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  • 小米集团2023年第四季度及全年业绩报告(英文版)(45页).pdf

    Xiaomi CorporationXiaomi Corporation2023 Fourth Quarter and 2023 Fourth Quarter and Annual ResultsAnnual ResultsDisclaimerDisclaimerBy attending the meeting where this presentation is made,or by reading the presentation materials,you agree to be bound by the following limitations:The information in this presentation has been prepared by representatives of Xiaomi Corporation(the“Company”,and together with its subsidiaries,the Group)for use inpresentations by the Group and does not constitute a recommendation regarding the securities of the Group.No part of this presentation should form the basis of,or be relied onin connection with,any contract or commitment or investment decision whatsoever.No representation or warranty,express or implied,is made as to,and no reliance should be placed on,the fairness,accuracy,completeness or correctness of the information,oropinions contained herein.Neither the Company nor any of the Companys subsidiaries,affiliates,advisors or representatives shall have any responsibility or liability whatsoever(for negligence or otherwise)for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation.Theinformation set out herein may be subject to updating,completion,revision,verification and amendment and such information may change materially.This presentation is based on the economic,regulatory,market and other conditions in effect on the date hereof.It should be understood that subsequent developments mayaffect the information contained in this presentation,which neither the Company nor its subsidiaries,affiliates,advisors or representatives are under an obligation to update,reviseor affirm.The information communicated in this presentation may contain certain statements that are or may be forward looking.These statements typically contain words such as will,may,expects,forecasts,plans and anticipates and words of similar import.By their nature forward looking statements involve risk and uncertainty because they relate toevents and depend on circumstances that will occur in the future.There may be additional material risks that are currently not considered to be material or of which the Companyand its advisors or representatives are unaware.Against the background of these uncertainties,readers should not rely on these forward-looking statements.Neither theCompany nor its subsidiaries,affiliates,advisors or representatives assume any responsibility to update forward-looking statements or to adapt them to future events ordevelopments.This presentation and the information contained herein does not constitute or form part of any offer for sale or subscription of or solicitation or invitation of any offer to buy orsubscribe for any securities of the Company or any of its subsidiaries or affiliates in any jurisdiction.The securities of the Company have not been and will not be registered underthe U.S.Securities Act of 1933,as amended(the Securities Act),and may not be offered,sold or delivered within the United States or to U.S.persons absent from registrationunder or an applicable exemption from the registration requirements of the United States securities laws.In addition,certain information related to other companies and market in general presented in this presentation has been obtained from publicly available information.Theaccuracy and appropriateness of that information has not been verified by the Company and cannot be guaranteed.No invitation is made by this presentation or the information contained herein to enter into,or offer to enter into,any agreement to purchase,acquire,dispose of,subscribe for orunderwrite any securities or structured products,and no offer is made of any shares in or debentures of a company for purchase or subscription except as permitted underrelevant laws.22023 Financial Highlights3RevenueRMB 271.0 billion-3.2%YoY1Defined as profit for the period,as adjusted by adding back(i)share-based compensation,(ii)net fair value changes on investments,(iii)amortization of intangible assets resulting from acquisitions,(iv)changes of value of financial liabilities to fund investors,and(v)income tax effects of non-IFRS adjustments2Expenses related to smart EV and other new initiatives exclude share-based compensation expenses related to smart EV and other new initiatives of RMB0.8 billionSmartphonesRMB 157.5 billion AIoTRMB 80.1 billion Internet ServicesRMB 30.1billion Gross Profit Margin21.2% 4.2ppt YoYSmartphones 14.6%AIoT16.3%Internet Services74.2justed Net Profit1RMB 19.3 billion 126.3%YoYRMB 6.7 billionIncluding Expenses Related to Smart EV and Other New Initiatives22023 Business Highlights4Smartphones#3Global Market Share Ranking112.8%Global Market Share151 marketsRanked Top 3165 marketsRanked Top 51AIoT739.7 millionAIoT Connected Devices2 25.5%YoY14.5 millionUsers with 5 or More ConnectedDevices2 25.3%YoYInternet Services641.2 millionGlobal MAU3 59.1 million(10.2%)YoY155.6 millionMainland China MAU3 11.9 million(8.3%)YoY1According to Canalys,by shipments in 20232As of December 31,2023,excluding smartphones,tablets and laptops3In December 2023,including smartphones and tablets Business Highlights6Corporate Strategy UpgradeHuman x Car x HomeOctober 2023February 2024 Corporate Strategy Upgraded to Human x Car x Home Unveiled Our New Operating System Xiaomi HyperOSHuman x Car x Home andXiaomi HyperOSLaunched Overseas7Vendor2023 Shipments(Million Units)2023 Market ShareYoY ShipmentsChangeApple229.120.1%-1.3%Samsung225.519.7%-12.6%Xiaomi146.112.8%-4.3%OPPO100.78.8%-11.2%Transsion92.68.1&.6%Others347.930.5%-4.4%Total1,141.9100.0%-4.3%Source:Canalys,by shipmentsGlobal Smartphone Shipments Ranked No.3 for 14 Consecutive Quarters30.533.241.540.7 11.3.9.1.8%0.0%2.0%4.0%6.0%8.0.0.0.0%-10.0 20.0 30.0 40.0 50.0 60.0Q1 2023Q2 2023Q3 2023Q4 20232023 by Quarter Global Smartphone Shipments and Market Share-1.3pptYoYChange-0.9ppt 0.5ppt 1.6pptGlobal Smartphone Shipments(Million Units)Market Share(%)Leading Position in All Major Markets Globally82023 Smartphone Shipments Ranking and Market ShareSource:Canalys,by shipmentsYoY Market Share ChangeNo.3No.314.1.1%SoutheastAsiaNo.3No.316.916.9%IndiaNo.3No.38.98.9ricaNo.3No.320.720.7%EuropeNo.2No.217.1.1%Middle EastNo.3No.316.0.0%Latin AmericaNo.5No.513.1.1%Mainland ChinaNo.3No.312.8.8%Global 1.2% 1.3% 0.1% 2.4%9Mainland China Smartphone Units Sold Ranked No.1 in December 2023Source:By units sold in mainland China,according to third-party dataXiaomiPeer APeer HPeer vPeer O16.5%Market Share15.9.9.5.3%XiaomiSmartphone Premiumization Strategy Reaping Rewards10Continuous Superior Ratings from Our Users1Xiaomi 13 SeriesXiaomi MIX Fold 2Xiaomi 12S UltraXiaomi 13 UltraXiaomi MIX Fold 3Xiaomi 14 Series99% 99% 98% 99% 99% 99% 1Positive review rate on JD.com in one month after product launch.For Xiaomi 14 Ultra,the positive review rate on JD.com was collected by the end of March 18,2024.Based on ratings from Xiaomi JD self-operated flagship store2By units sold in mainland China,according to third-party data.Premium smartphones in mainland China are smartphones with retail prices at or above RMB3,000RMB4,000-6,000 Smartphone Market Share2in Mainland China7.6 22202316.9%Mainland China Smartphone ASP(RMB)Premium Smartphone as%of Total Smartphone Units Sold in Mainland China217.7 .3 222023 2.6ppt2022202319% Xiaomi 14 Ultra99% Smartphone Market Share2Reached 28.2%in Q4 202311Offline Market Share Steadily Increased in Mainland China4.9%5.2%6.7%6.7%8.4 192020202120222023Smartphone Offline Market Share3Average Single-store GMV by Quarter2Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 202320222023Average Single-store GMV by Year11Average single-store GMV by year is calculated as the total GMV generated from offline retail stores in the year divided by the average of the number of offline retail stores at the beginning and the end of the year,then divided by the number of months during that period2Average single-store GMV by quarter is calculated as the total GMV generated from offline retail stores in the quarter divided by the average of the number of offline retail stores at the beginning and the end of the quarter,then divided by the number of months during that period3By units sold in mainland China,according to third-party dataSmart Large Home AppliancesShipments of air conditioners,refrigerators and washing machines all registered record highsSmart large home appliances revenue grew around 40%YoYTabletsTablets ranked No.3 in mainland China1Key AIoT Categories Delivered Solid Performance in 2023 12WearablesWearable bands ranked No.2 globally1Wearable bands ranked No.2 in mainland China11According to Canalys,by shipments in 2023.Wearable bands include basic bands,basic watches,and smart watches2According to Canalys,by shipmentsTablets ranked Top 5 globally2in Q3 2023 for the first time13Our First EV:Xiaomi SU7 SeriesFull-size High-performance Eco-technology Sedan0-100 km/hAcceleration 2.78sRechargeRange 800kmTopSpeed 265km/hMaxHorsepower 673psMaxTorque 838N m100-0 km/hBraking Distance 33.3mPricing to be Announced on March 28,2024Covering 59 Stores in 29 Cities NationwideAvailable for Launch and Delivery in ParallelNote:Specifications based on Xiaomi SU7 Max14Five Core Self-developed EV TechnologiesE-MotorXiaomi HyperEngine V6/V6s-In Mass Production-Industry-leading 21,000rpmXiaomi HyperEngine V8-Mass Production Planned 2025-Max Speed 27,200rpmXiaomi 800V Silicon Carbide High Voltage Platform-CTB Integrated Battery Technology-150kWh Peak Power-1,200km Range(CLTC)-9,100t Locking Force-72-in-1 Unit Die-Cast Rear Underbody-Self-developed Xiaomi Titans MetalPhase 1 Total Investment RMB4.7 Billion-End-to-End Sensing and Decision-Making AI Model-All-in-One Lidar System-Adaptive BEV Technology-Road-Mapping Foundational Model-Super-Res Occupancy Network TechnologySeamless Cross-device Connection-Up to 5 Displays-Xiaomi HyperOS-Xiaomi CarIoT Open EcosystemBatteryDie-Casting Autonomous DrivingSmart Cabin 15The Goal of Xiaomi EVsAesthetically Pleasing/Enjoyable to Drive/Comfortable/Smart/SafeA Dream Car for the New Automobile EraStrive to Become Top 5 Automobile Manufacturer in 15 to 20 Years16R&D Expenses Grew 19%YoY to RMB19 billionRMB BillionsR&D Expenses3.25.87.59.313.216.019.120172018201920202021202220232023 R&D AccomplishmentsXiaomi HyperOSXiaomi Die-castingProprietary Hinge TechnologyProprietary Shield GlassXiaomi Changping Smartphone FactoryXiaomi HyperEngineEmbrace AI in All Aspects of Our Business17AI Real-timeTranslationAI Input MethodAI PortraitAI Smart PaintingAI AssistantText-to-Image GenerationAI ImageExtender&AI Image SearchEnhance User ExperienceMultiple AI Features for the Beta TestAI Embedded in Our Latest SmartphonesBegan Beta Test of the Multimodal LLM Based on MiLM-6BOur First AI-Powered LLM Computational Photography PlatformUltra SnapUltra RAWUltra ZoomSales ForecastsIntelligent Decision SupportIntelligent Customer ServiceImprove Operational EfficiencyAutomobile ProductionFinancial Highlights59.5 67.4 70.9 73.2 Q1 2023Q2 2023Q3 2023Q4 2023RMB BillionsRevenue19Quarterly Revenue Increased throughout 2023167.2 157.5 79.8 80.1 28.3 30.1 20222023280.0271.0SmartphonesIoT and lifestyle productsInternet servicesOthers-18.9%YoY%-4.0% 0.6% 10.9%Record Gross Profit Margins20%Smartphone11.9%9.0.6 212022202317.7.0!.2 2120222023%Overall%AIoT13.1.4.3 212022202374.1q.8t.2 2120222023%Internet Service21Core Business Operating ExpensesDecreased Over 2.8 billion in 2023RMB BillionsOperating Expenses9.5 8.0 9.7 8.6 9.2 9.1 10.4 10.20.5 1.3 0.8 1.61.0 1.9 1.4 2.7 38.8 35.9 3.7 7.5 20222023Operating expenses(excluding expenses related to smart EV and other new initiatives)in 2023Expenses related to smart EV and other new initiatives,including share-based compensation(SBC)expensesOperating expenses(excluding expenses related to smart EV and other new initiatives)in 2022Q1Q2Q3Q42.9 3.2 2.1 5.1 2.16.0 1.54.90.01.02.03.04.05.06.07.08.5 19.30.0 .0.0.0.00.00.0%0.05.010.015.020.025.02022202322Full Year Adjusted Net Profit Increased 126.3%YoYRMB BillionsAdjusted Net Profit11Defined as profit for the period,as adjusted by adding back(i)share-based compensation,(ii)net fair value changes on investments,(iii)amortization of intangible assets resulting from acquisitions,(iv)changes of value of financial liabilities to fund investors,and(v)income tax effects of non-IFRS adjustmentsQ1Q2Q3Q420222023Inventory Returned to Normalized Levels231Including work in progress,spare parts,and others2Inventory turnover days is calculated as the average of opening and closing inventory balances for the quarter,divided by cost of sales and multiplied by the total number of days in the quarter19.3 17.1 11.5 23.9 28.7 27.1 10.5 8.1 8.0(1.3)(3.5)(2.2)202120222023Raw materials Finished goodsOthers1Provision for impairmentRMB BillionsInventory52.450.444.4876962632030405060708090100110120Q1 2023Q2 2023Q3 2023Q4 2023DaysInventory Turnover Days26.7(6.9)42.3 20212022202324Strong Operating Cash FlowAdjusted Operating Cash Flow1RMB Billions1Operating cash flow adjustments including(i)the change of loan and interest receivables and impairment provision for loan receivables mainly resulting from the Fin-tech business;(ii)the change of trade payments related to the finance factoring business;(iii)the change of restricted cash resulting from the Fin-tech business;and(iv)the change of deposits from customers resulting from the Airstar bank2Repurchase amount before year 2021 including transaction fees,whereas repurchase amount in year 2021 and after excluding transaction fees3Excluding transaction fees4As the end of March 18,2024Returned cash to shareholders through repurchasing 1.23 billion shares(over HKD18.0 billion2)since IPO126.6 million shares(HKD1.52 billion3)in 2023138.1 million shares(HKD1.86 billion3)in 20244Record High Cash Position25108.294.3136.3202120222023Our cash resources wereRMB136.3 billion 44.6%YoYCash Resources1RMB Billions1Including but not limited to(i)cash and cash equivalents,(ii)restricted cash,(iii)short-term bank deposits,(iv)short-term investments measured at fair value through profit or loss,(v)short-term investments measured at amortized cost,(vi)long-term bank deposits and(vii)other investments included in long-term investments measured at fair value through profit or lossESGFully Integrated ESG Management into Our Business OperationsGold Medal from EcoVadis Enhanced Corporate GovernanceESG ReportsWhite Paper on Climate Action Published on December 5,202327Appointed Female Independent Non-Executive DirectorCAI JinqingRating Score Improved from 53 in 2022 to 73 in 2024Ranked among Top 3%of Globally in the“Manufacture of Communication Equipment”IndustryGiving Back to Our Society28Poverty and Disaster ReliefCumulative Donations of RMB162 million1 Talent DevelopmentTechnologyInnovationXiaomi Scholarships ProgramCovered 60 Colleges and Universities1Xiaomi Young Talents ProgramCovered 30 Colleges and Universities11By Beijing Xiaomi Foundation,as of December 20232By Beijing Xiaomi FoundationDonated RMB100 million2 to National Natural Science Foundation of China on March 1,2024Smartphones30Smartphone Shipments Reached 145.6 million Units in 2023In 2023,smartphones revenue was RMB157.5 billion.Smartphone shipments reached 145.6 million units,while gross profit margin reached 14.6%,a record highIn Q4 2023,smartphones revenue was RMB44.2 billion.Smartphone shipments reached 40.5 million units,up 23.9%YoYRMB BillionsSmartphones Revenue167.2 157.5 2022202345.8 35.0 42.3 36.6 42.5 41.6 36.7 44.2 -5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0Q1Q2Q3Q420222023Continued Expansion in Emerging MarketsLatin AmericaSmartphone Shipments20222023 11%Source:Canalys,by shipments20222023 45ricaSmartphone Shipments20222023 20%Middle EastSmartphone Shipments31Overall Market Shipments 6%YoYOverall Market Shipments 11%YoYOverall Market Shipments 2%YoY32Xiaomi 14 Ultra:Lens to LegendLaunched in Mainland China and Overseas in February 2024Ultra CameraXiaomi HyperOSBidirectional Satellite CommunicationQuad-camera with LeicaLeica Summilux Optical Lenses/1.63-/4.0 Stepless Variable ApertureUltra PerformanceSnapdragon 8 Gen 3 Mobile PlatformXiaomi Guardian StructureOur First AI-Powered LLM Computational Photography PlatformUltra SnapUltra RAWUltra ZoomLaunch EventMainland China LaunchOverseas LaunchRedmi K70 Series:Enhanced AI Performance33Note:Specifications based on Redmi K70 ProLaunched in Mainland China in November 2023Snapdragon 8 Gen 3Light Hunter 800 SensorXiaomi HyperOSSecond-generation 2K ScreenWildboost 3.0K70 Pro Champion Lamborghini Limited EditionSales Volume Exceeded 600,000 Units in the First Five Minutes of Sales Launch Over 1 Billion Redmi Smartphones Sold Globally Since LaunchAIoTGlobal Leading Consumer AIoT PlatformNumber of Connected Devices135589.4 618.0 654.5 698.9 739.7 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023MillionsMi Home App MAU75.8 78.1 82.9 84.0 85.8 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023Millions11.6 12.3 13.0 13.7 14.5 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023MillionsUsers with 5 or More Devices Connected to Xiaomis AIoT Platform11Excluding smartphones,tablets and laptops36IoT and Lifestyle Products Revenue Achieved YoY Growth in 2023In 2023,IoT and lifestyle products revenue reached RMB80.1 billion,grew 0.4%YoYIn 2023,gross profit margin reached 16.3%,registered arecord highIn Q4 2023,IoT and lifestyle products revenue reached RMB20.3 billionRMB BillionsIoT and Lifestyle Products Revenue79.8 80.1 2022202319.5 16.8 19.8 22.3 19.1 20.7 21.4 20.3 -5.0 10.0 15.0 20.0 25.020222023Q1Q2Q3Q4Smart TV:Top 5 TV Shipments Globally in 2023 37Global Smart TV ShipmentsReached 10.7 million in 2023Ranked Top 5Globally11According to AVC,by shipments in 2023Smart Large Home Appliances:Another Year of Robust Growth38Air ConditionersRefrigerator shipments exceeded2.0 million units in 2023,up 105%YoY,a record highWashing MachinesWashing machine shipments exceeded 1.3 million units in 2023,up 24%YoY,a record highRefrigeratorsAir conditioner shipments exceeded4.4 million units in 2023,up 49%YoY,a record high39Tablets:Top 3 Shipments in Mainland China in 20231According to Canalys,by shipmentsXiaomi Pad 6S Pro 12.4Launched in Mainland China and Overseas in February 2024Ranked Top 3 in Mainland China1 in 2023Global Shipments in 2023 up 50% YoYOverseas Shipments in 2023 up 100% YoYRanked Top 5 Globally1 in Q3 2023Wearables:Maintained Leading Position401According to Canalys,by shipments.Wearable bands include basic bands,basic watches,and smart watchesTWSMainland China Shipments Ranking1in 2023No.2Wearable BandsGlobal Shipments Ranking1in 2023No.2Mainland China Shipments Ranking1in 2023No.2Internet ServicesGlobal MAU Reached 641 million and Mainland China MAU Reached 156 million in Q4 202342Global MAU1reached 641.2 million,YoY growth of 59.1 millionMainland China MAU1reached 155.6 million,YoY growth of 11.9 millionGlobal TV MAU2reached 66 millionAll three metrics reached record highs582.1594.8606.0623.1641.212.711.217.118.2Q4 2022Q1 2023Q2 2023 Q3 2023 Q4 2023Millions Global MAUMillions Mainland China MAU143.7146.2149.3151.9155.62.63.12.63.8Q4 2022Q1 2023Q2 2023 Q3 2023 Q4 202310.2%YoY%8.3%YoY%1In December 2023,including smartphones and tablets 2In December 2023,including TV,TV box and TV stick users43Internet Services Revenue Achieved Record High in 2023In 2023,internet services revenue reached RMB30.1 billion,a record high.Advertising and gamingrevenue grew 11.2%and 7.0%YoY,respectivelyIn Q4 2023,internet services revenue reached RMB7.9 billion,up 9.9%YoY.Advertising revenue reached a record high,grew 18.4%YoYAdvertising GamingOthersRMB BillionsInternet Services Revenue18.5 20.5 4.1 4.4 5.7 5.2 2022202328.330.17.1 7.0 7.0 7.4 7.1 7.8 7.2 7.9 20222023Q1Q2Q3Q4Overseas Internet Services Revenue Continued to GrowOverseas Internet Services Revenue as%of Total Internet Services Revenue44In 2023,overseas internet services revenue reached RMB8.4 billion,up 24.1%YoY,accounting for 28.0%of total internet services revenueIn Q4 2023,overseas internet services revenue reached RMB2.3 billion,up 23.8%YoY,accounting for 29.4%of total internet services revenue17.8$.0(.0 2120222023IRhttps:/

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  • 安联保险集团(ALLIANZ)2023年年度报告(英文版)(271页).pdf

    Courage tomove forwardALLIANZ GROUPAnnual Report 2023 To go directly to any chapter,simply click on the headline or the page number.All references to chapters,notes,web pages,etc.within this report are also linked.CONTENT A _ To Our Investors Pages 1 11 2 Letter to the Investors 4 Supervisory Board Report 10 Mandates of the Members of the Supervisory Board 11 Mandates of the Members of the Board of Management B _ Corporate Governance Pages 12 49 13 Corporate Governance Statement(part of the Group Management Report)22 Takeover-Related Statements and Explanations(part of the Group Management Report)24 Remuneration Report C _ Group Management Report Pages 50 148 51 Business Operations 54 Non-Financial Statement 109 Business Environment 110 Executive Summary of 2023 Results 111 Property-Casualty Insurance Operations 113 Life/Health Insurance Operations 115 Asset Management 117 Corporate and Other 118 Outlook 2024 122 Balance Sheet Review 124 Liquidity and Funding Resources 127 Reconciliations 128 Risk and Opportunity Report D _ Consolidated Financial Statements Pages 149 257 150 Consolidated Balance Sheet 151 Consolidated Income Statement 152 Consolidated Statement of Comprehensive Income 153 Consolidated Statement of Changes in Equity 154 Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements 155 General Information 177 Notes to Insurance Operations 206 Notes to Financial Operations 225 Other Information E _ Further Information Pages 258 267 259 Responsibility Statement 260 Independent Auditors Report 267 Auditors Report Annual Report 2023 Allianz Group 1 TO OUR INVESTORS A A _ To our Investors Annual Report 2023 Allianz Group 2 In 2023,the theme that dominated the global economy,capital markets and society alike was the fight against inflation.Over the past year,no one has been immune to inflations corrosive effects on savings and the affordability of goods.The monetary policies that were taken to mitigate inflation now appear to have arrested its trajectory,but present manifold challenges both for businesses and consumers.Throughout a period in which our customers and partners experienced significant increases in their cost of living and challenges in sustaining their businesses,we maintained our focus on delivering the greatest possible value to them through our customer service and product offerings.For our shareholders,we steered our business model and managed our capital position to overcome inflationary challenges,ultimately contributing to a record performance.Our ability to manage inflation in all its forms is proving to be a distinct competitive advantage for Allianz.We have successfully consolidated our leading position as one of the largest global insurers and active asset managers,one that is able to leverage its scale,global reach,and diversified business model to address the financial and protection needs of more people around the world.At the end of the 2023,our share price reached a 20-year high,our total business volume increased by 5.5%to 162 bn,and our operating profit reached another record level,rising by 6.7%to 14.7 bn.Our PropertyProperty-CasualtyCasualty segment grew strongly by 8.4%to almost 77 bn in total business volume.The operating profit topped 6.9 bn for the first time,despite another year that was marked by increased claims resulting from more frequent and severe natural catastrophes.This clearly confirms our healthy underlying profitability and underwriting expertise.Our Life/HealthLife/Health segment demonstrated robust growth,with the value of new business increasing by 2.2%to 4.0 bn as we developed attractive solutions to protect our customers from the effects of inflation on their savings.The operating profit of 5.2 bn was strong,making the Life/Health segment a resilient contributor to our earnings power.Our Asset Management Asset Management segment proved resilient managing through a volatile environment to deliver an operating profit of 3.1 bn.We recorded third-party net inflows of 21.5 bn a signal of active investors readiness to invest in the market through us and we achieved growth in third-party assets under management to 1.7 tn.Together with our continued strong investment outperformance,this bodes well for further improvements in growth and profitability.Our shareholders benefited from an outstanding total return of 27%for the year,outperforming the European insurance sector,our direct peers,and the broader European stock market.This performance is backed by our financial strength and affirmed by the leading financial rating agencies which place Allianz in the top of our category,at AA(S&P Global),Aa2(Moodys)and A (AM Best)respectively,and fully in line with our ratings objectives.Looking ahead,we will focus on unlocking the benefits of our scale,further increasing our productivity,and translating excellent customer experience into profitable customer growth.Alongside our strong financial performance,Allianzs organizational health further raises our confidence that our company will remain resilient in the face of volatility and be able to exceed our stakeholders expectations in the future:OLIVER BTE Chief Executive Officer A _ To our Investors Annual Report 2023 Allianz Group 3 Our brand value is stronger than ever before.Our brand value is stronger than ever before.Allianz is the worlds leading insurance and asset management brand for the fifth time in a row according to Interbrands 2023 Best Global Brands ranking,with our brand value exceeding USD 20bn for the first time.In addition,in an increasingly polarized world,Allianz remains the most trusted insurance brand among our peer set across all stakeholder groups,according to Edelman Trust Intelligence data.We embrace our societal responsibility and leverage our strength,stability,and skills to address the root causes of polarization and secure the future of those who put their trust in us.Our customers value the care and service we provide in their moments Our customers value the care and service we provide in their moments of greatest need.of greatest need.We evaluate our business performance based on the experience of our customers,as their satisfaction and loyalty are among the most important drivers of our growth.Our latest Net Promoter Score results,which measure our customers loyalty through customers willingness to recommend Allianz,show that three-quarters of our operating entities outperformed their peers,a remarkable jump of 11 percentage points from last year.And we are also proud that 59%of our operating entities have achieved the distinction of Loyalty Leadership status,which is a leading indicator for our future market expansion.Our success would be impossible without our engaged and healthy Our success would be impossible without our engaged and healthy workfoworkforcerce.We are therefore extremely proud that Allianz achieved record results in all three globally benchmarked indices of employee engagement against a declining industry trend:our Inclusive Meritocracy Index increased by 2percentage points reaching best-in-class levels,our Work Well Index rose by 5 percentage points,and our Employee Engagement Index by 3 percentage points.In addition,our employee share ownership reached 70%,which is a remarkable expression of our peoples confidence in our organization.Our industry leadership in diversity reflects the strength of our workforce and its preparedness for the future,and this talent advantage is recognized by the global Refinitiv Diversity&Inclusion Index 2023,which ranked Allianz first in the insurance category for the 5th consecutive year.However,our efforts to ensure resilience and to protect what is most valuable to our customers exceed our organization and touch on society at large.In 2023,we again demonstrated our industry leadership in sustainability by publishing our first comprehensive net-zero transition plan with concrete milestones to be achieved by 2030 detailing our commitment to achieve net-zero emissions in the investment of policyholder funds and our property and casualty portfolios by 2050.As we look ahead,our corporate health and resilience are foundational to our ability to deliver strong results and returns amid even the most challenging environments especially in the increasingly polarized world we live in today.We are well-prepared to lead in this context,drawing on the principles of sustainability,strength,and inclusion at which Allianz has excelled since our founding 134 years ago.Our company and our purpose are as relevant and important today as they have ever been,and we will not shy away from this calling.On behalf of our management team and our employees,I thank you for your trust in the AllianzGroup and look forward to earning your continued support in the year ahead.A _ To our Investors Annual Report 2023 Allianz Group 4 Ladies and Gentlemen,As in previous years,the Supervisory Board comprehensively fulfilled its duties and obligations as laid out in the companys statutes and applicable law in the financial year 2023.It monitored the activities of the companys Board of Management,addressed the succession planning for the Board of Management and the Supervisory Board,and advised the Board of Management on business management issues.In the financial year 2023,the Supervisory Board held six meetings and adopted one written resolution.The meetings took place in February,March,May,June,September,and December.The written resolution was adopted in October.All meetings were held as in-person meetings.At all meetings held in the financial year under review,the Board of Management informed the Supervisory Board about the development of business at AllianzSE and the Allianz Group.In particular,the Board of Management presented the development of Group revenues and results as well as business developments in the individual business segments.The Board of Management provided comprehensive information about the development of AllianzSE and the Allianz Group,including the planning as well as deviations of actual business developments from the planning.In this context,the Board of Management also regularly discussed the adequacy of capitalization,the solvency ratio of Allianz SE and the Group,and the corresponding stress and risk scenarios with the Supervisory Board.The annual and consolidated financial statements,including the respective auditors reports,the half-year report as well as quarterly earnings releases were reviewed in detail by the Supervisory Board after preparation by the Audit Committee.In the first half of 2023 in particular,the meetings again focused on the review of the Structured Alpha matter in close dialogue with the Board of Management,assisted by the law firm mandated by the Supervisory Board.The reports and deliberations also focused on the impact of rising inflation rates and interest rates on the overall economy and the insurance sector as well as a range of strategic topics,including the risk strategy and IT strategy,and the Board of Managements planning for the financial year 2024.The status of the digital implementation of the Allianz Customer Model by means of the Allianz Business Master Platform and the merger of the global MidCorp business with the business of Allianz Global Corporate&Specialty SE under the trading name Allianz Commercial was reported on at several meetings.Another regular item discussed was cyber risk security.The Supervisory Board also dealt extensively with personnel matters relating to the Board of Management as well as succession planning for the Board of Management and the Supervisory Board.The deliberations of the Supervisory Board and in particular the Personnel Committee and Sustainability Committee also included establishing target achievement and setting targets for the remuneration of the Board of Management.The Supervisory Board received regular,timely and comprehensive reports from the Board of Management.The Board of Managements oral reports at the meetings were prepared with written documents,sent to each member of the Supervisory Board in good time before the relevant meeting.The Board of Management also informed the Supervisory Board in writing about important events,including between meetings.The Chairmen of the Supervisory Board and the Board of Management held regular discussions about key developments and decisions.The Chairman of the Supervisory Board held separate talks with each member of the Board of Management on each individuals status of target achievement,both for the respective half year and the full year.Once again in 2023,individual and group training sessions were implemented on the basis of a development plan adopted for the further training of the members of the Supervisory Board,for example on the topics of cybersecurity,the sales strategy,and the auditing of financial statements.At the meeting on 16 February 2023,the Supervisory Board dealt extensively with the preliminary business figures for the financial year 2022 and the Board of Managements dividend proposal.The appointed audit firm,PricewaterhouseCoopers GmbH Wirtschaftsprfungsgesellschaft(PwC),Frankfurt am Main,reported in detail on the preliminary results of its audit.In the further course of the meeting,the Supervisory Board also discussed the status of the measures taken to implement results from the audit carried out by the Federal Financial Supervisory Authority(BaFin)regarding the Group steering processes and the System of Governance.Comprehensive discussions were also held on the status of implementation of the actions adopted by the Board of Management following the Structured Alpha matter.The Supervisory Board also obtained a detailed report on the status of the investigations carried out by the external lawyers into the question of potential misconduct at the level of subsidiaries in connection with the Structured Alpha matter.The Board of Management also reported on PIMCOs Asset Management business,focusing in particular on governance topics.The Supervisory Board also discussed the target achievement of the individual members of the Board of Management and,on that basis,set their variable remuneration for the financial year 2022,subject to the approval of the annual financial statements.In this context,the Supervisory Board decided to make use of its discretion to take unforeseeable extraordinary developments into account in determining target achievement and to use the net income attributable to shareholders,adjusted for the effects of Allianzs divestment in Russia,as the basis for target achievement.Against the backdrop of the Structured Alpha matter,the Supervisory Board once more also discussed the question of the applicability of the so-called compliance caveat in paying variable remuneration components to members of the Board of Management.The independent investigations of potential breaches of duty by members of the Board of Management had already concluded in December 2022 that there were no indications of misconduct by any members of the Board of Management of Allianz SE.Hence there was no reason to apply the compliance caveat.As part of the performance assessment,the Supervisory Board carried out a fit and proper assessment of the SUPERVISORY BOARD REPORT A _ To our Investors Annual Report 2023 Allianz Group 5 members of the Board of Management.The Supervisory Board also dealt with succession planning for the Supervisory Board.At the end of the meeting,the Supervisory Board held an executive session without the Board of Management members being present and discussed questions relating to succession planning for the Board of Management as well as the talks of the Supervisory Board Chairman with investors and proxy advisors.At the meeting on 2 March 2023,the Board of Management first reported on the business developments to that date in the financial year 2023.The Board of Management also presented its report on the development of risks and solvency in the financial year 2022 and the outlook for 2023.The annual reports from Internal Audit and Compliance were also presented and discussed at the meeting.The Supervisory Board then discussed the audited annual and consolidated financial statements and the Management and Group Management Report,including the Non-Financial Statement and the Remuneration Report,the solvency statements for Allianz SE and the Allianz Group,as well as the Board of Managements recommendation for the appropriation of earnings.The auditor confirmed that there had been no discrepancies since their February report and issued an unqualified auditors report for the individual and consolidated financial statements and for the solvency statements.The auditor did not have any reservations,either,regarding the audit of the Non-Financial Statement and the Remuneration Report,which partly went beyond legal requirements.The Supervisory Board then approved the audited annual and consolidated financial statements.It approved the Board of Managements proposal for the appropriation of earnings for the financial year 2022,the Remuneration Report and the Supervisory Board Report,the Corporate Governance Statement,and the Non-Financial Statement.Furthermore,the Board of Management reported on the status of investigations into potential misconduct at the level of subsidiaries in relation to the Structured Alpha matter.In addition,the Supervisory Board resolved,at the recommendation of the Audit Committee,to propose to the Annual General Meeting the election of PwC as auditor for the 2023 individual and consolidated financial statements and for the review of the half-year financial report for 2023,and to mandate PwC with the supplementary audit of the Remuneration Report and the Non-Financial Statement for the financial year 2023.Moreover,the Supervisory Board reviewed the agenda and proposals for resolution for Allianz SEs 2023 Annual General Meeting(AGM)and approved the stipulations of the Board of Management for the virtual AGM.It also obtained extensive information on the status of implementation of the Allianz Business Master Platform.Lastly,the Supervisory Board dealt with succession planning for the Supervisory Board and the Board of Management.On 4 May 2023,just before the Annual General Meeting,the Board of Management briefed the Supervisory Board on business developments in the first quarter of 2023,as well as on the current situation of both the Allianz Group and Allianz SE,in particular with regard to the development of the Groups solvency.The Supervisory Board also once again dealt with the status of the measures initiated by the Board of Management following the Structured Alpha matter and the status of the measures to implement results of the audit carried out by the BaFin regarding the Group steering processes and the System of Governance.The meeting on 23 June 2023 was held at Allianz UK in London.At the meeting,the Board of Management provided a comprehensive report on the business developments in the financial year 2023 to that date.The Supervisory Board also dealt with BaFins findings from the review of the implementation of the insurance supervisory law requirements for IT and the measures initiated by the Board of Management in response to these findings.Furthermore,given the substantial progress in implementing the measures initiated following the Structured Alpha matter,and at the recommendation of the lawyers mandated by the Supervisory Board,the Supervisory Board decided to dissolve the Audit Committee working group specifically set up for this purpose in 2021 and to return to regular reporting.In addition,the Supervisory Board obtained a comprehensive report on the status of the merger of the global MidCorp business with the business of Allianz Global Corporate&Specialty SE under the trading name Allianz Commercial.The Board of Management also reported in detail on the current concept of the Allianz Business Master Platform and its implementation status.Other topics covered by reports included the Board of Managements decision to leave the Net-Zero Insurance Alliance,and the business of Allianz UK,which was reported on by the CEO of Allianz UK.In addition,the Board of Management provided its regular status report on cyber risks and cybersecurity at Allianz as well as its annual report on Group data privacy.Finally,the Supervisory Board again dealt with succession planning for the Board of Management and Supervisory Board.The mandates of Board of Management members Dr.Karuth-Zelle and Mr.Townsend were each extended by five years up until 31 December 2028.At the end of the meeting,the Supervisory Board held an executive session without the members of the Board of Management being present and informed itself about the mid-year talks held between the Chairman of the Supervisory Board and the members of the Board of Management.Furthermore,the Supervisory Board discussed the assessment of Allianz made by an external finance and insurance analyst from the independent analyst firm Autonomous Research with that analyst.At the meeting on 28 September 2023,the Board of Management firstly again reported on the business developments in the financial year 2023 to that date,focusing in particular on the effects of damages from natural catastrophes.One of the key items discussed at the meeting was the Board of Managements IT strategy,and,in that context,the implementation status of the current strategy to launch the Business Master Platform.The Board of Management also reported on the motor vehicle liability insurance segment in Germany and provided an update on the business of Allianz Direct.The Supervisory Board also dealt with the status of business activities in the Latin America region.Moreover,the Supervisory Board discussed the upcoming decisions regarding personnel matters relating to the Board of Management,and in accordance with the proposal submitted by the Personnel Committee approved Mr.Terzariols resignation from the Board of Management and the termination of his service contract by way of mutual agreement with effect from 31 December 2023.The Supervisory Board appointed Ms.Claire-Marie Coste-Lepoutre to the Board of Management of Allianz SE to succeed Mr.Terzariol with effect from 1 January 2024.Subsequently,the Supervisory Board discussed the results of the self-evaluation of the Supervisory Board required by supervisory law and the resulting development plan,which includes training programs on accounting and the internal model for the financial year 2024.The Supervisory Board also discussed the succession planning for the Supervisory Board.The Supervisory Board then held its executive session without the members of the Board of Management being present.On 1 October 2023,the Supervisory Board extended the mandate of Mr.Bte as member and Chairman of the Board of Management until the end of the day of the Annual General Meeting resolving on the approval of the actions of the Board of Management for the financial year 2027 by way of a written resolution.In the same circular resolution,the Supervisory Board extended the mandate of Dr.Wimmer as member of the Board of Management up until 30 September 2029.A _ To our Investors Annual Report 2023 Allianz Group 6 At the meeting on 14 December 2023,the Board of Management first informed the Supervisory Board about the results for the third quarter,the further business developments,and the situation of the Allianz Group.Furthermore,the Supervisory Board discussed the risk strategy for the financial year 2024 and,closely linked with the risk strategy,the planning for the financial year 2024.It also obtained a report from the Board of Management on the status of implementation of the Allianz Commercial project and on the Asset Management business of Allianz Global Investors.The Board of Management also presented its regular status report on cyber risk security,dealing in particular with global staff shortages in IT.The Board of Management also reported on the M&A strategy and current M&A transactions.At that meeting,the Supervisory Board again discussed succession planning for the Board of Management.It also reviewed the appropriateness of the Board of Managements remuneration and set the targets for the variable remuneration for the members of the Board of Management for 2024.The appropriateness of the remuneration for the Supervisory Board members was also reviewed on the basis of an external benchmark analysis.The Supervisory Board also dealt with the Declaration of Conformity with the German Corporate Governance Code.The Supervisory Board then discussed the results of the self-assessment of its own activities(so-called efficiency review),once again carried out using an internal questionnaire in 2023.The Supervisory Board also discussed succession planning for the Supervisory Board.The Supervisory Board then held an executive session without the members of the Board of Management being present and discussed the planning of Supervisory Board activities for the financial year 2024.On 14 December 2023,the Board of Management and the Supervisory Board issued the Declaration of Conformity in accordance with section 161 of the German Stock Corporation Act(“Aktiengesetz”)and posted it on the company website,where it is available at all times.AllianzSE has complied with all recommendations set out by the German Corporate Governance Code in the version of 28 April 2022,and will continue to comply with them in the future.Further explanations on corporate governance in the Allianz Group can be found in the Corporate Governance Statement.More details on corporate governance are also provided on the Allianz company website.The Supervisory Board has formed various committees in order to perform its duties efficiently.The committees prepare the consultations in plenary sessions as well as the adoption of resolutions.They can also adopt their own resolutions.The composition of the committees can be found in the Corporate Governance Statement.The Standing Committee held five meetings in the financial year 2023,all of which were held as in-person meetings.The committee dealt with corporate governance issues,in particular the preparation of the Declaration of Conformity with the German Corporate Governance Code.The committee also dealt with the preparation of and follow-up to the Annual General Meeting,extensively deliberating on the format for the Annual General Meeting.The Standing Committee also prepared the Supervisory Board self-evaluation as required by supervisory law and the associated development plan.Collective and,if necessary,individual training measures are continuously carried out as part of the implementation of the development plan.The Standing Committee also reviewed the appropriateness of the remuneration of the members of the Supervisory Board.Regarding the Supervisory Boards annual efficiency review,the committee also discussed the implementation of the results of the efficiency review conducted in 2022 and prepared the efficiency review for 2023.As planned,the review was implemented without any external support.Lastly,the Standing Committee prepared the analysis of the results of the efficiency review 2023 by the Supervisory Board.The Personnel Committee held four regular meetings and one extraordinary meeting in 2023.The regular meetings were held in person,while the extraordinary meeting took place in a virtual format.At the meetings,the committee discussed in detail the preparatory review of the Remuneration Report for 2022 and target achievement of the members of the Board of Management for the financial year 2022,including the annual Fit&Proper assessment of each member of the Board of Management.As part of the target-assessment process,the Personnel Committee discussed in particular the adjustment of the net income,as a target performance indicator for variable remuneration,to reflect the extraordinary charges resulting from the divestment of the Russian business.The Personnel Committee also prepared the annual review of the appropriateness of the remuneration of the Board of Management and dealt with potential amendments to the remuneration system for the Board of Management.Furthermore,discussions focused on the preparation of the target setting for the variable remuneration for 2024.The committee also dealt with the departure of Mr.Terzariol from the Board of Management.Against this background and in light of the expiry of various mandates at the Board of Management,the Personnel Committee intensively dealt with succession planning for the Board of Management.Lastly,it discussed individual issues related to mandates or contracts of(former)Board of Management members.The Audit Committee held five meetings in 2023.All meetings were held in person.In the presence of the auditor,the committee discussed both Allianz SEs annual financial statements and the Allianz Groups consolidated financial statements,the management reports including non-financial reporting,the respective solvency statements,and the half-year financial report as well as the Remuneration Report.The auditor presented his respective audit reports.Reviews by the Audit Committee revealed no reasons for objection.The Board of Management reported on the quarterly results and discussed them in detail with the Audit Committee together with the results of the auditors review.The Board of Management also reported regularly on relevant special topics.In this context,the Audit Committee dealt,in particular,with the impact of the rise in inflation rates,the divestment of the majority stake in Allianzs Russian business,and the implementation of the new accounting standards IFRS 9 and 17.At all meetings,the Audit Committee also reviewed and monitored the status of the processing of the Structured Alpha matter.The focus of its deliberations in this context was on the status of implementation of the measures taken in response to the Structured Alpha matter to remedy the deficiencies identified.The Supervisory Board was regularly briefed on this matter by the Board of Management and the external lawyers assisting the Board of Management,and additionally obtained advice from the independent lawyers mandated by the Supervisory Board.In the framework of these monitoring activities,the Committee also discussed the appropriateness and completeness of these measures.With the support of the lawyers mandated by the Board of Management and the lawyers commissioned by the Supervisory Board,the Audit Committee also comprehensively dealt with the question of potential claims for damages against employees working for subsidiaries in connection with the Structured Alpha matter,and prepared the discussion of this topic at the plenary meetings of the Supervisory Board.The Audit Committees special working group specifically set up for this purpose also met twice in A _ To our Investors Annual Report 2023 Allianz Group 7 February and April 2023 before this working group was dissolved by the Supervisory Board in June 2023.In addition,the committee dealt with the proposal to the Annual General Meeting for the appointment of the auditor and,following the Annual General Meeting,the awarding of the audit mandates and determined key audit areas for the financial year 2023.At Group level,the focus was on governance processes in connection with ESG commitments.A review of the design and effectiveness of control functions,which were transferred to Allianz Technology together with a large number of IT services,was established as another key audit area at Group level.Other key audit areas were the review of controls over non-financial reporting and the assessment of the appropriateness of horizontal monitoring by Compliance.The results of the audits of the key audit areas were subsequently reported by the auditor at individual meetings.The Audit Committee discussed the assessment of the audit risk,the audit strategy,and the audit planning with the auditor.In addition,the Audit Committee held several discussions with the auditor in the absence of the Board of Management.Moreover,the Audit Committee conducted an assessment of the quality of the audit and discussed the auditors fees.It also dealt with the awarding of non-audit services to the auditor and approved an updated positive list of pre-approved audit and non-audit services.As before,the Audit Committee obtained a separate report from the PwC auditors in charge of the Asset Management.Furthermore,the Audit Committee was regularly informed by the Board of Management about the status of implementation of the measures taken by the Board of Management in response to the results of a review by BaFin of the implementation of the insurance supervisory law requirements for IT.In addition,the Audit Committee dealt extensively with the internal control systems,the accounting process and internal controls in the context of financial reporting,the annual review of the Groups system of governance and the audit plan prepared by Internal Audit for 2024.The committee also received reports on the implementation of the requirements of the German Supply Chain Act and discussed the Board of Managements further planning with regard to the Allianz Customer Model and the Business Master Platform with the auditor.At all meetings,reports on legal and compliance issues within the Group,operational risks,the work performed by Internal Audit,and data privacy issues were presented and discussed in detail.Furthermore,the head of the actuarial function(Group Actuarial,Planning&Controlling)presented his annual report.The Risk Committee held two meetings in 2023,both of which were held in person.At both meetings,the committee discussed the current risk situation of the Allianz Group and Allianz SE with the Board of Management.At the March meeting,the Risk Report and other risk-related statements in the annual and consolidated financial statements as well as management and Group management reports were reviewed with the auditor and acknowledged with approval.The appropriateness of the early risk detection system at Allianz SE and the Allianz Group and the result of further risk assessments by the auditor were also discussed.A recommendation was provided to the Audit Committee to include the Risk Report,as presented and discussed,in the Annual Report.At both meetings,the Risk Committee extensively dealt with the risk strategy,risk appetite,capital management,the external rating,as well as the effectiveness of the risk management system for the Allianz Group and Allianz SE.In this context,the committee discussed the current implementation status of enhancements of the risk and control framework.The committee also obtained reports on Allianzs own risk and solvency assessment and changes to the internal Solvency II model and discussed the reports in detail with the Board of Management and the head of the risk function.Moreover,the Risk Committee again dealt with the war in Ukraine,in particular with regard to possible scenarios for its further development,and its potential impact on the risk situation of Allianz.In addition,the Risk Committee intensively dealt with the impact of rising interest rates and inflation.In this context,discussions with the Board of Management and the head of the risk function focused,in particular,on potential effects on policy-holder termination behavior,as well as with a view to liquidity risks stress scenarios for the life insurance segment and the asset management segment as well as possible countermeasures.Furthermore,the Risk Committee dealt with the newly developed risk metrics for considering the asset management segment when establishing the risk capital requirements and obtained reports on the real estate portfolio,its quality,as well as current risk management measures.In addition,its deliberations focused on the respective implementation status of the transformation program for the Business Master Platform and the measures taken by the Board of Management in response to the BaFins findings as part of a review of the implementation of the insurance supervisory law requirements for IT.The Technology Committee held two meetings in the financial year 2023,both of which were held as in-person meetings.At these meetings,the committee extensively discussed the Business Master Platform and technological innovations.Detailed discussions were held regarding process mining,data analytics,and artificial intelligence,as well as the operational implications and profit contribution potential of these topics.In this context,the Technology Committee also dealt with the strategy for the use of data and artificial intelligence.Lastly,the Technology Committee received a report from the Board of Management on regulatory issues,for instance on the implementation of the Digital Operational Resilience Act(DORA).The Nomination Committee held five meetings in the financial year 2023,all of which were held in person.A major focus was on succession planning for the Supervisory Board,in particular with regard to the elections to the Supervisory Board due in the next few years.The Nomination Committee intensively discussed potential candidates to succeed the members of the Supervisory Board who will be retiring in the coming years.Excellently suited candidates were identified for each retiring member of the Supervisory Board.They have all declared their willingness to stand for election to the Supervisory Board at the Annual General Meetings in 2024,2025,and 2026.In addition,the Nomination Committee,together with the Board of Management and in consultation with BaFin,agreed on specific measures to prepare the candidates at an early stage for the duties of members of the Supervisory Board of Allianz SE.These measures include,for example,preparing candidates in the framework of a mandate or a guest role on the Supervisory Board of a European subsidiary of Allianz SE,or other suitable measures,as well as the early identification of training measures,taking particular account of the fitness requirements communicated by BaFin.The Nomination Committee also prepared the discussions regarding the composition of the Supervisory Board committees from the 2024 Annual General Meeting onwards.The Sustainability Committee held four meetings in the financial year 2023.One meeting was held as a video conference,while three meetings were held in person.The committee prepared the assessment of target achievement by the Board of Management regarding the sustainability targets for the financial year 2022 and the definition of sustainability targets for the financial year 2023 by A _ To our Investors Annual Report 2023 Allianz Group 8 the Personnel Committee and the Supervisory Board.In addition,the committee dealt in detail with sustainability-related reporting(Sustainability Report,Non-Financial Statement and Tax Transparency Report,each for the financial year 2022),including the planned amendments resulting from an E.U.Directive(Corporate Sustainability Reporting Directive CSRD).At the September meeting,the committee also held discussions with the Board of Management on the Allianz Groups long-term climate targets resulting from the published“Net-zero plan with interim targets for 2030 for key business areas”,and prepared the setting of sustainability targets for 2024 by the Personnel Committee.The committee also focused on the ongoing development of the sustainability strategy,particularly with regard to the general socio-political and business environment,as well as on the application of new artificial intelligence technologies for data usage in customer products.In view of the particular importance of the latter topic for the Allianz Groups business activities,also with regard to aspects of data ethics,the members of the Technology Committee also participated in the discussion of this topic at the relevant meeting.The Supervisory Board obtained regular and comprehensive information on the work performed by the committees.Overview of members participation in Supervisory Board and committee meetings in the financial year 2023 Individualized publication of members participation in meetings Presence%Plenary sessions of the Supervisory Board Michael Diekmann(Chairman)6/6 100 Gabriele Burkhardt-Berg(Vice Chairwoman)6/6 100 Herbert Hainer(Vice Chairman)6/6 100 Sophie Boissard 6/6 100 Christine Bosse 6/6 100 Rashmy Chatterjee 6/6 100 Dr.Friedrich Eichiner 6/6 100 Jean-Claude Le Goar 6/6 100 Martina Grundler 6/6 100 Frank Kirsch 6/6 100 Jrgen Lawrenz 6/6 100 Primiano Di Paolo 6/6 100 Presence%Standing Committee Michael Diekmann(Chairman)5/5 100 Sophie Boissard 5/5 100 Jean-Claude Le Goar 5/5 100 Herbert Hainer 5/5 100 Jrgen Lawrenz 5/5 100 Personnel Committee Michael Diekmann(Chairman)5/5 100 Gabriele Burkhardt-Berg 5/5 100 Herbert Hainer 5/5 100 Audit Committee Dr.Friedrich Eichiner(Chairman)5/5 100 Sophie Boissard 5/5 100 Michael Diekmann 5/5 100 Jean-Claude Le Goar 5/5 100 Martina Grundler 5/5 100 Risk Committee Michael Diekmann(Chairman)2/2 100 Christine Bosse 2/2 100 Dr.Friedrich Eichiner 2/2 100 Frank Kirsch 2/2 100 Primiano Di Paolo 2/2 100 Technology Committee Rashmy Chatterjee(Chairwoman)2/2 100 Gabriele Burkhardt-Berg 2/2 100 Michael Diekmann 2/2 100 Dr.Friedrich Eichiner 2/2 100 Jrgen Lawrenz 2/2 100 Nomination Committee Michael Diekmann(Chairman)5/5 100 Christine Bosse 5/5 100 Dr.Friedrich Eichiner 5/5 100 Sustainability Committee Christine Bosse(Chairwoman)4/4 100 Sophie Boissard 3/4 75 Gabriele Burkhardt-Berg 4/4 100 Michael Diekmann 4/4 100 Frank Kirsch 3/4 75 Upon a proposal submitted by the Supervisory Board,the companys Annual General Meeting held on 4 May 2023 appointed PwC as auditor for the annual and consolidated financial statements as well as the review of the half-year Financial Report 2023.PwC audited the financial statements of Allianz SE and the Allianz Group as well as the respective management reports and issued an unqualified auditors report in each case.The management reports each also contain the Non-Financial Statement.The consolidated financial statements were prepared on the basis of the International Financial Reporting Standards(IFRS)as applicable in the European Union.The annual financial statements of Allianz SE were prepared in accordance with German law and accounting standards.PwC performed a review of the half-year Financial Report.In addition,PwC was also mandated to perform an audit of the solvency statements according to SolvencyII as of 31 December 2023 for Allianz SE and the Allianz Group.Furthermore,PwC was commissioned to conduct an audit of the contents of the Non-Financial Statement and the Remuneration Report.All Supervisory Board members received the documentation relating to the annual financial statements and the audit reports from PwC in due time.The preliminary financial statements and PwCs preliminary audit results were discussed in the Audit Committee on 21 February 2024,as well as in the Supervisory Boards plenary session on 22 February 2024.The finalized financial statements and PwCs audit reports(dated 26 February 2024)were reviewed by the Audit Committee on 5 March 2024 and discussed in the Supervisory Board plenary session on 6 March 2024.The auditors participated in the discussions and presented the results of their audit.Particular emphasis was placed on the key audit matters described in the auditors report and on the audit procedures performed.No material weaknesses in the internal financial reporting control process were discovered.There were no circumstances that might give cause for concern about the auditors independence.In addition,the solvency statements dated 31 December 2023 for both Allianz SE and the Allianz Group,as well as the related reports by PwC,were reviewed by the Audit Committee and the Supervisory Board.A _ To our Investors Annual Report 2023 Allianz Group 9 On the basis of its own reviews of the annual and consolidated financial statements,the management and Group management reports,and the recommendation for the appropriation of earnings,the Supervisory Board has not raised any objections and agreed with the results of PwCs audit.It approved the annual and consolidated financial statements prepared by the Board of Management.The financial statements have thus been formally adopted.The Supervisory Board agrees with the Board of Managements proposal on the appropriation of earnings.The Supervisory Board would like to express its special thanks to all Allianz Group employees for their great personal commitment over the past financial year.There were no changes in the composition of the Supervisory Board in the financial year 2023.With effect from 1 January 2024,Claire-Marie Coste-Lepoutre was appointed as a member of the Board of Management.She succeeds Giulio Terzariol,who resigned from office as of 31 December 2023.Munich,6 March 2024 For the Supervisory Board:Michael Diekmann Chairman A _ To our Investors Annual Report 2023 Allianz Group 10 Chairman Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Vice Chairwoman Chairwoman of the Group Works Council of Allianz SE Membership in other statutory supervisory boards and SE administrative boards in Germany Vice Chairman Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Chairwoman of the Board of Management of Clariane SE Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in comparable1 supervisory bodies Member of various Supervisory Boards Membership in comparable1 supervisory bodies Chief Executive Officer ISTARI Global Ltd.Membership in comparable1 supervisory bodies Member of various Supervisory Boards Membership in other statutory supervisory boards and SE administrative boards in Germany Employee of Allianz LA.R.D.S.A.Membership in comparable1 supervisory bodies Membership in Group bodies National Representative Insurances,ver.di Berlin Membership in other statutory supervisory boards and SE administrative boards in Germany Employee of Allianz Beratungs-und Vertriebs-AG Employee of Allianz Technology SE Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Employee of Allianz Technology S.p.A.MANDATES OF THE MEMBERS OF THE SUPERVISORY BOARD 1_Generally,we regard memberships in other supervisory bodies as comparable if the company is listed on a stock exchange or has more than 500 employees.A _ To our Investors Annual Report 2023 Allianz Group 11 Chairman of the Board of Management Membership in comparable1 supervisory bodies Insurance Western&Southern Europe,Allianz Direct,Allianz Partners Membership in comparable1 supervisory bodies Membership in Group bodies Finance,Risk Actuarial,Legal,Compliance Operations,IT and Organization Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Membership in comparable1 supervisory bodies Membership in Group bodies Insurance German Speaking Countries,Central Europe,Global P&C Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Membership in comparable1 supervisory bodies Membership in Group bodies Finance,Risk Actuarial,Legal,Compliance Investment Management Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Global Insurance Lines,Reinsurance,Anglo Markets,Iberia,Latin America,Africa Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Membership in comparable1 supervisory bodies Membership in Group bodies Asia Pacific,Mergers&Acquisitions,People and Culture Membership in comparable1 supervisory bodies Membership in Group bodies Asset Management,US Life Insurance Membership in other statutory supervisory boards and SE administrative boards in Germany Membership in Group bodies Membership in comparable1 supervisory bodies Membership in Group bodies MANDATES OF THE MEMBERS OF THE BOARD OF MANAGEMENT 1_Generally,we regard memberships in other supervisory bodies as comparable if the company is listed on a stock exchange or has more than 500 employees.Annual Report 2023 Allianz Group 12 CORPORATE GOVERNANCE B B _ Corporate Governance 13 Annual Report 2023 Allianz Group The Corporate Governance Statements according to 289f and 315d of the German Commercial Code(“Handelsgesetzbuch HGB”)form part of the Management Report and the Group Management Report,respectively.According to 317(2)sentence 6 HGB,the audit of the disclosures is limited to whether the relevant disclosures have been made.Corporate Constitution of the European Company(SE)As a European company,Allianz SE is subject to special European SE regulations and the German SE Implementation Act(“SE-Ausfhrungsgesetz SEAG”)and the German Act on the Involvement of Employees in a European Company(“SE-Beteiligungsgesetz SEBG”),in addition to German Stock Corporation Law.Notwithstanding,key features of a German stock corporation in particular the two-tier board system(Board of Management and Supervisory Board)and the principle of equal employee representation on the Supervisory Board have been maintained by Allianz SE.The Corporate Constitution of Allianz SE is laid down in its Statutes.The current version of the Statutes is available on the Allianz company website.Regulatory requirements The regulatory requirements for corporate governance(System of Governance)applicable for insurance companies,insurance groups,and financial conglomerates apply.In particular,they include the establishment and further design of significant control functions(independent risk control function,actuarial function,compliance function,and internal audit)as well as general principles for an effective and proper business organization.These regulatory requirements are applicable throughout the Group in accordance with the principle of proportionality.The implementation of the regulatory requirements is supported by written guidelines issued by the Board of Management of Allianz SE.Furthermore,Solvency II requires the publication of qualitative and quantitative information,including a solvency statement.Details on the implementation of the regulatory requirements for corporate governance by Allianz SE and by the Allianz Group can be found in the Solvency and Financial Condition Report of Allianz SE and of the Allianz Group,which are published on the Allianz company website.Declaration of Conformity with the German Corporate Governance Code Good corporate governance is essential for sustainable business performance.The Board of Management and the Supervisory Board of Allianz SE therefore attach great importance to complying with the recommendations of the German Corporate Governance Code(hereinafter“Code”),as amended from time to time.There are no statutory provisions on the basis of which recommendations of the Code are not applicable to Allianz SE.On 14 December 2023,the Board of Management and the Supervisory Board issued the following Declaration of Conformity of Allianz SE with the Code:Declaration of Conformity in accordance with 161 of the German Stock Corporation Act Declaration of Conformity with the recommendations of the German Corporate Governance Code Commission by the Board of Management and the Supervisory Board of Allianz SE in accordance with 161 of the German Stock Corporation Act Since issuing the last Declaration of Conformity on 15 December 2022,Allianz SE has complied with all recommendations of the German Corporate Governance Code Commission in the version of 28 April 2022,and will comply with the recommendations in the future.Munich,14 December 2023 Allianz SE On behalf of the Board of Management:Signed Oliver Bte Signed Giulio Terzariol On behalf of the Supervisory Board:Signed Michael Diekmann In addition,Allianz SE follows all suggestions of the Code in its version of 28 April 2022.The Declaration of Conformity and further information on corporate governance at Allianz is available on the Allianz company website.Board of Management The Board of Management is responsible for setting business objectives and the strategic direction,for coordinating and supervising the operating entities,and for implementing and overseeing an appropriate and effective control and risk management system.The Board of Management also prepares the annual financial statements of Allianz SE,the consolidated financial statements of the Allianz Group,the respective solvency statements,and the interim reports.The Board of Management of Allianz SE currently has nine members.As a general rule,its members may not be older than 62.Further information on the members of the Board of Management can be found in Mandates of the Members of the Board of Management.The composition is also available on the Allianz company website,which also provides the CVs of the members of the Board of Management.The members of the Board of Management are jointly responsible for the management of the company and compliance with legal requirements.Notwithstanding this overall responsibility,the individual members independently head the departments assigned to them.They consult with the Chairperson of the Board of Management on important issues.The Chairperson of the Board of Management is also responsible for coordinating the departments.CORPORATE GOVERNANCE STATEMENT B _ Corporate Governance 14 Annual Report 2023 Allianz Group Divisional responsibilities for business segments and/or functional responsibilities are assigned to the individual departments.The latter include,inter alia,Finance,Risk Management and Controlling Functions,Investments,Operations and IT,Human Resources,Legal,Compliance,Internal Audit,and Mergers&Acquisitions.Business division responsibilities focus on geographical regions or global lines.Rules of procedure specify the inner organization of the Board of Management as well as the departmental responsibilities.The meetings of the Board of Management are convened and chaired by the Chairperson.In addition,any member of the Board may request a meeting,stating the proposed subject of discussion.As a rule,a meeting of the Board of Management was held every two weeks in the financial year 2023.The Board of Management has a quorum if all members of the Board of Management have been invited to a meeting and at least half its members including the Chairperson or a member of the Board of Management appointed by him attend the meeting.Unless otherwise stipulated by law,the full Board of Management takes decisions with a simple majority of participating members.In the event of a tie,the Chairperson of the Board of Management has the deciding vote.The Chairperson can also veto decisions,but he cannot enforce a decision against the majority vote of the Board of Management.The Board of Management has formed committees from among its members.The task of these committees is to coordinate and decide on matters of the Board of Management referred to them,to prepare decisions for the Board of Management reserved to it,and to submit proposals for resolutions.The committees advise the full Board of Management.The responsibilities and composition of the committees are defined in the respective rules of procedure.In the financial year 2023,the following Board of Management committees were in place:Board committees Board committees Responsibilities Group Finance and Risk Committee Giulio Terzariol(Chairman),Dr.Klaus-Peter Rhler,Dr.Gnther Thallinger,Christopher Townsend,Dr.Andreas Wimmer.Preparing the capital and liquidity planning for the Group and Allianz SE;implementing and overseeing the principles of group-wide capital and liquidity management;defining risk standards and preparing the risk strategy;approving key financial transactions and pension-related transactions;preparing guidelines for derivatives,Group financing and internal Group capital management as well as establishing and overseeing a group-wide risk management and risk monitoring system.Group IT Committee Dr.Barbara Karuth-Zelle(Chairwoman),Sirma Boshnakova,Dr.Klaus-Peter Rhler,Giulio Terzariol,Dr.Gnther Thallinger,Christopher Townsend.Developing and proposing a group-wide IT strategy,monitoring its implementation,and approving local and group-wide IT investments as well as reviewing and overseeing individual IT projects.Group Mergers and Acquisitions Committee Renate Wagner(Chairwoman),Oliver Bte,Giulio Terzariol,Dr.Andreas Wimmer.Managing and overseeing Group M&A transactions,including approval of individual transactions within certain thresholds.As of 31 December 2023 In addition to Board of Management committees,there are also Group committees.They,too,are responsible for coordinating and deciding on matters of the Board of Management referred to them,for preparing decisions for the Board of Management of Allianz SE,reserved to it,and submitting proposals for resolutions.They are also responsible for ensuring a smooth flow of information within the Group.In the financial year 2023,the following Group committees were in place:Group committees Group committees Responsibilities Group Compensation Committee Board members of Allianz SE and executives below Allianz SE Board level.Designing,monitoring,and improving group-wide compensation systems in line with regulatory requirements and submitting an annual report on the monitoring results,along with proposals for improvement.Group Investment Committee Board members of Allianz SE and Allianz Group executives.Specifying the strategic asset allocation for the Group to enable consistent implementation by the operating entities,particularly in relation to alternative assets;monitoring performance across all asset classes,and ensuring consistent organization of the Investment Management function and Investment Governance across the Group.Defining requirements for sustainable investments and providing guidance on the implementation of sustainability aspects in proprietary investments.As of 31 December 2023 B _ Corporate Governance 15 Annual Report 2023 Allianz Group The Supervisory Board has adopted the following diversity concept for the Board of Management of Allianz SE:For the composition of the Management Board,the Supervisory Board aims for an adequate“Diversity of Minds”.This comprises broad diversity with regard to gender,internationality,and educational as well as professional background.The Supervisory Board assesses the achievement of such target,inter alia,on the basis of the following specific indicators:adequate proportion of women on the Management Board;adequate share of members with an international background(e.g.,based on origin or extensive professional experience abroad),ideally with connection to the regions in which the Allianz Group is operating;adequate diversity with regard to educational and professional background,taking into account the limitations for the Supervisory Board by regulatory requirements(fitness).This diversity concept is implemented via the appointment procedure for members of the Board of Management by the Supervisory Board.For the purpose of long-term succession planning,a list of candidates is prepared and updated on an ongoing basis by the Chairperson of the Board of Management in consultation with the Chairperson of the Supervisory Board.It is ensured that lists of successors will comprise appropriate percentages of candidates with international experience.This is especially taken into account by the Personnel Committee in succession planning.The list of candidates includes internal and external candidates generally meeting the requirements for a mandate in the Board of Management.In the event of a vacancy on the Board of Management,the Personnel Committee,after a thorough examination,recommends a suitable candidate to the Supervisory Board plenary session.It also reports on the selection process and,if necessary,alternative candidates.Prior to an appointment to the Board of Management,all members of the Supervisory Board are given the opportunity to meet the candidate in person.Currently,the Board of Management of Allianz SE comprises four female members,accounting for 44.4%.Four members of the Board of Management have international backgrounds based on their origin.There is an adequate degree of diversity with regard to educational and professional backgrounds.The Board of Management of Allianz SE is thus composed in accordance with the diversity concept.The Supervisory Board of Allianz SE has adopted a clear and comprehensible system for the remuneration of the members of the Board of Management.The Board of Management remuneration system must be submitted to the General Meeting for approval whenever a material amendment is planned to be effected,but at least every four years.The most recent submission of the remuneration system for the Board of Management of Allianz SE to the General Meeting for approval was on 5 May 2021.In addition,the Board of Management and Supervisory Board must prepare a clear and comprehensible annual report on the remuneration of current and former Board members,which must be submitted to the General Meeting for approval each year.The current remuneration system for the Board of Management and the Remuneration Report,including the auditors report,are available on the Allianz company website.The Board of Management reports regularly and comprehensively to the Supervisory Board on business development,the companys net assets,financial position and earnings,planning and achievement of objectives,business strategy,and risk exposure.Details on the Board of Managements reporting to the Supervisory Board are laid down in the information rules issued by the Supervisory Board.Important decisions of the Board of Management require approval by the Supervisory Board.Approval requirements are stipulated by law,by the Statutes,or in individual cases by decisions of the General Meeting.Supervisory Board approval is required,for example,for certain capital measures,intercompany agreements,and the launch of new business segments or the closure of existing ones.Approval is also required for acquisitions of companies and holdings in companies as well as for divestments of Group companies that exceed certain thresholds.Moreover,the Agreement concerning the Participation of Employees in Allianz SE in the version dated June 2021(hereinafter“SE Agreement”)requires the approval of the Supervisory Board for the appointment of the member of the Board of Management responsible for labor and social affairs.Supervisory Board The Supervisory Board oversees and advises the Board of Management on managing the business.It is also responsible for appointing the members of the Board of Management,determining their overall remuneration,succession planning for the Board of Management,and reviewing Allianz SEs and the Allianz Groups annual financial statements.The Supervisory Boards activities in the financial year 2023,including an individualized disclosure of the meeting participation,are described in the Supervisory Board Report.The German Co-Determination Act(“Mitbestimmungsgesetz”)does not apply to Allianz SE because it has the legal form of a European Company(SE).Instead,the size and composition of the Supervisory Board is determined by general European SE regulations.These regulations are implemented in the Statutes and via the SE Agreement.The Supervisory Board comprises twelve members,including six shareholder representatives appointed by the General Meeting.The six employee representatives are appointed by the SE Works Council.The specific procedure for their appointment is laid down in the SE Agreement,which stipulates that the six employee representatives must be allocated in proportion to the number of Allianz employees in the different countries.The Supervisory Board currently in office includes four employee representatives from Germany including one trade union representative and one each from France and Italy.According to 17(2)SEAG,the Supervisory Board of Allianz SE shall comprise at least 30%women and at least 30%men.The regular term of appointment for the members of the Supervisory Board of Allianz SE is four years.Moreover,a staggered board with different appointment periods was introduced with the elections to the Supervisory Board on 4 May 2022.The composition of the Supervisory Board is presented in the Supervisory Board Report.Further information on the Supervisory Board members is presented in Mandates of the Members of the Board of Management.Furthermore,the composition and a general description of the operations of the Supervisory Board are available on the Allianz company website,which also provides the CVs of the Supervisory Board members.B _ Corporate Governance 16 Annual Report 2023 Allianz Group The Supervisory Board takes all decisions with a simple majority.The special requirements for appointing members to the Board of Management,as stipulated in the German Co-Determination Act,and the requirement to have a Conciliation Committee,do not apply to an SE.In the event of a tie,the casting vote lies with the Chairperson of the Supervisory Board,who at Allianz SE must be a shareholder representative.If there is a tie and the Chairperson is not present,the casting vote lies with the vice chairperson elected at the shareholder representatives proposal.A second vice chairperson is elected at the employee representatives proposal.The Supervisory Board regularly reviews the efficiency of its activities and the activities of its committees in the framework of a so-called self-assessment.The self-assessment is carried out either by means of an internal questionnaire or by consulting an external consultant.In 2023,the self-assessment was carried out using an internal questionnaire.The Supervisory Board plenary session discusses recommendations for improvements and adopts appropriate measures on the basis of recommendations from the Standing Committee.In addition,the fitness and propriety of the individual members of the Supervisory Board are reviewed as part of an annual self-evaluation required by supervisory law,and a development plan for the Supervisory Board is drawn up on this basis.The Supervisory Board and the Audit Committee also hold regular sessions that are not attended by any of the members of the Board of Management.Part of the Supervisory Boards work is carried out by its committees.The Supervisory Board receives regular reports on the activities of its committees.The composition of committees and the tasks assigned to them are governed by the Supervisory Boards Rules of Procedure,which can be found on the Allianz company website.Supervisory Board committees Supervisory Board committees Responsibilities Standing Committee 5 members Chairperson:Chairperson of the Supervisory Board(Michael Diekmann)Two further shareholder representatives(Herbert Hainer,Sophie Boissard)Two employee representatives(Jrgen Lawrenz,Jean-Claude Le Goar)Approval of certain transactions which require the approval of the Supervisory Board,e.g.,capital measures,acquisitions,and disposals of participations.Preparation of the Declaration of Conformity pursuant to 161 of the German Stock Corporation Act and review of corporate governance.Preparation of the self-assessment of the Supervisory Board.Audit Committee 5 members Chairperson:appointed by the Supervisory Board (Dr.Friedrich Eichiner)Three shareholder representatives(in addition to Dr.Friedrich Eichiner:Sophie Boissard,Michael Diekmann)Two employee representatives (Jean-Claude Le Goar,Martina Grundler)Initial review of the annual financial statements of Allianz SE and the Allianz Group,the Management Reports(including Non-financial Statement and Risk Report)and the proposal for the appropriation of net earnings,review of half-yearly reports and,where applicable,quarterly financial reports or statements.Monitoring of the financial reporting process,the effectiveness of the internal control and risk management system,internal audit system,and legal and compliance issues.Monitoring of the audit procedures,including the selection and independence of the auditor,the quality of the audit procedures and the services additionally rendered by the auditor,awarding of the audit contract,and determining the audit areas of focus.Discussion to evaluate the audit risk,audit strategy,and audit planning.Risk Committee 5 members Chairperson:appointed by the Supervisory Board (Michael Diekmann)Three shareholder representatives(in addition to Michael Diekmann:Christine Bosse,Dr.Friedrich Eichiner)Two employee representatives(Primiano Di Paolo,Frank Kirsch)Monitoring of the general risk situation and special risk developments in the Allianz Group.Monitoring of the effectiveness of the risk management system.Initial review of the Risk Report and other risk-related statements in the annual financial statements and consolidated financial statements as well as management reports,informing the Audit Committee of the results of such reviews.Supervisory Board committees Responsibilities Personnel Committee 3 members Chairperson:Chairperson of the Supervisory Board(Michael Diekmann)One further shareholder representative (Herbert Hainer)One employee representative (Gabriele Burkhardt-Berg)Preparation of the appointment of Board of Management members.Preparation of plenary session resolutions on the compensation system and resolutions on setting of the total compensation of Board of Management members.Preparation of the Remuneration Report.Conclusion,amendment,and termination of contracts with Board of Management members unless reserved for the plenary session.Long-term succession planning for the Board of Management.Approval of the assumption of other mandates by Board of Management members.Nomination Committee 3 members Chairperson:Chairperson of the Supervisory Board (Michael Diekmann)Two further shareholder representatives(Christine Bosse,Dr.Friedrich Eichiner)Setting of concrete objectives for the composition of the Supervisory Board.Establishment of selection criteria for shareholder representatives on the Supervisory Board in compliance with the Codes recommendations on the composition of the Supervisory Board.Selection of suitable candidates for election to the Supervisory Board as shareholder representatives.Technology Committee 5 members Chairperson:appointed by the Supervisory Board(Rashmy Chatterjee)Three shareholder representatives(in addition to Rashmy Chatterjee:Michael Diekmann,Dr.Friedrich Eichiner)Two employee representatives(Gabriele Burkhardt-Berg,Jrgen Lawrenz)Regular exchange regarding technological developments.In-depth monitoring of the Board of Managements technology and innovation strategy.Support of the Supervisory Board in the oversight of the implementation of the Board of Managements technology and innovation strategy.Sustainability Committee 5 members Chairperson:appointed by the Supervisory Board (Christine Bosse)Three shareholder representatives(in addition to Christine Bosse:Sophie Boissard,Michael Diekmann)Two employee representatives(Gabriele Burkhardt-Berg,Frank Kirsch)Regular exchange regarding sustainability-related issues(Environment,Social,Governance ESG).Close monitoring of the Board of Managements sustainability strategy.Support of the Supervisory Board in the oversight of the execution of the Board of Managements sustainability strategy.Support of the Personnel Committee of the Supervisory Board in the preparation of the ESG-related target setting as well as the assessment of the fulfillment of the set targets for the Board of Managements remuneration.As of 31 December 2023 B _ Corporate Governance 17 Annual Report 2023 Allianz Group The objectives for the composition of the Supervisory Board(in the version of September 2022),as specified to implement legal requirements and the recommendation of the Code,are set out below.In addition to the skills profile for the overall Supervisory Board to be drawn up under the Code,the diversity concept is also included.The objectives for the composition of the Supervisory Board can be found on the Allianz company website.B _ Corporate Governance 18 Annual Report 2023 Allianz Group Objectives for the composition of Allianz SEs Supervisory Board “The aim of Allianz SEs Supervisory Board is to have members who are equipped with the necessary skills and competence to properly supervise and advise Allianz SEs management.Supervisory Board candidates should possess the professional expertise and experience,integrity,motivation and commitment,independence,and personality required to successfully carry out the responsibilities of a Supervisory Board member in a financial services institution with international operations.These objectives take into account the regulatory requirements for the composition of the Supervisory Board as well as the relevant recommendations of the German Corporate Governance Code(“GCGC”).In addition to the requirements for each individual member,a profile of skills and expertise(“Kompetenzprofil”)as well as a diversity concept are provided for the entire Supervisory Board.Employee representation within Allianz SE,according to the Agreement concerning the Participation of Employees in Allianz SE,contributes to the diversity of work experience and cultural background.Pursuant to the provisions of the German SE Participation Act(SEBG),the number of women and men appointed as German employee representatives should be proportional to the number of women and men working in the German companies.However,the Supervisory Board does not have the right to select the employee representatives.The following requirements and objectives apply to the composition of Allianz SEs Supervisory Board:I.I.Requirements relating to the individual members of the Supervisory BoardRequirements relating to the individual members of the Supervisory Board 1.Propriety1.Propriety The members of the Supervisory Board must be proper as defined by the regulatory provisions.A person is assumed to be proper as long as no facts are to be known which may cause impropriety.Therefore,no personal circumstances shall exist which according to general experience lead to the assumption that the diligent and orderly exercise of the mandate may be affected(in particular,administrative offenses or violation of criminal law,especially in connection with commercial activity).2.Fitness2.Fitness The members of the Supervisory Board must have the expertise and experience necessary for a diligent and autonomous exercise of the Allianz SE Supervisory Board mandate,in particular for exercising control of and giving advice to the Management Board as well as for the active support of the development of the company.This comprises in particular:adequate expertise in all business areas,adequate expertise in the insurance and finance sector or comparable relevant experience and expertise in other sectors,adequate expertise in the regulatory provisions material for Allianz SE(supervisory law,including Solvency II regulation,corporate and capital markets law,corporate governance),ability to assess the business risks,knowledge of accounting basics and insurance specific risk management basics.3.3.IndependenceIndependence The GCGC defines a person as independent who,in particular,does not have any business or personal relations with Allianz SE or its executive bodies,a controlling shareholder,or an enterprise associated with the latter,which may cause a substantial and not merely temporary conflict of interest.The Supervisory Board of Allianz SE states the following with regard to the further specification of independence:Former members of the Allianz SE Management Board shall not be deemed independent during the mandatory corporate law cooling-off period.Members of the Supervisory Board of Allianz SE in office for more than 12 years shall not be deemed independent.Regarding employee representatives,the mere fact of employee representation and the existence of a working relationship with the company shall not itself affect the independence of the employee representatives.Applying such definition,at least eight members of the Supervisory Board shall be independent.In case shareholder representatives and employee representatives are viewed separately,at least four of each should be independent.It has to be considered that the possible emergence of conflicts of interests in individual cases cannot generally be excluded.Potential conflicts of interest must be disclosed to the Chairperson of the Supervisory Board and will be resolved by appropriate measures.4.Time of availability4.Time of availability Each member of the Supervisory Board must ensure that he/she has sufficient time to dedicate to the proper fulfillment of the mandate of this Supervisory Board position.In addition to the mandatory mandate limitations and the GCGC recommendation for active Management Board members of listed companies(max.two mandates),the common capital markets requirements shall be considered.With regard to the Allianz SE mandate,the members shall take into account that:at least four,but as a rule six,ordinary Supervisory Board meetings are held each year,each of which requires adequate preparation,sufficient time must be set aside for the audit of the annual and consolidated financial statements,participation in the General Meeting is required,depending on possible membership in one or more of the Supervisory Board Committees,extra time planning is required for participation in these Committee meetings and to do the necessary preparation for these meetings;this applies in particular for the Audit and Risk Committee,attendance of extraordinary meetings of the Supervisory Board or of a Committee might be required to deal with special matters.5.Retirement age5.Retirement age The members of the Supervisory Board shall,as a rule,not be older than 70 years of age.6.6.Term of membershipTerm of membership The continuous period of membership for any member of the Supervisory Board should,as a rule,not exceed 12 years.7.7.Former Former AllianzAllianz SESE Management Board membersManagement Board members Former Allianz SE Management Board members are subject to the mandatory corporate law cooling-off period of two years.According to regulatory provisions,no more than two former Allianz SE Management Board members shall be members of the Supervisory Board.II.Requirements for the entire Supervisory BoardII.Requirements for the entire Supervisory Board 1.Profile1.Profile of skills and expertise for the entire Supervisory Boardof skills and expertise for the entire Supervisory Board In addition to the expertise-related requirements for the individual members,the following shall apply with respect to the expertise and experience of the entire Supervisory Board:familiarity of members in their entirety with the insurance and financial services sector,adequate expertise of the entire Board with respect to regulatorily required areas of investment management,insurance actuarial practice,accounting,adequate expertise of the entire Board with respect to technology,including cybersecurity,employee engagement and sustainability(especially Environment,Social responsibility and Governance as well as data privacy),at least one member with considerable experience in the insurance and financial services fields,at least one member with comprehensive expertise in the field of accounting and at least one other member with comprehensive expertise in the field of auditing.The expertise in the field of accounting shall consist of special knowledge and experience in the application of accounting principles and internal control and risk management systems,and the expertise in the field of auditing shall consist of special knowledge and experience in the auditing of financial statements.Accounting and auditing also include sustainability reporting and its audit and assurance,at least one member with comprehensive expertise in the field of digital transformation,specialist expertise or experience in other economic sectors,managerial or operational experience.2.2.Diversity conceptDiversity concept To promote an integrative cooperation among the Supervisory Board members,the Supervisory Board strives for an adequate diversity with respect to gender,internationality,different occupational backgrounds,professional expertise,and experience:The Supervisory Board shall be composed of at least 30%women and at least 30%men.The representation of women is generally considered to be the joint responsibility of the shareholder and employee representatives.At least four of the members must,on the basis of their origin or function,represent regions or cultural areas in which Allianz SE conducts significant business.For Allianz SE as a Societas Europaea,the agreement concerning the Participation of Employees in Allianz SE provides that Allianz employees from different E.U.member states are considered in the allocation of employee representatives Supervisory Board seats.In order to provide the Board with the most diverse sources of experience and specialist knowledge possible,the members of the Supervisory Board shall complement each other with respect to their background,professional experience,and specialist knowledge.”B _ Corporate Governance 19 Annual Report 2023 Allianz Group The Supervisory Board pursues these objectives,and thus also the diversity concept,when nominating candidates for shareholder representatives.As employee representatives are appointed according to different national provisions,the potential to influence the selection of employee representatives is limited.The Supervisory Board of Allianz SE is composed in accordance with these objectives,including the diversity concept:According to the assessment of the Supervisory Board,all shareholder representatives i.e.,Ms.Boissard,Ms.Bosse,Ms.Chatterjee as well as Mr.Diekmann,Dr.Eichiner and Mr.Hainer are independent within the meaning of the objectives(see No.I.3).The members of the Audit Committee as a whole are familiar with the sector in which the company operates.All shareholder representatives on the Audit Committee,including the Chairperson of the Committee,have comprehensive expertise in the fields of accounting and auditing.The expertise in the field of accounting consists of special knowledge and experience in the application of accounting principles and internal control and risk management systems,and the expertise in the field of auditing consists of special knowledge and experience in the auditing of financial statements.Accounting and auditing also include sustainability reporting and its audit.The Chairperson of the Audit Committee,Dr.Eichiner,is a business administration graduate.He gained extensive knowledge and experience in both accounting and auditing during his many years as Chief Financial Officer of a DAX-listed company.Ms.Boissard also acquired extensive knowledge and experience in both of these areas during her many years as a member of the Audit Committee and as part of her role as CEO of Korian S.A.Finally,Mr.Diekmann also has in-depth knowledge and experience in both areas due to his many years of service first as CEO and later as Chairperson of the Supervisory Board and long-standing member of the Audit Committee of the Supervisory Board of Allianz SE.The employee representatives on the Audit Committee,Ms.Grundler and Mr.Le Goar,also have expertise in the fields of accounting and auditing due to their long-standing membership of the Audit Committee of the Supervisory Board of Allianz SE.With five female and seven male Supervisory Board members,the gender ratio of 30%required under the German Act on the Equal Participation of Women and Men in Executive Positions is met.In addition,the Supervisory Board has five members with international backgrounds.The skills profile is also met by the Supervisory Board as a whole.Based on the objectives for its composition,the Supervisory Board of Allianz SE has developed the following qualification matrix.Supervisory Board of Allianz SE:Qualification matrix Diekmann Hainer Boissard Bosse Chatterjee Eichiner Burkhardt-Berg Le Goar Grundler Kirsch Lawrenz Di Paolo Tenure Joined Board in 2017 2017 2017 2012 2022 2016 2012 2018 2016 2018 2015 2022 Personal Appropriateness Regulatory Requirement (Fit&Proper)Independence1 No Overboarding1 Diversity Gender male male female female female male female male female male male male Nationality German German French Danish Singaporean German German French German German German Italian Expertise Accounting Insurance Actuarial Practice Investment Management Technology Digital Transformation Employee Engagement Sustainability Regional Expertise North America -Growth Markets -Europe(E.U.)Criteria met.Expertise criteria based on annual self-evaluation by the Supervisory Board.Tick means at least“Good knowledge”and implies the capacity to understand the relevant matters well,and to take educated decisions.Good knowledge may result from existing qualifications and from the training regularly attended by all members of the Supervisory Board.On a scale from A-E this requires at least grade B.1_According to the German Corporate Governance Code.B _ Corporate Governance 20 Annual Report 2023 Allianz Group The remuneration of the Supervisory Board is laid down in the Statutes of Allianz SE.The most recent resolution on Supervisory Board remuneration was passed at the Annual General Meeting on 4 May 2023.The corresponding resolution of the Annual General Meeting and the Remuneration Report,including the auditors report,are available at the Allianz company website.General Meeting Shareholders exercise their rights at the General Meeting.The General Meeting elects the shareholder representatives of the Supervisory Board and decides on the approval of the actions taken by the Board of Management and the Supervisory Board.It decides,in particular,on the appropriation of net earnings,capital measures,the election of the auditor,and approval of intercompany agreements.It also decides on the approval of the remuneration system for the members of the Board of Management presented by the Supervisory Board,the remuneration of the Supervisory Board,the approval of the Remuneration Report prepared by the Board of Management and the Supervisory Board,as well as changes to the Companys Statutes.Resolutions of the General Meeting shall be passed,unless mandatory legal provisions require otherwise,by a simple majority of the votes cast.In accordance with European regulations and the Statutes,amendments to the Statutes require at least a two-thirds majority of the votes cast if less than half of the share capital is represented at the General Meeting.In addition,such resolutions require the simple majority of the capital stock represented at the time of the resolution,unless higher thresholds are stipulated by law.When adopting resolutions,each share confers one vote.Each year,an Annual General Meeting is held,at which the Board of Management and Supervisory Board give an account of the preceding financial year.For special circumstances,the German Stock Corporation Act provides for the convening of an Extraordinary General Meeting.If authorized by the Statutes,general meetings can also be held in virtual format.Corporate governance practices The Allianz Group has an appropriate and effective internal control system for reviewing and monitoring its operating activities and business processes,in particular financial reporting,as well as compliance with regulatory requirements.The requirements placed on the internal control system are essential,not only for the resilience and value of the company,but also to retain the confidence of the capital market,our customers,and the public.An assessment of the appropriateness and effectiveness of the internal control system as part of the System of Governance is conducted regularly in the course of the review of the business organization.In addition,the Allianz Group has implemented an appropriate and effective framework and measures to identify,assess,manage,and communicate risks.For further information on the internal control system and risk management system of Allianz,please refer to the Risk and Opportunity Report.Integrity is at the core of our compliance programs and underpins the trust of our customers,shareholders,business partners,and employees.The Compliance function fosters a corporate culture of individual and collective responsibility for ethical conduct and adherence to the rules.For further information on the compliance management system of Allianz,please refer to the Non-Financial Statement.Code of Conduct Our Code of Conduct and the internal compliance policies and guidelines derived from it provide all employees,managers,and executive board members with clear and practical guidance,enabling them to act in line with the values of the Allianz Group.The rules of conduct established by the Code of Conduct are binding for all employees worldwide and form the basis for our compliance programs.The Code of Conduct is available on the Allianz company website.Directors Dealings Members of the Board of Management and the Supervisory Board,as well as persons closely associated with them,are obliged by the E.U.Market Abuse Regulation to notify both Allianz SE and the German Federal Financial Supervisory Authority of any transactions carried out by them involving shares or debt securities of Allianz SE or related financial derivatives or other related financial instruments as soon as the value of the acquisition or disposal transactions by the member reaches or exceeds 20 thou in total within a calendar year.These disclosures are published on the Allianz company website.Accounting and auditing The Allianz Group prepares its accounts according to 315e HGB on the basis of the International Financial Reporting Standards(IFRS)as applicable in the European Union.The annual financial statements of Allianz SE are prepared in accordance with German law and accounting standards.The auditor of the annual financial statements and the auditor in charge of the review of the half-yearly financial report were elected by the Annual General Meeting on 4 May 2023.The audit of the financial statements covers the individual financial statements of Allianz SE and the consolidated financial statements of the Allianz Group.In addition,the auditor audits the(Group)Management Report,including the Non-Financial Statement.In accordance with regulatory requirements,the solvency statements are also audited by the auditor,who also has to audit the Remuneration Report.The Non-Financial Statement and the Remuneration Report for the financial year 2023 were also subjected to a substantive audit by the auditor,in addition to the statutory audit scope.B _ Corporate Governance 21 Annual Report 2023 Allianz Group We inform our shareholders,financial analysts,the media,and the general public about the Companys situation on a regular basis and in a timely manner.The annual financial statements of Allianz SE,the consolidated financial statements of the Allianz Group,and the respective Management Reports are made publicly available within 90 days of the end of each financial year.Additional information is provided in the Allianz Groups half-yearly financial reports and quarterly statements.Information is also made available at the Annual General Meeting,at conference calls for analysts and journalists,and on the corporate website.The Allianz company website also provides a financial calendar listing the dates of major publications and events,such as annual reports,half-yearly financial reports,quarterly statements,Annual General Meetings,and analyst conference calls as well as financial press conferences.Information in accordance with the German Act on the Equal Participation of Women and Men in Executive Positions in the Private and the Public Sectors The section below outlines the targets set for Allianz SE and the other companies of the Allianz Group in Germany that are subject to co-determination(the“subsidiaries concerned”)for the Supervisory Board,the Board of Management,and the two management levels below the Board of Management.Pursuant to 17(2)SEAG,the share of women and men among the members of the Supervisory Board of Allianz SE has to be at least 30ch.The Supervisory Board fulfills this requirement as it includes five women(41.7%)and seven men(58.3%).Pursuant to 16(2)SEAG,it has to be ensured that the Board of Management includes at least one female and at least one male member when appointing members to the Board of Management.This statutory requirement is met by the current Board of Management of Allianz SE.As at 31 December 2023,the proportion of women on the Board of Management was 33.3%.Since 1 January 2024,the proportion of women on the Board of Management has been 44.4%.With regard to the proportion of women on the first and second management levels below the Board of Management,the Board of Management has set targets of 30%for each,to be met by 31 December 2024.As at 31 December 2023,this target was already met for the first management level with a percentage of women of 34.2%,but was not yet met for the second level with a percentage of 28.6%.With regard to the Supervisory Boards of the subsidiaries concerned,the target quotas for nine of those eleven subsidiaries were set at 33%,the target quota for one subsidiary concerned was set at 35%,and the target quota for the remaining subsidiary concerned was set at 50%for 31 December 2024.Eight of the eleven subsidiaries reached this target ahead of the due date as at 31 December 2023.The target quotas for the respective Boards of Management of the subsidiaries concerned were between 25%and 50%(35.7%on average)for 31 December 2024 and were already met by eight of the eleven companies as of 31 December 2023.For the subsidiaries concerned,the respective Boards of Management have set target quotas of 30%to 40%(32.9%on average)for 31 December 2024 for the first management level and target quotas of 30%to 43.5%(39.2%on average)for the second management level below the Board of Management.Due to internal restructurings,one of the eleven subsidiaries no longer has any employees below the level of the Board of Management.Therefore,reference will only be made to ten subsidiaries in the following paragraph.As at 31 December 2023,the targets were met by four of the ten subsidiaries concerned for the first management level,while two of the ten companies met the target set for the second management level ahead of the due date.Despite increased efforts to promote women in the Allianz Group and in the individual subsidiaries,it was not possible to reach the targets ahead of the due date in the other cases as it was not always possible to identify suitable female candidates for all vacant positions.Allianz continues to work to achieve these targets.B _ Corporate Governance 22 Annual Report 2023 Allianz Group The following information is provided pursuant to 289a and 315a of the German Commercial Code(“Handelsgesetzbuch HGB”)and 176(1)of the German Stock Company Act(“Aktiengesetz AktG”).As of 31 December 2023,the share capital of Allianz SE was 1,169,920,000.It was divided into 391,718,983 registered and fully paid-up shares with no par value.All shares carry the same rights and obligations.Each no-par value share carries one vote.Shares may only be transferred with the consent of the company.An approval duly applied for may only be withheld if it is deemed necessary in the companys interest on exceptional grounds.The applicant will be informed of the reasons.Shares acquired by employees of the Allianz Group as part of the employee stock purchase plan are generally subject to a three-year lock-up period.During the lock-up period,employees can exercise their voting rights.Allianz SE is not aware of any direct or indirect interests in the share capital that exceed 10%of the voting rights.There are no shares with special rights conferring powers of control.The appointment and removal of members of Allianz SEs Board of Management is governed by Articles 9(1),39(2)and 46 of the SE Regulation,84,85 AktG,24(3)and 47 No.1 of the German Insurance Supervision Act(“Versicherungsaufsichtsgesetz VAG”),and the Statutes.According to the Statutes,the Board of Management shall consist of at least two persons;the Supervisory Board determines the number of any additional members(5(1)of the Statutes).The members of the Board of Management are appointed by the Supervisory Board for a term of up to five years;reappointment is permitted for a maximum of five years in each case(5(3)of the Statutes).A simple majority of the votes cast in the Supervisory Board is required to appoint members to the Board of Management.In the case of a tie vote,the Chairperson of the Supervisory Board,who pursuant to Article 42 of the SE Regulation must be a shareholder representative,shall have the casting vote(8(3)of the Statutes).If the Chairperson does not participate in the vote,the Vice-Chairperson shall have the casting vote,provided they are a shareholder representative.A Vice-Chairperson who is an employee representative has no casting vote(8(3)of the Statutes).Amendments to the Statutes are governed by Article 59 SE Regulation,179 AktG,and the Statutes.13(4)of the Statutes of Allianz SE stipulates that,unless mandatory law requires otherwise,changes to the Statutes require a two-thirds majority of the votes cast at a General Meeting or,if at least one half of the share capital is represented,a simple majority of the votes cast.Where the law requires a majority in capital for a shareholder resolution,a simple majority of the capital represented at the General Meeting is sufficient,provided this is in line with legal requirements.The Supervisory Board may alter the wording of the Statutes(179(1)AktG and 10 of the Statutes).The Board of Management is authorized to issue shares as well as to acquire and use treasury shares as follows:It may increase the companys share capital on or before 3 May 2027,with the approval of the Supervisory Board,by issuing new registered no-par value shares against contributions in cash and/or in kind,on one or more occasions:Up to a total of 467,968,000(Authorized Capital 2022/I):In case of a capital increase against cash contribution,the Board of Management may exclude the shareholders subscription rights for these shares with the consent of the Supervisory Board(i)for fractional amounts,(ii)in order to safeguard the rights pertaining to holders of convertible bonds or bonds with warrants,including mandatory convertible bonds,and(iii)in the event of a capital increase of up to 10%,if the issue price of the new shares is not significantly below the stock market price.The Board of Management may furthermore exclude the shareholders subscription rights with the consent of the Supervisory Board in the event of a capital increase against contributions in kind.Up to a total of 15,000,000(Authorized Capital 2022/II):The shareholders subscription rights are excluded.New shares may only be issued to employees of Allianz SE and its Group companies.The companys share capital is conditionally increased by up to 116,992,000(Conditional Capital 2022).This conditional capital increase will only be carried out to the extent that the holders of convertible bonds,bonds with warrants,convertible participation rights,participation rights,and subordinated financial instruments issued against cash by Allianz SE or its subsidiaries,based on the authorizations granted by the General Meeting on 4 May 2022,exercise their conversion or option rights,or to the extent that convers

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  • 微软(MICROSOFT)2023年年度报告(英文版)(85页).pdf

    1Dear shareholders,colleagues,customers,and partners,We are living through a time of historic challenge and opportunity.As I write this,the world faces ongoing economic,social,and geopolitical volatility.At the same time,we have entered a new age of AI that will fundamentally transformproductivity for every individual,organization,and industry on earth,and help us address some of our most pressingchallenges.This next generation of AI will reshape every software category and every business,including our own.Forty-eight yearsafter its founding,Microsoft remains a consequential company because time and time againfrom PC/Server,toWeb/Internet,to Cloud/Mobilewe have adapted to technological paradigm shifts.Today,we are doing so once again,aswe lead this new era.Amid this transformation,our mission to empower every person and every organization on the planet to achievemore remains constant.As a company,we believe we can be the democratizing force for this new generation oftechnology and the opportunity it will help unlock for every country,community,and individual,while mitigating its risks.Here are just a few examples of how we are already doing this:Leading electronic health records vendor Epic is addressing some of the biggest challenges facing thehealthcare industry todayincluding physician burnoutby deploying a wide range of copilot solutions builton Azure OpenAI Service and Dragon Ambient eXperience Copilot.Mercado Libre is reducing the time its developers spend writing code by more than 50 percent with GitHubCopilot,as the company works to democratize e-commerce across Latin America.Mercedes-Benz is making its in-car voice assistant more intuitive for hundreds of thousands of drivers usingChatGPT via the Azure OpenAI Service.Lumen Technologies is helping its employees be more productive,enabling them to focus on higher value-added activities,by deploying Microsoft 365 Copilot.Nonprofit The Contingent is matching foster families with children in need using Dynamics 365,Power BI,andAzure,with an eye on using AI to amplify its work across the US.And,Taiwans Ministry of Education has built an online platform to help elementary and high school studentslearn English using Azure AI.To build on this progress,we remain convicted on three things:First,we will maintain our lead as the top commercialcloud while innovating in consumer categories,from gaming to professional social networks.Second,because we knowthat maximum enterprise value gets created during platform shifts like this one,we will invest to accelerate our lead in AIby infusing this technology across every layer of the tech stack.And,finally,we will continue to drive operating leverage,aligning our cost structure with our revenue growth.As we make progress on these priorities,we delivered strong results in fiscal year 2023,including a record$211 billion inrevenue and over$88 billion in operating income.A NEW ERA OF AIThere are two breakthroughs coming together to define this new era of AI.The first is the most universal interface:naturallanguage.The long arc of computing has,in many ways,been shaped by the pursuit of increasingly intuitive human-computer interfaceskeyboards,mice,touch screens.We believe we have now arrived at the next big step forwardnatural languageand will quickly go beyond,to see,hear,interpret,and make sense of our intent and the world aroundus.The second is the emergence of a powerful new reasoning engine.For years,weve digitized daily life,places,and thingsand organized them into databases.But in a world rich with data,what has been most scarce is our ability to reason overit.This generation of AI helps us interact with data in powerful new waysfrom completing or summarizing text,todetecting anomalies and recognizing imagesto help us identify patterns and surface insights faster than ever.Together,these two breakthroughs will unlock massive new opportunity.And,in fact,just last month we announced ourvision for Copilot,an everyday AI companion.We are building Copilot into all our most used products and experiencesand allowing people to summon its power as a standalone app as well.Just like you boot up an OS to access applicationsor use a browser to visit websites today,our belief is that you will invoke a Copilot to do all those activities and more:toshop,to code,to analyze,to learn,to create.2As a company,any time we approach a transition like this,we do so responsibly.We believe AI should be as empoweringacross communities as it is powerful,and were committed to ensuring it is responsibly built and designed,with safety inmind from the outset.OUR OPPORTUNITYEvery customer solution area and every layer of our tech stack will be reimagined for the AI era.And thats exactly whatweve already begun to do:InfrastructureFour years ago,we first invested in our AI supercomputer,with a goal of building the best cloud for training and inference.Today,its being used by our partner OpenAI to power its best-in-class foundation models and services,including one ofthe fastest-growing consumer apps everChatGPT.NVIDIA,as well as leading AI startups like Adept and Inflection,isalso using our infrastructure to build its own breakthrough models.More broadly,organizations continue to choose our ubiquitous computing fabricfrom cloud to edgeto run theirmission-critical applications.We continued to see more cloud migrations to Azure this past fiscal year,as it remains earlywhen it comes to the long-term cloud opportunity.And we also continue to lead in hybrid computing with Azure Arc,whichnow has 18,000 customers.Data and AIEvery AI app starts with data,and having a comprehensive data and analytics platform is more important than ever.OurIntelligent Data Platform brings together operational databases,analytics,and governance so organizations can spendmore time creating value and less time integrating their data estate.We also introduced Microsoft Fabric this year,whichunifies compute,storage,and governance with a disruptive business model.With Azure AI,we are making foundation models available as platforms to our customers.We offer the best selection ofindustry-leading frontier and open models.In January,we made the Azure OpenAI Service broadly available,bringingtogether advanced models,including ChatGPT and GPT-4,with the enterprise capabilities of Azure.More than 11,000organizations across industries are already using it for advanced scenarios like content and code generation.Meta choseus this summer as its preferred cloud to commercialize its Llama family of models.And,with Azure AI Studio,we providea full lifecycle toolchain customers can use to ground these models on their own data,create prompt workflows,and helpensure they are deployed and used safely.Digital and app innovationGitHub Copilot is fundamentally transforming developer productivity,helping developers complete coding tasks 55 percentfaster.More than 27,000 organizations have chosen GitHub Copilot for Business,and to date more than 1 million peoplehave used GitHub Copilot to code faster.We also announced our vision for the future of software development withGitHub Copilot X,which will bring the power of AI throughout the entire software development lifecycle.All up,GitHubsurpassed$1 billion in annual recurring revenue for the first time this fiscal year.Were also applying AI across our low-code/no-code toolchain to help domain experts across an organization automateworkflows,create apps and webpages,build virtual agents,or analyze data,using just natural language with copilots inPower Platform.More than 63,000 organizations have used AI-powered capabilities in Power Platform to date.Business applicationsWe are bringing the next generation of AI to employees across every job function and every line of business withDynamics 365 Copilot,which works across CRM and ERP systems to reduce burdensome tasks like manual data entry,content generation,and notetaking.In fact,our own support agents are using Copilot in Dynamics 365 Customer Serviceto resolve more cases faster and without having to call on peers to help.With our Supply Chain Platform,were helpingcustomers apply AI to predict and mitigate disruptions.And,with our new Microsoft Sales Copilot,sellers can infuse theircustomer interactions with data from CRM systemsincluding both Salesforce and Dynamicsto close more deals.3All up,Dynamics surpassed$5 billion in revenue over the past fiscal year,with our customer experience,service,andfinance and supply chain businesses each surpassing$1 billion in annual sales.IndustryAcross industries,we are rapidly becoming the partner of choice for any organization looking to generate real value fromAI.In healthcare,for example,we introduced the worlds first fully automated clinical documentation application,DAXCopilot.The application helps physicians reduce documentation time by half,freeing them to spend more time face toface with patients.And Epic will integrate it directly into its electronic health records system.And,in retail,we introduced new tools to help companies manage their day-to-day operations and digitize their physicalstores.Modern workWe are rapidly evolving Microsoft 365 into an AI-first platform that enables every individual to amplify their creativity andproductivity,with both our established applications like Office and Teams,as well as new apps like Designer,Stream,andLoop.Microsoft 365 is designed for todays digitally connected,distributed workforce.This year,we also introduced a new pillar of customer value with Microsoft 365 Copilot,which combines next-generationAI with business data in the Microsoft Graph and Microsoft 365 applications to help people be more productive andunleash their creativity at work.Just last month,I was excited to announce that we will make Microsoft 365 Copilotgenerally available to our commercial customers later this year.We continue to build momentum in Microsoft Teams across collaboration,chat,meetings,and calls.We introduced a newversion of Teams that delivers up to two times faster performance,while using 50 percent less memory.We alsointroduced Teams Premium to meet enterprise demand for AI-powered features like intelligent meeting recaps.All up,Teams usage surpassed 300 million monthly active users this year.With Microsoft Viva,we have created a new category for employee experience.Copilot in Viva offers leaders a new wayto build high-performance teams by prioritizing both productivity and employee engagement.This year,Viva surpassed35 million monthly active users.SecurityAs the rate and pace of cyberthreats continue to accelerate,security is a top priority for every organization.Ourcomprehensive,AI-powered solutions give defenders the advantage.With Security Copilot,were combining largelanguage models with a domain-specific model informed by our threat intelligence and 65 trillion daily security signals,totransform every aspect of security operations center productivity.All up,more than 1 million organizations now count on our comprehensive,AI-powered solutions to protect their digitalestates,and our security business surpassed$20 billion in annual revenue,as we help protect customers across cloudsand endpoint platforms.Search,advertising,and newsWe are reshaping daily search and web habits with our new Bing and Microsoft Edge browser,which brings togethersearch,browsing,chat,and AI into one unified experience to deliver better search,more complete answers,a new chatexperience,and the ability to generate content.We think of these tools as an AI copilot for the web.We are also bringing these breakthrough capabilities to businesses,with Bing Chat Enterprise,which offers commercialdata protection,providing an easy on-ramp for any organization looking to get the benefit of next-generation AI today.Although its early in our journey,Bing users engaged in more than 1 billion chats and created more than 750 millionimages over the past year as they apply these new tools to get things done.And Edge has taken share for nineconsecutive quarters.4More broadly,we continue to expand our opportunity in advertising.This year,Netflix chose us as its exclusive technologyand sales partner for its first ad-supported subscription offering,a validation of the differentiated value we provide to anypublisher looking for a flexible partner to build and innovate with them.LinkedInThe excitement around AI is creating new opportunities across every functionfrom marketing,sales,service,andfinance,to software development and security.And LinkedIn is increasingly where people are going to learn,discuss,anduplevel their skills.We are using AI to help our members and customers connect to opportunities and tap into theexperiences of experts on the platform.In fact,our AI-powered articles are already the fastest-growing traffic driver to thenetwork.All up,LinkedIns revenue surpassed$15 billion for the first time this fiscal year,a testament to how mission critical theplatform has become to help more than 950 million members connect,learn,sell,and get hired.GamingIn gaming,we are rapidly executing on our ambition to be the first choice for people to play great games whenever,wherever,and however they want.With Xbox Game Pass,we are redefining how games are distributed,played,andviewed.Content is the flywheel behind the services growth,and our pipeline has never been stronger.It was especiallyenergizing to release Starfield this fall to broad acclaim,with more than 10 million players in the first month post-launchalone.Earlier this month,we were thrilled to close our acquisition of Activision Blizzard,and we look forward to sharing more inthe coming months about how,together,we will bring the joy of gaming to more people around the world.Devices and creativityFinally,were turning Windows into a powerful new AI canvas with Copilot,which rolled out as part of a Windows 11update last month.It uniquely incorporates the context and intelligence of the web,your work data,and what you aredoing in the moment on your PC to provide better assistance,while keeping your privacy and security at the forefront.Overall,the number of devices running Windows 11 more than doubled in the past year.And we are also transforminghow Windows is experienced and managed with Azure Virtual Desktop and Windows 365,which together surpassed$1 billion in annual revenue for the first time.OUR RESPONSIBILITYAs we pursue our opportunity,we are also working to ensure technology helps us solve problemsnot create new ones.To do this,we focus on four enduring commitments that are central to our mission and that take on even greaterimportance in this new era.For us,these commitments are more than just words.Theyre a guide to help us makedecisions across everything we doas we design and develop products,shape business processes and policies,help ourcustomers thrive,build partnerships,and morealways asking ourselves critical questions to ensure our actions arealigned with them.How can we expand opportunity?First,we believe access to economic growth and opportunity should reach every person,organization,community,andcountry.And although AI can serve as a catalyst for opportunity and growth,we must first ensure everyone has access tothe technologies,data,and skills they need to benefit.To achieve this,we are focused on getting technology into the hands of nonprofits,social entrepreneurs,and other civilsociety organizations to help them digitally transform,so they can help address some of societys biggest challenges.Thisyear,we provided nonprofits with over$3.8 billion in discounted and donated technology.Nearly 325,000 nonprofits usedour cloud.And to help them tap the potential of AI,were building new AI capabilities for fundraising,marketing,andprogram delivery.AI will displace some jobs,but it will also create new ones.Thats why we aim to train and certify 10 million people by2025 with the skills for jobs and livelihoods in an increasingly digital economy.Since July 2020,weve helped 8.5 millionpeople,including 2.7 million this year.Weve also focused on skilling women and underrepresented communities incybersecurity,working across 28 countries and with nearly 400 US community colleges to scale our efforts.5Finally,to help people learn more about AI,we launched the first online Professional Certificate on Generative AI inpartnership with LinkedIn Learning,created AI tools for educators,and held our first AI Community Learning event in theUS.These events will be replicated around the world and localized in 10 languages over the next year.We also partneredto launch a Generative AI Skills Grant Challenge to explore how nonprofit,social enterprise,and research or academicinstitutions can empower the workforce to use this new generation of AI.How can we earn trust?To create positive impact with technology,people need to be able to trust the technologies they use and the companiesbehind them.For us,earning trust spans the responsible use of AI,protecting privacy,and advancing digital safety andcybersecurity.Our commitment to responsible AI is not new.Since 2017,weve worked to develop our responsible AI practice,recognizing that trust is never given but earned through action.We have translated our AI principles into a core set of implementation processes,as well as tools,training,and practicesto support compliance.But internal programs arent enough.We also enable our customers and partners to develop anddeploy AI safely,including through our AI customer commitments and services like Azure AI Studio,with its content safetytooling and access to our Responsible AI dashboard.Building AI responsibly requires that we work with other industry leaders,civil society,and governments to advocate for AIregulations and governance globally.This year,we released our Governing AI Blueprint,which outlines concrete legal andpolicy recommendations for AI guardrails.We are signatories to the eight voluntary commitments developed with the USWhite House,and proud of the six additional commitments weve made to further strengthen and operationalize theprinciples of safety,security,and trust.The era of AI heightens the importance of cybersecurity,and we deepened our work across the private and public sectorsto improve cyber-resilience.Weve continued to support Ukraine in defending critical infrastructure,detecting anddisrupting cyberattacks and cyberinfluence operations,and providing intelligence related to these attacks.Our MicrosoftThreat Analysis Center team produced more than 500 intelligence reports to help keep customers and the public informed.And we published our third annual Microsoft Digital Defense Report,sharing our learnings and security recommendations.We also remain committed to creating safe experiences online and protecting customers from illegal and harmful contentand conduct,while respecting human rights.We supported the Christchurch Call Initiative on Algorithmic Outcomes toaddress terrorist and violent and extremist content online.And through the World Economic Forums Global Coalition forDigital Safety,we co-led the development of new global principles for digital safety.Protecting customers privacy and giving them control of their data is more important than ever.Weve begun our phasedrollout of the EU Data Boundary,supporting our commercial and public sector customers need for data sovereignty.Andeach month,more than 3 million people exercise their data protection rights through our privacy dashboard,makingmeaningful choices about how their data is used.How can we protect fundamental rights?In an increasingly digital world,we have a responsibility to promote and protect peoples fundamental rights and addressthe challenges technology creates.For us,this means upholding responsible business practices,expanding connectivityand accessibility,advancing fair and inclusive societies,and empowering communities.In 2023,we worked diligently to anticipate harmful uses of our technology and put guardrails on the use of technologiesthat are consequential to peoples lives or legal status,create risk of harm,or threaten human rights.We will continue toassess the impact of our technologies,engage our stakeholders,and model and adopt responsible practices and respectfor human rightsincluding across our global supply chain.Today,our lives are more connected than ever.Access to education,employment,healthcare,and other critical servicesis increasingly dependent on technology.Thats why weve expanded our commitment to bring access to affordable high-speed internet to a quarter of a billion people around the world,including 100 million people in Africa,by the end of 2025.Since 2017,weve helped bring internet access to 63 million people,a key first step to ensuring communities will haveaccess to AI and other digital technologies.6This year,we also continued working toward our five-year commitment to bridge the disability divide with a focus onhelping close the accessibility knowledge gap.Seven hundred and fifty-thousand learners enriched their understanding ofdisability and accessibility in partnership with LinkedIn Learning,Teach Access,and the Microsoft disability community.In addition,were stepping up efforts to combat online disinformation through new media content provenancetechnologiesenabling users to verify if an image or video was generated by AI.We continued our efforts to promoteracial equity across Microsoft,our ecosystem,and our communities,including our work to advance justice reform throughdata-driven insights.And we provided support in response to eight humanitarian disasters,including committing$540 million of support to those who have been impacted by the War in Ukraine.Finally,recognizing AIs potential to advance human rights and humanitarian action,we worked on several AI forHumanitarian Action projects.Together with our partners,were building the capabilities to identify at-risk communities,estimate seasonal hunger,predict malnutrition,and assist in disease identification.How can we advance sustainability?Climate change is the defining issue of our generation,and addressing it requires swift,collective action and technologicalinnovation.We are committed to meeting our own goals while enabling others to do the same.That means takingresponsibility for our operational footprint and accelerating progress through technology.We continue to see extreme weather impacting communities globally.To meet the urgent need,this must be a decade ofinnovation and decisive actionfor Microsoft,our customers,and the world.In our latest Environmental Sustainability Report,we shared our progress toward our 2030 sustainability targets acrosscarbon,water,waste,and ecosystems.In 2022,our overall carbon emissions declined by 0.5 percent while our businessgrew.Addressing scope 3 emissions,which account for the vast majority of our emissions,is arguably our ultimatechallengeone well continue to tackle through our supply chain,policy advances,and industry-wide knowledge-sharing.Weve provided just under 1 million people with access to clean water and sanitation,one of five pillars on our path tobecoming water positive.And in our pursuit to be zero waste,we achieved a reuse and recycle rate of 82 percent for allour cloud hardware and diverted over 12,000 metric tons of solid operational waste from landfills and incinerators.We also continue to take responsibility for the impacts of our direct operations on Earths ecosystems.Weve contractedto protect 17,268 acres of land,over 50 percent more than the land we use to operate.Of that,12,270 acrestheequivalent of approximately 7,000 soccer fieldswere designated as permanently protected.Technology is a powerful lever to help us avoid the most severe impacts of climate change.Thats why were acceleratingour investment in more efficient datacenters,clean energy,enhancements to the Microsoft Cloud for Sustainability andPlanetary Computer,and green software practices.To date,through our Climate Innovation Fund,weve allocated morethan$700 million to a global portfolio of 50 investments spanning sustainable solutions in energy,industrial,and naturalsystems.Finally,we believe AI can be a powerful accelerant in addressing the climate crisis.We expanded our AI for Good Lab inEgypt and Kenya to improve climate resilience for the continent.And,together with our partners,we launched GlobalRenewables Watch,a first-of-its-kind living atlas that aims to map and measure utility-scale solar and wind installations,allowing users to evaluate progress toward a clean energy transition.Although this new era promises great opportunity,it demands even greater responsibility from companies like ours.As wepursue our four commitments,we focus on transparencyproviding clear reporting on how we run our business and howwe work with customers and partners.Our annual Impact Summary shares more about our progress and learnings thisyear,and our Reports Hub provides detailed reports on our environmental data,political activities,workforcedemographics,human rights work,and more.OUR CULTURETheres never been a more important time to live our culture.The way we work and the speed at which we work arechanging.7In an economy where yesterdays exceptional is todays expected,all of us at Microsoft will need to embrace a growthmindset and,more importantly,confront our fixed mindsets as our culture evolves.It will take everyday courage toreformulate what innovation,business models,and sales motions look like in this new era.As a high-performanceorganization,we aspire to help our employees maximize their economic opportunity,while simultaneously helping themlearn and grow professionally and connect their own passion and purpose with their everyday work and the companysmission.To be successful,we need to be grounded in what our customers and the world need.We need to innovate andcollaborate as One Microsoft.And we need to actively seek diversity and embrace inclusion to best serve our customersand create a culture where everyone can do their best work.To empower the world,we need to represent the world.Tothat end,we remain focused on increasing representation and strengthening our culture of inclusion.Even as wenavigated challenges this year,our company continued to be the most globally diverse its ever been.Giving also remains core to our culture.This year,more than 105,000 employees gave$242 million(including companymatch)to over 35,000 nonprofits in 116 countries.And our employees volunteered over 930,000 hours to causes theycare about.I am deeply grateful to our employees for their commitment to the company and their communities,and how they areliving our mission and culture every day in a changing company and world.*In closing,this is Microsofts moment.We have an incredible opportunity to use this new era of AI to deliver meaningfulbenefits for every person and every organization on the planet.On New Years Day,I saw a tweet from Andrej Karpathy,Teslas former director of AI who now works at OpenAI,abouthow GitHub Copilot was writing about 80 percent of his code,with 80 percent accuracy.Two days later,I saw a stunningexample of work weve done with the government of Indias Ministry of Electronics and IT,which is applying an AI modelso farmers in rural areas can interact with government resources in their native languages.Think about that:A foundation model that was developed on the West Coast of the United States is already transformingthe lives of both elite developers and rural farmers on the other side of the globe.Weve not seen this speed of diffusionand breadth of impact in the tech industry before.As a company,this is our moment to show up and responsibly build solutions that drive economic growth and benefitevery community,country,industry,and person.If we do it well,the world will do well,and Microsoft will do well too.Ivenever been more confident that we will deliver on this promise together in the days,months,and years to come.Satya NadellaChairman and Chief Executive OfficerOctober 16,20238ISSUER PURCHASES OF EQUITY SECURITIES,DIVIDENDS,AND STOCK PERFORMANCEMARKET AND STOCKHOLDERSOur common stock is traded on the NASDAQ Stock Market under the symbol MSFT.On July 24,2023,there were 83,883registered holders of record of our common stock.SHARE REPURCHASES AND DIVIDENDSShare RepurchasesOn September 18,2019,our Board of Directors approved a share repurchase program authorizing up to$40.0 billion inshare repurchases.This share repurchase program commenced in February 2020 and was completed in November 2021.On September 14,2021,our Board of Directors approved a share repurchase program authorizing up to$60.0 billion inshare repurchases.This share repurchase program commenced in November 2021,following completion of the programapproved on September 18,2019,has no expiration date,and may be terminated at any time.As of June 30,2023,$22.3 billion remained of this$60.0 billion share repurchase program.We repurchased the following shares of common stock under the share repurchase programs:(In millions)SharesAmountSharesAmountSharesAmountYear Ended June 30,202320222021First Quarter17$4,60021$6,20025$5,270Second Quarter204,600206,233275,750Third Quarter184,600267,800255,750Fourth Quarter144,600287,800246,200Total69$18,40095$28,033101$22,970All repurchases were made using cash resources.Shares repurchased during fiscal year 2023 and the fourth and thirdquarters of fiscal year 2022 were under the share repurchase program approved on September 14,2021.Sharesrepurchased during the second quarter of fiscal year 2022 were under the share repurchase programs approved on bothSeptember 14,2021 and September 18,2019.All other shares repurchased were under the share repurchase programapproved on September 18,2019.The above table excludes shares repurchased to settle employee tax withholdingrelated to the vesting of stock awards of$3.8 billion,$4.7 billion,and$4.4 billion for fiscal years 2023,2022,and 2021,respectively.DividendsOur Board of Directors declared the following dividends:Declaration DateRecord DatePayment DateDividendPer ShareAmountFiscal Year 2023(In millions)September 20,2022November 17,2022December 8,2022$0.68$5,066November 29,2022February 16,2023March 9,20230.685,059March 14,2023May 18,2023June 8,20230.685,054June 13,2023August 17,2023September 14,20230.685,054Total$2.72$20,233Fiscal Year 2022September 14,2021November 18,2021December 9,2021$0.62$4,652December 7,2021February 17,2022March 10,20220.624,645March 14,2022May 19,2022June 9,20220.624,632June 14,2022August 18,2022September 8,20220.624,621Total$2.48$18,550The dividend declared on June 13,2023 was included in other current liabilities as of June 30,2023.9STOCK PERFORMANCECOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Microsoft Corporation,the S&P 500 Indexand the NASDAQ Computer Index6/186/196/206/216/226/23Microsoft Corporation$100.00$138.07$212.34$285.40$272.82$365.24S&P 500100.00110.42118.70167.13149.39178.66NASDAQ Computer100.00106.10156.93236.08184.53242.82*$100 invested on 6/30/18 in stock or index,including reinvestment of dividends.Fiscal year ending June 30.10Note About Forward-Looking StatementsThis report includes estimates,projections,statements relating to our business plans,objectives,and expected operatingresults that are“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933,and Section 21E of the Securities Exchange Act of 1934.Forward-lookingstatements may appear throughout this report,including the following sections:“Business”and“ManagementsDiscussion and Analysis of Financial Condition and Results of Operations”.These forward-looking statements generallyare identified by the words“believe,”“project,”“expect,”“anticipate,”“estimate,”“intend,”“strategy,”“future,”“opportunity,”“plan,”“may,”“should,”“will,”“would,”“will be,”“will continue,”“will likely result,”and similar expressions.Forward-lookingstatements are based on current expectations and assumptions that are subject to risks and uncertainties that may causeactual results to differ materially.We describe risks and uncertainties that could cause actual results and events to differmaterially in“Risk Factors,”“Managements Discussion and Analysis of Financial Condition and Results of Operations,”and“Quantitative and Qualitative Disclosures about Market Risk”in our fiscal year 2023 Form 10-K.Readers arecautioned not to place undue reliance on forward-looking statements,which speak only as of the date they are made.Weundertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events,or otherwise.BUSINESSGENERALEmbracing Our FutureMicrosoft is a technology company whose mission is to empower every person and every organization on the planet toachieve more.We strive to create local opportunity,growth,and impact in every country around the world.We arecreating the platforms and tools,powered by artificial intelligence(“AI”),that deliver better,faster,and more effectivesolutions to support small and large business competitiveness,improve educational and health outcomes,grow public-sector efficiency,and empower human ingenuity.From infrastructure and data,to business applications and collaboration,we provide unique,differentiated value to customers.In a world of increasing economic complexity,AI has the power to revolutionize many types of work.Microsoft is nowinnovating and expanding our portfolio with AI capabilities to help people and organizations overcome todays challengesand emerge stronger.Customers are looking to unlock value from their digital spend and innovate for this next generationof AI,while simplifying security and management.Those leveraging the Microsoft Cloud are best positioned to takeadvantage of technological advancements and drive innovation.Our investment in AI spans the entire company,fromMicrosoft Teams and Outlook,to Bing and Xbox,and we are infusing generative AI capability into our consumer andcommercial offerings to deliver copilot capability for all services across the Microsoft Cloud.Were committed to making the promise of AI real and doing it responsibly.Our work is guided by a core set ofprinciples:fairness,reliability and safety,privacy and security,inclusiveness,transparency,and accountability.What We OfferFounded in 1975,we develop and support software,services,devices,and solutions that deliver new value for customersand help people and businesses realize their full potential.We offer an array of services,including cloud-based solutions that provide customers with software,services,platforms,and content,and we provide solution support and consulting services.We also deliver relevant online advertising to aglobal audience.Our products include operating systems,cross-device productivity and collaboration applications,server applications,business solution applications,desktop and server management tools,software development tools,and video games.Wealso design and sell devices,including PCs,tablets,gaming and entertainment consoles,other intelligent devices,andrelated accessories.11The Ambitions That Drive UsTo achieve our vision,our research and development efforts focus on three interconnected ambitions:Reinvent productivity and business processes.Build the intelligent cloud and intelligent edge platform.Create more personal computing.Reinvent Productivity and Business ProcessesAt Microsoft,we provide technology and resources to help our customers create a secure,productive work environment.Our family of products plays a key role in the ways the world works,learns,and connects.Our growth depends on securely delivering continuous innovation and advancing our leading productivity andcollaboration tools and services,including Office 365,Dynamics 365,and LinkedIn.Microsoft 365 brings together Office365,Windows,and Enterprise Mobility Security to help organizations empower their employees with AI-backed toolsthat unlock creativity,increase collaboration,and fuel innovation,all the while enabling compliance coverage and dataprotection.Microsoft Teams is a comprehensive platform for work,with meetings,calls,chat,collaboration,and businessprocess automation.Microsoft Viva is an employee experience platform that brings together communications,knowledge,learning,resources,and insights.Microsoft 365 Copilot combines next-generation AI with business data in the MicrosoftGraph and Microsoft 365 applications.Together with the Microsoft Cloud,Dynamics 365,Microsoft Teams,and our AI offerings bring a new era of collaborativeapplications that optimize business functions,processes,and applications to better serve customers and employees whilecreating more business value.Microsoft Power Platform is helping domain experts drive productivity gains with low-code/no-code tools,robotic process automation,virtual agents,and business intelligence.In a dynamic labor market,LinkedIn is helping professionals use the platform to connect,learn,grow,and get hired.Build the Intelligent Cloud and Intelligent Edge PlatformAs digital transformation and adoption of AI accelerates and revolutionizes more business workstreams,organizations inevery sector across the globe can address challenges that will have a fundamental impact on their success.Forenterprises,digital technology empowers employees,optimizes operations,engages customers,and in some cases,changes the very core of products and services.We continue to invest in high performance and sustainable computing tomeet the growing demand for fast access to Microsoft services provided by our network of cloud computing infrastructureand datacenters.Our cloud business benefits from three economies of scale:datacenters that deploy computational resources atsignificantly lower cost per unit than smaller ones;datacenters that coordinate and aggregate diverse customer,geographic,and application demand patterns,improving the utilization of computing,storage,and network resources;andmulti-tenancy locations that lower application maintenance labor costs.The Microsoft Cloud provides the best integration across the technology stack while offering openness,improving time tovalue,reducing costs,and increasing agility.Being a global-scale cloud,Azure uniquely offers hybrid consistency,developer productivity,AI capabilities,and trusted security and compliance.We see more emerging use cases and needsfor compute and security at the edge and are accelerating our innovation across the spectrum of intelligent edge devices,from Internet of Things(“IoT”)sensors to gateway devices and edge hardware to build,manage,and secure edgeworkloads.Our AI platform,Azure AI,is helping organizations transform,bringing intelligence and insights to the hands of theiremployees and customers to solve their most pressing challenges.Organizations large and small are deploying Azure AIsolutions to achieve more at scale,more easily,with the proper enterprise-level and responsible AI protections.We have a long-term partnership with OpenAI,a leading AI research and deployment company.We deploy OpenAIsmodels across our consumer and enterprise products.As OpenAIs exclusive cloud provider,Azure powers all ofOpenAIs workloads.We have also increased our investments in the development and deployment of specializedsupercomputing systems to accelerate OpenAIs research.12Our hybrid infrastructure offers integrated,end-to-end security,compliance,identity,and management capabilities tosupport the real-world needs and evolving regulatory requirements of commercial customers and enterprises.Our industryclouds bring together capabilities across the entire Microsoft Cloud,along with industry-specific customizations.Azure Arcsimplifies governance and management by delivering a consistent multi-cloud and on-premises management platform.Nuance,a leader in conversational AI and ambient intelligence across industries including healthcare,financial services,retail,and telecommunications,joined Microsoft in 2022.Microsoft and Nuance enable organizations to accelerate theirbusiness goals with security-focused,cloud-based solutions infused with AI.We are accelerating our development of mixed reality solutions with new Azure services and devices.Microsoft Meshenables organizations to create custom,immersive experiences for the workplace to help bring remote and hybrid workersand teams together.The ability to convert data into AI drives our competitive advantage.The Microsoft Intelligent Data Platform is a leadingcloud data platform that fully integrates databases,analytics,and governance.The platform empowers organizations toinvest more time creating value rather than integrating and managing their data.Microsoft Fabric is an end-to-end,unifiedanalytics platform that brings together all the data and analytics tools that organizations need.GitHub Copilot is at the forefront of AI-powered software development,giving developers a new tool to write code easierand faster so they can focus on more creative problem-solving.From GitHub to Visual Studio,we provide a developer toolchain for everyone,no matter the technical experience,across all platforms,whether Azure,Windows,or any other cloudor client platform.Windows also plays a critical role in fueling our cloud business with Windows 365,a desktop operating system thats alsoa cloud service.From another internet-connected device,including Android or macOS devices,users can run Windows365,just like a virtual machine.Additionally,we are extending our infrastructure beyond the planet,bringing cloud computing to space.Azure Orbital is afully managed ground station as a service for fast downlinking of data.Create More Personal ComputingWe strive to make computing more personal,enabling users to interact with technology in more intuitive,engaging,anddynamic ways.Windows 11 offers innovations focused on enhancing productivity,including Windows Copilot with centralized AIassistance and Dev Home to help developers become more productive.Windows 11 security and privacy features includeoperating system security,application security,and user and identity security.Through our Search,News,Mapping,and Browser services,Microsoft delivers unique trust,privacy,and safety features.In February 2023,we launched an all new,AI-powered Microsoft Edge browser and Bing search engine with Bing Chat todeliver better search,more complete answers,and the ability to generate content.Microsoft Edge is our fast and securebrowser that helps protect users data.Quick access to AI-powered tools,apps,and more within Microsoft Edges sidebarenhance browsing capabilities.We are committed to designing and marketing first-party devices to help drive innovation,create new device categories,and stimulate demand in the Windows ecosystem.The Surface family includes Surface Pro,Surface Laptop,and otherSurface products.Microsoft continues to invest in gaming content,community,and cloud services.We have broadened our approach to howwe think about gaming end-to-end,from the way games are created and distributed to how they are played,includingsubscription services like Xbox Game Pass and new devices from third-party manufacturers so players can engageacross PC,console,and mobile.In January 2022,we announced plans to acquire Activision Blizzard,Inc.,a leader ingame development and an interactive entertainment content publisher.Our Future OpportunityWe are focused on helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of theirdigital spend while leading the new AI wave across our solution areas.We continue to develop complete,intelligent13solutions for our customers that empower people to be productive and collaborate,while safeguarding businesses andsimplifying IT management.Our goal is to lead the industry in several distinct areas of technology over the long term,which we expect will translate to sustained growth.We are investing significant resources in:Transforming the workplace to deliver new modern,modular business applications,drive deeper insights,andimprove how people communicate,collaborate,learn,work,and interact with one another.Building and running cloud-based services in ways that utilize ubiquitous computing to unleash newexperiences and opportunities for businesses and individuals.Applying AI and ambient intelligence to drive insights,revolutionize many types of work,and providesubstantive productivity gains using natural methods of communication.Tackling security from all angles with our integrated,end-to-end solutions spanning security,compliance,identity,and management,across all clouds and platforms.Inventing new gaming experiences that bring people together around their shared love for games on anydevices and pushing the boundaries of innovation with console and PC gaming.Using Windows to fuel our cloud business,grow our share of the PC market,and drive increasedengagement with our services like Microsoft 365 Consumer,Microsoft Teams,Microsoft Edge,Bing,XboxGame Pass,and more.Our future growth depends on our ability to transcend current product category definitions,business models,and salesmotions.Corporate Social ResponsibilityCommitment to SustainabilityMicrosofts approach to addressing climate change starts with the sustainability of our own business.In 2020,wecommitted to being a carbon negative,water positive,and zero waste company by 2030.In May 2023,we released our Environmental Sustainability Report which looked back at our progress during fiscal year2022.We continued to make progress on our goals,with our overall emissions declining by 0.5 percent.While our Scope1 and Scope 2 emissions continued to decline,Scope 3 emissions increased by 0.5 percent.Scope 3 represented96 percent of our total emissions,resulting primarily from the operations of our suppliers and the use of our productsacross our customers.A few examples of our continued progress include:Signed new power purchase agreements,bringing our total portfolio of carbon-free energy to over 13.5gigawatts.Contracted for water replenishment projects that are estimated to provide more than 15.6 million cubic metersin volumetric water benefit over the lifetime of these projects.Diverted 12,159 metric tons of solid waste from landfills and incinerators across our direct operationalfootprint.Protected 12,270 acres of land in Belize more than the 11,206 acres of land that we use around the world.Microsoft has a role to play in developing and advancing new climate solutions,but we recognize that no solution can beoffered by any single company,organization,or government.Our approach helps to support the sustainability needs ofour customers and the global community.Our Microsoft Cloud for Sustainability,an environmental sustainabilitymanagement platform that includes Microsoft Sustainability Manager,enables organizations to record,report,and reducetheir Scope 1,2,and 3 emissions.These digital tools can interoperate with business systems and unify data intelligencefor organizations.Addressing Racial Injustice and InequityWe are committed to addressing racial injustice and inequity in the United States for Black and African Americancommunities and helping improve lived experiences at Microsoft,in employees communities,and beyond.Our RacialEquity Initiative focuses on three multi-year pillars,each containing actions and progress we expect to make or exceed by2025.Strengthening our communities:using data,technology,and partnerships to help improve the lives of Blackand African American people in the United States,including our employees and their communities.14Engaging our ecosystem:using our balance sheet and relationships with suppliers and partners to fostersocietal change and create new opportunities.Increasing representation and strengthening inclusion:building on our momentum by adding a$150 millioninvestment to strengthen inclusion and double the number of Black,African American,Hispanic,and Latinxleaders in the United States by 2025.In fiscal year 2023,we collaborated with partners and worked within neighborhoods and communities to launch and scalea number of projects and programs,including:Working with 103 unique organizations in 165 cities and counties on our Justice Reform Initiative to empowercommunities and advance racial equity and fairness in the justice system.Increasing access to affordable broadband,devices,and digital literacy training across 14 geographies,including 11 cities and three states in the Black Rural south.Growing our Nonprofit Tech Acceleration for Black and African American Communities program,which usesdata,technology,and partnerships to help more than 2,000 local organizations to modernize and streamlineoperations.Expanding our Technology Education and Learning Support(“TEALS”)program to reach nearly 400 highschools in 21 communities to increase computer science opportunities for Black and African Americanstudents.We exceeded our 2020 goal to double the percentage of our transaction volumes with Black-and African American-owned financial institutions by 2023.We are also increasing investment activity with Black-and African American-ownedasset managers,which now represent 45 percent of our external manager group,enabling increased funds into localcommunities.We also met our goal of creating a$100 million program focused on mission-driven banks.We enriched oursupplier pipeline,achieving our goal to spend$500 million with double the number of Black-and African American-ownedsuppliers.We also increased the number of identified partners in the Black Partner Growth Initiative by more than250 percent,surpassing our initial goal.We have made meaningful progress on representation and inclusion at Microsoft.As of June 2023,we are 93 percent ofthe way to our 2025 commitment to double the number of Black and African American people managers in the U.S.(below director level),and 107 percent of the way for Black and African American directors(people managers andindividual contributors).We are 28 percent of the way for Hispanic and Latinx people managers(below director level)and74 percent of the way for Hispanic and Latinx directors.Investing in Digital SkillsAfter helping over 80 million jobseekers around the world access digital skilling resources,we introduced a new Skills forJobs initiative to support a more skills-based labor market,with greater flexibility and accessible learning paths to developthe right skills needed for the most in-demand jobs.Our Skills for Jobs initiative brings together learning resources,certification opportunities,and job-seeker tools from LinkedIn,GitHub,and Microsoft Learn,and is built on data insightsdrawn from LinkedIns Economic Graph.We also launched a national campaign to help skill and recruit 250,000 people into the cybersecurity workforce by 2025,representing half of the countrys workforce shortage.To that end,we are making curriculum available free of charge to allof the nations higher education institutions,providing training for new and existing faculty,and providing scholarships andsupplemental resources to 25,000 students.We have expanded the cyber skills initiative to 27 additional countries thatshow elevated cyberthreat risks coupled with significant gaps in their cybersecurity workforces,partnering with nonprofitsand other educational institutions to train the next generation of cybersecurity workers.Generative AI is creating unparalleled opportunities to empower workers globally,but only if everyone has the skills to useit.To address this,in June 2023 we launched a new AI Skills Initiative to help everyone learn how to harness the power ofAI.This includes a new LinkedIn learning pathway offering new coursework on learning the foundations of generative AI.We also launched a new global grant challenge to uncover new ways of training workers on generative AI and areproviding greater access to digital learning events and resources for everyone to improve their AI fluency.15HUMAN CAPITAL RESOURCESOverviewMicrosoft aims to recruit,develop,and retain world-changing talent from a diversity of backgrounds.To foster their andour success,we seek to create an environment where people can thrive and do their best work.We strive to maximize thepotential of our human capital resources by creating a respectful,rewarding,and inclusive work environment that enablesour global employees to create products and services that further our mission.As of June 30,2023,we employed approximately 221,000 people on a full-time basis,120,000 in the U.S.and 101,000internationally.Of the total employed people,89,000 were in operations,including manufacturing,distribution,productsupport,and consulting services;72,000 were in product research and development;45,000 were in sales and marketing;and 15,000 were in general and administration.Certain employees are subject to collective bargaining agreements.Our CultureMicrosofts culture is grounded in growth mindset.This means everyone is on a continuous journey to learn and grow,operating as one company instead of multiple siloed businesses.Our employee listening systems enable us to gather feedback directly from our workforce to inform our programs andemployee needs globally.Employees participate in our Employee Signals surveys,which cover a variety of topics such asthriving,inclusion,team culture,wellbeing,and learning and development.We also collect Daily Signals employee surveyresponses,giving us real-time insights into ways we can support our employees.In addition to Employee Signals andDaily Signals surveys,we gain insights through onboarding,exit surveys,internal Viva Engage channels,employee Q&Asessions,and our internal AskHR Service support.Diversity and inclusion are core to our business model,and we hold ourselves accountable for driving global systemicchange in our workforce and creating an inclusive work environment.We support multiple highly active EmployeeResource Groups for women,families,racial and ethnic minorities,military,people with disabilities,and employees whoidentify as LGBTQIA ,where employees can go for support,networking,and community-building.As described in our2022 Proxy Statement,annual performance and compensation reviews of our senior leadership team include anevaluation of their contributions to employee culture and diversity.To ensure accountability over time,we publicly discloseour progress on a multitude of workforce metrics including:Detailed breakdowns of gender,racial,and ethnic minority representation in our employee population,withdata by job types,levels,and segments of our business.Our EEO-1 report(equal employment opportunity).Disability representation.Pay equity(see details below).Total Rewards and Pay EquityWe develop dynamic,sustainable,market-driven,and strategic programs with the goal of providing a highly differentiatedportfolio to attract,reward,and retain top talent and enable our employees to thrive.These programs reinforce our cultureand values such as collaboration and growth mindset.Managers evaluate and recommend rewards based on,forexample,how well we leverage the work of others and contribute to the success of our colleagues.We monitor pay equityand career progress across multiple dimensions.Our total compensation opportunity is highly differentiated and is marketcompetitive.In order to manage our costs in a dynamic,competitive environment,in fiscal year 2023 we announced that base salariesof salaried employees would remain at fiscal year 2022 levels.Pay increases continue to be available for rewards-eligiblehourly and equivalent employees.We will continue our practice of investing in stock for all rewards-eligible employees,salaried and hourly,and investing in bonuses for all eligible employees.Since 2016,we have reported on pay equity as part of our annual Diversity and Inclusion report.In 2022,we reported thatall racial and ethnic minority employees in the U.S.combined earn$1.008 for every$1.000 earned by their whitecounterparts,that women in the U.S.earn$1.007 for every$1.000 earned by their counterparts who are men,and thatwomen outside the U.S.earn$1.002 for every$1.000 earned by their counterparts outside the U.S.who are men.In thisyears report,we again expanded our pay equity data beyond the U.S.to report on 61 additional countries(up from 12 lastyear),representing 99.8%of our global Microsoft workforce.16In addition,we began reporting on unadjusted median pay in our annual report,comparing total pay amounts for allemployees regardless of factors such as job title,level,or tenure.For employees who are eligible for rewards,theanalysis showed that total pay for women is 89.6%of total pay for men in the U.S.and 86.2%outside of the U.S.,andtotal pay for racial and ethnic minorities in the U.S.is 89.9%of total pay for white employees.As we continue to increaserepresentation for women and racial and ethnic minorities at more senior levels,and continue to ensure pay equity for all,the gap between the medians will reduce.Our intended result is a global performance and development approach that fosters our culture,and competitivecompensation that ensures equitable pay by role while supporting pay for performance.Wellbeing and Hybrid WorkMicrosoft is committed to supporting our employees wellbeing while they are at work and in their personal lives.We haveinvested significantly in wellbeing,and offer a differentiated benefits package which includes many physical,emotional,and financial wellness programs including counseling through the Microsoft CARES Employee Assistance Program,mental wellbeing support,flexible fitness benefits,disability accommodations,savings and investment tools,adoptionassistance,and back-up care for children and elders.Finally,our Occupational Health and Safety program helps ensureemployees can stay safe while they are working.We introduced Hybrid Workplace Flexibility Guidance to better support leaders,managers,and employees in hybrid workscenarios.Our ongoing survey data shows that 93%of employees value the flexibility related to work location,work site,and work hours,and 78%are satisfied with the quality of connection with co-workers.There is no one-size-fits-allapproach to flexible work at Microsoft.As a company,we will continue to leverage data and research to inform decisionmaking,balancing the needs of business,team,and individual.Learning and DevelopmentWe offer a range of learning opportunities,including personalized opportunities on our internal and external learningportals,in-classroom learning,required learning on compliance and company culture,on-the-job advancementopportunities,and manager coaching.We also provide customized manager learning,new employee orientation,andtools for operating in a flexible hybrid work environment.All Microsoft employees globally access our single Viva Learning tool for both required and personal choice learning.Thisincludes courses focused on our core principles and compliance matters,such as Business Conduct,Privacy,SecurityFoundations,and Harassment Prevention.We also deliver skills training for employees based on their profession and rolediscipline.We have over 27,000 people managers,all of whom must complete between 20-33 hours of compulsory training onleadership and management and are assigned additional targeted training on an ongoing basis related to peoplemanagement,compliance,and culture.OPERATING SEGMENTSWe operate our business and report our financial performance using three segments:Productivity and BusinessProcesses,Intelligent Cloud,and More Personal Computing.Our segments provide management with a comprehensivefinancial view of our key businesses.The segments enable the alignment of strategies and objectives across thedevelopment,sales,marketing,and services organizations,and they provide a framework for timely and rationalallocation of resources within businesses.Additional information on our operating segments and geographic and product information is contained in Note 19 Segment Information and Geographic Data of the Notes to Financial Statements.Our reportable segments are described below.17Productivity and Business ProcessesOur Productivity and Business Processes segment consists of products and services in our portfolio of productivity,communication,and information services,spanning a variety of devices and platforms.This segment primarily comprises:Office Commercial(Office 365 subscriptions,the Office 365 portion of Microsoft 365 Commercialsubscriptions,and Office licensed on-premises),comprising Office,Exchange,SharePoint,Microsoft Teams,Office 365 Security and Compliance,Microsoft Viva,and Microsoft 365 Copilot.Office Consumer,including Microsoft 365 Consumer subscriptions,Office licensed on-premises,and otherOffice services.LinkedIn,including Talent Solutions,Marketing Solutions,Premium Subscriptions,and Sales Solutions.Dynamics business solutions,including Dynamics 365,comprising a set of intelligent,cloud-basedapplications across ERP,CRM(including Customer Insights),Power Apps,and Power Automate;and on-premises ERP and CRM applications.Office CommercialOffice Commercial is designed to increase personal,team,and organizational productivity through a range of productsand services.Growth depends on our ability to reach new users in new markets such as frontline workers,small andmedium businesses,and growth markets,as well as add value to our core product and service offerings to spanproductivity categories such as communication,collaboration,analytics,security,and compliance.Office Commercialrevenue is mainly affected by a combination of continued installed base growth and average revenue per user expansion,as well as the continued shift from Office licensed on-premises to Office 365.Office ConsumerOffice Consumer is designed to increase personal productivity and creativity through a range of products and services.Growth depends on our ability to reach new users,add value to our core product set,and continue to expand our productand service offerings into new markets.Office Consumer revenue is mainly affected by the percentage of customers thatbuy Office with their new devices and the continued shift from Office licensed on-premises to Microsoft 365 Consumersubscriptions.Office Consumer Services revenue is mainly affected by the demand for communication and storagethrough Skype,O,and OneDrive,which is largely driven by subscriptions,advertising,and the sale of minutes.LinkedInLinkedIn connects the worlds professionals to make them more productive and successful and transforms the waycompanies hire,market,sell,and learn.Our vision is to create economic opportunity for every member of the globalworkforce through the ongoing development of the worlds first Economic Graph,a digital representation of the globaleconomy.In addition to LinkedIns free services,LinkedIn offers monetized solutions:Talent Solutions,MarketingSolutions,Premium Subscriptions,and Sales Solutions.Talent Solutions provide insights for workforce planning and toolsto hire,nurture,and develop talent.Talent Solutions also includes Learning Solutions,which help businesses close criticalskills gaps in times where companies are having to do more with existing talent.Marketing Solutions help companiesreach,engage,and convert their audiences at scale.Premium Subscriptions enable professionals to manage theirprofessional identity,grow their network,find jobs,and connect with talent through additional services like premiumsearch.Sales Solutions help companies strengthen customer relationships,empower teams with digital selling tools,andacquire new opportunities.LinkedIn has over 950 million members and has offices around the globe.Growth will dependon our ability to increase the number of LinkedIn members and our ability to continue offering services that provide valuefor our members and increase their engagement.LinkedIn revenue is mainly affected by demand from enterprises andprofessional organizations for subscriptions to Talent Solutions,Sales Solutions,and Premium Subscriptions offerings,aswell as member engagement and the quality of the sponsored content delivered to those members to drive MarketingSolutions.DynamicsDynamics provides cloud-based and on-premises business solutions for financial management,enterprise resourceplanning(“ERP”),customer relationship management(“CRM”),supply chain management,and other applicationdevelopment platforms for small and medium businesses,large organizations,and divisions of global enterprises.18Dynamics revenue is driven by the number of users licensed and applications consumed,expansion of average revenueper user,and the continued shift to Dynamics 365,a unified set of cloud-based intelligent business applications,includingPower Apps and Power Automate.CompetitionCompetitors to Office include software and global application vendors,such as Apple,Cisco Systems,Meta,Google,Okta,Proofpoint,Slack,Symantec,Zoom,and numerous web-based and mobile application competitors as well as localapplication developers.Apple distributes versions of its pre-installed application software,such as email and calendarproducts,through its PCs,tablets,and phones.Cisco Systems is using its position in enterprise communicationsequipment to grow its unified communications business.Meta offers communication tools to enable productivity andengagement within organizations.Google provides a hosted messaging and productivity suite.Slack provides teamworkand collaboration software.Zoom offers videoconferencing and cloud phone solutions.Okta,Proofpoint,and Symantecprovide security solutions across email security,information protection,identity,and governance.Web-based offeringscompeting with individual applications have also positioned themselves as alternatives to our products and services.Wecompetebyprovidingpowerful,flexible,secure,integratedindustry-specific,andeasy-to-useproductivityandcollaboration tools and services that create comprehensive solutions and work well with technologies our customersalready have both on-premises or in the cloud.LinkedIn faces competition from online professional networks,recruiting companies,talent management companies,andlarger companies that are focusing on talent management and human resource services;job boards;traditional recruitingfirms;and companies that provide learning and development products and services.Marketing Solutions competes withonline and offline outlets that generate revenue from advertisers and marketers,and Sales Solutions competes with onlineand offline outlets for companies with lead generation and customer intelligence and insights.Dynamics competes with cloud-based and on-premises business solution providers such as Oracle,Salesforce,and SAP.Intelligent CloudOur Intelligent Cloud segment consists of our public,private,and hybrid server products and cloud services that canpower modern business and developers.This segment primarily comprises:Server products and cloud services,including Azure and other cloud services;SQL Server,Windows Server,Visual Studio,System Center,and related Client Access Licenses(“CALs”);and Nuance and GitHub.Enterprise Services,including Enterprise Support Services,Industry Solutions(formerly Microsoft ConsultingServices),and Nuance professional services.Server Products and Cloud ServicesAzure is a comprehensive set of cloud services that offer developers,IT professionals,and enterprises freedom to build,deploy,and manage applications on any platform or device.Customers can use Azure through our global network ofdatacenters for computing,networking,storage,mobile and web application services,AI,IoT,cognitive services,andmachine learning.Azure enables customers to devote more resources to development and use of applications that benefittheir organizations,rather than managing on-premises hardware and software.Azure revenue is mainly affected byinfrastructure-as-a-service and platform-as-a-service consumption-based services,and per user-based services such asEnterprise Mobility Security.Azure AI offerings provide a competitive advantage as companies seek ways to optimize and scale their business withmachine learning.Azures purpose-built,AI-optimized infrastructure allows advanced models,including GPT-4 servicesdesigned for developers and data scientists,to do more with less.Customers can integrate large language models anddevelop the next generation of AI apps and services.Our server products are designed to make IT professionals,developers,and their systems more productive and efficient.Server software is integrated server infrastructure and middleware designed to support software applications built on theWindows Server operating system.This includes the server platform,database,business intelligence,storage,management and operations,virtualization,service-oriented architecture platform,security,and identity software.We alsolicense standalone and software development lifecycle tools for software architects,developers,testers,and projectmanagers.Server products revenue is mainly affected by purchases through volume licensing programs,licenses sold tooriginal equipment manufacturers(“OEM”),and retail packaged products.CALs provide access rights to certain serverproducts,including SQL Server and Windows Server,and revenue is reported along with the associated server product.19Nuance and GitHub include both cloud and on-premises offerings.Nuance provides healthcare and enterprise AIsolutions.GitHub provides a collaboration platform and code hosting service for developers.Enterprise ServicesEnterprise Services,including Enterprise Support Services,Industry Solutions,and Nuance Professional Services,assistcustomers in developing,deploying,and managing Microsoft server solutions,Microsoft desktop solutions,and Nuanceconversational AI and ambient intelligent solutions,along with providing training and certification to developers and ITprofessionals on various Microsoft products.CompetitionAzure faces diverse competition from companies such as Amazon,Google,IBM,Oracle,VMware,and open sourceofferings.Azures competitive advantage includes enabling a hybrid cloud,allowing deployment of existing datacenterswith our public cloud into a single,cohesive infrastructure,and the ability to run at a scale that meets the needs ofbusinesses of all sizes and complexities.Our AI offerings compete with AI products from hyperscalers such as AmazonBedrock,Amazon CodeWhisperer,and Google AI,as well as products from other emerging competitors,many of whichare also current or potential partners,including Metas LLaMA2 and other open source solutions.Our Enterprise Mobility Security offerings also compete with products from a range of competitors including identity vendors,security solutionvendors,and numerous other security point solution vendors.We believe our clouds global scale,coupled with our broadportfolio of identity and security solutions,allows us to effectively solve complex cybersecurity challenges for ourcustomers and differentiates us from the competition.Our server products face competition from a wide variety of server operating systems and applications offered bycompanies with a range of market approaches.Vertically integrated computer manufacturers such as Hewlett-Packard,IBM,and Oracle offer their own versions of the Unix operating system preinstalled on server hardware.Nearly allcomputer manufacturers offer server hardware for the Linux operating system,and many contribute to Linux operatingsystem development.The competitive position of Linux has also benefited from the large number of compatibleapplications now produced by many commercial and non-commercial software developers.A number of companies,suchas Red Hat,supply versions of Linux.We compete to provide enterprise-wide computing solutions and point solutions with numerous commercial softwarevendors that offer solutions and middleware technology platforms,software applications for connectivity(both Internet andintranet),security,hosting,database,and e-business servers.IBM and Oracle lead a group of companies focused on theJava Platform Enterprise Edition that competes with our enterprise-wide computing solutions.Commercial competitors forour server applications for PC-based distributed client-server environments include CA Technologies,IBM,and Oracle.Our web application platform software competes with open source software such as Apache,Linux,MySQL,and PHP.Inmiddleware,we compete against Java vendors.Our database,business intelligence,and data warehousing solutions offerings compete with products from IBM,Oracle,SAP,Snowflake,and other companies.Our system management solutions compete with server management and servervirtualization platform providers,such as BMC,CA Technologies,Hewlett-Packard,IBM,and VMware.Our products forsoftware developers compete against offerings from Adobe,IBM,Oracle,and other companies,and also against opensource projects,including Eclipse(sponsored by CA Technologies,IBM,Oracle,and SAP),PHP,and Ruby on Rails.We believe our server products provide customers with advantages in performance,total costs of ownership,andproductivity by delivering superior applications,development tools,compatibility with a broad base of hardware andsoftware applications,security,and manageability.Our Enterprise Services business competes with a wide range of companies that provide strategy and business planning,application development,and infrastructure services,including multinational consulting firms and small niche businessesfocused on specific technologies.More Personal ComputingOur More Personal Computing segment consists of products and services that put customers at the center of theexperience with our technology.This segment primarily comprises:Windows,including Windows OEM licensing(“Windows OEM”)and other non-volume licensing of theWindows operating system;Windows Commercial,comprising volume licensing of the Windows operatingsystem,Windows cloud services,and other Windows commercial offerings;patent licensing;and WindowsIoT.20Devices,including Surface,HoloLens,and PC accessories.Gaming,including Xbox hardware and Xbox content and services,comprising first-and third-party content(including games and in-game content),Xbox Game Pass and other subscriptions,Xbox Cloud Gaming,advertising,third-party disc royalties,and other cloud services.Search and news advertising,comprising Bing(including Bing Chat),Microsoft News,Microsoft Edge,andthird-party affiliates.WindowsThe Windows operating system is designed to deliver a more personal computing experience for users by enablingconsistency of experience,applications,and information across their devices.Windows OEM revenue is impactedsignificantly by the number of Windows operating system licenses purchased by OEMs,which they pre-install on thedevices they sell.In addition to computing device market volume,Windows OEM revenue is impacted by:The mix of computing devices based on form factor and screen size.Differences in device market demand between developed markets and growth markets.Attachment of Windows to devices shipped.Customer mix between consumer,small and medium businesses,and large enterprises.Changes in inventory levels in the OEM channel.Pricing changes and promotions,pricing variation that occurs when the mix of devices manufactured shiftsfrom local and regional system builders to large multinational OEMs,and different pricing of Windowsversions licensed.Constraints in the supply chain of device components.Piracy.Windows Commercial revenue,which includes volume licensing of the Windows operating system and Windows cloudservices such as Microsoft Defender for Endpoint,is affected mainly by the demand from commercial customers forvolume licensing and Software Assurance(“SA”),as well as advanced security offerings.Windows Commercial revenueoften reflects the number of information workers in a licensed enterprise and is relatively independent of the number ofPCs sold in a given year.Patent licensing includes our programs to license patents we own for use across a broad array of technology areas,including mobile devices and cloud offerings.Windows IoT extends the power of Windows and the cloud to intelligent systems by delivering specialized operatingsystems,tools,and services for use in embedded devices.DevicesWe design and sell devices,including Surface,HoloLens,and PC accessories.Our devices are designed to enablepeople and organizations to connect to the people and content that matter most using Windows and integrated Microsoftproducts and services.Surface is designed to help organizations,students,and consumers be more productive.Growth inDevices is dependent on total PC shipments,the ability to attract new customers,our product roadmap,and expandinginto new categories.GamingOur gaming platform is designed to provide a variety of entertainment through a unique combination of content,community,and cloud services.Our exclusive game content is created through Xbox Game Studios,a collection of first-party studios creating iconic and differentiated gaming experiences.We continue to invest in new gaming studios andcontent to expand our intellectual property roadmap and leverage new content creators.These unique gamingexperiences are the cornerstone of Xbox Game Pass,a subscription service and gaming community with access to acurated library of over 400 first-and third-party console and PC titles.21The gamer remains at the heart of the Xbox ecosystem.We are identifying new opportunities to attract gamers across avariety of different end points through our first-and third-party content and business diversification across subscriptions,ads,and digital stores.Weve seen new devices from third-party manufacturers along with key PC and mobile end pointsthat help us empower gamers to play in a way that is most convenient to them.We are focused on growing the platformand expanding to new ecosystems to engage as many gamers as possible.Xbox enables people to connect and share online gaming experiences that are accessible on Xbox consoles,Windows-enabled devices,and other devices.Xbox is designed to benefit users by providing access to a network of certifiedapplications and services and to benefit our developer and partner ecosystems by providing access to a large customerbase.Xbox revenue is mainly affected by subscriptions and sales of first-and third-party content,as well as advertising.Growth of our Gaming business is determined by the overall active user base through Xbox enabled content,availabilityof games,providing exclusive game content that gamers seek,the computational power and reliability of the devices usedto access our content and services,and the ability to create new experiences through first-party content creators.Search and News AdvertisingOur Search and news advertising business is designed to deliver relevant search,native,and display advertising to aglobal audience.Our Microsoft Edge browser and Bing Chat capabilities are key tools to enable user acquisition andengagement,while our technology platform enables accelerated delivery of digital advertising solutions.In addition to first-party tools,we have several partnerships with companies,such as Yahoo,through which we provide and monetize searchofferings.Growth depends on our ability to attract new users,understand intent,and match intent with relevant content onadvertising offerings.CompetitionWindows faces competition from various software products and from alternative platforms and devices,mainly from Appleand Google.We believe Windows competes effectively by giving customers choice,value,flexibility,security,an easy-to-use interface,and compatibility with a broad range of hardware and software applications,including those that enableproductivity.Devices face competition from various computer,tablet,and hardware manufacturers who offer a unique combination ofhigh-quality industrial design and innovative technologies across various price points.These manufacturers,many ofwhich are also current or potential partners and customers,include Apple and our Windows OEMs.Xbox and our cloud gaming services face competition from various online gaming ecosystems and game streamingservices,including those operated by Amazon,Apple,Meta,and Tencent.We also compete with other providers ofentertainment services such as video streaming platforms.Our gaming platform competes with console platforms fromNintendo and Sony,both of which have a large,established base of customers.We believe our gaming platform iseffectively positioned against,and uniquely differentiated from,competitive products and services based on significantinnovation in hardware architecture,user interface,developer tools,online gaming and entertainment services,andcontinued strong exclusive content from our own first-party game franchises as well as other digital content offerings.Our Search and news advertising business competes with Google and a wide array of websites,social platforms like Meta,and portals that provide content and online offerings to end users.OPERATIONSWe have regional operations service centers that support our operations,including customer contract and orderprocessing,billing,credit and collections,information processing,and vendor management and logistics.The center inIreland supports the African,Asia-Pacific,European,and Middle East regions;and the centers in Arlington,Virginia,Atlanta,Georgia,Charlotte,North Carolina,Fargo,North Dakota,Fort Lauderdale,Florida,Redmond,Washington,Reno,Nevada,and Puerto Rico support the American regions.In addition to our operations centers,we also operate datacenters throughout each of these regions.We continue toidentify and evaluate opportunities to expand our datacenter locations and increase our server capacity to meet theevolving needs of our customers,particularly given the growing demand for AI services.Our datacenters depend on theavailability of permitted and buildable land,predictable energy,networking supplies,and servers,including graphicsprocessing units(“GPUs”)and other components.22Our devices are primarily manufactured by third-party contract manufacturers.For the majority of our products,we havethe ability to use other manufacturers if a current vendor becomes unavailable or unable to meet our requirements.However,some of our products contain certain components for which there are very few qualified suppliers.Extendeddisruptions at these suppliers could impact our ability to manufacture devices on time to meet consumer demand.RESEARCH AND DEVELOPMENTProduct and Service Development,and Intellectual PropertyWe develop most of our products and services internally through the following engineering groups.Cloud and AI focuses on making IT professionals,developers,partners,independent software vendors,andtheir systems more productive and efficient through development of Azure AI platform and cloudinfrastructure,server,database,CRM,ERP,software development tools and services(including GitHub),AIcognitive services,and other business process applications and services for enterprises.Strategic Missions and Technologies focuses on incubating technical products and support solutions withtransformative potential for the future of cloud computing and continued company growth across quantumcomputing,Azure Space&Missions Engineering,telecommunications,and Microsoft Federal Sales andDelivery.Experiences and Devices focuses on delivering high value end-user experiences across our products,services,and devices,including Microsoft 365,Windows,Microsoft Teams,Search(including Microsoft Edgeand Bing Chat)and other advertising-based services,and the Surface line of devices.Microsoft Security focuses on delivering a comprehensive portfolio of services that protect our customersdigital infrastructure through cloud platform and application security,data protection and governance,identityand network access,and device management.Technology and Research focuses on fundamental research,product and business incubations,andforward-looking AI innovations that span infrastructure,services,and applications.LinkedIn focuses on our services that transform the way professionals grow their network and find jobs andthe way businesses hire,market,sell,and learn.Gaming focuses on developing hardware,content,and services across a large range of platforms to helpgrow our user base through game experiences and social interaction.Internal development allows us to maintain competitive advantages that come from product differentiation and closertechnical control over our products and services.It also gives us the freedom to decide which modifications andenhancements are most important and when they should be implemented.We strive to obtain information as early aspossible about changing usage patterns and hardware advances that may affect software and hardware design.Beforereleasing new software platforms,and as we make significant modifications to existing platforms,we provide applicationvendors with a range of resources and guidelines for development,training,and testing.Generally,we also create productdocumentation internally.We protect our intellectual property investments in a variety of ways.We work actively in the U.S.and internationally toensure the enforcement of copyright,trademark,trade secret,and other protections that apply to our software andhardware products,services,business plans,and branding.We are a leader among technology companies in pursuingpatents and currently have a portfolio of over 70,000 U.S.and international patents issued and over 19,000 pendingworldwide.While we employ much of our internally-developed intellectual property in our products and services,we alsoengage in outbound licensing of specific patented technologies that are incorporated into licensees products.From timeto time,we enter into broader cross-license agreements with other technology companies covering entire groups ofpatents.We may also purchase or license technology that we incorporate into our products and services.At times,wemake select intellectual property broadly available at no or low cost to achieve a strategic objective,such as promotingindustry standards,advancing interoperability,supporting societal and/or environmental efforts,or attracting and enablingour external development community.Our increasing engagement with open source software will also cause us to licenseour intellectual property rights broadly in certain situations.While it may be necessary in the future to seek or renew licenses relating to various aspects of our products and services,we believe,based upon past experience and industry practice,such licenses generally can be obtained on commerciallyreasonable terms.We believe our continuing research and product development are not materially dependent on anysingle license or other agreement with a third party relating to the development of our products.23Investing in the FutureOur success is based on our ability to create new and compelling products,services,and experiences for our users,toinitiate and embrace disruptive technology trends,to enter new geographic and product markets,and to drive broadadoption of our products and services.We invest in a range of emerging technology trends and breakthroughs that webelieve offer significant opportunities to deliver value to our customers and growth for the company.Based on ourassessment of key technology trends,we maintain our long-term commitment to research and development across a widespectrum of technologies,tools,and platforms spanning digital work and life experiences,cloud computing,AI,devices,and operating systems.While our main product research and development facilities are located in Redmond,Washington,we also operateresearch and development facilities in other parts of the U.S.and around the world.This global approach helps us remaincompetitive in local markets and enables us to continue to attract top talent from across the world.We plan to continue to make significant investments in a broad range of product research and development activities,andas appropriate we will coordinate our research and development across operating segments and leverage the resultsacross the company.In addition to our main research and development operations,we also operate Microsoft Research.Microsoft Research isone of the worlds largest corporate research organizations,often working in close collaboration with top universitiesaround the world,and is focused on advancing the state-of-the-art in computer science and a broad range of otherdisciplines.Our investment in fundamental research provides us a unique perspective on future trends and contributes toour innovation.DISTRIBUTION,SALES,AND MARKETINGWe market and distribute our products and services through the following channels:OEMs,direct,and distributors andresellers.Our sales organization performs a variety of functions,including working directly with commercial enterprisesand public-sector organizations worldwide to identify and meet their technology and digital transformation requirements;managing OEM relationships;and supporting system integrators,independent software vendors,and other partners whoengage directly with our customers to perform sales,consulting,and fulfillment functions for our products and services.OEMsWe distribute our products and services through OEMs that pre-install our software on new devices and servers they sell.The largest component of the OEM business is the Windows operating system pre-installed on devices.OEMs also selldevices pre-installed with other Microsoft products and services,including applications such as Office and the capability tosubscribe to Office 365.There are two broad categories of OEMs.The largest category of OEMs are direct OEMs as our relationship with them ismanaged through a direct agreement between Microsoft and the OEM.We have distribution agreements covering one ormore of our products with virtually all the multinational OEMs,including Dell,Hewlett-Packard,Lenovo,and with manyregional and local OEMs.The second broad category of OEMs are system builders consisting of lower-volume PCmanufacturers,which source Microsoft software for pre-installation and local redistribution primarily through the Microsoftdistributor channel rather than through a direct agreement or relationship with Microsoft.DirectMany organizations that license our products and services transact directly with us through Enterprise Agreements andEnterprise Services contracts,with sales support from system integrators,independent software vendors,web agencies,and partners that advise organizations on licensing our products and services(“Enterprise Agreement Software Advisors”or“ESA”).Microsoft offers direct sales programs targeted to reach small,medium,and corporate customers,in addition tothose offered through the reseller channel.A large network of partner advisors support many of these sales.We also sell commercial and consumer products and services directly to customers,such as cloud services,search,andgaming,through our digital marketplaces and online stores.Additionally,our Microsoft Experience Centers are designedto facilitate deeper engagement with our partners and customers across industries.24Distributors and ResellersOrganizations also license our products and services indirectly,primarily through licensing solution partners(“LSP”),distributors,value-added resellers(“VAR”),and retailers.Although each type of reselling partner may reach organizationsof all sizes,LSPs are primarily engaged with large organizations,distributors resell primarily to VARs,and VARs typicallyreach small and medium organizations.ESAs are also typically authorized as LSPs and operate as resellers for our othervolume licensing programs.Microsoft Cloud Solution Provider is our main partner program for reselling cloud services.We distribute our retail packaged products primarily through independent non-exclusive distributors,authorized replicators,resellers,and retail outlets.Individual consumers obtain these products primarily through retail outlets.We distribute ourdevices through third-party retailers.We have a network of field sales representatives and field support personnel thatsolicit orders from distributors and resellers and provide product training and sales support.Our Dynamics business solutions are also licensed to enterprises through a global network of channel partners providingvertical solutions and specialized services.LICENSING OPTIONSWe offer options for organizations that want to purchase our cloud services,on-premises software,and SA.We licensesoftware to organizations under volume licensing agreements to allow the customer to acquire multiple licenses ofproducts and services instead of having to acquire separate licenses through retail channels.We use different programsdesigned to provide flexibility for organizations of various sizes.While these programs may differ in various parts of theworld,generally they include those discussed below.SA conveys rights to new software and upgrades for perpetual licenses released over the contract period.It also providessupport,tools,training,and other licensing benefits to help customers deploy and use software efficiently.SA is includedwith certain volume licensing agreements and is an optional purchase with others.Volume Licensing ProgramsEnterprise AgreementEnterprise Agreements offer large organizations a manageable volume licensing program that gives them the flexibility tobuy cloud services and software licenses under one agreement.Enterprise Agreements are designed for medium or largeorganizations that want to license cloud services and on-premises software organization-wide over a three-year period.Organizations can elect to purchase perpetual licenses or subscribe to licenses.SA is included.Microsoft Customer AgreementA Microsoft Customer Agreement is a simplified purchase agreement presented,accepted,and stored through a digitalexperience.A Microsoft Customer Agreement is a non-expiring agreement that is designed to support all customers overtime,whether purchasing through a partner or directly from Microsoft.Microsoft Online Subscription AgreementA Microsoft Online Subscription Agreement is designed for small and medium organizations that want to subscribe to,activate,provision,and maintain cloud services seamlessly and directly via the web.The agreement allows customers toacquire monthly or annual subscriptions for cloud-based services.Microsoft Products and Services AgreementMicrosoft Products and Services Agreements are designed for medium and large organizations that want to license cloudservices and on-premises software as needed,with no organization-wide commitment,under a single,non-expiringagreement.Organizations purchase perpetual licenses or subscribe to licenses.SA is optional for customers thatpurchase perpetual licenses.25Open ValueOpen Value agreements are a simple,cost-effective way to acquire the latest Microsoft technology.These agreementsare designed for small and medium organizations that want to license cloud services and on-premises software over athree-year period.Under Open Value agreements,organizations can elect to purchase perpetual licenses or subscribe tolicenses and SA is included.Select PlusA Select Plus agreement is designed for government and academic organizations to acquire on-premises licenses at anyaffiliate or department level,while realizing advantages as one organization.Organizations purchase perpetual licensesand SA is optional.Partner ProgramsThe Microsoft Cloud Solution Provider Program offers customers an easy way to license the cloud services they need incombination with the value-added services offered by their systems integrator,managed services provider,or cloudreseller partner.Partners in this program can easily package their own products and services to directly provision,manage,and support their customer subscriptions.The Microsoft Services Provider License Agreement allows hosting service providers and independent software vendorswho want to license eligible Microsoft software products to provide software services and hosted applications to their endcustomers.Partners license software over a three-year period and are billed monthly based on consumption.The Independent Software Vendor Royalty Program enables partners to integrate Microsoft products into otherapplications and then license the unified business solution to their end users.CUSTOMERSOur customers include individual consumers,small and medium organizations,large global enterprises,public-sectorinstitutions,Internet service providers,application developers,and OEMs.Our practice is to ship our products promptlyupon receipt of purchase orders from customers;consequently,backlog is not significant.AVAILABLE INFORMATIONOur Internet address is .At our Investor Relations website, makeavailable free of charge a variety of information for investors.Our goal is to maintain the Investor Relations website as aportal through which investors can easily find or navigate to pertinent information about us,including:Our annual report on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,and anyamendments to those reports,as soon as reasonably practicable after we electronically file that material withor furnish it to the Securities and Exchange Commission(“SEC”)at www.sec.gov.Information on our business strategies,financial results,and metrics for investors.Announcements of investor conferences,speeches,and events at which our executives talk about ourproduct,service,and competitive strategies.Archives of these events are also available.Press releases on quarterly earnings,product and service announcements,legal developments,andinternational news.Corporate governance information including our articles of incorporation,bylaws,governance guidelines,committee charters,codes of conduct and ethics,global corporate social responsibility initiatives,and othergovernance-related policies.Other news and announcements that we may post from time to time that investors might find useful orinteresting.Opportunities to sign up for email alerts to have information pushed in real time.26We publish a variety of reports and resources related to our Corporate Social Responsibility programs and progress onour Reports Hub website, reports on sustainability,responsible sourcing,accessibility,digital trust,and public policy engagement.The information found on these websites is not part of,or incorporated by reference into,this or any other report we filewith,or furnish to,the SEC.In addition to these channels,we use social media to communicate to the public.It is possiblethat the information we post on social media could be deemed to be material to investors.We encourage investors,themedia,and others interested in Microsoft to review the information we post on the social media channels listed on ourInvestor Relations website.27MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSThe following Managements Discussion and Analysis of Financial Condition and Results of Operations(“MD&A”)isintended to help the reader understand the results of operations and financial condition of Microsoft Corporation.MD&A isprovided as a supplement to,and should be read in conjunction with,our consolidated financial statements and theaccompanying Notes to Financial Statements.This section generally discusses the results of our operations for the yearended June 30,2023 compared to the year ended June 30,2022.For a discussion of the year ended June 30,2022compared to the year ended June 30,2021,please refer to,“Managements Discussion and Analysis of FinancialCondition and Results of Operations”in our Annual Report on Form 10-K for the year ended June 30,2022.OVERVIEWMicrosoft is a technology company whose mission is to empower every person and every organization on the planet toachieve more.We strive to create local opportunity,growth,and impact in every country

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