Ordinary Shares

The authorized share capital consisted of 870,400,000 ordinary shares at a par value of US$0.00005 per share, of which 825,000,000 shares were designated as Class A ordinary shares, 35,400,000 as Class B ordinary shares,

and 10,000,000 shares designated as preferred shares. The rights of the holders of Class A and Class B ordinary shares are identical, except with respect to voting and conversion rights. Each share of Class A ordinary shares is entitled to one vote per share and is not convertible into Class B ordinary shares under any circumstances. Each share of Class B ordinary shares is entitled to ten votes per share and is convertible into one Class A ordinary share at any time by the holder thereof. Upon any transfer of Class B ordinary shares by the holder thereof to any person or entity that is not an affiliate of such holder, such Class B ordinary shares would be automatically converted into an equal number of Class A ordinary shares. The number of Class B ordinary shares transferred to Class A ordinary shares was 200,000 shares,

nil

and

nil

in the years ended December 31, 2017, 2018 and 2019, respectively.

As of December 31, 2019, there were 27,381,621 and 7,201,254 Class A and Class B ordinary shares outstanding, respectively. As of December 31, 2018 and 2019, there were

preferred shares issued and outstanding.

On October 29, 2015, the Company announced a share repurchase program under which the Company proposed to acquire up to an aggregate of US$2.0 billion of its shares over the next 24 months. On June 27, 2018, the Company announced a share repurchase program under which the Company proposed to acquire up to an aggregate of US$1.0 billion of its ordinary shares over the next 12 months in the open market or through privately negotiated transactions, depending on market conditions and in accordance with applicable rules and regulations.

On May 16, 2019, the Company announced a share repurchase program under which the Company proposed to acquire up to an aggregate of US$1.0 billion of its ordinary shares, effective until July 1, 2020 in the open market or through privately negotiated transactions, depending on market conditions and in accordance with applicable rules and regulations.

The Company repurchased 145,783, 207,165 and 664,534 Class A ordinary shares from the open market with an aggregate purchase price of RMB1.7 billion, RMB3.3 billion and RMB5.0 billion (US$712 million) during the years ended December 31, 2017, 2018 and 2019. The repurchased shares were cancelled under Cayman Islands law upon repurchase and the difference between the par value and the repurchase price was debited to retained earnings.

Retained Earnings

In accordance with the Regulations on Enterprises with Foreign Investment of China and their articles of association, the Company’s PRC subsidiaries, being foreign invested enterprises established in China, are required to make appropriations to certain statutory reserves, namely a general reserve fund, an enterprise expansion fund, a staff welfare fund and a bonus fund, all of which are appropriated from net profit as reported in their PRC statutory accounts. Each of the Company’s PRC subsidiaries is required to allocate at least 10% of its

after-tax

profits to a general reserve fund until such fund has reached 50% of its respective registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus funds are at the discretion of the Company’s subsidiaries.

In accordance with the China Company Laws, the Company’s VIEs must make appropriations from their

after-tax

profits as reported in their PRC statutory accounts to

non-distributable

reserve funds, namely a statutory surplus fund, a statutory public welfare fund and a discretionary surplus fund. Each of the Company’s VIEs is required to allocate at least 10% of its

after-tax

profits to the statutory surplus fund until such fund has reached 50% of its respective registered capital. Appropriations to the statutory public welfare fund and the discretionary surplus fund are made at the discretion of the Company’s VIEs.

General reserve and statutory surplus funds are restricted to

set-off

against losses, expansion of production and operation and increasing registered capital of the respective company. Staff welfare and bonus fund and statutory public welfare funds are restricted to capital expenditures for the collective welfare of employees. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor are they allowed for distribution except under liquidation.


	As of December 31,
	2018		2019		2019
	RMB		RMB		US$
	(In millions)
PRC statutory reserve funds		515		626		90
Unreserved retained earnings		128,731		125,642		18,047

Total retained earnings		129,246		126,268		18,137

Under PRC laws and regulations, there are restrictions on the Company’s PRC subsidiaries and VIEs with respect to transferring certain of their net assets to the Company either in the form of dividends, loans, or advances. Amounts of net assets restricted include paid in capital and statutory reserve funds of the Company’s PRC subsidiaries and the net assets of the VIEs in which the Company has no legal ownership, totaling RMB25.7 billion and RMB40.8 billion (US$5.9 billion) as of December 31, 2018 and 2019, respectively.

Furthermore, cash transfers from the Company’s PRC subsidiaries to their parent companies outside of China are subject to PRC government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the PRC subsidiaries and consolidated affiliated entities to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign currency denominated obligations.

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows:


	Foreign currency translation adjustment			Unrealized gains on available-for- sale investments			Total
	RMB			RMB			RMB
	(In millions)
Balance at December 31, 2016		(2,026	)		243			(1,783	)

Other comprehensive income before reclassification		732			2,574			3,306
Amounts reclassified from accumulated other comprehensive income		71			(999	)		(928	)

Net current-period other comprehensive income		803			1,575			2,378
Other comprehensive loss attribute to noncontrolling interests and redeemable noncontrolling interests		335			—			335

Balance at December 31, 2017		(888	)		1,818			930

Cumulative effect of accounting change *		—			(1,854	)		(1,854	)
Other comprehensive income before reclassification		114			4,117			4,231
Amounts reclassified from accumulated other comprehensive income		80			(2,171	)		(2,091	)

Net current-period other comprehensive income		194			92			286
Other comprehensive income attribute to noncontrolling interests and redeemable noncontrolling interests		(1,006	)		—			(1,006	)

Balance at December 31, 2018		(1,700	)		1,910			210

Other comprehensive income (loss) before reclassification		207			1,981			2,188
Amounts reclassified from accumulated other comprehensive income (loss)		(989	)		(2,689	)		(3,678	)
Net current-period other comprehensive income (loss)		(782	)		(708	)		(1,490	)
Other comprehensive loss (income) attribute to noncontrolling interests and redeemable noncontrolling interests		(102	)		(1	)		(103	)
Balance at December 31, 2019		(2,584	)		1,201			(1,383	)

Balance at December 31, 2019, in US$		(372	)		173			(199	)

*	Adjustment of net unrealized gains related to available-for-sale equity investments from accumulated other comprehensive income to opening retained earnings as a result of the adoption of ASC 321 on January 1, 2018.

The amounts reclassified out of accumulated other comprehensive income represent realized foreign currency translation adjustments, which mainly arising from disposal of partial interests in Trip, and gains on the

available-for-sale

investments upon their sales, which were then recorded in “Other income, net” in the consolidated statements of comprehensive income. The amounts reclassified were determined on the basis of specific identification.

In October 2019, the Company completed the partial disposal of its investment in Trip and the corresponding accumulated other

comprehensive

income of RMB989 million (US$ 142 million) was reclassified to earnings.

The following table sets forth the tax

benefit (expense

)

allocated to each component of other comprehensive income (loss) for the years ended December 31, 2017, 2018 and 2019:


	For the years ended December 31,
	2017			2018			2019			2019
	RMB			RMB			RMB			US$
	(In millions)
Unrealized gains on available-for-sale investments
Other comprehensive income (loss) before reclassification		(215	)		(409	)		(280	)		(40	)
Amounts reclassified from accumulated other comprehensive income (loss)		163			328			402			58

Net current-period other comprehensive income (loss)		(52	)		(81	)		122			18