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

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.

UMG’s Management is responsible for the preparation and presentation of these Financial Statements in accordancewith the basis set out in the Basis of preparation of the Financial Statements.
Our responsibility is to express a conclusion on these Financial Statements based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, which applies to areview of interim financial information performed by the independent auditor of the entity. A review of interim Financial
Statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and consequently does not enable us to obtain assurance that wewould become aware of all significant matters that might be identified in an audit. Accordingly, we do not express anaudit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying Financial
Statements are not prepared, in all material respects, in accordance with the basis set in the Basis of preparation of the
Financial Statements and IAS 34 – standard of the IFRS relating to interim financial reporting, as published by theInternational Accounting Standard Board (IASB) and endorsed by the European Union.
This report shall be governed by and construed in accordance with French law. The courts of France shall have exclusive
jurisdiction in relation to any claim, dispute or difference concerning the engagement letter or this report, and any
matter arising from them. Each party irrevocably waives any right it may have to object to an action being brought inany of those courts, to claim that the action has been brought in an inconvenient forum or to claim that those courts do
not have jurisdiction.
Paris-La Défense, July 28, 2021
The Independent Auditors
ERNST & YOUNG et Autres

Deloitte & Associés

Claire PAJONA

Géraldine SEGOND

2 l UNIVERSAL MUSIC GROUP BV l Universal Music Group BV’s independent auditors’ report on the review of the half yearly unaudited consolidated
condensed Financial Statements l June 30, 2021

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.

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

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

Earnings before provision for income taxes

(144)

(214)

(412)

Earnings from continuing operations

453

736

1,369

Earnings from discontinued operations

-

-

-

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

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)

Actuarial gains/(losses) related to employee defined benefit plans, net

Foreign currency translation adjustments
Comprehensive income from equity affiliates, net

10

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

Charges and income directly recognized in equity
Total comprehensive income

6

Of which
Total comprehensive income attributable to shareowners
Total comprehensive income attributable to non-controlling interests

Universal Music Group / 4

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

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)
-

-

-

-

(103)
(9)
(9)
(121)
(40)

149
(6)
(1)
142
(43)

625
(15)
(3)
607
(91)

(584)

85

217

6

(20)

(35)

(240)

104

133

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
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

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

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)

-

-

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

Universal Music Group / 7

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)

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

-

-

-

-

(2,428)-(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

Universal Music Group S.A.S. transferred to Vivendi SE

-

-

-

-

(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)

-

-

-

-

(3)

-

(3)

(3)
736

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Earnings

-

-

-

-

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

BALANCE AS OF JUNE 30, 2020
Attributable to Universal Music Group Shareowners

-

-

-

-

1,567

(314)

1,253

1,253

Attributable to non-controlling interests

-

-

-

-

1

(1)

-

-

Universal Music Group / 8

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
Universal Music Group S.A.S. transferred to Vivendi SE

-

-

-

-

(2,711)-(2,711)(2,711)

-

-

-

-

(2,428)-(2,428)(2,428)

(283)

-

(283)

(283)

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)

Dividends paid by subsidiaries to non-controlling interests

-

-

-

-

(5)

-

(5)

(5)

-

-

-

-

(5)

-

(5)

(5)

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (B)Earnings

-

-

-

-

1,369

-

1,369

1,369

Charges and income directly recognized in equity

-

-

-

-

-

(192)

(192)

(192)

TOTAL COMPREHENSIVE INCOME (C)

-

-

-

1,369

(192)

1,177

1,177

TOTAL CHANGES OVER THE PERIOD (A+B+C)

-

-

-

-

(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)

BALANCE AS OF DECEMBER 31, 2020

-

-

-

-

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)

-

-

Universal Music Group / 9

Notes to the Consolidated Condensed Financial
Statements
Accounting policies and valuation methods
1.1

Basis of preparation of the Unaudited Consolidated Condensed Financial Statements

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:
x

IFRS 15 – Revenue from contracts with customers: in accordance with IFRS 15, as from 2017, UMG applied
this change of accounting standard to revenues; andx

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:x

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

xan 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

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.
x

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

x

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.

x

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:x

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; orx

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:x

the interest expense on a borrowing granted by VH I to UMG Inc.; andx

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

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:x provisions for income taxes have been calculated on the basis of the estimated effective annual tax rateapplied to pre-tax earnings; andx 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

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 from
EBIT:
x the amortization of intangible assets acquired through business combinations as well as other rights catalogs
acquired;

Universal Music Group / 15

x impairment losses on goodwill, other intangibles acquired through business combinations and other rights
catalogs acquired; andx 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:x the depreciation of tangible, intangible and right of use assets;x gains/(losses) on the sale of tangible, intangible and right of use assets;x the amortization of intangible assets acquired through business combinations as well as other rights catalogs
acquired;x impairment losses on goodwill, other intangibles acquired through business combinations and other rights
catalogs acquired;x income from equity affiliates having similar operating activities; andx 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

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.

1.4

Principles governing the preparation of the Consolidated Condensed Financial Statements

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:x revenue: estimates of provisions for returns and price guarantees (please refer to Note 14);x goodwill and other intangible assets: valuation methods used to identify intangible assets acquired throughbusiness combinations (please refer to Note 7);
x 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);x 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);
x 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);x share-based compensation: assumptions are updated annually, such as the estimated term, volatility and theestimated dividend yield (please refer to Note 15);x 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-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.

x 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); andx 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:x 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;x 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; andx 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
Universal Music Group / 18

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:
x 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; andx 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.

Universal Music Group / 19

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

Universal Music Group / 20

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.

Universal Music Group / 21

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:x the identifiable assets acquired, and the liabilities assumed are recognized at their fair value on theacquisition date; andx 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:x on the acquisition date, to the extent possible, goodwill is allocated to each cash-generating unit likely tobenefit from the business combination;
x 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;
x acquisition-related costs are recognized as expenses when incurred;

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x 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; andx 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:
x buildings: 5 to 40 years;x equipment and machinery: 3 to 8 years; andx 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:xx

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:
x increased by the effect of undiscounting (interest expense on lease liabilities);x decreased by the cash out for lease payments; andx 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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x
x
x
x
x

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:x

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.

x

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:
x bonds and credit facilities, as well as various other borrowings (including commercial paper and debt related
to finance leases) and related accrued interest;x obligations arising out of commitments to purchase non-controlling interests;
x bank overdrafts; andx 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

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

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:x 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;
x 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; andx 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.

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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:x deferred tax assets, when the tax base value is greater than the carrying value (expected future tax saving);
andx 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.

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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:x

the expected term of the option granted is deemed to be the mid-point between the vesting date and theend of the contractual term;x

the value of the instruments granted is estimated and fixed at grant date; andxthe expense is recognized with a corresponding increase in equity.

Cash-settled instruments:x

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;x

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;x

the expense is recognized as a provision; andxmoreover, as plans settled in cash are primarily denominated in US dollars, the value fluctuates based on
the EUR/USD exchange rate.

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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:x 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;x pledges and guarantees with banks and financial institutions;x pending litigation, claims (in dispute) and environmental matters as well as related assessments forunrecorded contingencies with internal and/or external legal counsels;
x tax examiner’s reports and, if applicable, notices of reassessments and tax expense analyses for prior years;
x insurance coverage for unrecorded contingencies with the risk management department and insurance
agents and brokers with whom the group contracted;
x 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

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(in millions of euros)

Recorded
music

Music
publishing

Merchandis-ing and
other

Corporate
centerEliminationof intersegment transactions

Total

Six months ended 30 June 2021
Revenues

3,137

564

138

-)

(8)

3,831

EBITDA

749

134

-

(61)

-)

822

EBITA

705

127

(1)

(78)

-)

753

Six months ended 30 June 2020
Revenues

2,771

573

121

-)

(6)

3,459

EBITDA

590

132

1

(74)

-)

649

EBITA

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

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

Restructuring charges

9

8

20

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

Adjustments
Amortization of intangible assets acquired through business combinations

EBITA
Adjustments

EBITDA

Universal Music Group / 34

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

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

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

(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

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

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

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

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

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

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

Vivendi and UMG completely separated their cash pooling and financing arrangements after the following
transactions were implemented:x
xx

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

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

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:
x companies fully consolidated by UMG. The transactions between these companies have been eliminatedfor the preparation of UMG’s Interim Financial Statements;
x companies over which UMG exercises a significant influence;x all companies in which key executive managers or their close relatives hold significant voting rights;
x minority shareholders exercising a significant influence over UMG’s subsidiaries;
x Vivendi Corporate and its consolidated entities (the “Vivendi Group”), as well as its related parties; andx 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

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

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:
x 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;
x 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;x commitments related to UMG’s financing: undrawn confirmed bank credit facilities as well as the
management of interest rate, foreign currency and liquidity risks; andx 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

1 yearTotal

2-5 years

6,305

na: not applicable.

Universal Music Group / 49

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

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

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

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
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

Ownership
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