accounts payable
Music royalties to artists and repertoire owners
Other
Trade accounts payable and other

Note 14

9.2

December 31, 2020
121
2,305
1,417
3,843

December 31, 2019
132
2,251
1,598
3,981

January 1, 2019
120
2,037
1,456
3,613

Cash position, borrowings and financial risk management

Cash position
Universal Music Group (UMG)’s cash position comprises cash and cash equivalents, as well as loans to Vivendi classified as current financial
assets. As defined by Vivendi, money market funds relate to financial investments, which satisfy the ANC’s and AMF’s decision released in
November 2018.
(in millions of euros)

Loans to Vivendi SEof which Universal Music Group Treasury S.A.S.
Universal Music Group S.A.S.
Cash and cash equivalents (a)of which cash equivalents
cash
Cash positiona.

December 31, 2020
815
815
326
220
106
1,141

December 31, 2019
672
623
49
336
248
88
1,008

December 31, 2018
1,260
1,192
68
276
190
86
1,536

Included cash not centralized by Vivendi SE for €317 million as of December 31, 2020, €333 million as of December 31, 2019 and€249 million as of December 31, 2018. Vivendi SE centralizes daily cash surpluses (“cash pooling”) of all controlled entities (a) which
are not subject to local regulations restricting the transfer of financial assets, or (b) which are not subject to other contractual
agreements.

Borrowings and other financial liabilities
Universal Music Group Inc. bank credit facilities
Universal Music Group Inc. (UMG Inc.) is now an additional borrower under five of Vivendi SE’s eight bilateral credit facilities up to theaggregate limit of €750 million. As of December 31, 2020, drawings made by UMG Inc. were €422 million (drawings made in US dollars).
In addition, UMG Inc. has its own credit facilities maturing in September 2021 for an aggregate amount of $570 million, i.e. €466 million asof December 31, 2020 including a committed credit facility of €245 million. As of December 31, 2020, drawings made by UMG Inc. were€213 million (drawings made in US dollars), of which €131 million on the committed credit facility.

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Universal Music Group borrowings and intra-group investments with Vivendi SE
In addition to drawings made by UMG Inc. on bank credit facilities, Universal International Music B.V. borrows from Vivendi SE, andUniversal Music Group Treasury places its cash surpluses with Vivendi SE.

(in millions of euros)

Shareowners borrowings (a)Credit lines drawn by UMG Inc. (b)Bank overdrafts
Other
Borrowings at amortized cost
Derivative financial instruments
Borrowings and other financial liabilities

December 31, 2020
LongShortTotal
term
term
2,368
2,368
635
635
5
5
1
1
3,009
2,369
640
3,009
2,369
640

December 31, 2019LongShortTotal
term
term
14
14
1
1
15
1
14
15
1
14

December 31, 2018
LongShortTotal
term
term
17
17
1
1
18
1
17
18
1
17

a.

Corresponds to Universal International Music B.V.’s borrowing from Vivendi SE, maturing in 2027.

b.

Corresponds to credit lines drawn by UMG Inc. for €213 million on UMG Inc. credit lines and €422 million on Vivendi SE credit lines.

Investment risk and counterparty risk
UMG’s daily cash surpluses are centralized by Vivendi SE (cash pooling) and the investment policy is managed by Vivendi’s Financing andTreasury Department.
Liquidity risk
UMG manages the liquidity risk by continually supervising the cash flow projections and the actual cash flow.
Interest rate risk
UMG’s interest rate risk was not material as of December 31, 2020, 2019 and 2018.
Foreign currency risk
(in millions of euros)

December 31, 2020

Euro - EUR
US dollar - USD
OtherNominal value of borrowings before hedging
Currency swaps USD
Other currency swaps
Net total of hedging instruments (a)Euro - EUR
US dollar - USD
OtherNominal value of borrowings after hedging

a.

634
6
640
(3)
(36)
(39)
(39)
637
42
640

December 31, 2019
15
15
20
(19)
1
1
(20)
34
15

December 31, 2018
18
18
59
(63)
(4)
(4)
(59)
81
18

Notional amounts of hedging instruments translated into euros at the closing rates.

UMG’s foreign currency risk management is centralized by Vivendi SE’s Financing and Treasury Department in order to obtain the benefits
associated with internal hedging and to optimize the volume of external hedging issued from financial institutions. The foreign currency
hedging instruments set up have non-significant notional amounts. In addition, Vivendi SE may hedge foreign currency exposure resulting
from foreign-currency denominated financial assets and liabilities.
Moreover, due to their non-significant nature, net exposures related to UMG’s net working capital (internal flows of royalties as well as
external purchases) are generally not hedged. The associated risks are settled at the end of each month by translating the amounts into thefunctional currency of the relevant operating entities.
Derivative financial instruments recognized in assets amounted to nil as of December 31, 2020, €1 million as of December 31, 2019 and€5 million as of December 31, 2018.

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Note 15

EquityUniversal Music Group (UMG) distributes its cash surpluses to shareowners through dividends and share capital reductions:(in millions of euros)

Contributions by/distribution to shareownersof which Universal Music Group S.A.S. transferred to Vivendi SEof which Distribution by Universal International Music B.V. paid to shareownersof which Distribution by Universal Music Group Inc. paid to Vivendi SE
Universal Music Group S.A.S. share capital reduction
Changes in UMG ownership interest in subsidiaries that do not result in aloss of control
Changes in equity attributable to Universal Music Groupa.

December 31, 2020
December 31, 2019
2,711
1,002
2,428 (a)
283
244
758
-

December 31, 2018
981
246
735
1,414

13

-

-

2,724

1,002

2,395

On March 19, 2020, Universal Music Group S.A.S. was dissolved, with universal transmission of its property to Vivendi S.E.

Note 16

Provisions(in millions of euros)

Note

Employee benefits (a)Restructuring costs
Litigations
Other (b)Provisions

22

Deduction of current provisions
Non-current provisions

December 31, 2020
258
11
4
199
472
(137)
335

December 31, 2019
272
13
12
203
500
(63)
437

January 1, 2019
244
10
15
176
445
(79)
366

a.

Included deferred employee compensation as well as provisions for defined employee benefit plans (€225 million as of December 31,
2020, €232 million as of December 31, 2019 and €212 million as of January 1, 2019), but excluded employee termination reserves
recorded under restructuring costs.

b.

Notably included litigation provisions for which the amount and nature are not detailed because such disclosure could be prejudicial to
Universal Music Group.

Changes in provisions(in millions of euros)

Opening balance
Addition
Utilization
ReversalBusiness combinations
Divestitures, changes in foreign currency translation adjustments and other
Closing balance

2020

Year ended December 31,
2019
500
445 (a)
85
73
(74)
(53)
(43)
(23)
4
58
472
500

2018
513
95
(100)
(15)
(44) (b)449a.

In accordance with the new accounting standard IFRS 16 – Leases, the impact of the change of accounting standard was recorded in
the opening balance sheet as of January 1, 2019. For a detailed description, please refer to Notes 1.3.5.6 and 10.

b.

Certain reclassifications were made to the Combined Financial Statements for the year ended December 31, 2018, to conform to thepresentation of the Combined Financial Statements for the year ended December 31, 2019.

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Note 17
17.1

Employee benefits

Analysis of expenses related to employee benefit plans

The table below provides information about the cost of employee benefit plans, excluding its financial component. The total cost of defined
benefit plans is set forth in Note 17.2.2 below.
2020(in millions of euros)

Employee defined contribution plans
Employee defined benefit plans
Employee benefit plans

17.2

Employee defined benefit plans

17.2.1

Assumptions used in the evaluation and sensitivity analysis

Year ended December 31,
2019
36
34
3
3
39
37

2018
29
3
32

Discount rate, expected return on plan assets, and rate of compensation increase
The assumptions underlying the valuation of defined benefit plans were made in compliance with the accounting policies presented in
Note 1.3.8 and have been applied consistently for several years. Demographic assumptions (including notably the rate of compensation
increase) are company specific. Financial assumptions (notably the discount rate) are determined by independent actuaries and otherindependent advisors and are reviewed by Vivendi SE. The discount rate is therefore determined for each country by reference to yields on
notes issued by investment grade companies having a credit rating of AA and maturities identical to that of the valued plans, generally basedon relevant rate indices. The discount rates selected are therefore used, at year-end, to determine a best estimate by Vivendi SE of expected
trends in future payments from the first benefit payments.
In accordance with IAS 19, the expected return on plan assets is estimated by using the selected discount rate to value the obligations of theprevious year.
In weighted average

Discount rate (a)Rate of compensation increase
Duration of the benefit obligation (in years)

2020
1.1%
0.9%
16.9

Pension benefits
2019
1.0%
0.9%
17.3

Post-retirement benefits
2020
2019
2018
2.3%
2.8%
3.8%
na
na
na
11.4
11.7
11.6

2018
1.9%
2.2%
16.1

na: not applicable.
a.

A 50 basis point increase (or a 50 basis point decrease, respectively) to the 2020 discount rate would have led to a decrease of€1.1 million in pre-tax expense (or an increase of €1.0 million, respectively) and would have led to a decrease in the obligations ofpension and post-retirement benefits of €32 million (or an increase of €37 million, respectively).

Assumptions used in accounting for pension benefits, by country

Discount rate
Rate of compensation increase (weighted average)

2020
2.50%
na

United States
2019
2018
3.00%
4.00%
na
na

United Kingdom
2020
2019
2018
1.50%
1.75%
2.75%
na
na 3.50%

2020

Japan
2019

2018

Netherlands
2020
2019
2018

Discount rate

0.50%

0.25%

0.50%

0.75%

0.50%

1.50%

Rate of compensation increase (weighted average)

1.60%

1.60%

1.53%

na

na

na

2020
0.75%
1.75%

Germany
2019
0.50%
1.75%

2018
1.50%
1.75%

na: not applicable.

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Assumptions used in accounting for post-retirement benefits, by country

Discount rate
Rate of compensation increase

United States
2019
3.00%
na

2020
2.50%
na

2018
4.00%
na

na: not applicable.
Allocation of pension plan assets
December 31, 2020
4%
3%
1%
88%
4%
100%

Equity securities
Debt securities
Diversified funds
Insurance contracts
Real estate
Cash and other
Total

December 31, 2019
4%
2%
1%
90%
3%
100%

December 31, 2018
5%
3%
1%
88%
3%
100%

Pension plan assets are mainly financial assets actively traded in organized financial markets.
These assets do not include occupied buildings or assets used by the group, nor shares or debt instruments of Vivendi.
Cost evolution of post-retirement benefits
For the purpose of measuring post-retirement benefits, Vivendi assumed the annual growth in the per capita cost of covered health carebenefits would slow down from 5.9% for the under 65 years of age and 65 years of age and older categories in 2020, to 4.6% in 2028 forthese categories. In 2020, a one-percentage-point increase in the assumed cost evolution rates would have increased post-retirement benefit
obligations by €2.2 million and the pre-tax expense by €0.1 million. Conversely, a one-percentage-point decrease in the assumed costevolution rates would have decreased post-retirement benefit obligations by €1.9 million and the pre-tax expense by €0.1 million.
17.2.2Analysis of the expense recorded and of the amount of benefits paid(in millions of euros)

Current service cost
Past service cost
(Gains)/losses on settlements
Other
Impact on selling, administrative and general
expenses
Interest cost
Expected return on plan assets
Impact on other financial charges and income
Net benefit cost recognized in profit or loss

2020

Pension benefits
2019
2018
3
2
2
1
1

Post-retirement benefits
2020
2019
2018
-

Total
2019

2020
3
-

2
1

2018
2
1

3

3

3

-

-

-

3

3

3

4
(3)
1
4

7
(4)
3
6

6
(3)
3
6

1
1
1

1
1
1

1
1
1

5
(3)
2
5

8
(4)
4
7

7
(3)
4
7

In 2020 benefits paid amounted to (i) €15 million with respect to pensions (€16 million in 2019 and €16 million in 2018), of which €1 million
paid by pension funds (€1 million in 2019 and €1 million in 2018), and (ii) €1 million paid with respect to post-retirement benefits (€1 million
in 2019 and €1 million in 2018).

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17.2.3

Analysis of net benefit obligations with respect to pensions and post-retirement benefits

Changes in value of benefit obligations, fair value of plan assets, and funded status
Employee defined benefit plans
Year ended December 31, 2020
Benefit obligation
Fair value of planNet
assets(provision)/asset
recorded in thestatement offinancial position(A)(B)(B)-(A)Note(in millions of euros)
Opening balance
440
216
(224)
Current service cost
3
(3)
Past service cost
(Gains)/losses on settlements
Other
Impact on selling, administrative and general expenses(3)Interest cost
5(5)
Expected return on plan assets
33
Impact on other financial charges and income(2)
Net benefit cost recognized in profit or loss
(5)
Experience gains/(losses) (a)11Actuarial gains/(losses) related to changes in demographic assumptions(1)
1
Actuarial gains/(losses) related to changes in financial assumptions(5)
5
Adjustment related to asset ceiling
Actuarial gains/(losses) recognized in other comprehensive income
7
Contributions by plan participantsContributions by employers
1212
Benefits paid by the fund(1)
(1)
Benefits paid by the employer
(15)
(15)
Business combinations
Divestitures of businesses
Transfers
Foreign currency translation and other
(3)
(9)
(6)
Closing balance
423
207
(216)
of which wholly or partly funded benefits
212
wholly unfunded benefits (b)211of which assets related to employee benefit plans
9
provisions for employee benefit plans (c)
16
(225)

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Employee defined benefit plans
Year ended December 31, 2019
Benefit obligation
Fair value of planNet
assets(provision)/asset
recorded in thestatement offinancial position(A)(B)(B)-(A)Note(in millions of euros)
Opening balance
376
173
(203)
Current service cost
2
(2)
Past service cost
(Gains)/losses on settlements
Other
(1)
(1)
Impact on selling, administrative and general expenses(3)Interest cost8
(8)
Expected return on plan assets
44Impact on other financial charges and income(4)
Net benefit cost recognized in profit or loss
(7)
Experience gains/(losses) (a)13332Actuarial gains/(losses) related to changes in demographic assumptions
1(1)
Actuarial gains/(losses) related to changes in financial assumptions (d)58(58)
Adjustment related to asset ceiling
Actuarial gains/(losses) recognized in other comprehensive income(27)
Contributions by plan participantsContributions by employers
13
13
Benefits paid by the fund(1)
(1)
Benefits paid by the employer
(15)
(15)
Business combinations
Divestitures of businesses
Transfers
Foreign currency translation and other10
10
Closing balance
440
216
(224)
of which wholly or partly funded benefits
224
wholly unfunded benefits (b)216of which assets related to employee benefit plans
8
provisions for employee benefit plans (c)
16
(232)

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(in millions of euros)

Opening balance
Current service cost
Past service cost
(Gains)/losses on settlements
Other
Impact on selling, administrative and general expenses
Interest cost
Expected return on plan assets
Impact on other financial charges and income
Net benefit cost recognized in profit or loss
Experience gains/(losses) (a)Actuarial gains/(losses) related to changes in demographic assumptions
Actuarial gains/(losses) related to changes in financial assumptions
Adjustment related to asset ceiling
Actuarial gains/(losses) recognized in other comprehensive income
Contributions by plan participantsContributions by employers
Benefits paid by the fund
Benefits paid by the employer
Business combinations
Divestitures of businesses
Transfers
Foreign currency translation and other
Closing balanceof which wholly or partly funded benefits
wholly unfunded benefits (b)of which assets related to employee benefit plansprovisions for employee benefit plans (c)Employee defined benefit plans
Year ended December 31, 2018
Benefit obligation
Fair value of planNet
assets(provision)/asset
recorded in thestatement offinancial position(A)(B)(B)-(A)
Note
390
177
(213)
2
(2)
(1)
(1)
(3)
7
(7)
3
3
(4)
(7)
(1)
(6)
(5)
3
(3)
(8)
8
17
17
(1)
(1)
(16)
(16)
376
173
(203)
177
199
9
16
(212)

a.

Includes the impact on the benefit obligations resulting from the difference between actuarial assumptions at the previous year-end andeffective benefits during the year, and the difference between the expected return on plan assets at the previous year-end and theactual return on plan assets during the year.

b.

In accordance with local laws and practices, certain plans are not covered by plan assets. As of December 31, 2020, 2019 and 2018,such plans principally comprised supplementary pension plans in the United States, pension plans in Germany and post-retirement
benefit plans in the United States.

c.

Included a current liability of €16 million as of December 31, 2020, €15 million as of December 31, 2019, and €13 million as ofDecember 31, 2018.

d.

In 2019, included €63 million attributable to a decrease in discount rates, of which €24 million relating to Germany, €4 million to theNetherlands and €32 million relating to the United Kingdom.

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Benefit obligation, fair value of plan assets, and funded status detailed by country(in millions of euros)

Benefit obligation
US companies
UK companies (b)German companies (c)Japanese companies
Dutch companies
Other
Fair value of plan assets
US companies
UK companies (b)German companies (c)Japanese companies
Dutch companies
Other
Net provision
US companies
UK companies (b)German companies (c)Japanese companies
Dutch companies
Other

Pension benefits (a)December 31,
2020
2019
2018

Post-retirement benefits
December 31,
2020
2019
2018

Total
December 31,
2019

2020

2018

5
159
184
24
17
15
404

5
168
198
24
18
6
419

4
129
184
22
15
6
360

16
3
19

18
3
21

14
2
16

21
162
184
24
17
15
423

23
171
198
24
18
6
440

18
131
184
22
15
6
376

156
2
31
17
1
207

163
2
32
18
1
216

125
2
30
15
1
173

-

-

-

156
2
31
17
1
207

163
2
32
18
1
216

125
2
30
15
1
173

(5)
(3)
(182)
7
(14)
(197)

(5)
(5)
(196)
8
(5)
(203)

(4)
(4)
(182)
8
(5)
(187)

(16)
(3)
(19)

(18)
(3)
(21)

(14)
(2)
(16)

(21)
(6)
(182)
7
(14)
(216)

(23)
(8)
(196)
8
(5)
(224)

(18)
(6)
(182)
8
(5)
(203)

a.

No employee defined benefit plan individually exceeds 10% of the aggregate value of the obligations and net provisions under theseplans, except for three pension plans in Germany individually exceeding between 10% and 11% of the aggregate value of theobligations, and 21% and 22% of the net provisions.

b.

In December 2017, the UMPGS fund in the United Kingdom purchased a buy-in insurance policy, covering pension benefits. This
insurance policy is an asset to the UMGPS plan. It was purchased following the exercise by some beneficiaries of the right to exit the
UMGPS plan against a payment in cash. UMG continues to cover the benefits with regards to the remaining beneficiaries of the plan. In
principle, the benefit obligations are equal to the plan’s assets, and no net pension liability is recorded in the Combined Statement of
Financial Position.

c.

Relates to retirement benefits in Germany for eligible employees, former employees and retirees, and such of their beneficiaries who
met the required conditions. Those plans are closed to new entrants. In accordance with current regulations in relation to the funding
policy of this type of plan, those plans are not funded. The main risks for the group relate to changes in discount rates.

17.2.4

Benefits estimation and future payments

For 2021, hedge fund contributions and benefit payments by UMG to retirees are estimated at €15 million in respect of pensions, of which€3 million relates to pension funds, and at €1 million in respect of post-retirement benefits.
Estimates of future benefit payments to beneficiaries by the relevant pension funds or by UMG (in nominal value for the following 10 years)
are as follows:(in millions of euros)

2021
2022
2023
2024
2025
2026-2030

Pension benefits
16
13
13
13
12
60

Post-retirement
benefits
1
1
1
1
1
5

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Note 18

Share-based compensation plans

18.1

Plans granted by Vivendi

18.1.1Equity-settled instruments

Transactions relating to outstanding instruments that occurred in 2018, 2019 and 2020 were as follows:
Stock options
Number of outstanding
Weighted average strike pricestock optionsof outstanding stock options(in thousands)(in euros)

Performance shares
Number of outstanding
performance shares(in thousands)

Balance as of December 31, 2017
GrantedExercised / Issued
Forfeited
Cancelled
Balance as of December 31, 2018
GrantedExercised / Issued
Forfeited
Cancelled
Balance as of December 31, 2019
GrantedExercised / Issued
Forfeited
Cancelled
Balance as of December 31, 2020

2,427(572) (a)
(380)
1,475
(789) (a)(90)596(263) (a)(76)
257 (c)

17.1
na
19.1
20.2
na
15.6
na
15.8
16.1
na
15.2
na
16.0
15.8
na
14.2

963
205
(130)
(29)
1,009
200
(73)
na
(14)
1,122
163
(276)
na
(55) (b)954 (d)Acquired / Exercisable as of December 31, 2020
Rights acquired as of December 31, 2020

257
257

14.2
14.2

388

na

na: not applicable.
a.

In 2020, beneficiaries exercised stock options at the weighted average stock market price of €23.0 (compared to €25.0 for stock options
exercised in 2019 and €21.9 for stock options exercised in 2018).

b.

At its meeting held on February 13, 2020, after a review by the Vivendi SE Corporate Governance, Nominations and Remuneration
Committee, the Supervisory Board of Vivendi SE approved the achievement level of objectives set for the cumulative fiscal years 2017,2018 and 2019 for the performance share plan granted in 2017. It was confirmed that all the criteria had been met with a maximum rateof 100%. However, given that the negative impact of the situation in Italy was not reflected in the financial results, the Supervisory
Board of Vivendi SE decided to confirm the final grant of the 2017 performance share plan only up to 75% of the initial grant.
Consequently, 55,250 rights to performance shares, which were granted in 2017, were cancelled.

c.

At the stock market price on December 31, 2020, the cumulated intrinsic value of remaining stock options to be exercised wasestimated at €3 million.

d.

The weighted-average remaining period before delivering performance shares was 2.0 years.

Outstanding stock options as of December 31, 2020
Range of strike prices

Number(in thousands)

Under €17
€17-€18
More than €18

144
113
257

Weighted average strikeprice

Weighted averageremaining life(in euros)(in years)

11.8
17.2
14.2

1.3
0.3
0.9

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Performance share plans
On February 13, 2020, Vivendi SE granted to UMG employees and executive management 163 thousand performance shares (200 thousand
granted on February 14, 2019 and 205 thousand granted on May 17, 2018).
As of February 13, 2020, the share price was €25.19 and the expected dividend yield was 2.38% (compared to €22.60 and 2.21% respectively
as of February 14, 2019, and to €23.03 and 1.95% respectively as of May 17, 2018). After taking into account the cost associated with theretention period of the shares (described below), the discount for non-transferability was set at 7.0% of the share price as of February 13,2020 (compared to 7.9% in 2019 and 8.1% in 2018). Consequently, the fair value of each granted performance share was estimated at€21.68 (compared to €19.37 in 2019 and €19.85 in 2018), corresponding to an aggregate fair value of the plan of €4 million (compared to€4 million in 2019 and €4 million in 2018).
Subject to satisfaction of the performance criteria, performance shares definitely vest at the end of a three-year period, subject to thepresence of the beneficiaries in the group (vesting period), and the shares must be held by the beneficiaries for an additional two-year period(retention period). The compensation cost is recognized on a straight-line basis over the vesting period. The accounting methods that are
applied to estimate and recognize the value of these granted plans are described in Note 1.3.10.
Satisfaction of the objectives that determine the definitive grant of performance shares is assessed over a three-year consecutive period
based on the following performance criteria:• Internal indicators (with a weighting of 70%):- the adjusted net income per share (50%) (compared to the group’s earnings before interest and income taxes - EBIT (35%) in 2018);
and- the group’s cash flow from operations after interest and income tax paid - CFAIT (20%) (compared to 35% in 2018).
• External indicators (with a weighting of 30%) tied to changes in Vivendi’s share price compared to the STOXX® Europe Media index(20%) and to the CAC 40 index (10%).
The granted shares correspond to the same class of common shares making up the share capital of Vivendi SE, and as a result, at the end of
the three-year vesting period, beneficiaries will be entitled to the dividends and voting rights attached to these shares. The compensation
cost recognized corresponds to the estimated value of the equity instruments granted to the beneficiary, and is equal to the difference
between the fair value of the shares to be received and the aggregate discounted value of the dividends that were not received over thevesting period.
In 2020, the charge recognized with respect to all performance share plans amounted to €3 million, compared to €4 million in 2019 and€3 million in 2018.
18.1.2

Employee stock purchase and leveraged plans

On July 21, 2020, Vivendi SE carried out an employee shareholding plan through the sale of treasury shares under an employee stock
purchase plan and leveraged plan, reserved for UMG’s employees and retirees. The Vivendi shares were previously repurchased by Vivendi
SE pursuant to the authorization granted at the Vivendi’s General Shareholders’ Meeting of April 15, 2019.
On July 17, 2019 and July 19, 2018, Vivendi SE made capital increases through employee stock purchase plans and leveraged plans whichgave UMG’s employees and retirees an opportunity to subscribe for Vivendi shares.
These shares, which are subject to certain sale or transfer restrictions during a five-year period, are subscribed to at a discount of up to 15%
on the average opening market price for Vivendi shares during the 20 trading days preceding the date of the Management Board meeting
which set the subscription price for the new shares to be issued. The difference between the subscription price for the shares and the shareprice on that date represents the benefit granted to the beneficiaries. In addition, Vivendi applied a discount for non-transferability during afive-year period, which is deducted from the benefit granted to the employees. The value of the subscribed shares is estimated and fixed at
the date on which the subscription price for the new shares to be issued is set.
The applied valuation assumptions were as follows:
Grant date
Data at grant date:
Share price (in euros)
Expected dividend yieldRisk-free interest rate
5-year interest rate in fine
Repo rate
Discount for non-transferability per share

2020
June 182019
June 142018
June 18

22.77
2.64%
-0.48%
3.91%
0.36%
18.64%

21.57
2.09%-0.11%
3.81%
0.36%
17.49%

20.58
1.94%-0.21%
3.93%
0.36%
18.44%

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Under the employee stock purchase plan (ESPP), 33 thousand shares were acquired for in 2020 through a company mutual fund (Fonds
Commun de Placement d’Entreprise) at a price of €16.554 per share (compared to 19 thousand shares at a price of €21.106 per sharesubscribed for in 2019 and 23 thousand shares at a price per share of €19.327 subscribed for in 2018).
The benefit granted to the beneficiaries, which is equal to the positive difference between the acquisition price and the stock price at theend of the subscription period on June 18, 2020 (discount of 27.3%), was higher than the discount for non-transferability (18.6%). In 2020,
the charge recognized with respect to the employee stock purchase plan amounted to €65 thousand. In 2019 and 2018, no charges wererecognized, as the benefit granted, which is equal to the positive difference between the subscription price and the stock price at the end of
subscription period on June 14, 2019 and on June 18, 2018 (discount of 13.8% and of 10.4% in 2018), was lower than the discount for nontransferability (19.3% and 17.49% in 2018).
Under the leveraged plan, 2,613 thousand shares were acquired in 2020 through a company mutual fund at a price of €16.554 per share(compared to 1,796 thousand shares were subscribed for in 2019 through a company mutual fund at a price of €21.106 per share and1,847 thousand shares at a price of €19.327 in 2018). The leveraged plan entitles employees and retirees of UMG and its French and foreignsubsidiaries to acquire Vivendi shares at a discounted price and to ultimately receive the capital gain (calculated pursuant to the terms andconditions of the plan) equal to 10 shares for each subscribed share. A financial institution mandated by Vivendi hedges this transaction. In
addition, 193 thousand shares were acquired for as part of an employee shareholding plan implemented for employees of the group’s
Japanese subsidiaries (compared to 151 thousand shares subscribed for in 2019 and 193 thousand shares subscribed for in 2018).
In 2020, the charge recognized with respect to the leveraged plan amounted to €6 million, compared to €1 million in 2019, and €1 million in
2018.

18.2

Dailymotion’s long-term incentive plan

In 2015, Vivendi implemented a long-term incentive plan for a five-year period until June 30, 2020 for certain key executives of Vivendi andcertain of its subsidiaries, including Universal Music Group. This plan was tied to the growth of Dailymotion’s enterprise value compared toits acquisition value, as measured as of June 30, 2020, based upon an independent expertise. In the event of an increase in Dailymotion’svalue, the amount of the compensation with respect to the incentive plan was capped at a percentage of such increase, depending on thebeneficiary. Within the six months following June 30, 2020, the plan had to be settled in cash, if applicable.
As of June 30, 2020, the plan has expired without any charges having been recognized and without any cash payments having been made.

Note 19
19.1

Cash Flow Statement

Adjustments
Year ended December 31,(in millions of euros)

Items related to operating activities with no cash impact
Amortization and depreciation of intangible and tangible assets
Change in provision, net
Income from equity affiliates - operational
Proceeds from sales of property, plant, equipment and intangible assets
Adjustments

19.2

Note

11

2020

2018

2019
236
(33)
9
1
213

202
(4)
2
1
201

126
(22)
1
1
106

Investing and financing activities with no cash impact

In 2020, 2019 and 2018, there were no significant investing and financing activities with no cash impact.

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Note 20

Related parties

Universal Music Group (UMG)’s related parties are the key executive managers and other related parties including:• companies fully consolidated by UMG. The transactions between these companies have been eliminated for the preparation of
UMG’s Combined Financial Statements;• companies over which UMG exercises a significant influence;• all companies in which key executive managers or their close relatives hold significant voting rights;• minority shareholders exercising a significant influence over UMG’s subsidiaries;• Vivendi Corporate and its consolidated entities (the “Vivendi Group”), as well as its related parties; and• Bolloré Group and its related parties, given that Vivendi has been fully consolidated by Bolloré Group since April 26, 2017.

20.1

Executive management compensation

As of December 31, 2020, 2019 and 2018, UMG’s Executive Management Board is comprised of 11 members. Their aggregate compensation
is presented in the table below.
(in millions of euros)

Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Executive management compensation

2020
111.3
2.6
2.9
116.8

Year ended December 31,
2019
71.4
1.4
2.8
75.6

2018
49.0
1.3
2.1
52.4

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20.2

Other related-party transactions

UMG’s other related parties include companies over which UMG exercises a significant influence (e.g., Vevo and Duzy Dom). They also
include Vivendi Corporate, its consolidated entities (e.g., Canal+ Group and Havas Group) and its related parties (e.g., Telecom Italia andBanijay Group Holding), as well as Bolloré Group, its subsidiaries and its related parties.
December 31, 2020

December 31, 2019

December 31, 2018

AssetsTrade accounts receivable and otherOf which Vevo
Duzy Dom
Telecom Italia
Havas Group
Vivendi Corporate

61
31
8
1
19

22
10
9
2
1

27
11
5
1
1
9

Current financial assets
Of which Vivendi Corporate

-

1
1

5
5

Liabilities
Non-operating liabilities
Of which Vivendi Corporate

-

1
1

(4)
(4)

Trade accounts payable and otherOf which Havas Group
Vivendi Corporate
Bolloré Group
Canal+ Group
Vivendi Village

1
1
-

6
1
3
3
(1)

1
1
-

Income tax payable
Of which Vivendi Corporate

-

11
11

3
3

(in millions of euros)

Year ended December 31,
2019

2020

2018

Statement of earnings
Operating income
Of which Vevo
Duzy Dom
Telecom Italia
Canal+ Group
Havas Group
Vivendi Corporate
Vivendi Village

191
164
13
1
1
7
1
-

183
156
13
2
1
6
1

179
152
11
4
3
4
1
-

Financial income
Of which Vivendi Corporate

(17)
(17)

7
7

25
25

Operating expenses
Of which Havas Group
Canal+ Group
Vivendi Corporate
Bolloré Group
Vivendi Village
Banijay Group Holding
Ingrooves Music Group (a)

(48)
(11)
(30)
(5)
na

(43)
(9)
(3)
(24)
(3)
(1)
-

(44)
(7)
(5)
(20)
(1)
(7)

na: not applicable.
a.

On March 15, 2019, UMG acquired the remaining interest in Ingrooves Music Group.

Moreover, UMG’s borrowings to Vivendi amounted to €2,368 million as of December 31, 2020. In addition, UMG’s loans to Vivendi amounted
to €815 million as of December 31, 2020, €672 million as of December 31, 2019 and €1,260 million as of December 31, 2018 (please refer toNote 14).
UMG distributes its cash surpluses to shareowners through dividends and share capital reductions (please refer to Note 15).
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20.3

Services billed by Vivendi Corporate2020(in millions of euros)Management fees
Share-based compensation plans
Other
Services billed by Vivendi Corporate

Note 21

(15)
(10)
(10)
(35)

Year ended December 31,
2019
(14)
(5)
(8)
(27)

2018
(11)
(4)
(8)
(23)

Contractual obligations and other commitments

Universal Music Group (UMG)’s material contractual obligations and contingent assets and liabilities include:• certain contractual obligations relating to the group’s business operations, such as content commitments (please refer to Note 9.2),
contractual obligations and commercial commitments recorded in the Statement of Financial Position, including leases and offbalance sheet commercial commitments, such as long-term service contracts and purchase or investment commitments;• commitments related to UMG’s consolidation scope made under acquisitions or divestitures such as share purchase or salecommitments, contingent assets and liabilities subsequent to given or received commitments related to the divestiture or acquisitionof shares, commitments under shareholders’ agreements and collateral and pledges granted to third parties over UMG’s assets;• commitments related to UMG’s financing: undrawn confirmed bank credit facilities as well as the management of interest rate,
foreign currency and liquidity risks; and• contingent assets and liabilities resulting from legal proceedings in which UMG and/or its subsidiaries are either plaintiff ordefendant (please refer to Note 22).

21.1

Contractual obligations and commercial commitments(in millions of euros)

Borrowings and other financial liabilities
Leases liabilities (a)Content liabilities
Consolidated statement of financial
position items
Contractual content commitments
Commercial commitments
Net off-balance sheet commitments

Minimum future payments as of December 31, 2020
Payments due in
Note
Total
2021
2022 - 2025 After 2025
3,009
640
1
2,368
525
78
265
182
9.2
2,771
2,509
257
5

9.2

Operating leases and subleases (a)Total

Total minimum future payments as ofDecember 31, 2019
15
596
2,552

December 31, 2018
18
na
2,332

6,305
1,337
(3,975)(2,638)3,227
732(2,030)(1,298)523
578(1,945)(1,367)

2,555
27
27

3,163
1,329
(1,676)
(347)

2,350
1,172
(733)
439

na
3,667

na
1,929

na
(844)

na
2,582

na
2,816

674
3,463

na: not applicable.
a.

As from January 1, 2019, UMG applies the new accounting standard IFRS 16 – Leases. In accordance with IFRS 16, the impact of thechange of accounting standard was recorded in the Statement of Financial Position as of January 1, 2019. For a detailed description,please refer to Notes 1 and 10. Assessing the lease term relates to the non-cancellable period of the lease, and taking into account all
options to extend the lease that UMG is reasonably certain to exercise and all options to terminate the lease that UMG is reasonably
certain not to exercise.

Off-balance sheet commercial commitments(in millions of euros)

Given commercial commitments
Received commercial commitments (a)Net totala.

Minimum future payments as of December 31, 2020
Due inTotal
2021
2022 - 2025
After 202546
31
15
(4,021)(2,061)(1,960)(3,975)(2,030)(1,945)-

Total minimum future payments as ofDecember 31, 201982
(1,758)(1,676)

December 31, 2018
60
(793)
(733)

Includes minimum guarantees to be received by UMG pursuant to distribution agreements entered into with third parties, notably digitalplatforms.
Universal Music Group / 57

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21.2

Other commitments given or received relating to operations

Given commitments amounted cumulatively to €10 million as of December 31, 2020, €23 million as of December 31, 2019 and €15 million asof December 31, 2018.
Received commitments amounted cumulatively to €1 million as of December 31, 2020, €31 million as of December 31, 2019 and €10 million
as of December 31, 2018.

21.3

Contingent assets and liabilities subsequent to given or received commitments related to thedivestiture or acquisition of shares

Several guarantees given during prior years in connection with asset acquisitions or disposals have expired. However, the time periods or
statute of limitations of certain guarantees relating, among other things, to employees, environment and tax liabilities, in consideration ofshare ownership, or given notably in connection with the winding-up of certain businesses or the dissolution of entities are still in effect. To
the best of UMG’s knowledge, no material claims for indemnification against such liabilities have been made to date.
In addition, when settling disputes and litigation, UMG regularly delivers commitments for damages to third parties, which are customary fortransactions of this type.
Contingent liabilities
As of December 31, 2020, 2019 and 2018, there was no material contingent liabilities.
Contingent assets
As part of the acquisition of EMI Recorded Music in September 2012, UMG received commitments from Citi relating to full pension
obligations in the United Kingdom. UMG also received warranties relating to losses stemming from taxes and litigation claims, in particular
those relating to pension obligations in the United Kingdom. These commitments and warranties are not limited in time.

21.4

Shareholders’ agreements

Under existing shareholders’ or investors’ agreements, UMG holds certain rights (e.g., pre-emptive rights and rights of first offer) that give it
control over the capital structure of its consolidated companies having minority shareholders. Conversely, UMG has granted similar rights tothese other shareholders in the event that it sells its interests to third parties.
Moreover, pursuant to other shareholders’ agreements or the bylaws of other consolidated entities, equity affiliates or unconsolidated
interests, UMG or its subsidiaries have given or received certain rights (pre-emptive and other rights) entitling them to maintain theirshareholder’s rights.

21.5

Collaterals and pledges

As of December 31, 2020, 2019 and 2018, no material asset in UMG’s Statement of Financial Position was subject to a pledge or mortgage
for the benefit of third parties.

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Note 22

Litigation

In the normal course of its business, Universal Music Group is subject to various lawsuits, arbitrations and governmental, administrative orother proceedings (collectively referred to herein as “Legal Proceedings”).
The costs which may result from these Legal Proceedings are only recognized as provisions when they are likely to be incurred and when the
obligation can reasonably be quantified or estimated, in which case, the amount of the provision represents UMG’s best estimate of the risk
and is based on a case-by-case assessment of the risk level, provided that UMG may, at any time, reassess such risk if events occur during
such proceedings. Provisions recorded by UMG for all claims and litigation were €4 million as of December 31, 2020, €12 million as ofDecember 31, 2019 and €15 million as of December 31, 2018 (please refer to Note 16).
To the company’s knowledge, there are no Legal Proceedings or any facts of an exceptional nature (including any pending or threatened
proceedings in which it is a defendant), which may have or have had in the previous 12 months a material effect on the company and on its
group’s financial position, profit, business and property, other than those described herein.
The status of proceedings disclosed hereunder is described as of March 1st, 2021.
Soundgarden, Hole, Steve Earle and the estates of Tom Petty and Tupac Shakur against UMG
On June 21, 2019, the groups Soundgarden and Hole, Steve Earle, Tom Petty's ex-wife and Tupac Shakur's estate filed a class action lawsuit
against UMG in the Central District Court of California relating to a 2008 fire that allegedly destroyed thousands of archived recordings.
The plaintiffs allege that UMG breached the terms of the contracts with the artists by failing to adequately protect the recordings. It is also
argued that the Group should have shared the settlement proceeds received as a result of its negotiations with the insurance companies and
NBC Universal. On July 17, 2019, UMG filed a motion to dismiss the lawsuit. On August 16, 2019, the plaintiffs filed an amended complaint
removing Hole as a plaintiff, and adding a number of claims. On September 6, 2019, UMG filed a new motion to dismiss. On March 13 and23, 2020, most of the plaintiffs withdrew from the case, leaving Jane Petty (Tom Petty's ex-wife) as the only remaining plaintiff. On April 6,
2020, the Court granted UMG's motion to dismiss and dismissed Jane Petty's claims.
However, Jane Petty is seeking to pursue the case. On April 16, 2020, she filed an application for class certification and, on April 27, 2020,
she filed a second amended complaint. On May 18, 2020, UMG filed a motion to dismiss. The Court has yet to rule on this motion.
John Waite, Syd Straw, The Dickies, Kasim Sulton and The Dream Syndicate against UMG Recordings, Inc.
On February 5, 2019, a class action lawsuit was filed against UMG Recordings, Inc. on behalf of a putative class of all recording artists who
had requested the termination of their contracts with UMG pursuant to Section 203 of the Copyright Act which allows, under certain
conditions, a creator who has contractually transferred the rights to his or her work to a third party to terminate such contract after 35 years.
The complaint seeks to have the Court recognize the termination of the contracts of the artists involved in the litigation and also alleges
copyright infringement, as UMG continued to use the recordings after the purported end date of the contract. On May 3, 2019, UMG
Recordings filed a motion to dismiss. On June 15, 2019, the plaintiffs filed a First Amended Complaint adding artists Syd Straw, Kasim
Sulton and The Dickies as additional plaintiffs. On August 31, 2020, a second Amended Complaint was filed, adding the Dream Syndicate as
an additional plaintiff. On September 30, 2020, UMG and Capitol filed a response in which they made a counterclaim against plaintiffs Joe
Ely and Syd Straw, alleging that they had exploited certain recordings without authorization. On November 18, 2020, following a settlement
reached between UMG and Joe Ely, the Court acknowledged Joe Ely's withdrawal from the proceedings.
UMG Recordings, Inc. and Universal Music Publishing Group (along with the other major labels and publishers) against Cox
Communications, Inc. and CoxCom LLC
On July 31, 2018, a complaint for copyright infringement was filed by UMG Recordings, Inc. and Universal Music Publishing Group (alongwith the other major labels and publishers including Sony and Warner) against Cox Communications, an Internet access and service provider,and its parent company CoxCom, for knowingly inducing and supporting copyright infringement by its customers, contrary to the provisions of
the Digital Millennium Copyright Act (DMCA), which requires an Internet service provider to implement a termination policy against its
repeat infringing customers. At the end of the trial, which took place in December 2019, the jury awarded the plaintiffs $1 billion in damages.
Cox filed a motion seeking to reduce the amount of damages awarded to the plaintiffs. On January 21, 2021, the motion was dismissed, andthe judge upheld the jury's verdict in the amount of $1 billion. Cox has indicated that it will appeal against this decision and has posted
security to stay the execution of the judgment pending the appeal.

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Wednesday March 03, 2021

Note 23

List of combined entities

The number of entities consolidated or accounted for under the equity method by UMG was 388 as of December 31, 2020, 368 as ofDecember 31, 2019 and 363 as of December 31, 2018. The major entities are presented in the table below.

Universal Music Group, Inc.
Universal Music Group Holdings, Inc.
UMG Recordings, Inc.
Vevo
Universal International Music B.V. (a)Universal Music Entertainment GmbH
Universal Music LLC
Universal Music France S.A.S.
Universal Music Holdings Ltd.
EMI Group Worldwide Holding Ltd.
Universal Music Group Treasury S.A.S.

Country
United States
United States
United States
United States
Netherlands
Germany
Japan
FranceUnited Kingdom
United Kingdom
FranceYears ended December 31, 2020, 2019 and 2018
Accounting Method
Voting Interest
Ownership Interest
C
100%
100%
C
100%
100%
C
100%
100%
E
49.4%
49.4%
C
100%
100%
C
100%
100%
C
100%
100%
C
100%
100%
C
100%
100%
C
100%
100%
C
100%
100%

C: consolidated; E: equity affiliates.
a.

On March 19, 2020, Universal Music Group S.A.S. was dissolved, with universal transmission of its property to Vivendi S.E.

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