Kuke Music Holding Ltd.

Company Overview

Business Model: Kuke Music Holding Limited operates a classical music service platform in China, encompassing classical music licensing, subscription, and education services. The company is also a provider of smart music learning solutions and organizes large-scale live classical music events. Its core value proposition is to make classical music more accessible in China through an extensive content library and expertise in music education.

Market Position: Kuke Music Holding Limited is a leading provider of smart music learning services in China and one of the few companies with the experience and scale to organize large-scale live classical music events in the country. The company leverages a content library of approximately 3.06 million music tracks, including over 2.17 million traditional classical music tracks and more than 890 thousand tracks of jazz, world, folk, and other genres, as of December 31, 2024. This extensive library, primarily licensed from Naxos (over 99% of audio albums), positions the company with a strong competitive advantage in content offerings within mainland China. As of December 31, 2024, it served over 880 institutional subscribers across China, including over 530 universities and music conservatories and over 340 public libraries.

Recent Strategic Developments:

• Acquisition of BMF: In February 2020, Kuke Music Holding Limited acquired 100% equity interest in BMF, integrating the organization of the Beijing Music Festival and other classical music events into its business.
• Smart Music Learning Pivot: Since 2022, the company has shifted its focus in smart music learning from offering Kukey courses directly to kindergarten students to selling smart music hardware and content to primary and secondary schools.
• Strategic Investment in KOLO: In February 2022, Kuke Music Holding Limited made a strategic investment in KOLO, a classical music-focused, decentralized NFT platform driven by blockchain technology. This was followed by an agreement in March 2023 to acquire a 49% equity interest in KOLO, which closed on August 25, 2023, with an option to acquire the remaining 51%.
• Acquisition of JoyMiracle Inc.: On March 20, 2025, the company entered into a share purchase agreement to acquire JoyMiracle Inc., a Web3 computing power asset issuance and trading platform. This acquisition aims to build generative AI classical music creation and adaptation capabilities, create classical music NFTs, and enable secondary market transactions and automatic distribution of copyright fees.

Geographic Footprint: Kuke Music Holding Limited is incorporated in the Cayman Islands as a holding company. Its primary operational regions are within mainland China, where it conducts business through its wholly foreign-owned enterprises (WFOEs) and Variable Interest Entities (VIEs). Key markets include all provinces, autonomous regions, and municipalities in China, except Tibet, for its institutional subscribers. The company has international subsidiaries in the British Virgin Islands and Hong Kong, which serve as intermediate holding companies. While it currently does not have international operations, its long-term business strategy incorporates potential international expansion. The company's operations are subject to regulatory jurisdictions in the Cayman Islands, Hong Kong, and the People's Republic of China.

Cross-Border Operations: Kuke Music Holding Limited operates through a holding company structure with its ultimate parent in the Cayman Islands. It utilizes British Virgin Islands and Hong Kong subsidiaries (Rococo Holding Limited, Gauguin Limited, Rosenkavalier Limited, Degas Limited) to hold its PRC WFOEs (Kuke International, Beijing Lecheng). Due to PRC foreign ownership restrictions in certain sectors (e.g., value-added telecommunication services, internet audio-video program services), the company conducts these businesses in China through VIEs (Beijing Kuke Music, BMF Culture) via contractual arrangements. Naxos China, a joint venture, is 51% owned by Kuke International. The company's content library relies heavily on exclusive, long-term licensing agreements with Naxos for content within mainland China. Cash transfers between the Cayman Islands holding company, its offshore subsidiaries, and its PRC subsidiaries and VIEs are subject to various PRC laws and regulations, including foreign exchange controls and statutory reserve requirements, which can restrict the flow of funds out of China.

Financial Performance

Revenue Analysis

Profitability Metrics (2024):

• Gross Margin: 38.92%
• Operating Margin: -90.00%
• Net Margin: -97.34%

Investment in Growth (2024):

• R&D Expenditure: US$0.4 million (RMB3.2 million), representing 4.64% of revenue.
• Capital Expenditures: US$4.4 million (RMB32.4 million).
• Strategic Investments: The company acquired a 49% equity interest in KOLO in August 2023 and entered into an agreement to acquire JoyMiracle Inc. in March 2025, focusing on blockchain, NFT, and AI for classical music.

Currency Impact Analysis:

• Foreign exchange impact on revenue and earnings: The company recorded a foreign exchange loss of US$0.2 million (RMB1.5 million) in 2024.
• Hedging strategies and effectiveness: Kuke Music Holding Limited has not entered into any hedging transactions to reduce foreign currency exchange risk, noting very limited hedging options available in China.
• Functional currency considerations: Operating transactions are mainly denominated in Renminbi, while ADSs are traded in U.S. dollars, exposing the company to exchange rate fluctuations.

Business Segment Analysis

Licensing and Subscription

Financial Performance (2024):

• Revenue: US$8.3 million (RMB59.9 million), a decrease of 13.74% YoY from US$9.8 million (RMB69.4 million) in 2023.
• Gross Profit: US$3.0 million (RMB21.6 million).
• Gross Margin: 36.13%.
• Key Growth Drivers: The decrease in revenue in 2024 was primarily due to two customers having no revenue during the fiscal year. In 2023, this segment saw a 47.9% increase in revenue due to higher customer demand. Cost of sales increased by 39.7% in 2024, primarily due to increased amortization from newly purchased copyright resources in 2023.

Product Portfolio: This segment involves licensing music content to online music entertainment platforms (e.g., Tencent Music Entertainment Group, NetEase Cloud Music) and commercial enterprises (e.g., film/TV production companies, airlines, smart hardware companies). It also provides subscription services offering online and offline streaming access to its content library via its website, mobile app, and smart music devices. The encyclopedic catalog is particularly suited for educational and professional use.

Market Dynamics: The company competes with other classical music licensing and subscription service providers in China. Institutional subscribers, primarily public universities, music conservatories, and public libraries, rely on government funding, making revenue sensitive to government spending levels and allocation discretion.

Geographic Revenue Distribution:

• China: All revenue for this segment is generated from China, with over 880 institutional subscribers spread across all provinces, autonomous regions, and municipalities, except Tibet.

Smart Music Education

Financial Performance (2024):

• Revenue: US$0.1 million (RMB0.9 million), a significant decrease of 97.29% YoY from US$4.8 million (RMB34.2 million) in 2023.
• Gross Profit: (US$0.02 million) (RMB0.2 million) (gross loss).
• Gross Margin: -18.61%.
• Key Growth Drivers: The substantial decrease in revenue and gross profit is a direct result of the company's strategic decision since 2022 to focus more on selling smart music hardware and content to primary and secondary schools, and significantly reducing the offering of Kukey courses.

Product Portfolio: The segment offers proprietary Kuke smart pianos, Kuke smart music teaching systems, and Kukey courses. Kuke smart pianos are sold with pre-installed Kuke smart music teaching systems. The teaching system provides real-time, individualized feedback on student performance through sensors and cloud-based data analytics.

Market Dynamics: The smart music learning market in China is rapidly evolving and highly competitive. Competition is based on user experience, perceived effectiveness, educational content, technology infrastructure, data analytics, brand recognition, and pricing. The business relies on distributors to establish collaborations with kindergartens and resell products to schools.

Geographic Revenue Distribution:

• China: All revenue for this segment is generated from China.

Live Classical Music Events & Others

Financial Performance (2024):

• Revenue: US$1.1 million (RMB8.1 million), an increase of 142.41% YoY from US$0.5 million (RMB3.3 million) in 2023.
• Gross Profit: US$0.7 million (RMB5.4 million).
• Gross Margin: 66.11%.
• Key Growth Drivers: The increase in revenue was primarily due to new revenue derived from promotion, publicity, and technical services during 2024. The segment's performance in 2023 and 2024 was impacted by the aftermath of the COVID-19 pandemic, leading to partial hosting of the Beijing Music Festival and reduced overseas artist participation.

Product Portfolio: This segment organizes the Beijing Music Festival and other classical music events (e.g., Good Afternoon themed events, embassy events). It also offers online and offline opportunities for classical music education and participation. Revenue is primarily generated from sponsorship fees, performance fees, service fees, ticket sales, and royalties.

Market Dynamics: The market benefits from growing interest in live classical music in China. The company competes with other live classical music event organizers for audience and sponsorship. It maintains long-standing relationships with high-profile corporate sponsors.

Geographic Revenue Distribution:

• China: All revenue for this segment is generated from China.

International Operations & Geographic Analysis

Revenue by Geography:

International Business Structure:

• Subsidiaries: Kuke Music Holding Limited (Cayman Islands, ultimate holding company), Rococo Holding Limited (British Virgin Islands), Gauguin Limited (Hong Kong), Kuke International (PRC WFOE), Rosenkavalier Limited (British Virgin Islands), Beijing Lecheng (PRC WFOE).
• Joint Ventures: Naxos China, a PRC limited liability company, is 51% owned by Kuke International and 49% by Naxos International.
• Licensing Agreements: The company holds an exclusive and long-term license to the vast majority of content owned by Naxos within mainland China.

Cross-Border Trade:

• Export Markets: Not explicitly detailed in the filing.
• Import Dependencies: The company is highly dependent on Naxos for its classical music content, with over 99% of its audio albums licensed from Naxos. It also relies on a limited number of third-party suppliers and contract manufacturers for components and manufacturing of Kuke smart pianos and other smart music devices.
• Transfer Pricing: Contractual arrangements between the company's WFOEs and VIEs (e.g., exclusive consulting service agreements, exclusive intellectual property rights licensing agreements) are subject to potential audit or challenge by PRC tax authorities. In 2022, 2023, and 2024, the WFOEs did not charge service fees from the VIEs under these arrangements.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Not disclosed.
• Dividend Payments: Kuke Music Holding Limited does not expect to pay any cash dividends in the foreseeable future, intending to retain all future earnings to finance operations and business expansion.
• Future Capital Return Commitments: No specific future capital return commitments are disclosed.

Balance Sheet Position (as of December 31, 2024):

• Cash and Equivalents: US$0.35 million (RMB2.6 million).
• Total Debt: US$7.57 million (RMB55.2 million), comprising US$7.40 million (RMB54.0 million) in current interest-bearing loans and borrowings and US$0.17 million (RMB1.2 million) in non-current interest-bearing borrowings.
• Net Cash Position: (US$7.22 million) (RMB52.6 million).
• Debt Maturity Profile: US$7.40 million (RMB54.0 million) due within one year, and US$0.17 million (RMB1.2 million) due in 1-5 years.

Cash Flow Generation (2024):

• Operating Cash Flow: (US$2.58 million) (RMB18.8 million) net cash used in operating activities.
• Free Cash Flow: Not explicitly stated, but operating cash flow was negative.

Operational Excellence

Production & Service Model: Kuke Music Holding Limited's operational model is diversified across its business segments. For classical music licensing and subscription, it provides digital content access for streaming and downloading, along with value-added services like content recommendation and search localization. In smart music learning, it offers proprietary Kuke smart pianos and Kuke smart music teaching systems, which provide real-time, individualized feedback to students through integrated sensors and cloud-based analytics. For live classical music events, the company organizes large-scale festivals and performances, managing event production and securing sponsorships.

Global Supply Chain Architecture: Key Suppliers & Partners:

• Content Providers: Naxos is the largest content provider, accounting for over 99% of the company's content offerings as of December 31, 2024, under an exclusive and long-term license for mainland China. The company also engages recording agencies for original music recordings, retaining sole copyright ownership.
• Manufacturing Partners: The company relies on a limited number of third-party suppliers for main components and contract manufacturers for the production of Kuke smart pianos and other smart music devices.
• Technology Partners: Strategic investments in KOLO (blockchain, NFT) and acquisition of JoyMiracle Inc. (Web3 computing power, AI models) indicate a focus on leveraging advanced technologies.

Facility Network:

• Manufacturing: The company relies on contract manufacturers and does not own manufacturing facilities.
• Research & Development: Kuke Music Holding Limited maintains an in-house R&D team of 20 employees (33.9% of total headcount as of December 31, 2024). R&D efforts focus on course materials, Kuke smart music teaching system functionalities, big data analytics, machine learning, and content recommendation algorithms.
• Distribution: Distribution channels include third-party mobile app stores (Apple’s App Store, Android App Stores) for its Kuke Music and BMF Club mobile apps. It also utilizes third-party distributors for institutional sales of music subscription services, Kuke smart pianos, and Kuke smart music teaching systems, as well as for establishing collaborations with kindergartens.

Operational Metrics:

• Content Library: Approximately 3.06 million music tracks, over 2,900 video titles, more than 5,200 spoken content albums, and over 5,750 volumes of sheet music as of December 31, 2024.
• Institutional Subscribers: Over 880, including more than 530 universities and music conservatories and over 340 public libraries, as of December 31, 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The company employs sales and marketing personnel to promote its products and services.
• Channel Partners: It relies on third-party distributors for sales of institutional music subscription services, Kuke smart pianos, and Kuke smart music teaching systems, and for establishing collaborations with kindergartens for Kukey courses. For sales to public or government-affiliated entities, the company often participates in public bidding processes, sometimes including third-party products for resale.
• Digital Platforms: The company distributes its Kuke Music and BMF Club mobile apps through third-party mobile application distribution channels such as Apple’s App Store and various Android App Stores. Its content is also accessible via its website, www.kuke.com, and smart music devices.

Customer Portfolio: Enterprise Customers: Key enterprise customers include online music entertainment platforms (e.g., Tencent Music Entertainment Group, NetEase Cloud Music), commercial enterprises (e.g., film and TV production companies, airlines, smart hardware companies), and institutional subscribers (universities, music conservatories, public libraries). Strategic Partnerships: Naxos is a strategic global business partner and the largest independent classical music content provider, with whom Kuke Music Holding Limited has long-standing relationships. Customer Concentration: As of December 31, 2024, the largest customer accounted for 54% of the company's total trade receivables, indicating a significant concentration risk.

Regional Market Penetration: The company's market penetration is primarily within China, serving institutional subscribers across all provinces, autonomous regions, and municipalities, except Tibet.

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: The classical music market in China has experienced rapid growth, driven by increasing popularity, digitization of content, and supportive government policies. The smart music learning market in China is characterized by rapid evolution and intense competition.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Kuke Music Holding Limited faces competition from other classical music licensing service providers, online classical music subscription service providers, smart music learning service providers, and live classical music event organizers in China. Competitive Threats by Region, Company Responses: Competitors may possess greater financial, technical, or marketing resources, stronger brand awareness, or more experience. The company responds by focusing on service quality, user experience, diverse content offerings, brand recognition, and competitive pricing. It also continuously enhances its sales and marketing approaches and explores new methods to adapt to market developments and customer preferences.

Risk Assessment Framework

Strategic & Market Risks

• Global Market Dynamics: The company is exposed to risks from changing consumer needs and preferences, evolving industry standards, and the competitive landscape. The lingering effects of the COVID-19 pandemic, government actions, and general economic conditions in China continue to pose uncertainties.
• Technology Disruption: Risks include the failure to successfully introduce new products or services, adopt new technologies, or enhance existing offerings, which could impact market acceptance and profitability.
• Customer Concentration: A significant portion of trade receivables (54% from the largest customer as of December 31, 2024) indicates a concentration risk. The loss of key customers or a decline in their spending could materially affect revenue.

Operational & Execution Risks

• Global Supply Chain Vulnerabilities: Dependence on a limited number of third-party suppliers and contract manufacturers for Kuke smart pianos and other smart music devices creates risks of industry-wide shortages, price fluctuations, long lead times, and potential disruptions if these parties fail to perform or cease service.
• Regional Disruptions: The business is vulnerable to natural disasters, health epidemics (as demonstrated by the COVID-19 pandemic's impact on operations, events, and customer spending), wars, acts of terrorism, power shortages, or communication interruptions in China.
• Trade Restrictions: Increasing tension between the United States and China regarding trade policies, tariffs, and potential escalation could significantly increase content costs, particularly for content providers located or incorporated in the United States.

Financial & Regulatory Risks

• Currency & Financial Risks: Fluctuations in the exchange rate between the Renminbi and the U.S. dollar can materially affect revenues, earnings, and the value of ADSs. The company faces foreign currency risks from a loan receivable from a Hong Kong entity and foreign suppliers.
• Interest Rate Risk: The company's loans, borrowings, and deposits are subject to interest rate fluctuations.
• Credit & Liquidity: Inability to collect trade receivables on a timely basis, especially from customers affected by economic downturns, could adversely affect liquidity and cash flows. The company may require additional capital for growth, which might not be available on commercially acceptable terms.
• Multi-Jurisdictional Compliance: The company's VIE structure is subject to substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations, particularly concerning foreign ownership restrictions in value-added telecommunication services and internet audio-video program services. Non-compliance could lead to severe penalties or forced relinquishment of interests.
• Regulatory & Compliance Risks: The company operates under a complex and evolving regulatory framework in China, including laws on internet content, data security (Cybersecurity Law, Data Security Law, Personal Information Protection Law), anti-monopoly, M&A, and employee stock incentive plans. Failure to obtain or renew necessary licenses, permits, or approvals, or to comply with changing regulations, could lead to liabilities, penalties, and operational disruption. The Holding Foreign Companies Accountable Act (HFCAA) poses a risk of delisting if the PCAOB is unable to inspect the company's auditor for two consecutive years in the future.
• Tax Regulations: Risks include potential classification as a PRC resident enterprise for tax purposes, leading to PRC enterprise income tax on worldwide income and withholding taxes on dividends for non-PRC shareholders. Transfer pricing adjustments by PRC tax authorities on contractual arrangements with VIEs could also increase tax liabilities.

Geopolitical & External Risks

• Country-Specific Risks: The PRC government may exert substantial intervention and influence over the company's operations, and laws and regulations can change rapidly with little notice. Uncertainties in the PRC legal system may impede the enforcement of contracts. There is also a risk that Hong Kong's legal system could become more integrated into the PRC legal system, potentially subjecting Hong Kong subsidiaries to similar regulatory risks as mainland China.

Innovation & Technology Leadership

Research & Development Focus: Global R&D Network: Kuke Music Holding Limited maintains an in-house research and development team of 20 employees, representing approximately 33.9% of its total headcount as of December 31, 2024. Focus Areas: R&D efforts are concentrated on designing and developing course materials, enhancing the functionalities of the Kuke smart music teaching system, and conducting extensive research on market needs, user feedback, and music proficiency test requirements. The team also focuses on big data analytics and machine learning to develop proprietary content recommendation algorithms and performance evaluation tools for smart music learning. Innovation Pipeline: The company plans to continuously update its Kukey courses, introduce new versions of the Kuke smart music teaching system, offer additional value-added services to students, launch new products featuring other musical instruments, stream more live classical music events, and expand its classical music educational programs.

Intellectual Property Portfolio (as of December 31, 2024):

• Patent Strategy: The company owns 11 patents in China.
• Copyright Strategy: It holds 96 copyrights in China. For original music recordings created with third-party agencies, Kuke Music Holding Limited is the sole owner of all related copyrights.
• Licensing Programs: The company licenses its extensive content library, primarily from Naxos, on an exclusive and long-term basis for mainland China.
• Trademark Strategy: The company owns 67 trademarks in China, including Kuke, Kukey, BMF, and Beijing Music Festival.
• Domain Names: It holds 48 domain names in China.

Technology Partnerships:

• Strategic Alliances: Kuke Music Holding Limited has made a strategic investment in KOLO, a classical music-focused and decentralized NFT platform driven by blockchain technology, aiming to develop a global NFT application in the Metaverse and enhance digital music asset liquidity.
• Research Collaborations: The acquisition of JoyMiracle Inc. in March 2025 is intended to leverage Web3 computing power and AI models for generative AI classical music creation, NFT creation, and automated copyright fee distribution.

Leadership & Governance

Executive Leadership Team

International Management Structure: The company's management structure includes regional leadership, with key executive officers overseeing operations primarily in China. The board of directors and executive team possess a mix of operational, financial, and industry-specific expertise relevant to its multi-jurisdictional operations.

Board Composition: The board of directors has established an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee. The Audit Committee consists of Li Song and Jia Li (both independent directors), with Li Song serving as the "audit committee financial expert." The Compensation Committee comprises Jia Li (independent) and He Yu. The Corporate Governance and Nominating Committee includes Jia Li (independent), Li Song (independent), and He Yu. Kuke Music Holding Limited is a "controlled company" under NYSE listing rules, as Mr. He Yu beneficially owns more than 50% of the total voting power of outstanding ordinary shares, allowing it to rely on certain exemptions from corporate governance requirements.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments:

• People's Republic of China (PRC): The company's operations in China are subject to extensive regulations governing foreign investment (Foreign Investment Law, Negative List), telecommunications (VATS, Internet Content Provider License), internet audio-video programs (Audio and Video Service Permission), radio and TV program production (License for Production and Operation of Radio and TV Programs), online publishing (Online Publishing Service Permit, currently under renewal), internet culture activities (Online Culture Operating Permit), online music, commercial performances, internet security, privacy protection (Data Security Law, Personal Information Protection Law), intellectual property (Copyright Law, Trademark Law, Patent Law), taxation (Enterprise Income Tax Law, VAT), foreign exchange (SAFE Circulars), M&A (M&A Rules, Anti-Monopoly Law), and employment and social welfare.
• Cayman Islands: As an exempted company, Kuke Music Holding Limited is subject to the Companies Act and benefits from tax concessions, including no taxes on profits, income, gains, or appreciation for 20 years from November 22, 2021.
• Hong Kong: Hong Kong subsidiaries are subject to profits tax at rates of 8.25% on assessable profits up to HK$2,000,000 and 16.5% on amounts exceeding this threshold.

Cross-Border Compliance:

• Export Controls: Not explicitly detailed, but general risks related to trade restrictions are acknowledged.
• Sanctions Compliance: Not explicitly detailed, but general risks related to trade restrictions are acknowledged.
• Anti-Corruption: The company faces risks under the United States Foreign Corrupt Practices Act (FCPA) and Chinese anti-corruption laws, particularly due to its engagement with state-owned or state-affiliated enterprises and officials in China.
• Multi-Jurisdictional Compliance: The company's VIE structure is designed to comply with PRC foreign ownership restrictions, but its validity and enforcement are subject to substantial uncertainties in the evolving PRC legal system. The company is also subject to the Holding Foreign Companies Accountable Act (HFCAA) in the U.S., which could lead to delisting if its auditor cannot be fully inspected by the PCAOB for two consecutive years.
• International Tax Strategy: Dividends paid by PRC subsidiaries to Hong Kong entities may be subject to a 10% PRC withholding tax, potentially reduced to 5% under the PRC-Hong Kong tax treaty if specific conditions are met. The company faces uncertainties regarding the interpretation and application of PRC tax rules on indirect transfers of equity interests by non-PRC holding companies.

Innovation & Technology Leadership

Research & Development Focus: Global R&D Network: Kuke Music Holding Limited maintains a dedicated R&D team of 20 employees, comprising 33.9% of its total workforce as of December 31, 2024. Focus Areas: R&D efforts are primarily directed towards the in-house design and development of course materials and the functionalities of the Kuke smart music teaching system. This includes extensive research into market needs, user feedback, music proficiency test requirements, and input from music professionals. The company also invests significantly in big data analytics and machine learning to develop proprietary content recommendation algorithms for its music subscription business and performance evaluation tools for its smart music learning segment. Innovation Pipeline: The company's innovation pipeline includes continuous updates to Kukey courses, new versions of the Kuke smart music teaching system, additional value-added services for students, and the launch of new products featuring other musical instruments. It also focuses on streaming more live classical music events and offering expanded classical music educational programs.

Intellectual Property Portfolio:

• Patent Strategy: As of December 31, 2024, the company held 11 patents in China.
• Copyright Strategy: The company owned 96 copyrights in China as of December 31, 2024. It also secures sole ownership of copyrights for original music recordings produced through agreements with recording agencies. The vast majority of its content library is secured through exclusive, long-term licensing agreements with Naxos for mainland China.
• Licensing Programs: The company engages in cross-border licensing, primarily as a licensee for its extensive classical music content.
• Trademark Strategy: The company owns 67 trademarks in China, including key brands such as Kuke, Kukey, BMF, and Beijing Music Festival.
• IP Litigation: The company acknowledges the risk of assertions by third parties regarding intellectual property infringement, which could lead to litigation, monetary damages, or content removal.

Technology Partnerships:

• Strategic Alliances: Kuke Music Holding Limited has a strategic investment in KOLO, a classical music-focused, decentralized NFT platform utilizing blockchain technology, aimed at developing global NFT applications in the Metaverse.
• Research Collaborations: The acquisition of JoyMiracle Inc. in March 2025 is a strategic move to integrate Web3 computing power and AI models for generative classical music creation, NFT development, and automated copyright fee distribution, indicating a focus on advanced technology integration.

Leadership & Governance

Executive Leadership Team

International Management Structure: The company's management team includes individuals with diverse backgrounds and expertise, including international experience (e.g., Mr. He Yu's musical training and MBA, Mr. Lung Yu's international recognition). Regional leadership and reporting relationships are managed through the company's WFOEs and VIEs in China.

Board Composition: The board of directors comprises seven members, including two independent directors (Li Song and Jia Li). The Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee are established under the board. Li Song is designated as an "audit committee financial expert." As a "controlled company" due to Mr. He Yu's significant voting power, Kuke Music Holding Limited may rely on exemptions from certain NYSE corporate governance requirements, which could afford less protection to shareholders compared to U.S. domestic issuers.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments:

• PRC: The company operates under a comprehensive set of PRC laws and regulations covering foreign investment, telecommunications, internet content, intellectual property, taxation, foreign exchange, and labor. Key licenses and permits include the Internet Content Provider License, License for Production and Operation of Radio and TV Programs, Online Culture Operating Permit, and commercial performance approvals. The Online Publishing Service Permit is currently under renewal.
• Cayman Islands: As an exempted company, Kuke Music Holding Limited benefits from a tax-neutral environment, with no corporate income or capital gains taxes.
• Hong Kong: Hong Kong subsidiaries are subject to a two-tiered profits tax system (8.25% and 16.5%).

Cross-Border Compliance:

• Export Controls: The company acknowledges risks related to trade restrictions and export controls, particularly in the context of US-China tensions.
• Sanctions Compliance: Compliance with multi-jurisdictional sanctions is a recognized risk for international operations.
• Anti-Corruption: The company is exposed to the United States Foreign Corrupt Practices Act (FCPA) and Chinese anti-bribery laws, especially given its interactions with state-owned or state-affiliated entities in China.
• Multi-Jurisdictional Compliance: The company's Variable Interest Entity (VIE) structure is a critical component for compliance with PRC foreign ownership restrictions in sensitive industries. However, this structure faces ongoing uncertainties regarding interpretation and enforcement by PRC authorities. The company is also subject to the Holding Foreign Companies Accountable Act (HFCAA) in the U.S., which could lead to trading prohibitions if its auditor is not fully inspected by the PCAOB for two consecutive years.
• International Tax Strategy: The company's PRC subsidiaries are subject to a 25% enterprise income tax rate, with Beijing Kuke Music benefiting from a reduced 15% rate as a "high and new technology enterprise." Dividends from PRC subsidiaries to Hong Kong entities are subject to a 10% withholding tax, potentially reduced to 5% under the PRC-Hong Kong tax treaty. The company faces uncertainties regarding PRC tax authorities' interpretation of "de facto management body" for its offshore entities and transfer pricing adjustments for inter-company transactions.

Environmental & Social Impact

Global Sustainability Strategy: The filing does not explicitly detail a global sustainability strategy, environmental commitments, carbon neutrality targets, or renewable energy adoption.

Regional Sustainability Initiatives: No specific regional sustainability initiatives are detailed in the filing.

Social Impact by Region: The company complies with PRC laws and regulations regarding employee social security plans, including pension, medical insurance, unemployment insurance, maternity insurance, work-related injury insurance, and housing fund contributions for its employees in China. It maintains employment agreements with confidentiality and non-competition provisions.

Currency Management & Financial Strategy

Multi-Currency Operations: Currency Exposure:

Hedging Strategies: Kuke Music Holding Limited has not entered into any hedging transactions to reduce its exposure to foreign currency exchange risk, citing very limited hedging options available in China. The company's primary operational currency is Renminbi, which provides a natural hedge for its domestic revenues and costs. However, the value of its ADSs, traded in U.S. dollars, remains exposed to RMB/USD exchange rate fluctuations.