UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) (cid:1) REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR (cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2016 OR (cid:1) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR (cid:1) SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report…………… For the transition period from to Commission file number 001-36614 Alibaba Group Holding Limited (Exact name of Registrant as specified in its charter) Cayman Islands (Jurisdiction of incorporation or organization) c/o Alibaba Group Services Limited 26/F Tower One, Times Square 1 Matheson Street, Causeway Bay Hong Kong (Address of principal executive offices) Timothy A. Steinert, Esq., General Counsel and Secretary Telephone: +852-2215-5100 Facsimile: +852-2215-5200 Alibaba Group Holding Limited c/o Alibaba Group Services Limited 26/F Tower One, Times Square 1 Matheson Street, Causeway Bay Hong Kong (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Ordinary Shares, par value US$0.000025 per share American Depositary Shares, each representing New York Stock Exchange one Ordinary Share Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 2,473,927,859 Ordinary Shares Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. (cid:2) Yes (cid:1) No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. (cid:1) Yes (cid:2) No Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (cid:2) Yes (cid:1) No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). (cid:2) Yes (cid:1) No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer (cid:2) Accelerated filer (cid:1) Non-accelerated filer (cid:1) Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP (cid:2) International Financial Reporting Standards as issued Other (cid:1) by the International Accounting Standards Board (cid:1) If ‘‘Other’’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. (cid:1) Item 17 (cid:1) Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). (cid:1) Yes (cid:2) No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. (cid:1) Yes (cid:1) No TABLE OF CONTENTS Page PART I ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . . . . . . . . . 1 ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE. . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 3 KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 4 INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ITEM 4A. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS . . . . . . . . . . . . . . . . . . . 106 ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . 151 ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . 170 ITEM 8 FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 ITEM 9 THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 ITEM 10 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . 198 ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES . . . . . . . . . . . 200 PART II ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES . . . . . . . . . . . . . . . . 202 ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 ITEM 15 CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 ITEM 16B. CODE OF ETHICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . 203 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE . . . . . . 203 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT . . . . . . . . . . . . . . . . . . . 204 ITEM 16G. CORPORATE GOVERNANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 ITEM 16H. MINE SAFETY DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 PART III ITEM 17 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 ITEM 18 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 ITEM 19 EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 i CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F Unless the context otherwise requires, references in this annual report on Form 20-F to: (cid:127) ‘‘active buyers’’ in a given period are to user accounts that confirmed one or more orders on the relevant marketplace in that period, regardless of whether or not the buyer and seller settle the transaction; (cid:127) ‘‘active sellers’’ in a given period are to seller accounts (representing storefronts) that had one or more orders confirmed by a buyer on the relevant marketplace in that period and that were active at the end of the period, regardless of whether the buyer or seller settle the transaction; (cid:127) ‘‘ADSs’’ are to the American depositary shares, each of which represents one ordinary share; (cid:127) ‘‘Alipay’’ are to Alipay.com Co., Ltd., a company with which we have a long-term contractual relationship and is a wholly-owned subsidiary of Ant Financial Services or, where the context requires, its predecessor entities. We do not have any interest or control over either Ant Financial Services or Alipay; (cid:127) ‘‘Alipay annual active users’’ are to Alipay user accounts with one or more successful transactions during the past twelve months; (cid:127) ‘‘Ant Financial Services’’ are to Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (formerly referred to as Small and Micro Financial Services Company), a company organized under the laws of the PRC; (cid:127) ‘‘Cainiao Network’’ are to Cainiao Smart Logistics Network Limited, an affiliate in which we own approximately 47% equity interest as of March 31, 2016, together with its subsidiaries, including Cainiao Network Technology Co., Ltd.; (cid:127) ‘‘China’’ and the ‘‘PRC’’ are to the People’s Republic of China, excluding, for the purposes of this annual report only, Taiwan and the special administrative regions of Hong Kong and Macau; (cid:127) ‘‘China retail marketplaces’’ are to Taobao Marketplace, Tmall and Juhuasuan, collectively. Promotional slots on Juhuasuan may only be purchased by Taobao Marketplace and Tmall merchants, and transactions from traffic originating on Juhuasuan are completed on the merchants’ storefronts on Taobao Marketplace or Tmall. For this reason, depending on the context, we may refer only to Taobao Marketplace and Tmall when discussing certain aspects of our China retail marketplaces business; (cid:127) ‘‘GMV’’ are to the value of confirmed orders of products and services on our marketplaces, regardless of how, or whether, the buyer and seller settle the transaction. Unless otherwise stated, GMV in reference to our marketplaces includes only GMV transacted on our China retail marketplaces. GMV generated from traffic through Juhuasuan is recorded as either Taobao Marketplace GMV or Tmall GMV depending on which of these two marketplaces the transaction is completed. Our calculation of GMV for our China retail marketplaces includes shipping charges paid by buyers to sellers. As a prudential matter aimed at eliminating any influence on our GMV of potentially fraudulent transactions, we exclude from our calculation of GMV transactions in certain product categories over certain amounts and transactions by buyers in certain product categories over a certain amount per day. The translation of annual GMV in RMB for the year ended March 31, 2016 into U.S. dollar amount represents the sum of GMV in U.S. dollars reported for the quarters ended June 30, September 30, and December 31, 2015 and March 31, 2016, each converted from the RMB amounts at the exchange rate as of the end of each relevant quarter; (cid:127) ‘‘ISVs’’ are to independent software vendors; (cid:127) ‘‘mobile GMV’’ are to that portion of GMV generated by orders that were confirmed using a mobile app or mobile browser; (cid:127) ‘‘mobile MAUs’’ in a given month are to the number of unique mobile devices that were used to visit or access certain of our mobile applications at least once during that month; ii (cid:127) ‘‘mobile monetization rate’’ are to mobile revenue from China commerce retail expressed as a percentage of mobile GMV for a given period; (cid:127) ‘‘mobile revenue’’ are to that portion of revenue generated by online marketing services delivered on a mobile app or mobile browser, and commissions on mobile GMV settled through Alipay with merchants, as captured by our online auction system, real-time bidding system and other settlement systems; (cid:127) ‘‘monetization rate’’ are to revenue from China commerce retail expressed as a percentage of GMV for a given period; (cid:127) ‘‘orders’’ are to each confirmed order from a transaction between a buyer and a seller for products and services on our China retail marketplaces, even if such order includes multiple items, during the specified period, whether or not the transaction is settled; (cid:127) ‘‘retail marketplaces’’ are to Taobao Marketplace, Tmall, Juhuasuan and AliExpress, collectively; (cid:127) ‘‘RMB’’ and ‘‘Renminbi’’ are to the legal currency of China; (cid:127) ‘‘SMEs’’ are to small and medium-sized enterprises; (cid:127) ‘‘SoftBank’’ are to SoftBank Group Corp. (formerly known as SoftBank Corp. before July 2, 2015), SBBM Corporation and SB China Holdings Pte Ltd., collectively; (cid:127) ‘‘tier 1 and tier 2 cities’’ are to 28 cities in China, as categorized by AliResearch, our research division. Based on national divisions of administrative areas in China as of the end of 2014, AliResearch categorizes over 2,200 cities, city-level regions and counties in China into six tiers, based on online shopping potential composite index, which takes into account GDP, population, retail sales of consumer goods, household disposable income, and number of Internet users; (cid:127) ‘‘variable interest entities’’ are to our variable interest entities that are 100% owned by PRC citizens or by PRC entities owned by PRC citizens, where applicable, that hold the Internet content provider licenses, or ICP licenses, or other business operation licenses or approvals, and generally operate the various websites for our Internet businesses or other businesses in which foreign investment is restricted or prohibited, and are consolidated into our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries; (cid:127) ‘‘we,’’ ‘‘us,’’ ‘‘our company’’ and ‘‘our’’ are to Alibaba Group Holding Limited and its consolidated subsidiaries and its affiliated consolidated entities, including our variable interest entities and their subsidiaries; (cid:127) ‘‘wholesale marketplaces’’ are to 1688.com and Alibaba.com, collectively; (cid:127) ‘‘Yahoo’’ are to Yahoo! Inc. and Aabaco Holdings Hong Kong Limited (formerly known as Yahoo! Hong Kong Holdings Limited), collectively; and (cid:127) ‘‘US$,’’ ‘‘dollars’’ and ‘‘U.S. dollars’’ are to the legal currency of the United States. Our reporting currency is the Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at RMB6.4480 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 31, 2016. We make no representation that the Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On May 20, 2016, the noon buying rate for Renminbi was RMB6.5485 to US$1.00. iii FORWARD-LOOKING STATEMENTS This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about us, our industry and the regulatory environment in which we and companies integral to our ecosystem operate. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the ‘‘safe harbor’’ provision under Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as ‘‘may,’’ ‘‘will,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘aim,’’ ‘‘estimate,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘believe,’’ ‘‘potential,’’ ‘‘continue,’’ ‘‘is/are likely to’’ or other similar expressions. The forward-looking statements included in this annual report relate to, among others: (cid:127) our growth strategies; (cid:127) our future business development, results of operations and financial condition; (cid:127) trends in online and mobile commerce, both globally and in the PRC; (cid:127) competition in our industry; (cid:127) fluctuations in general economic and business conditions in China and globally; (cid:127) expected changes in our revenues and certain cost and expense items and our operating margins; (cid:127) the regulatory environment in which we and companies integral to our ecosystem operate; and (cid:127) assumptions underlying or related to any of the foregoing. The global and PRC Internet, retail, wholesale, online and mobile commerce, media and entertainment, cloud computing and data industries market may not grow at the rates projected by market data, or at all. The failure of these industries or markets to grow at the projected rates may have a material adverse effect on our business, financial condition and results of operations and the market price of our ADSs. If any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update any forward- looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we have referred to in this annual report completely and with the understanding that our actual future results may be materially different from what we expect. iv PART I ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not Applicable. ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable. ITEM 3 KEY INFORMATION A. Selected Financial Data The selected consolidated statements of operations data for the years ended March 31, 2014, 2015 and 2016, and the selected consolidated balance sheet data as of March 31, 2015 and 2016 have been derived from our audited consolidated financial statements included elsewhere in this annual report. Our selected consolidated statements of operations data for the years ended March 31, 2012 and 2013 and the selected consolidated balance sheet data as of March 31, 2012, 2013 and 2014 have been derived from our audited consolidated financial statements not included in this annual report. Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The following selected consolidated financial data for the periods and as of the dates indicated are qualified by reference to and should be read in conjunction with our consolidated financial statements and related notes and ‘‘Item 5. Operating and Financial Review and Prospects,’’ both of which are included elsewhere in this annual report. Our historical results for any prior period do not necessarily indicate our results to be expected for any future period. 1 Consolidated Statements of Operations Data: Year ended March 31, 2012 2013 2014 2015 2016 RMB RMB RMB RMB RMB US$ (in millions, except per share data) Revenue China commerce. . . . . . . . . . . . . . . . . . . . . . . . . . 15,637 29,167 45,132 62,937 84,321 13,077 International commerce . . . . . . . . . . . . . . . . . . . . . 3,765 4,160 4,851 6,486 7,629 1,183 Cloud computing . . . . . . . . . . . . . . . . . . . . . . . . . 515 650 773 1,271 3,019 468 Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 540 1,748 5,510 6,174 958 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,025 34,517 52,504 76,204 101,143 15,686 Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,554) (9,719) (13,369) (23,834) (34,355) (5,328) Product development expenses . . . . . . . . . . . . . . . . . . (2,897) (3,753) (5,093) (10,658) (13,788) (2,138) Sales and marketing expenses. . . . . . . . . . . . . . . . . . . (3,058) (3,613) (4,545) (8,513) (11,307) (1,753) General and administrative expenses(1) . . . . . . . . . . . . (2,211) (2,889) (4,218) (7,800) (9,205) (1,428) Amortization of intangible assets . . . . . . . . . . . . . . . . (155) (130) (315) (2,089) (2,931) (455) Impairment of goodwill and intangible assets . . . . . . . . (135) (175) (44) (175) (455) (71) Yahoo TIPLA amendment payment(2) . . . . . . . . . . . . . — (3,487) — — — — Income from operations . . . . . . . . . . . . . . . . . . . . . . 5,015 10,751 24,920 23,135 29,102 4,513 Interest and investment income, net . . . . . . . . . . . . . . 258 39 1,648 9,455 52,254 8,104 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . (68) (1,572) (2,195) (2,750) (1,946) (301) Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . 327 894 2,429 2,486 2,058 319 Income before income tax and share of results of equity investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,532 10,112 26,802 32,326 81,468 12,635 Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . (842) (1,457) (3,196) (6,416) (8,449) (1,310) Share of results of equity investees . . . . . . . . . . . . . . . (25) (6) (203) (1,590) (1,730) (269) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665 8,649 23,403 24,320 71,289 11,056 Net (income) loss attributable to noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (437) (117) (88) (59) 171 27 Net income attributable to Alibaba Group Holding Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,228 8,532 23,315 24,261 71,460 11,083 Accretion of convertible preference shares(3). . . . . . . . . — (17) (31) (15) — — Dividends accrued on convertible preference shares(3) . . — (111) (208) (97) — — Net income attributable to ordinary shareholders . . . . . 4,228 8,404 23,076 24,149 71,460 11,083 Earnings per share/ADS attributable to ordinary shareholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71 3.66 10.61 10.33 29.07 4.51 Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.67 3.57 10.00 9.70 27.89 4.33 Weighted average number of shares used in computing earnings per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,479 2,294 2,175 2,337 2,458 Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,522 2,389 2,332 2,500 2,562 Supplemental information:(4) Non-GAAP EBITDA . . . . . . . . . . . . . . . . . . . . . . . . 7,274 16,607 30,731 40,753 52,340 8,117 Non-GAAP net income. . . . . . . . . . . . . . . . . . . . . . . 6,452 13,869 28,274 34,981 42,741 6,629 Non-GAAP diluted EPS . . . . . . . . . . . . . . . . . . . . . . 2.38 5.76 12.09 13.97 16.75 2.60 Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,752 19,745 32,269 48,121 51,279 7,953 (1) In fiscal year 2014, these expenses included an equity-settled donation expense of RMB1,269 million relating to the grant of options to purchase 50,000,000 of our ordinary shares to a non-profit organization designated by Jack Ma and Joe Tsai. (2) We entered into the Yahoo TIPLA in October 2005, pursuant to which we paid royalty fees to Yahoo. We and Yahoo amended the existing TIPLA in September 2012, pursuant to which we made a lump sum payment in the amount of US$550 million. 2 (3) Upon the completion of our initial public offering in September 2014, all of our then outstanding convertible preference shares were converted into ordinary shares. (4) See ‘‘Non-GAAP Measures’’ below. Non-GAAP Measures We use non-GAAP EBITDA, non-GAAP net income, non-GAAP diluted EPS and free cash flow, each a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We believe that non-GAAP EBITDA, non-GAAP net income and non-GAAP diluted EPS help identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income from operations, net income and diluted EPS. We believe that non-GAAP EBITDA, non-GAAP net income and non-GAAP diluted EPS provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet. Non-GAAP EBITDA, non-GAAP net income, non-GAAP diluted EPS and free cash flow should not be considered in isolation or construed as an alternative to income from operations, net income, diluted EPS, cash flows or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. Non-GAAP EBITDA represents net income before (i) interest and investment income, net, interest expense, other income, net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization, depreciation, impairment of goodwill and intangible assets as well as (iii) one-time expense items consisting of the Yahoo TIPLA amendment payment and an equity- settled donation expense that we do not believe are reflective of our core operating performance during the periods presented. Non-GAAP net income represents net income before share-based compensation expense, amortization, impairment of goodwill, intangible assets and investments, gain on deemed disposals/disposals/revaluation of investments, amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Financial Services, and one-time expense items relating to the Yahoo TIPLA amendment payment, an equity-settled donation expense, the expenses relating to the sale of shares by existing shareholders in our initial public offering, charge for financing-related fees as a result of early repayment of bank borrowings and others. Non-GAAP diluted EPS represents non-GAAP net income attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effects of the assumed conversion of convertible preference shares prior to our initial public offering in September 2014. Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement less purchases of property and equipment and intangible assets (excluding acquisition of land use rights and construction in progress), and adjusted for changes in loan receivables relating to micro loans of our SME loan business (which we transferred to Ant Financial Services in February 2015), the Yahoo TIPLA amendment payment and others. We present the adjustment for changes in loan receivables because such receivables are reflected under cash flow from operating activities, whereas the secured borrowings and other bank borrowings used to finance them are reflected under cash flows from financing activities, and accordingly, the adjustment is made to show cash flows from operating activities net of the effect of changes in loan receivables. 3 The following table sets forth a reconciliation of our net income to non-GAAP EBITDA for the periods indicated: Year ended March 31, 2012 2013 2014 2015 2016 RMB RMB RMB RMB RMB US$ (in millions) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665 8,649 23,403 24,320 71,289 11,056 Less: Interest and investment income, net . . . . . . . . . . . (258) (39) (1,648) (9,455) (52,254) (8,104) Add: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 68 1,572 2,195 2,750 1,946 301 Less: Other income, net . . . . . . . . . . . . . . . . . . . . . . . (327) (894) (2,429) (2,486) (2,058) (319) Add: Income tax expenses . . . . . . . . . . . . . . . . . . . . . 842 1,457 3,196 6,416 8,449 1,310 Add: Share of results of equity investees. . . . . . . . . . . . 25 6 203 1,590 1,730 269 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . 5,015 10,751 24,920 23,135 29,102 4,513 Add: Share-based compensation expense. . . . . . . . . . . . 1,254 1,259 2,844 13,028 16,082 2,494 Add: Amortization of intangible assets . . . . . . . . . . . . . 155 130 315 2,089 2,931 455 Add: Depreciation and amortization of property and equipment and land use rights . . . . . . . . . . . . . . . . . 715 805 1,339 2,326 3,770 584 Add: Impairment of goodwill and intangible assets . . . . . 135 175 44 175 455 71 Add: Yahoo TIPLA amendment payment . . . . . . . . . . . — 3,487 — — — — Add: Equity-settled donation expense . . . . . . . . . . . . . . — — 1,269 — — — Non-GAAP EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . 7,274 16,607 30,731 40,753 52,340 8,117 The following table sets forth a reconciliation of our net income to non-GAAP net income for the periods indicated: Year ended March 31, 2012 2013 2014 2015 2016 RMB RMB RMB RMB RMB US$ (in millions) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665 8,649 23,403 24,320 71,289 11,056 Add: Share-based compensation expense. . . . . . . . . . . . 1,254 1,259 2,844 13,028 16,082 2,494 Add: Amortization of intangible assets . . . . . . . . . . . . . 155 130 315 2,089 2,931 455 Add: Impairment of goodwill, intangible assets and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 420 163 1,032 2,319 360 Less: Gain on deemed disposals/disposals/ revaluation of investments and others . . . . . . . . . . . . . . . . . . . . . . (21) (76) (384) (6,715) (50,144) (7,777) Add: Amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Financial Services . . . . . . . . . . . . . . . . . . . — — — 166 264 41 Add: Yahoo TIPLA amendment payment . . . . . . . . . . . — 3,487 — — — — Add: Equity-settled donation expense . . . . . . . . . . . . . . — — 1,269 — — — Add: Expenses relating to the sale of shares by existing shareholders at initial public offering. . . . . . . . . . . . . — — — 231 — — Add: One-time charge for financing-related fees as a result of early repayment of bank borrowings . . . . . . . — — 664 830 — — Non-GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . 6,452 13,869 28,274 34,981 42,741 6,629 4 The following table sets forth a reconciliation of our diluted EPS to non-GAAP diluted EPS for the periods indicated: Year ended March 31, 2012 2013 2014 2015 2016 RMB RMB RMB RMB RMB US$ (in millions, except per share data) Net income attributable to ordinary shareholders . . . . . . . 4,228 8,404 23,076 24,149 71,460 11,083 Add: Reversal of accretion upon assumed conversion of convertible preference shares . . . . . . . . . . . . . . . . . . — 17 31 15 — — Add: Dividend eliminated upon assumed conversion of convertible preference shares . . . . . . . . . . . . . . . . . . — 111 208 97 — — Less: Dilution effect on earnings arising from option plans operated by a subsidiary . . . . . . . . . . . . . . . . . (7) — — — — — Net income attributable to ordinary shareholders for computing diluted EPS . . . . . . . . . . . . . . . . . . . . . . 4,221 8,532 23,315 24,261 71,460 11,083 Add: Non-GAAP adjustments to net income(1). . . . . . . . 1,787 5,220 4,871 10,661 (28,548) (4,427) Non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted EPS . . 6,008 13,752 28,186 34,922 42,912 6,656 Weighted average number of shares on a diluted basis . . 2,522 2,389 2,332 2,500 2,562 Diluted EPS(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.67 3.57 10.00 9.70 27.89 4.33 Add: Non-GAAP adjustments to net income per share(3) . 0.71 2.19 2.09 4.27 (11.14) (1.73) Non-GAAP diluted EPS(4) . . . . . . . . . . . . . . . . . . . . . . . 2.38 5.76 12.09 13.97 16.75 2.60 (1) See the table above regarding the reconciliation of net income to non-GAAP net income for more information of these non-GAAP adjustments. (2) Diluted EPS is derived from net income attributable to ordinary shareholders for computing diluted EPS divided by weighted average number of shares on a diluted basis. (3) Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted average number of shares on a diluted basis. (4) Non-GAAP diluted EPS is derived from non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted EPS divided by weighted average number of shares on a diluted basis. The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the periods indicated: Year ended March 31, 2012 2013 2014 2015 2016 RMB RMB RMB RMB RMB US$ (in millions) Net cash provided by operating activities . . . . . . . . . . . . . . 9,275 14,476 26,379 41,217 56,836 8,815 Less: Purchase of property and equipment and intangible assets (excluding land use rights and construction in progress). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (749) (1,046) (3,285) (4,770) (5,438) (843) Add: Changes in loan receivables, net and others. . . . . . . . . 226 2,828 9,175 11,674 (119) (19) Add: Yahoo TIPLA amendment payment . . . . . . . . . . . . . . — 3,487 — — — — Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,752 19,745 32,269 48,121 51,279 7,953 5