Universal Music Group - Prospectus -14 September 2021

Universal Music Group N.V.

(a public company (naamloze vennootschap) incorporated under the laws of the Netherlands with its statutory

seat in Amsterdam, the Netherlands and its registered address in Hilversum, the Netherlands)

Admission to listing and trading of all ordinary shares on Euronext Amsterdam

This prospectus (this Prospectus) has been prepared in connection with the Distribution (as defined

below) and the first admission to listing and trading (the Admission) of all of the ordinary shares (the Shares) in

the share capital of Universal Music Group B.V. (to be converted to a public company (naamloze vennootschap)

incorporated under the laws of the Netherlands prior to the Admission) (the Company) on Euronext Amsterdam,

a regulated market operated by Euronext Amsterdam N.V. (Euronext Amsterdam).

The shareholders of Universal Music Group, Inc. (UMGI) and Universal International Music B.V.

(UIM), Vivendi SE (Vivendi), Concerto Investment B.V. (Concerto) and Scherzo Investment B.V. (Scherzo)

(Concerto and Scherzo hereafter collectively referred to as the Tencent-led Consortium and together with

Vivendi, the Restructuring Shareholders) contributed their shares held in UMGI and UIM, representing all of

the issued capital of both UMGI and UIM, to the Company in exchange for newly issued shares in the Company,

as a consequence whereof the Company became the sole holding company of the Group (as defined below) (the

Restructure). The Restructure was completed on February 26, 2021.

Capitalized terms used but not otherwise defined in this Prospectus are defined in Section 17 (Definitions

and Glossary).

Vivendi shall make a distribution in kind of the majority of the issued and outstanding shares that it holds

in the share capital of the Company (the Distribution). On September 23, 2021 (the Distribution Date), Vivendi

shall distribute up to 60% of the Shares to the Vivendi Shareholders (as defined in this Prospectus) pursuant to

the Distribution (the Distribution Shares). Each Vivendi Shareholder will receive one (1) Share for each one (1)

share which it holds in Vivendi on September 22, 2021 (the Distribution Record Date) as part of the Distribution

(the Allocation Ratio), subject to adjustment of the Allocation Ratio (the Adjustment of the Allocation Ratio).

Approval of the Distribution by the Vivendi Shareholders was obtained at the annual general meeting of Vivendi

Shareholders held on June 22, 2021 (the Vivendi AGM).

The Distribution Shares will constitute up to 60% of the issued and outstanding Shares of the Company

upon the Distribution Date. Following the Distribution: (i) Vivendi will hold such number of Shares, representing

approximately 10% of the issued and outstanding share capital of the Company; (ii) Concerto will hold such

number of Shares, representing 10% of the issued and outstanding share capital of the Company; (iii) Scherzo will

hold such number of Shares, representing 10% of the issued and outstanding share capital of the Company; (iv)

Pershing Square Holdings, Ltd., Pershing Square L.P., Pershing Square International Ltd. and PS VII Master, L.P.

(together, the Pershing Entities) will hold such number of Shares, representing 10% of the issued and outstanding

share capital of the Company and (v) it is expected that the Bolloré Entities will hold such number of Shares,

representing 18% of the issued and outstanding share capital of the Company.

Investing in the Shares involves substantial risks and uncertainties. An investor is exposed to the risk

to lose all or part of his or her investment. Before any investment in the Shares, an investor must read

this entire document and in particular Section 1 (Risk Factors).

Prior to the Admission, there has been no public market for the Shares. Application has been made to list

all of the Shares under the symbol “UMG” on Euronext Amsterdam. Trading in the Shares on an “as-if-and-when-

delivered” basis on Euronext Amsterdam is expected to start on or about September 21, 2021 (the First Trading

Date). BNP Paribas, Crédit Agricole Corporate and Investment Bank, Morgan Stanley, Natixis and Société

Générale are acting as joint financial advisors (in such and any other capacity, the Lead Financial Advisors).

Banque Hottinguer, Messier et Associés, CIC, Rothschild, Bank of America, ING, Intesa Sanpaolo S.p.A., Lazard,

Mizuho Securities and Banco Santander are acting as financial co-advisors (in such and any other capacity, the

Financial Co-Advisors). Bank of China and Goldman Sachs Bank Europe SE are acting as other financial advisors

(in such and any other capacity, the Other Financial Advisors and, together with the Lead Financial Advisors and

the Financial Co-Advisors, the Lead Equity Capital Markets Advisors). The Lead Equity Capital Markets

Advisors and the Listing and Paying Agent (as defined herein) are acting exclusively for the Company and/or

Vivendi and no one else in connection with the Admission and Distribution. They will not regard any other person

(whether or not a recipient of this document) as their respective clients in relation to the Admission and

Distribution and will not be responsible to anyone other than the Company and Vivendi for providing the

protections afforded to their respective clients nor for giving advice in relation to the Admission and Distribution

or any transaction or arrangement referred to herein. The Lead Equity Capital Markets Advisors are acting only

in respect of the Admission and Distribution.

Allotment, delivery and settlement of the Distribution Shares (Settlement) to the Vivendi Shareholders

is expected to take place on or about September 23, 2021 through the book-entry systems of Euroclear France.

For more information on the Distribution, see Section 14 (The Distribution).

This Prospectus constitutes a prospectus for the purposes of Article 3 of Regulation (EU) 2017/1129 (the

Prospectus Regulation) and has been prepared in accordance with the Prospectus Regulation. This Prospectus

has been approved by the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële

Markten, the AFM), as competent authority under the Prospectus Regulation. The AFM only approves this

Prospectus as meeting the standards of completeness, comprehensibility and consistency imposed by the

Prospectus Regulation. Such approval should not be considered as an endorsement of the Company that is or the

quality of the securities that are the subject of this Prospectus. Investors should make their own assessment as to

the suitability of investing in the Shares.

Prospectus dated September 14, 2021

Lead Financial Advisors

BNP Paribas Crédit Agricole CIB Morgan Stanley

Natixis

Société Générale

Financial Co-Advisors

Banque Hottinguer Messier et Associés CIC

Rothschild ING

Intesa Sanpaolo S.p.A. Bank of America Lazard

Mizuho Securities Banco Santander

Other Financial Advisors

Bank of China Goldman Sachs Bank Europe SE

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CONTENTS

(A) Summary of the Prospectus ...................................................................................................... 1

1. Risk Factors ....................................................................................................................................... 8

2. Important Information ...................................................................................................................... 27

3. Forward-Looking Statements ........................................................................................................... 33

4. Reasons for the Distribution and Use of Proceeds ........................................................................... 35

5. Dividend Policy ............................................................................................................................... 36

6. Capitalisation and Indebtedness ....................................................................................................... 38

7. Selected Financial Information ........................................................................................................ 41

8. Operating and Financial Review ...................................................................................................... 49

9. UMG Profit Forecast ........................................................................................................................ 75

10. Industry Overview ......................................................................................................................... 79

11. Business Description ...................................................................................................................... 91

12. Board and Employees .................................................................................................................. 114

13. Description of Share Capital and Corporate Governance ............................................................ 143

14. The Distribution ........................................................................................................................... 159

15. Taxation ....................................................................................................................................... 163

16. General Information on the Company ......................................................................................... 167

17. Definitions and Glossary .............................................................................................................. 176

18. Historical Financial Information .................................................................................................. 183

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(A) SUMMARY OF THE PROSPECTUS

INTRODUCTION AND WARNINGS

Warning. The summary has been prepared in accordance with Article 7 of Regulation (EU) 2017/1129 and should

be read as an introduction to the prospectus (the Prospectus) prepared in connection with the Distribution (as defined

below) and the first admission to listing and trading (the Admission) of all of the ordinary shares (the Shares) in the

share capital of Universal Music Group B.V. (to be converted to a public company (naamloze vennootschap)

incorporated under the laws of the Netherlands prior to the Admission) (the Company) on Euronext Amsterdam, a

regulated market operated by Euronext Amsterdam N.V. (Euronext Amsterdam).

The shareholders of Universal Music Group, Inc (UMGI) and Universal International Music B.V. (UIM), Vivendi

SE (Vivendi), Concerto Investment B.V. (Concerto) and Scherzo Investment B.V. (Scherzo) (Concerto and Scherzo

hereafter collectively referred to as the Tencent-led Consortium and together with Vivendi, the Restructuring

Shareholders) contributed their shares held in UMGI and UIM, representing all of the issued capital of both UMGI

and UIM, to the Company in exchange for newly issued shares in the Company, as a consequence whereof the

Company became the sole holding company of the Group (the Restructure). The Restructure was completed on

February 26, 2021. Vivendi shall make a distribution in kind of the majority of the issued and outstanding shares that

it holds in the share capital of the Company (the Distribution). On September 23, 2021 (the Distribution Date),

Vivendi shall distribute up to 60% of the Shares to the Vivendi Shareholders (as defined in this Prospectus) pursuant

to the Distribution (the Distribution Shares).

Any decision to invest in the Shares should be based on a consideration of the Prospectus as a whole by any potential

investor. Any potential investor could lose all or part of its invested capital. Where a claim relating to the information

contained in the Prospectus is brought before a court, the plaintiff investor might, under national law, have to bear

the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those

persons who have tabled the summary, including any translation thereof, but only where the summary is misleading,

inaccurate or inconsistent when read together with the other parts of the Prospectus or where it does not provide,

when read together with the other parts of the Prospectus, key information in order to aid investors when considering

whether to invest in the Shares.

The Prospectus was approved on September 14, 2021 by the Netherlands Authority for the Financial Markets

(Stichting Autoriteit Financiële Markten, the AFM), as competent authority under Regulation (EU) 2017/1129, with

its head office at Vijzelgracht 50 1017 HS, Amsterdam, and telephone number: +31(0)20-797 2000.

KEY INFORMATION ON THE ISSUER

Who is the issuer of the securities?

Domicile and legal form. The Company is a private company with limited liability (besloten vennootschap met

beperkte aansprakelijkheid) with the name Universal Music Group B.V. The commercial name is “Universal Music”.

In accordance with applicable law, the Company has undertaken to convert to a public company (naamloze

vennootschap) prior to the Admission. The Company’s statutory seat is in Hilversum, the Netherlands (and will, upon

the conversion of the Company to a public company (naamloze vennootschap) be in Amsterdam, the Netherlands).

The registered office address of the Company is ‘s-Gravelandseweg 80, 1217 EW Hilversum, the Netherlands. The

telephone number of the Company is +31 (0) 88 62 61 500. The Company is registered with the trade register of the

Chamber of Commerce of the Netherlands (Kamer van Koophandel) under number 81106661. Its legal entity

identifier is 724500GJBUL3D9TW9Y18.

Principal Activities. The Company is the holding company of the Universal Music Group (together with the

Company, UMG or the Group). UMG is a driving force in the global music industry, with revenues of €7.2 billion

in the year ended December 31, 2019 and €7.4 billion in the year ended December 31, 2020. UMG, operating in more

than 60 territories, is home to the greatest local and international artists, spanning all genres and generations including

ABBA, Louis Armstrong, The Beatles, The Beach Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi,

Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti,

Queen, The Rolling Stones, Frank Sinatra, U2, Amy Winehouse and Stevie Wonder, as well as many of the biggest

artists today, such as J Balvin, Justin Bieber, Luke Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish,

Eminem, Selena Gomez, Ariana Grande, Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone,

Shawn Mendes, Kacey Musgraves, Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie

Underwood, Keith Urban and The Weeknd. UMG has three main operating businesses: recorded music, music

publishing and merchandising. The recorded music business is dedicated to the discovery and development of artists,

marketing and promoting their music across a wide array of formats and platforms. UMG is also expanding into other

areas such as live events, livestreaming, sponsorship, film and television and podcasts. The music publishing business

discovers and develops songwriters and owns and administers the copyright for musical compositions used in

recordings, public performances and related uses, such as films, television programs and advertisements. The

merchandising business produces and sells artist

branded and other bra

nded products. These products are marketed

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through multiple sales channels, including fashion retail, concert touring and retail stores and direct-to-consumer

online sales. UMG’s activities also extend to other areas, such as brand rights management.

Major Shareholders. As at the date of the Prospectus, Vivendi, the Bolloré Entities, the Tencent-led Consortium and

the Pershing Entities (together, the Existing Shareholders) beneficially hold 100% of the Company’s issued ordinary

share capital. The following table sets forth the shareholders of the Company which, to the Company’s knowledge

as of September 8, 2021 and based on the number of shares and voting rights comprising the share capital of Vivendi

published on September 1, 2021, will directly or indirectly have a notifiable interest in the Company’s capital and

voting rights within the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht) (DFSA) (i)

immediately prior to the Distribution (as defined below) and (ii) immediately following the Distribution.

Shares to be owned immediately

prior to the Distribution

Shares to be owned immediately

following the Distribution

Amount % Amount %

Vivendi

(1)

...........................

1,269,268,713 70% c. 183,582,493 c.10.12%

(7)

Concerto

(2)

..........................

181,324,116 10% 181,324,116 10%

Scherzo

(2)

...........................

181,324,116 10% 181,324,116 10%

Pershing Entities jointly

(3)

181,324,115 10% 181,324,115 10%

Bolloré Entities jointly

(4)(5)

100 0% 326,507,033 18.01%

Société Générale

(6)

0 0% 59,556,315 3.28%

(1) Vivendi’s shares have been listed on Euronext Paris since 1995. No shareholder is controlling Vivendi within the meaning of article L.233-

3 of the French commercial code. Vivendi’s major shareholder is Bolloré Group (through the Bolloré Entities, Vincent Bolloré and Cyrille

Bolloré), representing jointly 29.46% of the share capital, 29.73% of the theoretical voting rights and 30.34% of the exercisable voting rights

of Vivendi as of August 31, 2021, representing an indirect interest of 20.62% in the Shares of the Company.

(2) Concerto LLC indirectly controls Concerto and Scherzo.

(3) Pershing Entities refers collectively to entities advised by, or affiliated with, Pershing Square Capital Management, L.P. William A. Ackman

controls Pershing Square Capital Management, L.P.

(4) Bolloré Entities collectively refers to Compagnie de Cornouaille and Compagnie de l’Odet. For more information, see Section 12.11.

Compagnie de Cornouaille is controlled by Compagnie de l’Odet, itself controlled by Sofibol, which is controlled at the highest level by

Bolloré Participations SE. Bolloré Participations SE is controlled by Vincent Bolloré, who holds, directly and indirectly 92.55% of the share

capital, 72.20% of the theoretical voting rights and 93.60% of the exercisable voting rights of Compagnie de l’Odet.

(5) This percentage only reflects the shares held by the Bolloré Entities and does not take into account the Vivendi shares directly held by M.

Vincent Bolloré and M. Cyrille Bolloré, which represent together less than 0.01% of the total share capital and voting rights of Vivendi.

(6) On August 24, 2021, the French Autorité des Marchés Financiers reported that, on August 19, 2021, Société Générale had crossed the

threshold of 5% of the share capital and voting rights of Vivendi. On September 7, 2021, Vivendi was informed by Société Générale that,

on September 2 and September 6, 2021, it had crossed the statutory threshold of 5.5% of the share capital and voting rights of Vivendi and

that it held 59,556,315 shares in Vivendi, representing 5.37% of the share capital and 5.21% of the voting rights of Vivendi as of August 31,

2021, representing an indirect interest of 3.76% in the Shares of the Company .

(7) These figures include an estimate of the number of Shares to be transferred by Vivendi to the relevant Corporate Executives pursuant to an

award by Vivendi to a limited number of senior managers of UMG, including certain of the Corporate Executives. The number of Shares to

be transferred to the relevant Corporate Executive will only be determinable closer to the date of listing and may vary depending upon the

expected trading price of the Shares, and the number of shares will be reduced to cover any required local payroll and income withholding,

and market capitalization of the Company. For more information, see Section 12.6.

Key executive directors. Sir Lucian Grainge CBE is the Chairman and Chief Executive Officer of the Company, and

Vincent Vallejo is the Deputy Chief Executive Officer of the Company.

Independent auditors. Ernst & Young et Autres (EY), an independent registered public audit firm with its address at

Tour First, TSA 14444, 92037 Paris-La Défense Cedex, France. The auditors signing the auditor's reports on behalf

of Ernst & Young et Autres are members of the Compagnie régionale des Commissaires aux Comptes de Versailles

et du Centre. Deloitte & Associés (Deloitte), an independent registered public audit firm with its address at 6, place

de la Pyramide, 92908 Paris-la Défense Cedex, France. The auditors signing the auditor's reports on behalf of Deloitte

& Associés are members of the Compagnie régionale des Commissaires aux Comptes de Versailles et du Centre.

What is the key financial information regarding the issuer?

With regard to the financial information as at and for the financial years ended December 31, 2018, 2019 and 2020

presented in the Prospectus, references to Universal Music Group, UMG or the Group refer to UMGI and UIM

collectively, and each of their respective subsidiaries, unless otherwise indicated. The Prospectus includes the

combined financial statements of Universal Music Group as at and for the years ended December 31, 2018, 2019 and

2020 (together, the Combined Financial Statements) and the unaudited consolidated condensed interim financial

statements for the Company as at and for the six-month period ended June 30, 2021 (the Interim Financial

Statements and, together with the Combined Financial Statements the UMG Financial Statements). There are no

qualifications in the auditors’ report on the Combined Financial Statements, and no qualifications in the auditors’

review report on the Interim Financial Statements included in the Prospectus. The Joint Auditors’ report includes

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the Combined Financial Statements the following emphasis of matter paragraph, titled “Emphasis of matter”: We

draw attention to the Note "Basis of preparation of the Combined Financial Statements", in Section "Accounting

conventions used when preparing the Combined Financial Statements". Our opinion is not modified in respect of this

matter. This ‘Emphasis of matter” has been noted by the Joint Auditors in view of the fact that combined financial

statements are less common than consolidated financial statements and, taking into account that they comprise

accounts of two different companies (as opposed to an aggregate consolidated position of a parent company and its

subsidiaries as is the case for consolidated accounts) are more complex than consolidated financial statements.

Therefore, the Joint Auditors deemed it necessary and helpful to include an emphasis of matter paragraph in their

Report on the Combined Financial Statements to draw readers’ attention to the basis of preparation of these accounts,

which basis is described in the relevant notes to the Combined Financials Statements.

Summary combined / consolidated statements of profit or loss

Year ended December 31

6 months ended June

2020 2019

2018

2021 2020

Audited Unaudited

(€ millions)

Revenues ........................................................................ 7,432 7,159 6,023 3,831 3,459

Cost of revenues .............................................................. (3,917) (3,818) (3,110) (2,047) (1,820)

Selling, general and administrative expenses .................. (2,265) (2,276) (2,062) (1,090) (1,104)

Restructuring charges ...................................................... (20) (24) (29) (9) (8)

Impairment losses on intangible assets acquired through

business combinations .....................................................

- - - - -

Income from equity affiliates - operational ..................... (9) (2) (1) (1) (11)

Earnings before interest and income taxes (EBIT) .....

1,221 1,039 821 684 516

Interest ............................................................................. (15) 14 27 (9) (6)

Income from investments ................................................ - - 1 - -

Other financial income .................................................... 603 174 333 105 453

Other financial charges .................................................... (28) (57) (29) (183) (13)

560 131 332 (87) 434

Earnings before provision for income taxes ................ 1,781 1,170 1,153 597 950

Provision for income taxes ..............................................

(412) (195) (251) (144) (214)

Earnings from continuing operations ..........................

1,369 975 902 453 736

Earnings from discontinued operations ........................... - - - - -

Earnings .........................................................................

1,369 975 902 453 736

of which

Earnings attributable to shareowners ......................... 1,366 972 897 452 735

Non-controlling interests .................................................

3 3 5 1 1

Summary combined / consolidated statements of financial position

As at December 31 As at June 30

2020 2019 2018 2021 2020

Audited Unaudited

(€ millions)

Non-current assets ...................... 8,000 6,055 4,749 7,808 6,849

Current assets ............................. 2,987 2,775 3,248 2,865 2,748

Total assets ................................

10,987 8,830 7,997 10,673 9,597

Total equity ...............................

1,432 2,984 3,077 1,487 1,253

Non-current liabilities ................ 4,830 1,713 1,138 2,308 4,114

Current liabilities........................ 4,725 4,133 3,782 6,878 4,230

Total liabilities ..........................

9,555 5,846 4,920

9,186

8,344

TOTAL EQUITY AND

LIABILITIES ...........................

10,987 8,830 7,997 10,673 9,597

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Summary combined / consolidated statements of cash flows

Year ended December 31 6 months ended June 30

2020 2019 2018 2021 2020

Audited Unaudited

(€ millions)

Net cash provided by operating activities .......... (3) 685 747 309 76

Net cash provided by/(used for) investing

activities ............................................................ (46) (129) (111) 29 (37)

Net cash provided by/(used for) financing

activities ............................................................ 217 (1,076) (2,387) (584) 85

Foreign currency translation adjustments of

continuing operations ........................................ (35) (8) (19) 6 (20)

Change in cash and cash equivalents and

shareowners loans ...........................................

133 (528) (1,770) (240) 104

Cash and cash equivalents and shareowners

loans ..................................................................

At beginning of the period................................. 1,008 1,536 3,306 1,141 1,008

At end of the period ........................................... 1,141 1,008 1,536 901 1,112

of which Shareowners loans

At beginning of the period................................. 672 1,260 3,059 815 672

At end of the period ...........................................

815 672 1,260 146 695

of which Cash and cash equivalent

At beginning of the period................................. 336 276 247 326 336

At end of the period ...........................................

326 336 276 755 417

Other Key Financial Information

KPIs. The table below sets out the Group’s key performance indicators (KPIs), which the Group monitors

to track the financial and operating performance of its business. Certain of these KPIs are not defined in the

International Financial Reporting Standards issued by the International Accounting Standards Board and as endorsed

by the EU (IFRS).

Year ended December 31

6 months ended

June 30

2020 2019 2018

2021 2020

Audited Unaudited

(€ millions, unless otherwise indicated)

EBITA

(1)

....................................

1,329 1,124 902 753 567

EBITA margin

(2)

.......................

17.9% 15.7% 15.0% 19.7% 16.4%

EBITDA

(3)

................................. 1,487 1,267 979 822 649

EBITDA margin

(4)

....................

20.0% 17.7% 16.3% 21.5% 18.8%

(1) To calculate EBITA, the accounting impact of the following items is excluded from the income from EBIT: (i) the amortization of intangible

assets acquired through business combinations as well as other rights catalogs acquired; (ii) impairment losses on goodwill, other intangibles

acquired through business combinations and other rights catalogs acquired; and (iii) other income and charges related to transactions with

shareowners (except when directly recognized in equity).

(2) EBITA margin represents EBITA as a percentage of revenues. EBITA margin is unaudited.

(3) To calculate EBITDA, the accounting impact of the following items is excluded from the income from EBIT: (i) the depreciation of tangible,

intangible and right of use assets; (ii) gains/(losses) on the sale of tangible, intangible and right of use assets; (iii) the amortization of

intangible assets acquired through business combinations as well as other rights catalogs acquired; (iv) impairment losses on goodwill, other

intangibles acquired through business combinations and other rights catalogs acquired; (v) income from equity affiliates having similar

operating activities; and (vi) restructuring charges, and other non-recurring items.

(4) EBITDA margin represents EBITDA as a percentage of revenues. EBITDA margin is unaudited.

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What are the key risks that are specific to the issuer?

Any investment in the Shares is associated with risks. Prior to any investment decision, it is important to carefully

analyse the risk factors considered relevant to the future development of the Group and the Shares. The below are

the key risks relating to the Company that, alone or in combination with other events or circumstances, could have a

material adverse effect on the Group’s business, financial condition, results of operations and prospects. In making

the selection, the Group has considered circumstances such as the probability of the risk materialising on the basis of

the current state of affairs, the potential impact which the materialisation of the risk could have on the Group’s

business, financial condition, results of operations and prospects, and the attention that management would, on the

basis of current expectations, have to devote to these risks if they were to materialise:

 UMG may be unable to compete successfully in the highly competitive industry and markets in which it

operates and UMG’s business may be adversely affected if UMG fails to identify, attract, sign and retain

successful recording artists and songwriters or by the absence of superstar releases.

 If streaming and subscription adoption or revenue fail to grow or grow less rapidly than UMG anticipates,

UMG’s business may be adversely affected.

 UMG relies on digital service providers for the online distribution and marketing of its music on the basis

of contractual terms that are subject to change.

 UMG’s results of operations may be adversely affected if it is unable to compete successfully in the evolving

markets in which it operates or is unable to execute its business strategy.

 Technological advancements are rapidly changing the marketplace in which UMG competes and the nature

of UMG’s competition.

 UMG operates in many jurisdictions around the world and therefore, is subject to a variety of trends,

developments and limitations in those jurisdictions, which could affect it adversely.

 UMG’s ability to operate effectively could be impaired if it fails to attract and retain its executive officers

and other key personnel.

 The success of UMG’s business is dependent on the existence and maintenance of its intellectual property

rights and challenges in obtaining, maintaining, protecting and enforcing UMG’s intellectual property rights

and involvement in intellectual property litigation could adversely affect its business, operating results and

financial condition.

 Piracy continues to adversely impact UMG’s business and content protection is a key focus of UMG’s

business.

 UMG’s business is subject to a variety of European, US and other supranational or domestic laws, rules,

policies and other obligations regarding data protection.

 A significant portion of UMG’s revenues are subject to regulation either by government entities or by local

third-party collecting societies throughout the world and rates on other income streams may be set by

governmental proceedings or be subject to legislative intervention, which may limit its profitability.

 Changes in laws and regulations, including those relating to intellectual property rights, may have an adverse

effect on UMG’s business.

KEY INFORMATION ON THE SECURITIES

What are the main features of the securities?

Type, class and ISIN. The Shares are ordinary shares, created under and in accordance with the laws of the

Netherlands, with a nominal value of €10.00 each in the share capital of the Company. Application has been made to

list all of the Shares under the ticker symbol “UMG” on Euronext Amsterdam under ISIN Code NL0015000IY2.

Currency, denomination, par value and number of securities. The Shares are denominated in and will trade in euro.

Immediately prior to the Distribution, the authorized share capital of the Company shall amount to €27,000,000,000,

divided into 2,700,000,000 Shares with a nominal value of €10.00 each. The issued share capital of the Company

immediately prior to the Distribution is expected to amount to €18,132,411,600, divided into 1,813,241,160 Shares

with a nominal value of €10.00 each.

Rights attached to the Shares. Shortly prior to Admission, the articles of association of the Company will be amended

and fully restated. Reference to the Articles of Association hereafter will be to the Company’s articles of association

as they will read after such amendment and restatement. Each Share confers its holder the right to cast one vote at

the Company’s general meeting, being the corporate body or, where the context so requires, the physical meeting

(the General Meeting). There are no restrictions on voting rights. The Shares carry dividend rights.

Rank of securities in the issuer’s capital structure in the event of insolvency. The Shares do not carry any rights in

respect to capital to participate in a distribution (including on a winding-up) other than those that exist as a matter of

law. The Shares, which includes the Distribution Shares, will rank pari passu in all respects.

Restrictions on the free transferability of the securities. There are no restrictions on the transferability of the Shares

in the Articles of Association or under Dutch law. However, the offering of Shares to persons located or resident in,

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or who are citizens of, or who have a registered address in certain countries, and the transfer of Shares into certain

jurisdictions, may be subject to specific regulations or restrictions.

Dividend or pay-out policy. The Company plans, as from the Admission, to annually declare and pay dividends to

all holders of the Shares on a pro rata basis in two semi-annual instalments, in the aggregate amount of no less than

50% of the Company’s net profits realized during the relevant financial year, subject to agreed non-cash items. The

Company intends to pay an interim dividend in the fourth quarter of each financial year, after the publication of the

half-year figures of the Company, and a final dividend in the second quarter of the following financial year, to be

paid following approval of the Company’s financial statements at its annual General Meeting.

On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all Shareholders

by way of an interim dividend distribution at the charge of the Company’s current profits in the current financial year

that started on January 1, 2021, provided that in the event that after adoption of the annual accounts for the financial

year of the Company that started on January 1, 2021, the Company’s profits shall appear to be less than the amount

of such interim dividend distribution, the balance shall be deemed to have been a distribution from the Company’s

freely distributable reserves. With regard to such distribution: (i) the ex-dividend date will be October 25, 2021; (ii)

the record date will be October 26, 2021; and (iii) the payment date will be October 28, 2021.

Where will the securities be traded?

Application has been made for the admission to listing and trading of all of the Shares (Admission) under the symbol

“UMG” on Euronext Amsterdam. Trading on an “as-if-and-when-delivered” basis in the Shares on Euronext

Amsterdam is expected to commence at 9.00 (Central European Time (CET)) on or around September 21, 2021 (the

First Trading Date). Prior to being admitted to trading on Euronext Amsterdam, there has been no public trading

market for the Shares.

What are the key risks that are specific to the securities?

The key risks relating to the Distribution and the Shares are:

 The Existing Shareholders will continue to hold a significant minority stake in the Company and may have

conflicts of interest with other Shareholders.

 An active trading market on Euronext Amsterdam may not develop.

 The Company may issue additional Shares or other equity securities without Shareholder approval, which

would dilute Shareholder ownership interests and may depress the market price of the Shares.

KEY INFORMATION ON THE ADMISSION TO TRADING ON A REGULATED MARKET

Under which conditions and timetable can I invest in this security?

Timetable. Subject to acceleration or extension of the timetable by the Company and Vivendi for, or withdrawal of,

the Admission and the Distribution, the timetable below lists the expected key days for the Admission and the

Distribution:

Event Time (CET) and date

Distribution

Resolution of Vivendi’s management board to distribute an exceptional interim

dividend in kind

September 14, 2021

Euronext Amsterdam notice announcing the Reference Price for the Shares September 20, 2021

Distribution ex-Date in respect of Distribution of Distribution Shares September 21, 2021

Admission September 21, 2021

Commencement of trading under the ticker symbol "UMG" on an "if-and-when-

delivered" (conditional upon delivery) basis

September 21, 2021

Distribution Record Date in respect of Distribution of Distribution Shares September 22, 2021

Payment of the Distribution (delivery and book-entry of the Distribution Shares

allocated pursuant to the Distribution)

September 23, 2021

Distribution Settlement September 23, 2021

The Company and Vivendi reserve the right to adjust the dates, times and periods given in the timetable and throughout the

Prospectus.

Lead Equity Capital Markets Advisors. BNP Paribas, Crédit Agricole Corporate and Investment Bank, Morgan

Stanley, Natixis and Société Générale are acting as lead financial advisors (in such and any other capacity, the Lead

Financial Advisors). Banque Hottinguer, Messier et Associés, CIC, Rothschild, Bank of America, ING, Intesa

Sanpaolo S.p.A., Lazard, Mizuho Securities and Banco Santander are acting as financial co-advisors (in such and

any other capacity, the Financial Co-Advisors). Bank of China and Goldman Sachs Bank Europe SE are acting as

other financial advisors (in such and any other capacity,

the

Other Financial Advisors

and, together with the Lead

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Financial Advisors and the Financial Co-Advisors, the Lead Equity Capital Markets Advisors). The Lead Equity

Capital Markets Advisors are acting only in respect of the Admission and Distribution.

Distribution Allocation Ratio. Subject to adjustment of the Allocation Ratio (the Adjustment of the Allocation

Ratio), each Vivendi Shareholder will receive one (1) Share for each one (1) share which it holds in Vivendi on

September 22, 2021 (the Distribution Record Date) as part of the Distribution (the Allocation Ratio).

Distribution Delivery. Subject to acceleration or extension of the timetable for the Distribution, the Distribution is

expected to be implemented and settled on September 23, 2021 (the Distribution Date) through the book entry

facilities of Euroclear France in accordance with Euroclear France’s normal procedures applicable to equity securities

(the Distribution Settlement).

Listing and Paying Agent. BNP Paribas is the Listing Agent and BNP Paribas Securities Services is the Paying and

Settlement Agent with respect to the Shares on Euronext.

Dilution. There shall be no dilution of the shareholdings of the Existing Shareholders pursuant to the Distribution,

however, the shareholding of Vivendi will be reduced from 70% to approximately 10% as a result of the Distribution.

Estimated expenses related to the Admission: The maximum amount of expenses to be paid in relation to the

Admission and Distribution cannot precisely be estimated as of the date of this Prospectus, however, the maximum

amount expenses will in any case remain limited to a maximum of 0.5% of the total amount of the Distribution.

Estimated expenses charged to the investors. No expenses or fees will be charged by the Company or Vivendi to

Vivendi Shareholders in relation to the Admission and the Distribution. However, the beneficiaries of the Distribution

would be required to pay, as appropriate, to their authorized financial intermediary or to Vivendi, through the Listing

and Paying Agent, the social withholdings and/or the non-final withholding tax or the withholding tax payable in

respect of the Distribution.

Why is this prospectus being produced?

Reasons for the Admission. Prior to the date of the Prospectus, financial analysts highlighted that Vivendi’s stock

market price per share was approximately 10% to 30% lower than the sum of all of Vivendi’s businesses divided by

its number of shares. For a number of years, Vivendi’s leading institutional shareholders have been seeking a spin-

off from or a distribution of UMG by Vivendi to reduce such conglomerate discount and to allow for a valuation of

UMG, and for UMG to further develop, on a stand-alone basis. The transactions resulting in 20% of the share capital

of UMG now being held by the Tencent-led Consortium led Vivendi’s management board to conclude that the time

was ripe for a distribution of up to 60% of UMG’s share capital to the Vivendi Shareholders, which resulted in

Vivendi’s pursuance of the Distribution. Whilst the Company will not receive any proceeds from the Admission, it

believes that the Admission is well aligned to the Company’s continued growth ambitions and will help to maximise

shareholder value over time, including by addressing the conglomerate discount highlighted by financial analysts in

relation to Vivendi’s stock market price per share. In addition, the Company and Vivendi believe that the Admission

is also a significant step and presents a new opportunity to the Company which will allow it to broaden artist

opportunities and enrich experiences for music fans, further promoting a thriving music and entertainment industry

and further solidifying UMG’s position as an industry leader. The Admission is expected to further increase the

Company’s profile with the music and entertainment industry, investors, business partners and customers, brand

recognition and credibility. The Admission is also expected to provide additional financial flexibility and diversity

through access to capital markets.

Net proceeds. No proceeds shall be raised pursuant to Admission and the Distribution.

Most material conflicts of interest pertaining to the Admission and the Distribution. Certain of the Lead Equity

Capital Markets Advisors and/or their affiliates are, or have been, engaged and may in the future engage in

commercial banking, investment banking and financial advisory (including in the context of the Admission and

Distribution) and ancillary activities in the ordinary course of their business with the Group and/or Vivendi, other

Existing Shareholders or any parties related to or competing with any of them, in respect of which they have received,

and may in the future receive, customary fees and commissions. In particular, some of the Lead Equity Capital

Markets Advisors and/or their affiliates have taken an active part or takes an active part to Vivendi and UMG’s

financing (see for example a description of the syndicated bank credit facility mentioned in Section 16.5.3 (Facilities

Agreement)) and are long-standing partners to Vivendi. Additionally, the Lead Equity Capital Markets Advisors

may, in the ordinary course of their business, and in the future, effect transactions for their own account or the account

of customers, and make or hold a broad array of investments and actively trade debt and equity securities (or related

derivative securities) and financial instruments on behalf of themselves or their customers. Such investments and

securities activities may involve long or short positions in the Company’s and/or Vivendi’s securities. As a result of

acting in the capacities described above, the Lead Equity Capital Markets Advisors and their affiliates may have

interests that may not be aligned, or could potentially conflict, with the interests of investors in the Shares or with the

interests of the Company or the Group.

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1. RISK FACTORS

Any investment in the Shares is subject to a number of risks. Investors should carefully consider the risk

factors included below, UMG’s business and the industry in which it operates, together with all other information

contained in this Prospectus.

The occurrence of any of the events or circumstances described in these risk factors, individually or

together with other circumstances, may have a significant negative impact on the Group’s business, financial

condition, results of operations and prospects. The price of the Shares could decline and an investor might lose

part or all of its investment upon the occurrence of any such event.

All of these risk factors and events are contingencies that may or may not occur. The Group may face a

number of these risks described below simultaneously and some risks described below may be interdependent

where indicated with a cross-reference. Although the most material risk factors have been presented first within

each category, the order in which the remaining risks are presented is not necessarily an indication of the

likelihood of the risks actually materializing, of the potential significance of the risks or of the scope of any

potential negative impact to the Group’s business, financial condition, results of operations and prospects. While

the risk factors below have been divided into categories, some risk factors could belong in more than one category

and prospective investors should carefully consider all of the risk factors set out in this section.

The below is what the Company believes are the material risks and uncertainties concerning the Group’s

business and industry, and the Shares that, alone or in combination with other events or circumstances, could

have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

In making the selection, the Group has considered circumstances such as the probability of the risk materializing

on the basis of the current state of affairs, the potential impact which the materialization of the risk could have

on the Group’s business, financial condition, results of operations and prospects, and the attention that

management would, on the basis of current expectations, have to devote to these risks if they were to materialize:

Although the Company believes that the risks and uncertainties described below are the material risks and

uncertainties concerning the Group’s business and industry, and the Shares, they are not the only risks and

uncertainties relating to the Group and the Shares. Other risks, events, facts or circumstances not presently known

to the Group, or that the Group currently deems to be immaterial could, individually or cumulatively, prove to be

important and may have a significant negative impact on the Group’s business, financial condition, results of

operations and prospects and the price of the Shares may decline and investors could lose all or part of their

investment.

Any investment in the Shares is associated with risks. Prior to any investment decision, it is important to

carefully analyze the risk factors considered relevant to the future development of the Group and the Shares.

Prospective investors should carefully read and review the entire Prospectus and should form their own views

before making an investment decision with respect to any Shares. Furthermore, before making an investment

decision with respect to any Shares, prospective investors should consult their own professional adviser and

carefully review the risks associated with an investment in the Shares and consider such an investment decision

in light of their personal circumstances.

1.1 Risks Related to UMG’s Business and Industry

1.1.1 UMG may be unable to compete successfully in the highly competitive industry and markets in which

it operates and UMG’s business may be adversely affected if UMG fails to identify, attract, sign and

retain successful recording artists and songwriters or by the absence of superstar releases.

The industry in which UMG operates is highly competitive, influenced by consumer preferences and

rapidly evolving. UMG’s competitive position is dependent on identifying, attracting, signing and retaining

recording artists who are or will become commercially successful, who have long-term potential, whose music is

well received, whose subsequent music is demanded by consumers and whose music will continue to generate

sales as part of its catalog for years to come. Competition among record companies for such talent is intense.

UMG is also dependent on signing and retaining songwriters who are capable of writing songs that will be the

popular hits of today and the classics of tomorrow. For example, in 2020, UMG’s artists took four of the year’s

top five spots in the Spotify global charts (Drake, J. Balvin, Juice WRLD and The Weeknd), released the number

one song of the year (Blinding Lights by The Weeknd) and took two spots in the top three album rankings (After

Hours by The Weeknd and Hollywood’s Bleeding by Post Malone). UMG’s competitive position is dependent on

its continuing ability to attract and develop such recording artists and songwriters whose work can achieve a high

degree of popularity and thereafter, continue to create music and songs to retain, engage and expand their fan

base. With regard to development of recording artists and songwriters, UMG believes that traditional, high-touch,

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full-service label deals with its portfolio of world-renowned labels, provide the most long-term value to an artist

and greatly increase the commercial success, consumer base and longevity potential for artists at every stage of

their careers. These deals provide for the full suite of professional expertise and global resources of a major label,

including a comprehensive approach to content creation, organic artist development, timing, marketing,

promotion, financial investment, and forward planning.

UMG’s recorded music business is to a large extent dependent on technological developments in order

to remain competitive, including access to, selection and viability of new technologies, and UMG’s recorded

music business is subject to potential pressure from competitors as a result of technological developments

modifying the nature of UMG’s competition. If UMG is unable to remain competitive as a result of technological

developments, this could have a material adverse effect on UMG’s business, prospects, financial condition and

results of operations. See Section 1.1.5 (Technological advancements are rapidly changing the marketplace in

which UMG competes and the nature of UMG’s competition).

UMG’s business may be adversely affected if it is unable to sign successful recording artists or

songwriters. Signing, retaining and successfully developing artists is highly competitive, requires substantial

human and capital resources, and can be dependent on consumer preferences that are rapidly and continuously

changing. UMG uses external sources of data provided by streaming platforms or other external providers.

Limitations to access of such data could adversely impact UMG’s capability of identifying future talents and

therefore negatively affect its business. While UMG is required to devote significant time and investment to these

activities, the returns on these activities are influenced by a number of factors, including factors outside of the

control of UMG, and are uncertain at the time of investment. To the extent that the expected returns from these

activities fail to materialize or are not in line with expectations, this may negatively impact UMG’s operating and

financial performance and prospects.

UMG’s competitors may become more successful at signing, marketing and promoting recording artists,

for example if UMG’s competitors increase the amounts they spend to discover, or to market and promote,

recording artists and songwriters or reduce the prices of their music in an effort to expand market share, which

may adversely impact UMG’s business, financial condition, results of operations and prospects.

UMG’s business, prospects, financial condition and results of operations may be adversely affected if it

is unable to identify, attract, sign and retain such recording artists and songwriters on terms that are economically

viable to it. UMG’s financial results may also be affected by the absence of superstar recording artist releases

during a particular period via a negative impact on physical sales, download volumes and UMG’s share of digital

platform subscription streaming revenues, which may result in a decrease in UMG’s revenues from these income

streams and an adverse impact on UMG’s business, financial condition, results of operations and prospects.

1.1.2 If streaming and subscription adoption or revenue fail to grow or grow less rapidly than UMG

anticipates, UMG’s business may be adversely affected.

Revenues from subscription music services are important to UMG because they offset declines in

downloads and physical sales and represent a growing area of UMG’s recorded music business. According to the

IFPI Global Music Report 2021 issued by the International Federation of the Phonographic Industry (IFPI), an

organization that represents the interests of the recording industry worldwide, subscription music services and ad-

supported streaming revenues accounted for approximately 62.1% of global recorded music revenues in 2020,

approximately a 19.9% increase as compared to 2019. In 2020, UMG generated €3,833 million of revenue from

subscription music services and ad-supported streaming, as compared to €3,325 million in 2019. There can be no

assurance that this growth pattern will persist or that digital revenue will continue to grow at a rate sufficient to

offset and exceed declines in downloads and physical sales. Consumption formats in the music industry are

susceptible to technological advancements and changing consumer preferences around how music is accessed, as

illustrated in recent years by the global decline in revenue derived from downloads and CD sales. See Section

1.1.5 (Technological advancements are rapidly changing the marketplace in which UMG competes and the nature

of UMG’s competition). These, and other factors, may in the future negatively impact subscription and ad-

supported streaming, for example where newer formats become more popular with consumers. Additionally,

technology around streaming manipulation, fraud and hacking is becoming increasingly refined and subscription

streaming services are particularly vulnerable which could undermine consumer confidence and cause revenue

loss.

If UMG’s subscription or streaming revenue fails to grow, grows less rapidly than it has over the past

several years or declines, UMG’s recorded music business may experience reduced levels of revenue and

operating income. Additionally, slower growth in streaming adoption or revenue is also likely to have a negative

impact on UMG’s music publishing business, which generates a significant portion of its revenue from sales and

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other uses of recorded music. Both of these may adversely impact UMG’s business, prospects, financial condition

and results of operations.

1.1.3 UMG relies on digital service providers for the online distribution and marketing of its music on the

basis of contractual terms that are subject to change.

UMG derives an increasing portion of its revenues from the distribution of music through digital

distribution channels and partners with several hundred music services around the world and, in 2020, the top 50

music services accounted for 95% of UMG’s digital revenue for 2020. In 2020, 65% of UMG’s overall revenue

was derived from digital channels.

UMG currently enters into relatively short-term agreements with digital music streaming services. There

can be no assurance that UMG will be able to renew or enter into new agreements with any digital music service.

The terms of these agreements, including the rates that UMG receives pursuant to them and the basis for

calculation of those rates, may change as a result of changes in the industry or changes in the law, or for other

reasons. Decreases in rates or changes to other terms of agreements with digital music streaming services could

adversely impact UMG’s business, prospects, financial condition and results of operations.

UMG’s music is also promoted by the digital music services on playlists curated by such services or

generated from their algorithms (or a combination of both). Any unfavorable changes made by such service

providers to their algorithms or to the terms on which they market or promote UMG’s music could adversely

affect UMG’s business, prospects, financial condition and results of operations.

1.1.4 UMG’s results of operations may be adversely affected if it is unable to compete successfully in the

evolving markets in which it operates or is unable to execute its business strategy.

UMG expects to increase revenues and cash flow through a business strategy which requires it to, among

other things, continue to maximize the long-term value of its music by expanding the licensing partners with

which UMG works and diversifying its revenue streams by partnering with an increasing array of new businesses

that benefit from the use of music content to engage consumers. UMG’s strategy includes efforts to grow revenues

from new digital platforms, including fitness and video games, and through business arrangements with non-

traditional partners, including social media platforms. For example, in 2017, UMG became the first major music

company to sign a deal with Facebook. UMG has the largest portfolio of fitness technology agreements of any

music company, including with Peloton and Apple’s Fitness+, and in 2021, licensed its catalog to Equinox Media,

LLC’s Variis digital fitness app. The success of these initiatives relies on adequate third-party support and requires

UMG to accurately forecast and keep up with technological developments and consumer preferences relating to

platforms and may require UMG to implement new business models or adapt to new distribution platforms. If

UMG is unable to implement its strategy successfully or properly react to changes in consumer preference, its

financial condition, results of operations and cash flows could be adversely affected.

1.1.5 Technological advancements are rapidly changing the marketplace in which UMG competes and the

nature of UMG’s competition.

The industries in which UMG operates are subject to rapid and significant changes in technology and are

characterized by the frequent introduction of new products and services and use of technology in new ways, as

demonstrated by the resulting global increase in streaming revenues over the past five years, coupled with a

converse decline in downloads and CD sales. Technological advancements are also modifying the nature of

UMG’s competition and bringing new challenges. The uses of technology are constantly evolving, and it may not

be possible to foresee the ways in which technology could be used in, and to disrupt, the music industry, for

example through the use of artificial intelligence and non-fungible tokens. Technological advancements may also

be used to manipulate and adversely impact the reach of UMG’s digital content to its consumers and, as mentioned

above, technology around streaming manipulation, fraud and hacking is becoming increasingly advanced.

Adapting to, and competing with, rapid technological advancements requires substantial investment of

time and resources; however, such investment does not guarantee UMG’s success in developing, implementing,

transitioning to, competing with, utilizing or defending against new technology. Any failure by UMG to accurately

anticipate customers’ changing needs and emerging technological trends could significantly harm UMG’s

competitive positioning and results of operations. If UMG is not successful in adapting to or competing and

keeping up with new technology, UMG’s business, prospects, financial condition and results of operations could

be adversely affected.

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In addition, UMG’s competitors may in the future be able to innovate or adjust faster than UMG can,

and new technologies may increase competitive pressure by enabling UMG’s competitors to offer superior

services or be more attractive to artists and songwriters. Such developments could make UMG’s value proposition

less compelling, which could have a material adverse effect on UMG’s business, prospects, financial condition

and results of operations.

1.1.6 UMG operates in many jurisdictions around the world and therefore is subject to a variety of trends,

developments and limitations in those jurisdictions, which could affect it adversely.

UMG has offices engaged in recorded music, music publishing, merchandising and audiovisual content

in more than 60 territories around the world. UMG’s local presences have become increasingly important as the

popularity of music originating from a country’s own language and culture is very significant, and more countries

around the world have developed legitimate business models to monetize music. In addition, UMG’s business

model is increasingly focused on developing business in new high-growth music markets. For example, in 2020,

UMG strengthened its global presence through new activities and key partnerships in Israel, Morocco, Vietnam,

Senegal, Cameroon, Nigeria, Italy, India, Indonesia, Thailand and South Korea. However, if UMG’s music does

not continue to have appeal in various countries, UMG’s results of operations could be adversely impacted and

its investments in new jurisdictions could fail to generate returns for UMG in line with expectations. Additionally,

UMG may not be successful in identifying and signing the most promising artists in these markets, which may

negatively impact UMG’s competitive position in these geographies, its prospects and its ability to generate

returns in these markets.

In countries in which the Group currently conducts, or may in the future conduct, its businesses, the

Group’s operations, growth strategy and development may be negatively impacted as a result of less developed

digital, internet and mobile network infrastructure. The Group’s success, particularly streaming revenues, depend

on the continued development and use of internet by consumers to access music as well as increasing high-speed

internet and smart-phone penetration. If internet access or smart phone penetration in these markets develops

slower than expected, or is stalled, the Group’s growth strategy could be adversely affected.

Further, depending on the customs and norms in various markets, UMG’s presence in and generation of

revenues from other countries may require UMG to accept longer accounts receivable settlement cycles and may

subject UMG to difficulties in collecting its accounts receivables. UMG is also subject to restrictions on

repatriation of capital in several jurisdictions in which it operates. For more information, see Section 1.3.6 (Export

and import control laws and regulations, tariffs and trade barriers could have an adverse effect on UMG’s

business) below. Additionally, as a result of its global presence, UMG is subject to challenges in the global

economic environment, as a result of political instability in jurisdictions where it is present as well as recessionary

trends, inflation and instability in the financial markets in jurisdictions where it is present.

Any failure of UMG to adequately respond to the needs of its operations in various jurisdictions, its

inability to appeal to consumers in various countries or the restrictions on UMG’s business due to customs, norms

and policies in various jurisdictions may adversely impact UMG’s business, prospects, financial condition and

results of operations.

1.1.7 UMG faces competition for the attention of its consumers given the constantly evolving entertainment

options that are available.

A significant portion of UMG’s revenue comes from the production and distribution of audio and

audiovisual recordings. The success of UMG’s content depends primarily upon its acceptance by the public and

on consumer tastes and preferences, which change over time and are difficult to predict. The market for these

products is highly competitive and competing products are often released into the marketplace at the same time.

To remain competitive, UMG constantly seeks new platforms to engage different demographics of consumers

around the world. The commercial success of audio and audiovisual recordings depends on several variable

factors, including the quality and acceptance of competing offerings released into the marketplace at or near the

same time, the availability of alternative forms of entertainment and leisure time activities and general economic

conditions and other tangible and intangible factors, all of which can change quickly and in unforeseeable ways.

The recorded music business faces competition for consumer attention from other forms of entertainment

and leisure activities, such as cable and satellite television, on-demand television, motion pictures, podcasts and

video games and user-generated content in physical and digital formats. UMG may face competition in the future

from the development of any number of new forms of entertainment and leisure activities. Although new platforms

and means of entertainment provide opportunities for UMG to engage its customers, such initiatives may not be

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successful or offset constantly changing consumer preferences or cycling preferences between different forms of

entertainment.

If UMG’s recorded music business unsuccessfully competes against other existing or new forms of

entertainment and leisure activities, or produces and distributes audio and audiovisual recordings without broad

consumer appeal, that may adversely impact UMG’s business, prospects, financial condition and results of

operations.

1.1.8 In addition to competition from traditional music industry players, new entrants into the music

industry, artists choosing not to sign with labels and the evolving role of intermediaries may increase

competition and impact UMG’s ability to sign artists.

UMG faces competition from traditional music industry players as well as new entrants, including

investment funds whose investment thesis includes making acquisitions of collections of musical compositions,

or “catalog acquisitions”. UMG’s competitors may launch aggressive promotional campaigns and other marketing

activities, or they may pay higher than market rates to attract new talent and increase their market share. In

response, in order to stay competitive, UMG may be required to make additional investments and incur significant

additional expenditures. If UMG is unable to compete successfully in the changing competitive landscape, UMG

may lose market share, worsen its business prospects and financial condition and its results of operations may be

materially and adversely affected.

In addition, changing business practices, particularly due to the emergence of new technologies and

access to a global network of consumers, has and could further result in artists choosing to make content available

to consumers directly without being affiliated with a label or an intermediary, or could result in music services

playing some of the roles that UMG has traditionally played. In this regard, UMG also competes with certain of

the music distribution platforms who distribute the works of artists and songwriters without the involvement of

labels or intermediaries.

These and other changes in the market could also result in modifications to the ways in which UMG

contracts with its artists and to the revenue generated from those relationships. It is not possible to predict all the

ways in which the music industry could change, and UMG may not be able to effectively adapt to all of these

changes and become less competitive. As a result, changing business practices and disintermediation could have

an adverse impact on UMG’s business, prospects, financial condition and results of operations.

1.1.9 UMG’s ability to operate effectively could be impaired if it fails to attract and retain its executive

officers and other key personnel.

UMG’s success depends, in part, upon the continuing contributions of its executive officers and key

operational and creative personnel, led by its Chairman and Chief Executive Officer, Sir Lucian Grainge. These

executive officers and key personnel possess significant experience within the music industry and their established

personal connections and relationships in the music industry are important to the Group’s operations. UMG

competes with other music and entertainment companies, record labels, digital service providers, technology

companies and other companies for top talent, including executive officers and other key personnel.

If the Group were to unexpectedly lose a member of the Group’s key management, its business, financial

condition, results of operations and prospects could be materially adversely affected. Although all of UMG’s

executive officers have employment agreements with UMG, UMG cannot guarantee that key personnel, including

executive officers, will remain in UMG’s employment or that it will be able to attract and retain qualified

personnel in the future, at a reasonable cost, to replace any departing key personnel, which may disrupt its business

and operations and could adversely impact UMG’s business, prospects, financial condition and results of

operations.

1.1.10 Where UMG acquires, combines with or invests in other businesses or joint ventures, UMG will face

risks inherent in such transactions.

UMG has in the past completed and, as part of its business strategy, will continue, from time to time, to

consider strategic transactions, which could involve acquisitions, combinations or dispositions of businesses or

assets, or strategic alliances or joint ventures with companies engaged in music entertainment, entertainment,

investing or other businesses. For example, in March 2019, UMG acquired the remaining rights in Ingrooves

Music Group (Ingrooves), a global music distribution company that provides marketing and rights management

services for independent labels and artists. Ingrooves subsequently acquired a leading South African independent

distributor, based on chart performance, Electromode, allowing UMG to enhance its digital, distribution and

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marketing services footprint across the continent and in December 2018, UMG acquired 100% of the share capital

in Epic Rights, thereby further expanding UMG’s merchandising business. However, there can be no assurance

that UMG will continue to be able to identify and invest in suitable operations or assets. In addition, any such

investment could be material, be difficult to implement, disrupt its business or change its business profile, focus

or strategy significantly.

UMG may not be successful in addressing any risks or problems encountered in connection with any

strategic transactions. UMG cannot assure that if it makes any future acquisitions, investments, strategic alliances

or joint ventures or enters into any business combination that they will be completed in a timely manner, or at all,

that they will be structured or financed in a way that will enhance its creditworthiness or that they will meet its

strategic objectives or otherwise be successful. In addition, if any new business in which UMG invests or which

it attempts to develop does not progress as planned, it may not recover the funds and resources it has expended,

and this could have a negative impact on its business, prospects, financial condition and results of operations.

Additionally, UMG has made investments into joint ventures with third parties in certain jurisdictions

and it may in the future enter into additional such joint ventures as a means of conducting its business in various

jurisdictions.

While UMG seeks to ensure that it has appropriate control when entering into joint ventures, in the future

UMG may not be able to fully control the operations and the assets of its joint ventures as other investors in the

joint venture may have or require certain rights under the terms of the joint venture, and therefore, UMG may not

be able to unilaterally make significant decisions or take timely actions with respect to its joint ventures. UMG’s

inability to take decisive unilateral action in respect to its joint ventures could have a material adverse impact on

its business, prospects, financial condition and results of operations.

1.1.11 UMG has engaged in substantial restructuring and re-organization activities in the past and may need

to implement further restructurings and re-organizations in the future and its restructuring and re-

organization efforts may not be successful or generate expected cost savings.

UMG’s business has been, and may continue to be, impacted by significant ongoing changes in the

entertainment industry. In response, it has sought, and will continue to actively seek, to adapt its operations and

cost structure to the changing economics of the industry. For example, while physical sales are still significant in

some markets, music consumption has shifted from an ownership model, whereby consumers purchase vinyl or

CDs, to an access model that includes subscription and ad-supported streaming formats. UMG has shifted and

continues to shift resources from its physical sales channels to efforts focused on digital channels, emerging

technologies and other new revenue streams, and it continues its efforts to reduce overhead and manage its variable

and fixed-cost structure. UMG now has entered into agreements and partnerships with every major digital music

service launched in the last decade, including Amazon, Apple, Spotify, YouTube and many others and was one

of the earliest supporters of digital streaming and subscription services, all of which required substantial internal

restructuring activities in order to adapt to the shift from a focus on physical channels to a focus on digital

channels.

UMG may be required to implement further restructuring activities, make additions or other changes to

its management or workforce based on other cost reduction measures or changes in the markets and industry in

which it competes, including the evolving skill sets required from its employees. UMG’s inability to structure its

operations based on evolving market conditions could impact its business. Restructuring activities can also create

unanticipated consequences and negative impacts on its business, and UMG cannot be certain that any ongoing

or future restructuring efforts will be successful or generate expected cost savings. If UMG were to unsuccessfully

implement restructuring and re-organization plans, that could adversely impact UMG’s business, prospects,

financial condition and results of operations.

1.1.12 Unfavorable currency exchange rate fluctuations could adversely affect UMG’s results of operations.

A significant portion of UMG’s assets, liabilities, revenues and costs are denominated in currencies other

than Euros, in particular US Dollars. To prepare its UMG Financial Statements, UMG must translate those assets,

liabilities, revenues and expenses into Euros from such currencies at then-applicable exchange rates.

Consequently, increases and decreases in the value of the Euro as compared to such other currencies will affect

the amount of these items in its UMG Financial Statements, even if their value has not changed in their original

currency. These translations could result in significant changes to its results of operations from period to period.

In addition, exchange rate fluctuations could cause its expenses to increase as a percentage of net sales, affecting

its profitability and cash flows.

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From time to time, UMG enters into foreign exchange contracts to hedge the risk of unfavorable foreign

currency exchange rate movements. However, these hedging strategies may not fully eliminate the exchange rate

risk and currency volatility to which it is exposed. While UMG seeks to hedge currency transaction risks by

offsetting opposing cash flows (natural hedging) and uses derivative hedges, UMG’s efforts to do so may not be

successful or opportunities to do so may not be readily available and such risks may have a material adverse effect

on UMG’s business, prospects, financial condition and results of operations.

1.1.13 UMG’s results of operations, cash flows and financial condition have been and may continue to be

adversely impacted by the COVID-19 pandemic or the state of the global economy as a whole.

Certain of the measures taken by regional and national governments, including, stay-at-home orders and

limitations on indoor and outdoor gatherings have negatively affected UMG’s business. For example, the extended

pause over live concert tours adversely impacted UMG’s sale of tour merchandise which resulted in a decline in

revenue from UMG’s merchandising business in 2020. UMG’s merchandising segment has, in 2020 compared to

2019, decreased by 40.3%. UMG’s merchandising segment relies on vendors outside of the United States and

therefore, faces risks inherent in purchasing from foreign suppliers, including the COVID-19 pandemic on the

supply chain. The limitations on live concert touring have also adversely impacted music publishing performance

revenues. The stay-at-home orders also resulted in the cessation of or significant delay in the production of motion

pictures and television programs, which negatively affected licensing revenue in UMG’s recorded music business

and synchronization revenue in its music publishing business. It has been widely reported that early in the COVID-

19 pandemic, advertisers temporarily reduced their advertising spend. This resulted in a corresponding initial

decline in ad-supported streaming revenue in UMG’s recorded music business and, to a lesser extent, recorded

music licensing revenue and music publishing synchronization, performance and mechanical ad-supported

streaming revenue. UMG’s physical sales rely in part on distribution and retailing of CDs or vinyl through major

retail chains and local shops. Shops closures and stay at home orders negatively affected physical sales of music

through major retail chains and local shops, and any future measures, whether globally or in specific countries,

may continue to have a negative effect on these sales channels.

Notwithstanding recent developments with respect to vaccines for COVID-19, given the global scale,

severity and duration of the COVID-19 pandemic, its trajectory is difficult to predict. The COVID-19 pandemic

is expected to continue to materially and adversely affect the global economy, creating risk around the timing and

collectability of UMG’s accounts receivable and possibly leading to a decline in consumer discretionary spending

which, in turn, could have a negative impact on UMG’s results of operations, cash flows and financial condition.

Stay-at-home and shelter-in-place orders, business closures, travel restrictions, supply chain disruptions,

employee illness or quarantines, and other extended periods of interruption to its business have resulted and could

continue to result in disruptions to UMG’s operations. Any worsening of the COVID-19 pandemic, ineffectiveness

of the vaccination efforts or the spread of any new variants of the coronavirus could result in additional material

adverse impact on its business, financial condition, results of operations and prospects. To the extent the COVID-

19 pandemic adversely affects UMG’s business, prospects, results of operations, cash flows or financial condition,

it may also have the effect of heightening other risks described in this Section 1.

A significant portion of UMG’s revenues relies on consumers spending discretionary funds on leisure

activities, such as music subscriptions, CDs, vinyl albums and artist merchandise. The state of the economy as a

whole, inflation, deflation, political uncertainty, the availability of consumer credit, taxation, unemployment and

the impact of the COVID-19 pandemic are all factors that relate to the prevailing macroeconomic conditions and

affect UMG’s business. Economic growth and consumer confidence are important for UMG’s growth and

strategy. In 2020, UMG’s merchandising revenues were down 39.6% at constant currency and perimeter compared

to 2019 due to the impact of the COVID-19 pandemic on both touring and retail activity, which cut off access for

consumers to purchase these products at their usual retail points. As such, UMG’s eCommerce business grew

significantly in 2020, but could not fully offset the loss of touring and retail merchandise sales. UMG was able to

further offset the negative impact of the COVID-19 pandemic with a significant increase in subscription and

streaming revenues. UMG also generated some incremental revenue from its work on more than 100 live

performances by artists worldwide that streamed on more than a dozen platforms. However, any decrease in global

economic growth or slowdown in certain fast-growing markets could negatively affect the Group’s results of

operations going forward.

In the event that the COVID-19 pandemic and its related effects continue on an extended basis globally,

UMG would continue to look for ways to evolve and develop its business in an effort to off-set the associated

negative effects and avoid a material negative impact to its business. However, in view of the fact that the COVID-

19 pandemic had a direct impact on UMG’s business and certain of its revenue sources, UMG still considers this

risk factor to be a material item.

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1.2 Risks Related to Intellectual Property, Data Security and Information Technology

1.2.1 The success of UMG’s business is dependent on the existence and maintenance of its intellectual

property rights and challenges in obtaining, maintaining, protecting and enforcing UMG’s

intellectual property rights and involvement in intellectual property litigation could adversely affect

its business, operating results and financial condition.

The success of UMG’s business depends on its ability to obtain, maintain, protect and enforce its

trademarks, copyrights and other intellectual property rights around the world. UMG’s intellectual property rights,

as well as its ability to enforce its intellectual property rights depend on the laws and regulations of the many

jurisdictions in which it conducts business, which are not consistent across jurisdictions. In order to obtain,

maintain, protect and enforce its intellectual property rights, UMG takes a variety of measures, including, if

necessary, litigation or proceedings before governmental authorities and administrative bodies. For example, on

July 31, 2018, a complaint for copyright infringement was filed by UMG Recordings, Inc. and Universal Music

Publishing Group (UMPG) (along with the other major labels and publishers including Sony Music Entertainment

and Warner Music Group) against, amongst others, Cox Communications, an Internet access and service provider,

for knowingly inducing and supporting copyright infringement by its customers. UMG also has a content

protection unit tasked with leading and coordinating take downs of content that infringes its intellectual property

rights.

However, these measures can be expensive and time-consuming and, in some instances, can be

ineffective such that, despite such measures, third parties may be able to obtain and use UMG’s intellectual

property without its permission, and there is no guarantee that UMG will be able to successfully obtain, protect,

maintain or enforce its intellectual property rights in every instance. The inability to obtain, maintain, protect or

enforce its intellectual property rights could harm UMG’s brand or brand recognition and adversely affect its

business, prospects, financial condition and results of operations.

In addition, if UMG is alleged to have infringed, misappropriated or otherwise violated the intellectual

property rights of a third party (even where such claims are without merit), any litigation to defend the claim could

be costly and would divert the time and resources of management, regardless of the merits of the claim and whether

the claim is settled out of court or determined in its favor. There can be no assurance that UMG would prevail in

any such litigation. If UMG were to lose a litigation relating to intellectual property, in addition to the potential

reputational damage, it could be forced to pay monetary damages, to obtain a license, or to cease using certain

intellectual property or technologies. For example, on February 5, 2019, a class action lawsuit was filed against

UMG Recordings, Inc. on behalf of a putative class of all recording artists who have to date requested the

termination of alleged transfers of US copyright to UMG pursuant to Section 203 of the Copyright Act, which

allows, under certain conditions, an author who has contractually transferred the US copyright rights to his or her

work to a third party to terminate such grant after 35 years. While a class has not been certified in this case, and

UMG believes it has valid defenses to the claims, the complainant seeks to have the court recognize the purported

termination of certain alleged grants by the artists involved in the litigation and also alleges copyright

infringement, alleging that UMG continued to use certain recordings after the purported termination dates. To the

extent that UMG is unable to successfully defend these claims, amongst other things, it may face damages claims

from the relevant artists.

Additionally, artists signed by UMG may seek to challenge and dispute the scope of intellectual property

rights under their contracts entered into with UMG, including potential disputes as to the application and effect of

technological developments and new formats to access music. In this regard, see Section 1.3.3 (UMG is and could

become involved in a number of lawsuits, which could negatively affect UMG’s results of operations, financial

condition and reputation).

Any of the foregoing may cause UMG to suffer economic loss and reputational damage, which would

adversely affect UMG’s business, prospects, financial condition and results of operations.

1.2.2 Piracy continues to adversely impact UMG’s business and content protection is a key focus of UMG’s

business.

Technological advances and the conversion of music into digital formats have made it easy to create,

transmit and “share” high-quality unauthorized copies of music in a manner that does not provide an economic

return for UMG. This includes “stream-ripping” to access UMG’s music illegally through the internet, whether

by download or streaming (including by illegal “stream-ripping”). In a 2021 IFPI survey of 43,000 internet users

aged 16 to 64 across 21 countries, 40% admitted using illegal stream-ripping services, the leading form of music

piracy. Organized industrial piracy may also lead to decreased revenues. The impact of piracy on legitimate music

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revenues and subscriptions is hard to quantify, but UMG believes that illegal file sharing and other forms of

unauthorized activity, including stream manipulation, have a substantial negative impact on music revenues. If

UMG is not entirely successful in its content protection efforts, whether as a result of challenges in obtaining

appropriate relief via the judicial process or challenges in its efforts to lobby governments to enact and enforce

stronger legal penalties for copyright infringement or a failure to develop effective means of protecting and

enforcing its intellectual property rights, its business, prospects, financial condition and results of operations may

suffer.

1.2.3 UMG’s business is subject to a variety of European, US and other supranational and domestic laws,

rules, policies and other obligations regarding data protection.

UMG is subject to laws, regulations, rules, and other obligations governing privacy, data protection,

direct marketing, and cybersecurity in jurisdictions around the world. These laws impose restrictions on the way

UMG and its counterparties may collect, use, retain, secure, disclose, and transfer personal information. These

laws may shape, for example, how UMG engages in eCommerce transactions or other transactions with

consumers; how it operates its online properties; how UMG engages in direct and behavioral advertising, email

marketing, mobile marketing, and social media activities; and UMG’s internal operations in areas such as

employment and how it transfers data among its subsidiaries. Further, UMG makes statements about its use and

disclosure of personal information through its privacy policies, information on its websites and press statements.

UMG may also have contractual obligations regarding the use of personal information with its counterparties.

Privacy, data protection, direct marketing, and cybersecurity are the subject of intense media, political,

and regulatory scrutiny. Several jurisdictions in which UMG is active have recently passed laws in these areas,

and other jurisdictions are considering imposing additional restrictions. These laws, and the ways in which

authorities interpret and enforce them, continue to develop and may be inconsistent from jurisdiction to

jurisdiction. Complying with emerging and changing requirements may cause UMG to incur substantial costs,

change its business practices, modify its product and service offerings, and forego other business opportunities.

For example, UMG is subject to extensive European regulations on privacy, information security and

data protection, the main and most relevant of which relate to the collection, protection and use of personal and

business data, consumer credit data and other information and the provision of credit ratings, including Regulation

(EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free

movement of such data (the General Data Protection Regulation) (the GDPR), the Directive 2002/58/EC of the

European Parliament and of the Council of July 12, 2002 concerning the processing of personal data and the

protection of privacy in the electronic communications sector (Directive on privacy and electronic

communications) and national laws implementing each of them. Additionally, UMG is subject to the UK GDPR

(the retained EU law version of the GDPR) and the United Kingdom’s Data Protection Act 2018. The GDPR,

which has applied since May 25, 2018, is directly applicable in all member states of the European Economic Area

(the Member States). The GDPR has increased both the number, and restrictive nature, of the obligations binding

on the UMG for the collection, storage and processing of personal data. In particular, the GDPR establishes a

tiered approach to penalties for breach, which enables the relevant authorities to impose fines for some

infringements of up to €20 million, or 4% of annual worldwide turnover.

In the United States, UMG is subject to overlapping federal and state laws governing privacy, data

protection and security. For example, state data breach notification laws or consumer protection laws generally

mandate the rules that must be followed in the event of the unauthorized disclosure of personal information. One

of the most significant state privacy laws, the California Consumer Privacy Act, as amended by the California

Privacy Rights Act, establishes actionable rights for stipulated parties relating to data handled by covered entities

such as UMG, as well as obligations on covered entities relating to privacy disclosures, data handling, and more.

The Commonwealth of Virginia has a similar law coming into force at the start of 2023, and other states may be

following suit. Moreover, UMG is also subject to regulatory authorities, such as the Federal Trade Commission

(FTC), and self-regulatory requirements, such as the Payment Card Industry Data Security Standard (PCI DSS).

The FTC is authorized to enforce prohibitions on “unfair or deceptive acts or practices,” to include a company’s

violations of its own privacy policies or commitments, or security or privacy practices that the FTC deems

fundamentally “unfair”. The PCI DSS are a set of payment-related data security requirements the violation of

which can result in fines or restrictions on the ability to process transactions. Generally distinct from state privacy

laws, some state laws also impose separate requirements regarding the handling of payment card information.

Noncompliance, or even allegations of noncompliance, with these laws or UMG’s public statements or

contracts in these areas, could lead government entities, supervisory authorities or private actors to institute

investigations into or proceedings against UMG. These investigations or proceedings may entail legal costs and

-17-

reputational harm, and if defense of such proceedings is unsuccessful even in part, UMG may face significant

penalties, liability, or ongoing monitoring or audit requirements.

Additionally, any perceived or actual failure by UMG, including its third-party service providers, to

protect confidential data or any material non-compliance with privacy or data protection or other consumer

protection laws could cause customers to lose trust in UMG, reduce UMG’s ability to attract and retain customers,

artists and other business relationships and counterparties and result in litigation or other actions being brought

against UMG. Lastly, if third parties that UMG works with, such as UMG’s suppliers, violate applicable laws or

UMG’s policies, such violations may also put the information in UMG’s database at risk and could in turn have

an adverse impact on UMG’s business, prospects, financial condition and results of operations.

1.2.4 UMG’s operations are dependent on its information technology and information systems, and any

disruption to the Group’s IT system or failures in the Group’s IT systems could adversely impact the

Group’s operations.

The integrity, reliability and operational performance of UMG’s information technology (IT)

infrastructure and technology network are critical to its operations. UMG relies upon the capacity, reliability, and

security of its IT hardware and software infrastructure and its ability to expand and update this infrastructure in

response to changing needs.

Certain elements of the IT systems infrastructure on which UMG depends are outsourced to third parties.

The services and functions provided by these third parties are critical to the Group’s business and include (but are

not limited to) storage, data processing and network.

The availability of UMG’s IT platforms and other services may be interrupted by damage or disruption

to the Group’s or the Group’s third-party service providers’ IT systems, which may be caused by, for example

hardware or software defects, human error, unauthorized access, fire, power loss, natural hazards, the impact of

war and terrorism, disasters or similarly disruptive events, as well as planned upgrades and improvements which

may be subject to developmental delay or fail to be effective. Additionally, UMG may be subject to cyber-attacks,

including phishing, malware, and ransomware. While no such attack has had a material adverse effect on its

business in the past, there can be no assurance with regard to potential future attacks and UMG’s systems may be

vulnerable to damage from such attacks.

While UMG has in place business continuity procedures, there can be no assurance that these will be

fully successful in preventing all disruptions to the availability of UMG’s IT platforms or other services. To the

extent the Group outsources its business continuity or disaster recovery operations, it is at risk of the vendor’s

unresponsiveness in the event of breakdowns in the Group’s systems, which could cause delays in recovering

service.

Furthermore, performance issues, system interruptions or other failures in the Group’s IT systems could

expose the Group to potential liability to pay damages as well as reputational harm, additional operating expenses

to remediate the IT failures and exposure to other losses or other liabilities, all of which could have a material

adverse effect on the Group’s business, financial condition and results of operations.

In addition, UMG receives certain personal information about its customers and potential customers, and

it also receives personal information concerning its employees, artists and vendors. In addition, UMG maintains

sensitive confidential business information of itself and, in some cases, counterparties. It also holds intellectual

property rights including rights in music recordings and compositions, and further including not-yet-released

music. Further, UMG relies on its computer systems and those of service providers for its operations. No computer

system is immune from attacks or other incidents, and UMG’s system may be vulnerable to, or may have suffered

unknown, security breaches by computer hackers and others that attempt to penetrate or otherwise defeat the

security measures that it has in place. A compromise of its security systems that results in the loss or exposure of

confidential information, including not-yet-released music or personal information, and that compromises the

integrity of UMG’s information, causes UMG’s systems to operate in a way that UMG does not intend or affects

the availability of such systems or information for use, may lead to operational disruptions and significant

expenditures to address the incident. In addition, any vulnerabilities found in UMG’s systems, the loss of

competitively sensitive information, theft of funds, reputational harm, litigation and investigations, legal expenses,

liability, penalties, or the imposition of ongoing monitoring or audit requirements may also lead to operational

disruptions and/or significant expenditures. Any of the foregoing may adversely impact UMG’s business,

prospects, financial condition and results of operations.

-18-

While UMG maintains what it considers to be an appropriate level of insurance against some of these

risks, UMG’s insurance coverage may not cover all of the costs and liabilities it incurs as the result of any such

interruptions or failures of its IT systems, and if its business continuity and/or disaster recovery plans do not

effectively and timely resolve issues resulting from a cyber-attack, UMG may suffer material adverse effects on

its business.

1.2.5 UMG faces a potential loss of certain catalog titles to the extent that those recording artists have a

right to recapture recordings under the US Copyright Act.

The US Copyright Act of 1976, as amended (the US Copyright Act), provides authors (or their heirs) a

right to terminate transfers of US copyrights (i.e., licenses or assignments of rights in their copyrighted works) in

certain circumstances. This right does not apply to works that are “works made for hire.” Since the enactment of

the Sound Recordings Act of 1971, which first accorded federal copyright protection for sound recordings in the

US, the vast majority of UMG’s agreements with recording artists provide that such recording artists render

services under a work-made-for-hire relationship. A termination right exists under the US Copyright Act for

transfers of US rights in musical compositions that similarly are not “works made for hire.” If any of UMG’s

commercially available sound recordings created after February 15, 1972 were determined not to be “works made

for hire,” then the recording artists (or their heirs) could have the right to terminate the US federal copyright rights

they granted to it, generally during a five-year period starting at the end of 35 years from the date of release of a

recording under a post-1977 license or assignment (or, in the case of a pre-1978 grant in a pre-1978 recording,

generally during a five-year period starting at the end of 56 years from the date of copyright). For example, on

February 5, 2019, a purported class action lawsuit was filed against UMG Recordings, Inc. on behalf of a putative

class of all recording artists who had requested the termination of certain alleged grants of US copyrights to UMG

pursuant to Section 203 of the US Copyright Act. See Section 11.14 (Litigation).

Any right of artists to terminate the copyright rights granted to UMG may adversely impact UMG’s

business, prospects, financial condition and results of operations.

1.3 Legal, Regulatory and Tax Risks

1.3.1 A significant portion of UMG’s revenues are subject to regulation either by government entities or by

local third-party collecting societies throughout the world and rates on other income streams may be

set by governmental proceedings or be subject to legislative intervention, which may limit its

profitability.

Mechanical royalties and performance royalties (on both physical and digital sales) are two of the main

sources of income to UMG’s music publishing business, accounting for under 13% of UMG’s revenue in 2020,

and mechanical royalties are an expense for its recorded music business, accounting for 1.1% of UMG’s revenue

in 2020. In the United States, mechanical royalty rates are set every five years pursuant to an administrative

process under the US Copyright Act, unless rates are determined through industry negotiations, and performance

royalty rates are determined by negotiations with performing rights organizations, which in the US include

American Society of Composers, Authors and Publishers, (ASCAP), Broadcast Music, Inc. (BMI) and the Society

of European Stage Authors and Composers (SESAC). ASCAP and BMI are subject to a consent decree rate-

setting process if negotiations are unsuccessful. The Antitrust Division of the Department of Justice (the DOJ)

has previously reviewed UMG’s consent decrees with ASCAP and BMI and, while in January 2021, the DOJ

announced that it would take no further action to modify or terminate such decrees, there is no guarantee that the

DOJ will not choose to review such decrees in the future. Changes to the mechanical royalty rate, the performance

royalty rates or consent decrees governing the US performing rights organizations could potentially impact the

profitability of UMG’s music publishing business.

Outside of the United States, mechanical and performance royalty rates are typically negotiated on an

industry-wide basis (or for multi-territorial online licensing, on a repertoire-specific basis but still necessarily in

partnership with collecting societies as rights holders) and may be subject to mandatory collecting regimes. In

most territories outside the United States, mechanical royalties are based on a percentage of wholesale prices for

physical product and based on a percentage of consumer prices for digital formats. The mechanical and

performance royalty rates set pursuant to such processes may adversely affect UMG by limiting its ability to

increase the profitability of its music publishing and/or recorded music businesses.

The performance royalty rates received by UMG’s recorded music business in the United States for

webcasting and satellite radio are set every five years by an administrative process under the US Copyright Act

unless rates are determined through industry negotiations. In most jurisdictions outside the United States, UMG’s

recorded music business receives payment for the public performance and broadcast of its sound recordings via

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collecting societies, with rates generally set by industry agreement or rate setting tribunal. In certain jurisdictions,

governments either have, are proposing or face certain pressure to introduce legislation which may introduce

and/or extend mandatory collective licensing and direct remuneration claims for certain rights, such as (but not

limited to) the introduction of an additional remuneration right for performers for the so-called “making available”

of sound recordings on digital services.

As revenues continue to shift from physical to diversified distribution channels, it is important that UMG

receives fair value for all of the uses of its intellectual property as its business model now depends upon multiple

revenue streams from multiple sources. To the extent that the rates set for recorded music and music publishing

income sources through collecting societies or legally prescribed rate-setting processes are set at levels which are

not favorable or economically viable for UMG, this could have an adverse impact on its business, prospects,

financial condition and results of operations.

1.3.2 Changes in laws and regulations, including those relating to intellectual property rights, may have an

adverse effect on UMG’s business.

UMG’s intellectual property rights, particularly copyrights, are very important to UMG’s business.

UMG’s business is subject to a variety of laws and regulations in jurisdictions around the world, including those

relating to intellectual property, content regulation, user privacy, data protection and consumer protection, among

others. In addition, various governments currently have under consideration, and may in the future adopt, new

laws, regulations and policies regarding a wide variety of matters that could directly or indirectly affect UMG’s

business and operations, the ownership of UMG’s content assets or UMG’s ability to maintain, protect or enforce

its intellectual property rights. For example, the UK Parliamentary Select Committee on Digital, Culture, Media

and Sport issued its advisory report on July 15, 2021, as part of an inquiry to examine “what economic impact

music streaming is having on artists, record labels and the sustainability of the wider music industry”. The report

recommended to the UK government a number of actions to regulate music companies, including on issues related

to artist and songwriter compensation, which could hinder or add cost to the companies’ operations. UMG’s

business is also impacted by laws and regulations of the various jurisdictions in which UMG, or its partners,

operate, including quotas, tax regimes, currency restrictions and data protection regimes.

UMG could also be adversely affected by new laws and regulations, by the threat that additional laws or

regulations may be forthcoming and by changes in existing laws or changes in interpretation of existing laws by

courts and regulators. For example, legislation has been introduced in California that would amend California

Labor Code Section 2855 (Section 2855) such that UMG’s ability to recover damages from artists that fail to

deliver on their contractually promised recordings after more than seven years may be hindered. Changes in the

area of copyright law, in particular, could directly or indirectly affect UMG’s operations, the ownership of UMG’s

content assets or UMG’s ability to maintain, protect or enforce its intellectual property rights.

Litigation and proceedings before governmental authorities, whether or not UMG is involved in such

proceedings, may serve as precedents that adversely impact UMG’s operations, ownership of content assets or

intellectual property rights. UMG could incur substantial costs to comply with new or modified laws and

regulations or substantial penalties or other liabilities if it fails to comply. UMG could also be required by such

laws to change or limit certain of its business practices, which could impact its ability to generate revenues.

Furthermore, laws in various jurisdictions differ from each other in significant respects, and the

enforcement of such laws can be inconsistent and unpredictable. This could impact UMG’s ability to operate its

business in various jurisdictions and undertake activities that UMG believes is beneficial to its business. For

example, the European Union (EU) adopted the Directive on Copyright in the Digital Single Market (the

provisions, including Article 17, which clarifies the EU copyright safe harbor requiring Online Content Sharing

Service Providers (OCSSPs or online platforms that host user-generated content) to employ “effective and

proportionate” measures to prevent unauthorized use of copyrighted materials. The EU’s Member States must

implement the Copyright Directive via enactment of domestic legislation. While some Member States (such as

France, the Netherlands, Hungary, Denmark and Malta) are implementing the Copyright Directive’s Article 17

faithfully to the legislative intent, other Member States are considering (and, in the case of Germany, have

implemented) legislation that differs significantly from the Copyright Directive in letter and spirit – and which

would not only undo the benefit of Article 17 but also potentially disrupt existing licensing models.

Any of the foregoing may adversely impact UMG’s business, prospects, financial condition and results

of operations.

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1.3.3 UMG is and could become involved in a number of lawsuits, which could negatively affect UMG’s

results of operations, financial condition and reputation.

UMG is and could become involved in a number of lawsuits, disputes or investigations initiated by

consumers, business partners, competitors, artists, governmental entities, tax authorities and third parties. Such

lawsuits, disputes or investigations may relate to, inter alia, copyright infringement, contractual disputes,

employment disputes, antitrust and tax disputes. For example, on February 5, 2019, a purported class action

lawsuit was filed against UMG Recordings, Inc. on behalf of a putative class of all recording artists who had

requested the termination of certain alleged grants of US copyrights to UMG pursuant to Section 203 of the US

In some of these cases, if UMG fails to negotiate amicable settlement, it may be ordered to pay damages

or financial penalties. UMG recognizes a provision each time a risk is identified, is likely to materialize and is

either quantifiable or can be estimated with reasonable accuracy. In addition to the legal proceedings which UMG

is currently involved in, it could become involved in litigation in the future that could have an adverse impact on

UMG’s business, prospects, financial condition and results of operations.

1.3.4 Changes in tax laws or challenges to the Group’s tax position could adversely affect the Group’s

results of operations and financial condition.

Given the footprint of the Group’s operations globally, the Group is subject to complex tax laws and

regulations in the various countries where it operates. It is subject to taxation in, and to the tax laws and regulations

of, multiple jurisdictions as a result of the international scope of its operations and its corporate structure. Adverse

developments in applicable tax laws or regulations, or any change in the position by the relevant authorities

regarding the application, administration or interpretation of any applicable tax laws or regulations, could subject

the Group to additional or increased tax payments, and in turn have a material adverse effect on the Group’s

business, financial condition and results of operations. In this regard, the fast-paced development of the global

digital economy has led, and may lead, to public authorities adapting, or considering to adapt, tax regimes

applicable to the Group, which could further subject the Group to changes in tax legislation in the countries where

it operates. Given the international nature of the Group’s operations, the Group is particularly impacted by changes

to regulations relating to transfer pricing and withholding tax on the repatriation of funds.

In addition, the Group often relies on generally available interpretations of applicable tax laws and

regulations including interpretations made by the relevant tax authorities and courts of law. There cannot be

certainty that the relevant tax authorities or courts agree with the Group’s interpretation of these laws or, as the

case may be, that such tax authorities or courts do not depart from the generally available interpretations of

applicable tax laws and regulations on which the Group often relies. If the Group’s tax positions are challenged

by relevant tax authorities, the potential imposition of additional or increased taxes could require the Group to pay

taxes that the Group currently does not collect or pay or increase the costs of the Group’s services to track and

collect such taxes, which could in turn increase the Group’s costs of operations or the Group’s effective tax rate

and have a negative effect on the Group’s business, financial condition and results of operations.

1.3.5 The Group may be subject to scrutiny under antitrust and competition laws

UMG may be subject to scrutiny in the countries and regions where it operates by various government

and regulatory agencies such as the Antitrust Division of the DOJ, the European Commission, under US and EU

law and regulation, and other foreign laws and regulations, including antitrust and competition laws. These and

other government agencies, entities and individuals have jurisdiction to consider whether UMG’s business

practices violate applicable antitrust or competition laws of the countries and regions in which UMG operates.

UMG’s licensing agreements, including with streaming services, satellite radio, and web-based services may be

subject to regulatory scrutiny and might be the subject of regulatory action or antitrust litigation.

In this regard, in August 2019, UMG received a notice of investigation from State Administration for

Market Regulation (SAMR), the enforcement arm of the Chinese Government in charge of investigating market

competition, monopolies and intellectual property, stating that it was opening an anti-monopoly investigation into

music licensing in the territory. An adverse finding against UMG could result in financial penalties as well as

other measures, which may materially and adversely affect UMG’s business, financial condition, results of

operations and prospects in China.

Any such actions, claims or investigations, even if without foundation, may be very expensive to defend

or respond to, involve negative publicity and substantial diversion of management time and effort, and could result

in reputational harm, significant judgments against the Group, or require the Group to change its business

-21-

practices, which may materially and adversely affect its business, financial condition, results of operations and

prospects.

1.3.6 Export and import control laws and regulations, tariffs and trade barriers could have an adverse effect

on UMG’s business.

UMG has offices in more than 60 territories around the world and exports music and merchandise from

country to country. UMG’s exports not only include physical exports, such as vinyl, CDs and merchandise,

including apparel, but also digital trade and is subject to a variety of export control and import laws and regulations

and trade and tariff regulations. Compliance with export control and import laws and regulations may create delays

in the introduction of UMG’s music and merchandise in international markets, resulting in a loss of opportunities

and increase costs due to import and export duties and tariffs.

Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws,

sanctions and regulations, or change in the countries, governments, persons or technologies targeted by such laws

and regulations, could also result in decreased ability to export UMG’s music and merchandise to consumers. Any

limitation on UMG’s ability to export its music or merchandise could materially adversely affect its business,

prospects, financial position and results of operations.

1.3.7 Exposure to United Kingdom political developments, including the effect of its withdrawal from the

European Union, could be costly and difficult to comply with and could seriously harm UMG’s

business.

UMG has operations in the United Kingdom involved in identifying, signing and retaining recording

artists. The United Kingdom’s withdrawal from the European Union has created significant uncertainty about the

long-term future relationship between the United Kingdom and the European Union. It has also had, and may in

the future have, a material adverse effect on global economic conditions and the stability of global financial

markets and could reduce global market liquidity and restrict the ability of market participants to operate in

financial markets in the United Kingdom or Europe. Lack of clarity about the future relationship between the

United Kingdom and the European Union, and the laws and regulations that may apply, including with respect to

aspects of laws and regulations which were not covered by the EU-UK Trade and Cooperation Agreement, could

adversely affect UMG’s business, prospects, financial condition and results of operations.

1.4 Risks related to the Distribution and Admission

1.4.1 The combined post- Distribution value of UMG and Vivendi Shares may not equal or exceed the

aggregate pre- Distribution value of Vivendi Shares.

After the Distribution, Vivendi Shares will continue to be traded on Euronext Paris. The Shares will be

traded under the symbol “UMG” on Euronext Amsterdam. The Company has no current plans to apply for listing

on any additional stock exchanges. As a result of the Distribution, Vivendi expects the trading prices of Vivendi

Shares at market open on September 21, 2021 to be lower than the trading prices at market close on September

20, 2021, because the trading prices will no longer reflect the value of the UMG Shares which will commence

trading on Euronext Amsterdam as of such date on an if-and-when-delivered basis. There can be no assurance

that the aggregate market value of the Vivendi Shares and the Shares following the Distribution will be higher

than, equal to, or lower than the market value of Vivendi Shares if the Distribution did not occur. This means, for

example, that the combined trading prices of one Vivendi Share and one Share after Euronext Paris opens on the

First Trading Date may be higher than, equal to, or less than the trading price of one Vivendi Share up to

September 20, 2021. In addition, following the close of business on September 21, 2021, but before the

commencement of trading on September 22, 2021, Vivendi Shares will reflect an ownership interest solely in

Vivendi and will not include the right to receive any Shares in the Distribution, but may not yet accurately reflect

the value of such Vivendi Shares excluding the Shares.

1.4.2 UMG may not achieve some or all of the expected benefits of the Admission, and the Admission and

Distribution may adversely affect its business.

UMG may not be able to achieve the full strategic and financial benefits expected to result from the

Admission, or such benefits may be delayed or not occur at all. The Admission is expected to provide the following

benefits, among others:

 enhanced strategic and management focus;

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 distinct investment identity;

 more efficient allocation of capital; and

 direct access to capital markets; and alignment of incentives with performance objectives.

The Company may not achieve these and other anticipated benefits for a variety of reasons, including,

among others:

 the execution of the Admission and Distribution may distract from other strategic initiatives;

 following the Admission and Distribution, UMG may be more susceptible to market

fluctuations and other adverse events than if it had remained a part of the Vivendi Group;

 the costs associated with being an independent publicly listed company; and

 the other actions required to separate UMG’s from the Vivendi Group could disrupt operations.

Additionally, as a separate public company, UMG will be a smaller and less diversified group than the

Vivendi Group, and there is a possibility it may not have access to financial and other resources comparable to

those available to the Vivendi Group prior to the Distribution. UMG cannot predict the effect that the Admission

and Distribution will have on its relationship with partners, employees or other stakeholders, including its

relationship with recording artists and songwriters. Furthermore, as a less diversified group, UMG may be more

likely to be negatively impacted by changes in global market conditions, regulatory reforms, and other industry

factors, which could have a material adverse effect on its business, prospects, financial condition, and results of

operations. If UMG is unable to achieve some or all of the benefits expected to result from the Admission and

Distribution, or if such benefits are delayed, its business, prospects, financial condition and results of operations

could be adversely affected.

1.4.3 UMG’s accounting and other management systems and resources may not be adequately prepared to

meet the financial reporting and other requirements to which the Company will be subject following

the Admission and Distribution.

UMG’s financial results were previously included within the consolidated results of Vivendi, and UMG’s

reporting and control systems were appropriate for those of a subsidiary of a public company. Additionally, as a

Dutch company with ordinary shares listed on Euronext Amsterdam, the Company will be required to comply

with the reporting requirements of Directive 2004/109/EC (as amended by Directive 2013/50/EU) as transposed

into Dutch law, including the preparation of annual and half yearly financial statements in accordance with IFRS.

The Company will also be subject to the ongoing disclosure requirements of Regulation (EU) No 596/2014 of the

European Parliament and the Council (the Market Abuse Regulation). These and other obligations will place

significant demands on UMG’s management, administrative and operational resources, including accounting and

information technology resources, which it had previously not been required to meet independently.

To comply with these requirements, UMG is, and may be, required to upgrade its systems, including

computer hardware infrastructure, implement additional financial and management controls, reporting systems

and procedures and hire additional accounting, finance and information technology staff. To the extent that the

upgrades made by UMG to its financial and management controls, reporting systems, information technology and

procedures in a timely and effective fashion are not successful, UMG’s ability to comply with its financial

reporting requirements and other rules that apply to reporting companies could be impaired. In addition to the

potential reputation damage, any failure to achieve and maintain effective internal controls could have a material

adverse effect on UMG’s business, prospects, financial condition and results of operations.

1.4.4 The transitional services Vivendi has agreed to provide UMG may not be sufficient for its needs. In

addition, UMG may fail to have necessary systems and services in place when certain of the Transition

and Services Agreement expires.

In connection with the Admission and Distribution, UMG intends to enter into a transition and services

agreement (the Transition and Services Agreement) with Vivendi. See Section 13.3 (Major Shareholders) and

Section 12.14 (Related Party Transactions and Agreements). The Transition and Services Agreement will provide

for the performance of key business services by the Vivendi Group for UMG’s benefit for a period of time after

the completion of the Admission and Distribution, including in relation to treasury related services and

applications. These services may not be sufficient to meet UMG’s needs and the terms of such services may not

-23-

be equal to or better than the terms UMG may have received from unaffiliated third parties, including its ability

to obtain redress.

UMG will rely on the Vivendi Group to satisfy its obligations under the Transition and Services

Agreement. If the Vivendi Group is unable to satisfy its obligations under the Transition and Services Agreement,

UMG could incur operational difficulties or losses. If UMG does not have in place its own systems and services,

or if UMG does not have agreements with other providers of these services once the Transition and Services

Agreement expires, it may not be able to operate its business effectively and this may have an adverse effect on

its business, financial condition, and results of operations. In addition, after the Transition and Services Agreement

expires, UMG may not be able to obtain these services at as favorable prices or on as favorable terms as they were

obtained under the Transition and Services Agreement.

1.5 Risks Related to the Shares

1.5.1 The Existing Shareholders will continue to hold a significant minority stake in the Company and may

have conflicts of interest with other Shareholders.

Upon the implementation of the Distribution, Vivendi will own Shares representing c.10% of the

Company’s issued and outstanding Shares, Concerto will own Shares representing 10% of the Company’s issued

and outstanding Shares, Scherzo will own Shares representing 10% the Company’s issued and outstanding Shares,

the Pershing Entities will own Shares, representing 10% of the Company’s issued and outstanding Shares and it

is expected that the Bolloré Entities will own Shares representing 18% of the Company’s issued and outstanding

Shares.

In addition, the Bolloré Entities and the Restructuring Shareholders have entered into an agreement in

respect of inter alia the appointment of Non-Executive Directors and the Dividend Policy of the Company, dated

September 8, 2021 (the Relationship Agreement), which the Company signed for acknowledgement and

agreement with certain provisions. Under the Relationship Agreement, the Tencent-led Consortium has the right

to maintain up to two Non-Executive Directors on the Board until the annual General Meeting to be held in 2024,

subject to it holding a certain minimum interest.

Furthermore, the Bolloré Entities and the Restructuring Shareholders have agreed upon the dividend

policy as set out in Section 5 (Dividend Policy) (the Dividend Policy) and to comply with the Dividend Policy as

further set out in the Relationship Agreement.

For the purposes of forming and exercising, to the extent possible, a common view and vote on the items

on the agenda of any General Meeting in connection with the subjects included in and obligations of the Parties

under the Relationship Agreement in relation to the Dividend Policy and maintaining two Non-Executive

Directors designated by the Tencent-led Consortium, the Bolloré Entities and the Restructuring Shareholders will,

as from the Admission, consult with each other prior to each General Meeting.

For more information see Section 12.11 (Relationship Agreement).

In light of the above, the Existing Shareholders may, individually or collectively, exert a substantial

influence on actions requiring a Shareholder vote, potentially in a manner that is not supported by other

Shareholders. If one or more Existing Shareholders purchases any additional Shares in the public market or in

privately negotiated transactions following the closing of the Distribution, their shareholding and influence on the

Company’s affairs would increase.

Specifically, the significant ownership of the Existing Shareholders may, individually or collectively: (i)

delay or deter a change of control of the Company (including deterring a third party from making a takeover offer

for the Company); (ii) deprive Shareholders of an opportunity to receive a premium for their Shares as part of a

sale of the Company; or (iii) affect the liquidity of the Shares, each of which could have a material adverse effect

on the trading volume and market price of the Shares. This could be the case if investors determine that the stock

is not as attractive due to high concentration of ownership and degree of influence by the Existing Shareholders,

as a result of which demand for the Shares may be reduced.

1.5.2 An active trading market on Euronext Amsterdam may not develop.

Until trading on Euronext Amsterdam commences on an “as-if-and-when-delivered” basis, which is

expected on September 21, 2021, but is subject to acceleration, extension and Settlement taking place, there is no

public trading market for the Shares. UMG can give no assurance that an active trading market for the Shares will

develop after the Distribution or, if it does develop, that it will be sustained or liquid, in particular given that the

-24-

free float will be approximately 42% of the issued ordinary share capital of the Company following the

implementation of the Distribution. If such a market fails to develop or is not sustained, the liquidity and trading

price of the Shares could be adversely affected, as well as increase their price volatility. Even if such market

develops or is sustained, the market price for the Shares may fall below the Reference Price, perhaps substantially.

As a result of fluctuations in the market price of the Shares, investors may not be able to sell their Shares at or

above the Reference Price, or at all.

1.5.3 The Company may issue additional Shares or other equity securities without Shareholder approval,

which would dilute Shareholder ownership interests and may depress the market price of the Shares.

After Admission, 1,813,241,160 Shares will be issued and outstanding. Subject to Dutch law the Articles

of Association will authorize the Company to issue Shares and rights relating to the Shares for such consideration

and on such terms and conditions as established by the Board in its sole discretion, whether in connection with

future acquisitions or otherwise. Shareholders would receive advance notice of any issuance of additional Shares

or other equity through regulatory filings. Any Shares issued, could dilute the percentage ownership held by the

Shareholders.

The Company’s issuance of additional Shares or other equity securities of equal or senior rank would

have the following effects:

 the Company’s existing Shareholders’ proportionate ownership interest in the Company will

decrease;

 the amount of cash available per Share, including for payment of dividends in the future, may

decrease;

 the relative voting strength of each previously outstanding Share may be diminished; and

 the market price of Shares may decline.

1.5.4 Future offerings of debt or equity securities by the Company may adversely affect the market price of

the Shares.

In the future, the Company may attempt to obtain financing or to further increase its capital resources by

issuing additional Shares or offering debt or other equity securities, including commercial paper, medium-term

notes, senior or subordinated notes, debt securities convertible into equity or preferred shares. Future acquisitions

could require substantial additional capital in excess of cash from operations. The Company may obtain the capital

required for acquisitions through a combination of additional issuances of equity, corporate indebtedness and/or

cash from operations.

Issuing additional Shares or other equity securities or securities convertible into equity may dilute the

economic and voting rights of existing Shareholders or reduce the market price of the Shares or both. Upon

liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other

borrowings would receive a distribution of the Company’s available assets prior to the holders of the Shares. Debt

securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain

events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could

have a preference with respect to liquidating distributions or a preference with respect to dividend payments that

could limit the Company’s ability to pay dividends to the holders of the Shares. The Company’s decision to issue

securities in any future offering will depend on market conditions and other factors beyond the Company’s control,

which may adversely affect the amount, timing and nature of the Company’s future offerings.

1.5.5 Risks relating to future sales or transfers of the Company’s shares by shareholders.

Following completion of the Distribution, the Restructuring Shareholders and the Pershing Entities will

beneficially own approximately 40% of the issued ordinary share capital of the Company in aggregate.

Additionally, it is expected that the Bolloré Entities will beneficially own 18% of the issued and outstanding share

capital of the Company after the Distribution. The Existing Shareholders will not be subject to lock-up

arrangements post the Distribution.

The issue or sale of a substantial number of Shares by the Group, the Existing Shareholders or the

Directors in the public market, or the perception that these sales may occur, may depress the market price of the

Shares. Furthermore, a sale of Shares by any Director could be perceived as a lack of confidence in the

-25-

performance and prospects of the Group and could cause the market price of the Shares to decline. In addition,

any such sales could impair the Group’s ability to raise capital through the issuance of equity securities in the

future.

1.5.6 Shareholders in the US and other jurisdictions outside of the Netherlands may not be able to

participate in future equity offerings.

The securities laws of certain jurisdictions outside the EU may, however, restrict UMG’s ability to allow

participation by Shareholders in future offerings. In particular, Shareholder residents in the US may not be entitled

to exercise their rights with respect to future equity offerings of the Company, unless either the Shares and any

other securities that are offered and sold are registered under the US Securities Act, or the Shares and such other

securities are offered pursuant to an exemption from, or in a transaction not subject to, the registration

requirements of the US Securities Act. UMG cannot assure prospective investors that any exemption from such

overseas securities law requirements would be available to enable Shareholder residents in the US or other non-

EU Shareholders to exercise their pre-emption rights or, if available, that UMG will utilise any such exemption.

1.5.7 Overseas shareholders may be subject to exchange rate risk.

The Shares are priced in euros and will be quoted and traded in the euro currency. In addition, any

dividends the Group may pay will be declared and paid in euro denominations. Accordingly, investor residents

outside the Eurozone are subject to risks arising from adverse movements in the value of the respective investor’s

reference currency against the euro, as well as additional transaction costs in converting the euro into the respective

investor’s reference currency, which may materially reduce the value of the Shares, as well as that of any dividends

paid. Investors whose reference currency is a currency other than the euro are therefore urged to consult their

financial advisers.

1.5.8 The market price of the Shares may be volatile, which could cause the value of the Shares to decline.

Even if a trading market develops, the market price of the Shares may be highly volatile and could be

subject to wide fluctuations. In addition, the trading volume in the Shares may fluctuate and cause significant

price variations to occur. Securities markets worldwide experience significant price and volume fluctuations. This

market volatility, as well as general economic, market and political conditions (including as a result of the COVID-

19 pandemic), could reduce the market price of the Shares in spite of its operating performance. If UMG is unable

to operate as profitably as investors expect, the market price of Shares will likely decline when it becomes apparent

that the market expectations may not be realized. In addition, UMG’s results of operations could be below the

expectations of public market analysts and investors due to a number of potential factors, including variations in

UMG’s quarterly or annual results of operations; operating results of other companies in the same industry;

additions or further departures of key management personnel; changes in UMG’s earnings estimates (if provided)

or failure to meet analysts’ earnings estimates; publication of research reports about UMG’s industry; litigation

and government investigations, changes or proposed changes in laws or regulations or differing interpretations or

enforcement thereof affecting UMG’s business; adverse market reaction to any indebtedness UMG may incur or

securities it may issue in the future; changes in market valuations of similar companies or speculation in the press

or the investment community with respect to UMG or its industry; investors shorting UMG shares; negative media

coverage; adverse announcements by UMG or others and developments affecting UMG, announcements by

UMG’s competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or

capital commitments; actions by institutional shareholders; the possible effects of war, terrorism and other

hostilities; adverse weather conditions; changes in general conditions in the economy or the financial markets or

other developments affecting the music industry; and increases in market interest rates that may lead investors in

the Shares to demand a higher yield, and in response the market price of the Shares could decrease significantly.

These broad market and industry factors may decrease the market price of the Shares, regardless of

UMG’s actual operating performance. The stock market in general has, from time to time, experienced extreme

price and volume fluctuations. In addition, in the past, following periods of volatility in the overall market and the

market price of a company’s securities, securities class-action litigation has often been instituted against such

companies. Such litigation, if instituted against UMG, could result in substantial costs, a material negative impact

on UMG’s liquidity, negative impact on UMG’s reputation and a diversion of UMG’s management’s attention

and resources.

1.5.9 No assurance can be given that the Company will pay or declare dividends.

There can be no assurance that the Company will pay or declare dividends in the future in accordance

with its dividend policy. The determination of the Board as to whether to resolve upon a dividend will depend

-26-

upon many factors, including UMG’s future revenue, financial conditions, general economic and business

conditions, earnings, corporate strategy, the capital required by the Company’s operating subsidiaries to conduct

their business, legal requirements to which the Company is subject, and prospectus and such other factors deemed

relevant by the Board.

On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all

Shareholders by way of an interim dividend distribution at the charge of the Company’s current profits in the

current financial year that started on January 1, 2021, provided that in the event that after adoption of the annual

accounts for the financial year of the Company that started on January 1, 2021, the Company’s profits shall appear

to be less than the amount of such interim dividend distribution, the balance shall be deemed to have been a

distribution from the Company’s freely distributable reserves. With regard to such distribution: (i) the ex-dividend

date will be October 25, 2021; (ii) the record date will be October 26, 2021; and (iii) the payment date will be

October 28, 2021. However, there can be no assurances that the Group’s performance will allow for such interim

dividend or facilitate adherence to the dividend policy or any increase in the pay-out ratio and, in particular, the

Company’s ability to pay dividends may be impaired if any of the risks described in this section of the Prospectus

were to occur. In addition, subject to Dutch law and the Articles of Association, the Board may resolve to make

an interim distribution of profits, provided that it appears from an interim statement of financial position signed

by the Board that the Company’s equity does not fall below the sum of called-up and paid-in share capital and

any statutory reserves.

1.5.10 As UMG is organized under the laws of the Netherlands as a public company, the ability of its

Shareholders in certain countries other than the Netherlands, in particular in the US, to bring an

action against UMG may be limited under law.

It may be difficult or impossible for investors to effect service of process within the US upon such persons

or UMG or to enforce against them in US courts a judgment obtained in such courts.

In addition, there is doubt as to the enforceability, in the Netherlands, of original actions or actions for

enforcement based on the federal or state securities laws of the US or judgments of US courts, including judgments

based on the civil liability provisions of the US federal or state securities laws. The US and the Netherlands do

not currently have a treaty providing for reciprocal recognition and enforcement of judgments, other than

arbitration awards, in civil and commercial matters. A judgment rendered by a court in the US will not be

recognized and enforced by the Dutch courts; however, if a person has obtained a final judgment without appeal

in such a matter rendered by a court in the US that is enforceable in the US and such person files his or her claim

with the competent Dutch court, the Dutch court will recognize and give effect to such foreign judgment insofar

as it finds that (i) the jurisdiction of the US court has been based on grounds which are internationally acceptable,

(ii) proper legal procedures have been observed, (iii) the judgment does not contravene Dutch public policy and

(iv) the judgment is not irreconcilable with a judgment of a Dutch court or an earlier judgment of a foreign court

that is capable of being recognized in the Netherlands.

1.5.11 If securities or industry analysts do not publish research or reports about UMG’s business or industry,

or if such analysts (if any) change their recommendations regarding the Shares adversely, the market

price and trading volumes of the Shares could decline.

The trading market for the Shares may be influenced by the research and reports that securities or industry

analysts publish about UMG’s business or industry. If securities or industry analysts do not publish or cease to

publish research or reports about UMG’s business or industry, UMG could lose visibility in the financial markets,

which could cause the market price or trading volume of the Shares to decline. Also, if one or more of the analysts

covering UMG’s business or industry recommends selling Shares, or if negative research is published on the

industry or geographic markets UMG serves, the market price of the Shares could decline.

-27-

2. IMPORTANT INFORMATION

2.1 General

Prospective investors are expressly advised that an investment in the Shares entails certain risks and that

they should therefore read and carefully review the content of this Prospectus, including all information

incorporated by reference in this Prospectus. A prospective investor should not invest in the Shares unless it has

the expertise (either alone or with a financial adviser) to evaluate how the Shares will perform under changing

conditions, the resulting effects on the value of the Shares and the impact this investment will have on its overall

investment portfolio. Prospective investors should also consult their own tax advisers as to the tax consequences

of the purchase, ownership and disposition of the Shares.

The validity of this Prospectus shall expire on the Settlement Date or 12 months after its approval

by the AFM on September 14, 2021, whichever occurs earlier. The obligation to supplement this Prospectus

in the event of significant new factors, material mistakes or material inaccuracies shall cease to apply upon

the expiry of the validity period of this Prospectus.

This Prospectus has been approved by the AFM as competent authority under the Prospectus Regulation.

The AFM has only approved this Prospectus as meeting the standards of completeness, comprehensibility and

consistency imposed by the Prospectus Regulation. Such approval should not be considered as an endorsement of

the Company or the quality of the securities that are the subject of this Prospectus. Investors should make their

own assessment as to the suitability of investing in the securities.

The content of this Prospectus is not to be considered or interpreted as legal, financial or tax advice. This

Prospectus should not be considered as a recommendation by the Company or Vivendi, or any of their respective

affiliates or representatives that any recipient of this Prospectus should invest in the Shares. Prior to making any

decision whether to purchase Shares, prospective investors should read the whole of this Prospectus and, in

particular, Section 1 (Risk Factors), and not just rely on key information or information summarized within it.

Each prospective investor should consult his own stockbroker, bank manager, lawyer, auditor or other financial,

legal or tax advisers before making any investment decision with regard to the Shares, to consider such investment

decision in light of the prospective investor’s personal circumstances, and in order to determine whether or not

such prospective investor is eligible to purchase the Shares. The Company does not undertake to update this

Prospectus, unless required pursuant to Article 23 of the Prospectus Regulation, and therefore prospective

investors should not assume that the information in this Prospectus is accurate as of any date other than the date

of this Prospectus.

In making an investment decision, prospective investors must rely on their own assessment of the

Company, the Shares and the terms of the Distribution and Admission, the information contained in, or

incorporated by reference into, terms of this Prospectus and any supplement to this Prospectus, should such

supplement be published, within the meaning of Article 23 of the Prospectus Regulation, including the merits and

risks involved, and the risk factors described in this Prospectus. For the avoidance of doubt, prospective investors

may not rely on any other registration statements, prospectuses or other offer documents published by shareholders

of the Company when assessing the Company, the Shares and the terms of the Distribution and Admission. Any

acquisition of the Shares should be based on the assessments that the investor in question may deem necessary,

including the legal basis and consequences of the Distribution and Admission, and including possible tax

consequences that may apply, before deciding whether or not to invest in the Shares.

No person has been authorized to give any information or to make any representations in connection with

the Distribution and Admission, other than those contained in this Prospectus and, if given or made, such

information or representations must not be relied upon as having been authorized by or on behalf of the Company,

the Lead Equity Capital Markets Advisors, Vivendi, the Listing and Paying Agent or any of their respective

affiliates or representatives.

Each of the Lead Equity Capital Markets Advisors and the Listing and Paying Agent is acting exclusively

for the Company and no one else in connection with the Admission. They will not regard any other person

(whether or not a recipient of this Prospectus) as their respective clients in relation to the Admission and will not

be responsible to anyone other than the Company for providing the protections afforded to their respective clients

nor for giving advice in relation to the Admission or any transaction or arrangement referred to herein.

Certain of the Lead Equity Capital Markets Advisors and/or their affiliates are, or have been, engaged

and may in the future engage in commercial banking, investment banking and financial advisory (including in the

context of the Admission and Distribution) and ancillary activities in the ordinary course of their business with

-28-

the Group and/or Vivendi, other Existing Shareholders or any parties related to or competing with any of them, in

respect of which they have received, and may in the future receive, customary fees and commissions. In particular,

some of the Lead Equity Capital Markets Advisors and/or their affiliates have taken an active part or takes an

active part to Vivendi and UMG’s financing (see for example a description of the syndicated bank credit facility

mentioned in Section 16.5.3 (Facilities Agreement)) and are long-standing partners to Vivendi. Additionally, the

Lead Equity Capital Markets Advisors may, in the ordinary course of their business, and in the future, effect

transactions for their own account or the account of customers, and make or hold a broad array of investments and

actively trade debt and equity securities (or related derivative securities) and financial instruments on behalf of

themselves or their customers. Such investments and securities activities may involve long or short positions in

the Company’s and/or Vivendi’s securities. As a result of acting in the capacities described above, the Lead Equity

Capital Markets Advisors and their affiliates may have interests that may not be aligned, or could potentially

conflict, with the interests of investors in the Shares or with the interests of the Company or the Group.

Each person receiving this Prospectus acknowledges that: (i) such person has not relied on the Lead

Equity Capital Markets Advisors or any person affiliated with the Lead Equity Capital Markets Advisors in

connection with any investigation of the accuracy of any information contained in this Prospectus; and (ii) it has

relied only on the information in this Prospectus, and no person has been authorized to give any information or to

make any representation concerning the Company or the Shares (other than as contained herein and information

given by the Company’s duly authorized officers and employees in connection with investors’ examination of the

Company and the terms of the Distribution and the Admission) and, if given or made, any such other information

or representation should not be relied upon as having been authorized by the Company.

2.2 Supplements

The information in this Prospectus is current as of the date printed on the front of the cover, unless

expressly stated otherwise. Without prejudice to the Company’s obligation to publish supplements to this

Prospectus when legally required, the delivery of this Prospectus at any time after the date hereof shall not, under

any circumstances, create any implication that there has been no change in the Group’s business or affairs since

the date hereof or that the information contained in this Prospectus is correct as of any time since its date. If a

significant new factor or a material mistake or inaccuracy relating to the information included in this Prospectus

which is capable of affecting the assessment of the Shares arises or is noted between the date of this Prospectus

and Settlement, a supplement to this Prospectus will be published. The obligation to supplement this Prospectus

shall cease to apply upon the earlier of: (i) the First Trading Date; or (ii) the expiry of the validity period of this

Prospectus. Any supplement to this Prospectus will be subject to approval by the AFM and will be made public

in accordance with the relevant rules under the Prospectus Regulation. The summary shall also be supplemented,

if necessary, to take into account the new information included in the supplement.

Statements contained in any such supplement (or contained in any document incorporated by reference

therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or

supersede statements contained in this Prospectus or in a document which is incorporated by reference in this

Prospectus. Any supplement shall specify which statement is so modified or superseded and shall specify that

such statement shall, except as so modified or superseded, no longer constitute a part of this Prospectus.

2.3 Responsibility Statement

The Company accepts responsibility for the information contained in this Prospectus. The Company

declares that the information contained in this Prospectus is, to the best of its knowledge, in accordance with the

facts and makes no omission likely to affect its import.

None of the Lead Equity Capital Markets Advisors nor the Listing and Paying Agent nor any of their

respective affiliates or respective directors, officers or employees or any other person makes any representation

or warranty, express or implied, as to, or assumes any responsibility for, the accuracy or completeness or fairness

of the information in this Prospectus or incorporated by reference herein, and nothing in this Prospectus or

incorporated herein by reference is, or shall be relied upon as, a promise or representation by the Lead Equity

Capital Markets Advisors, the Listing and Paying Agent or any of their respective affiliates or respective directors,

officers or employees or any other person, whether as to the past or the future.

None of the Lead Equity Capital Markets Advisors nor the Listing and Paying Agent accepts any

responsibility whatsoever for the contents of this Prospectus or for any other statements made or purported to be

made by either itself or on its behalf in connection with UMG, the Distribution, or the Shares. Accordingly, each

of the Lead Equity Capital Markets Advisors and the Listing and Paying Agent disclaims, to the fullest extent

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permitted by applicable law, any and all liability, whether arising in tort, contract or otherwise, which they might

otherwise be found to have in respect of this Prospectus and/or any such statement.

2.4 Notice to Prospective Investors

2.4.1 No offering is being made to any person in any jurisdiction.

This Prospectus may not be used for, or in connection with, and does not constitute, or form part of, an

offer by, or invitation by or on behalf of, the Company, Vivendi, any of the Lead Capital Markets Equity Advisors

or any representative of the Company or Vivendi or a Lead Capital Markets Advisor, to purchase any securities

or an offer to sell or issue, or the solicitation to buy securities by any person in any jurisdiction. The distribution

of this Prospectus may be restricted by law in certain jurisdictions. Neither this Prospectus nor any advertisement

or any other related material may be distributed or published in any jurisdiction except under circumstances that

will result in compliance with any applicable laws and regulations.

2.4.2 Notice to Prospective Investors in the United States

This Prospectus does not constitute an offer of securities for sale in the United States or an offer to acquire

or exchange securities in the United States. The Shares may not be offered, sold, resold, delivered, distributed or

otherwise transferred, directly or indirectly, in or into the United States absent registration under the US Securities

Act or an exemption therefrom. The Shares have not been approved or disapproved by the US Securities and

Exchange Commission (the SEC), any state securities commission in the United States or any other United States

regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the accuracy or adequacy

of this Prospectus. Any representation to the contrary is a criminal offense in the United States.

2.5 Presentation of Financial Information

2.5.1 Financial information

This Prospectus includes the audited Combined Financial Statements and unaudited Interim Financial

Statements.

With regard to the financial information as at and for the financial years ended December 31, 2018, 2019

and 2020 presented in the Prospectus, references to Universal Music Group, UMG or the Group refer to UMGI

and UIM, collectively, and each of their respective subsidiaries, unless otherwise indicated.

The Company was incorporated on December 4, 2020 for the purpose of the Restructure and, prior to the

Restructure, conducted no operations other than activities preparatory to the Restructure. Accordingly, there is no

historical financial information for the Company for the financial years ended December 31, 2018, 2019 and 2020.

Because the Company is a holding company and UMGI and UIM conducted, and continues to conduct, all

business operations presented in this Prospectus over and during the financial years ended December 31, 2018,

2019 and 2020, the Company is of the view that, in accordance with Article 6(1) of the Prospectus Regulation,

the combined Financial Statements of Universal Music Group as of and for the financial years ended December

31, 2018, 2019 and 2020 provide the information required to be presented with regard to the Company’s financial

years ended December 31, 2018, 2019 and 2020 so that prospective investors may make an informed investment

decision to purchase Shares. The Combined Financial Statements have been prepared in accordance with

International Financial Reporting Standards as adopted by the European Union (IFRS). The Combined Financial

Statements have been audited by Ernst & Young et Autres (EY) and Deloitte & Associés (Deloitte and, together

with EY, the Joint Auditors), independent auditors of Universal Music Group. The Interim Financial Statements

have been prepared in accordance with IAS 34 Interim Financial Reporting and reviewed by the Joint Auditors.

The Joint Auditors’ report on the Combined Financial Statements includes the following emphasis of

matter paragraph:

Emphasis of matter

We draw attention to the Note "Basis of preparation of the Combined Financial Statements", in Section

"Accounting conventions used when preparing the Combined Financial Statements". Our opinion is not

modified in respect of this matter.

The aforementioned note is set out in full at page F-59 of this Prospectus. This ‘Emphasis of matter” has

been noted by the Joint Auditors in view of the fact that combined financial statements are less common than

consolidated financial statements and, taking into account that they comprise accounts of two different companies

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(as opposed to an aggregate consolidated position of a parent company and its subsidiaries as is the case for

consolidated accounts) are more complex than consolidated financial statements. Therefore, the Joint Auditors

deemed it necessary and helpful to include an emphasis of matter paragraph in their Report on the Combined

Financial Statements to draw readers’ attention to the basis of preparation of these accounts, which basis is

described in the relevant notes to the Combined Financials Statements.

The aforementioned Combined Financial Statements of Universal Music Group, the Interim Financial

Statements and the related auditors’ report are included in this Prospectus beginning on page F-1.

Financial information presented in parentheses in the tables in this Prospectus denotes the negative of

such number presented. In respect of financial data set out in this Prospectus, a dash (“–”) signifies that the relevant

figure is not available, while a zero (“0”) signifies that the relevant figure is available but has been rounded to

zero.

2.5.2 Non-IFRS financial information

This Prospectus contains certain financial measures that are not defined or recognized under IFRS,

including EBIT, EBITA, EBITA margin, EBITDA, EBITDA margin and Net Working Capital.

Definitions of these financial measures, along with reconciliations of the measures, as applicable, to the

Group’s historical financial information appears in Section 7 (Selected Financial Information).

These financial measures are the non-IFRS financial measures used by the Group to help evaluate growth

trends, establish budgets and assess operational performance and efficiencies. The Group believes that these non-

IFRS performance measures, in addition to IFRS measures, provide an enhanced understanding of the Group’s

results and related trends, therefore increasing transparency and clarity into the core results of the business. There

are no generally accepted principles governing the calculation of these measures and the criteria upon which these

measures are based can vary from company to company. These measures, by themselves, do not provide a

sufficient basis to compare the Group’s performance with that of other companies and should not be considered

in isolation or as a substitute for profit or loss or any other measure as an indicator of the Group’s performance,

or as an alternative to cash generated from operating activities as a measure of liquidity. Further explanation of

the relevance of each of the non-IFRS measures, a reconciliation of the non-IFRS measures to the most directly

comparable measures calculated and presented in accordance with IFRS and a discussion of their limitations is

set out in Section 7 (Selected Financial Information). The Group does not regard these non-IFRS measures as a

substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS or those

calculated using financial measures that are calculated in accordance with IFRS. The non-IFRS measures may not

be comparable to other similarly titled measures used by other companies and have limitations as analytical tools

and should not be considered in isolation or as a substitute for analysis of the Group’s results as reported under

IFRS. The non-IFRS measures have not been audited or reviewed.

2.5.3 Currency Presentation

Unless otherwise indicated, all references in this Prospectus to “€”, “euro” or “EUR” are to the currency

introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the treaty

establishing the European Community, as amended. All references to “sterling”, “pounds sterling”, “GBP”, “£”,

or “pence” are to the lawful currency of the United Kingdom. All references to “$”, “US$”, “USD” or “US dollars”

are to the lawful currency of the United States.

2.5.4 Rounding

Certain data in this Prospectus, including financial, statistical, and operating information has been

rounded. As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from the

actual arithmetic totals of such data. Percentages have been rounded and accordingly may not add up to 100%.

2.6 Market, Economic and Industry Data

This Prospectus contains statistics, data and other information relating to markets, market sizes, market

shares, market positions and other industry data pertaining to the Company’s business and markets. Unless the

source is otherwise stated, the market, economic and industry data in this Prospectus constitute the Company’s

estimates, using underlying data from independent third parties. The Company obtained market data used in this

Prospectus from internal surveys, reports and studies, where appropriate, as well as market research, publicly

available information and industry publications (in particular by reports and publications the International

Federation of the Phonographic Industry (IFPI), Nielsen Corporation and Music & Copyright). Any such

-31-

estimations and forecasts are subject to inherent risks and uncertainties. The availability of market information

differs significantly between countries. In particular, actual results could be impacted by future events which

cannot be predicted or controlled, including, without limitation, changes in business strategies, the development

of future products and services, changes in market and industry conditions, the outcome of contingencies, changes

in management, changes in law, regulations or individual countries’ policies.

The Company confirms that all third-party data contained in this Prospectus which has been sourced

from a third party, being those instances where the source has been stated, has been accurately reproduced and,

so far as the Company is aware and able to ascertain from information published by such third parties, no facts

have been omitted that would render the reproduced information inaccurate or misleading.

Certain other statistical or market-related data has been estimated by management based on reliable third-

party sources, where possible, including those referred to above or based on data generated in-house by the Group.

Although management believes its estimates regarding markets, market sizes, market shares, market positions and

other industry data to be reasonable, these estimates have not been verified by any independent sources, and the

Company cannot assure prospective investors as to the accuracy of these estimates or that a third party using

different methods to assemble, analyze or compute market data would obtain the same results. Management’s

estimates are subject to risks and uncertainties and are subject to change based on various factors. The Company

does not intend, and does not assume any obligation, to update the industry or market data set forth herein, other

than as required by Article 23 of the Prospectus Regulation.

Industry publications or reports generally state that the information they contain has been obtained from

sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. The

Company has not independently verified and cannot give any assurance as to the accuracy or completeness of

market data contained in this Prospectus that were extracted or derived from these industry publications or reports.

Market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of

actual market conditions. Such statistics are based on market research, which itself is based on sampling and

subjective judgments by both the researchers and the respondents.

As a result, prospective investors should be aware that statistics, data, statements and other information

relating to markets, market sizes, market shares, market positions and other industry data in this Prospectus and

estimates and assumptions based on that information are necessarily subject to a high degree of uncertainty and

risk due to the limitations described above and to a variety of other factors, including those described in Section

1 (Risk Factors) and elsewhere in this Prospectus.

2.7 Incorporated by Reference

The Articles of Association are incorporated in this Prospectus by reference and, as such, form part of

this Prospectus.

The Articles of Association can be obtained in electronic form from the Company’s website

(https://universalmusic.com/Universal_Music_Group_N.V._-_Articles_of_Association). Prospective investors

should only rely on the information that is provided in this Prospectus or incorporated by reference into this

Prospectus.

No other documents or information, including the contents of the Company’s website

(www.universalmusic.com) or of websites accessible from hyperlinks on that website, form part of, or are

incorporated by reference into, this Prospectus. Other than the information incorporated by reference into this

Prospectus, the contents of the Company’s website (www.universalmusic.com) or of websites accessible from

hyperlinks on that website have not been scrutinized or approved by the AFM.

2.8 Definitions and Glossary

Certain terms used in this Prospectus, including all capitalized terms and certain technical and other

items, are defined and explained in Section 17 (Definitions and Glossary).

2.9 Enforceability of Judgments

The ability of Shareholders in certain countries other than the Netherlands, in particular in the United

States, to bring an action against the Company may be limited under applicable law. Prior to the Distribution,

Company will be converted to a public company under the laws of the Netherlands and will have its registered

office in Hilversum, the Netherlands.

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The majority of the Directors are resident of countries other than the United States. All or a substantial

proportion of the assets of these individuals are located outside the United States. The Group’s assets are located

outside the United States. As a result, it may not be possible or it may be difficult for investors to effect service

of process within the United States upon the Group or such persons, or to enforce against them in US courts a

judgment obtained in such courts, including judgments predicated on the civil liability provisions of US federal

securities laws or the securities laws of any state or territory within the United States.

The United States and the Netherlands currently do not have a treaty providing for reciprocal recognition

and enforcement of judgments, other than arbitration awards, in civil and commercial matters. In addition, the

countries of residence of the Directors and of the Company’s employees may also not have a treaty providing for

the reciprocal recognition and enforcement of judgments. Consequently, a final judgment for payment given by a

court in the United States, whether or not predicated solely upon US securities laws, would not be enforceable in

the Netherlands. Accordingly, a final judgment for payment rendered by a court in the United States, whether or

not predicated solely upon US securities laws, will not be recognized and enforced by the Dutch courts. However,

if a person has obtained a final and conclusive judgment for the payment of money rendered by a court in the

United States which is enforceable in the United States and files his claim with the competent Dutch court, the

Dutch court will generally give binding effect to such foreign judgment insofar as it finds that (i) the jurisdiction

of the US court has been based on a ground of jurisdiction that is generally acceptable according to international

standards, (ii) the judgment by the US court was rendered in legal proceedings that comply with the standards of

the proper administration of justice that includes sufficient safeguards (behoorlijke rechtspleging) and (iii) the

judgment by the US court is not incompatible with a decision rendered between the same parties by a Dutch court,

or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the

same subject and is based on the same cause, provided that the previous decision qualifies for acknowledgement

in the Netherlands and except to the extent that the foreign judgment contravenes Dutch public policy (openbare

orde). It is uncertain whether this practice extends to default judgments as well. Dutch courts may deny the

recognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce the

amount of damages granted by a US court and recognize damages only to the extent that they are necessary to

compensate actual losses or damages. Enforcement and recognition of judgments of US courts in the Netherlands

are solely governed by the provisions of the Dutch Civil Procedure Code (Wetboek van Burgerlijke

Rechtsvordering).

-33-

3. FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus constitute forward-looking statements. Forward-looking statements

appear in a number of places in this Prospectus, including, without limitation, under Section 8 (Operating and

Financial Review) and Section 11 (Business Description). Forward-looking statements are sometimes identified

by the use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “intend,”

“may,” “plan,” “predict,” “project,” “target,” “potential,” “would,” “could,” “should,” “continue,” or the negative

thereof, other variations thereon or similar expressions. Other forward-looking statements can be identified by the

context in which the statements are made.

Although management believes that the expectations reflected in these forward-looking statements are

reasonable, such forward-looking statements are based on management’s current views and assumptions and

involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the

Company and are difficult to predict, that may cause actual results, performance, achievements or developments

to differ materially from any future results, performance, achievements or developments expressed or implied

from the forward-looking statements. Some of the factors that could cause actual results to differ materially from

those contemplated by the forward-looking statements include, but are not limited to, those discussed in Section

1 (Risk Factors) and include, among others:

 general economic, political and market conditions, market risk and investor behavior;

 UMG’s ability to operate in the highly competitive industry and markets in which it operates;

 the impact of complex regulatory regimes;

 UMG’s ability to develop, manage and protect its IT and information systems, including

outsourced IT systems;

 UMG’s ability to adapt to new technology and services;

 the impact of regulation in the areas of privacy, information security and data protection and

UMG’s ability to prevent unauthorized disclosure of data;

 UMG’s ability to maintain compliance with anti-corruption and anti-money laundering laws

and regulations and economic sanctions programs;

 the effectiveness of UMG’s risk management policies and procedures;

 the impact of the international expansion of UMG’s operations;

 UMG’s ability to attract, integrate, manage and retain qualified personnel or key employees;

 the impact of litigation, governmental or regulatory investigations and other claims;

 the adequacy of UMG’s insurance coverage;

 UMG’s ability to protect its intellectual property rights;

 the impact of labor disputes or work stoppages;

 the impact of changes in tax laws or challenges to UMG’s tax position; and

 the global expansion and (continued) effects of the COVID-19 pandemic to and within a large

number of countries.

Should one or more of these risks or uncertainties materialize, or should any underlying assumptions

prove to be incorrect, the Company’s actual financial condition, cash flows or results of operations could differ

materially from what is described herein as anticipated, believed, estimated or expected. Investors are urged to

read the Sections of this Prospectus entitled Section 1 (Risk Factors), Section 8 (Operating and Financial Review)

and Section 11 (Business Description) for a more complete discussion of the factors that could affect the

Company’s future performance and the industry in which it operates.

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Such forward-looking statements contained in this Prospectus speak only as of the date of this Prospectus

and are expressly qualified in their entirety by the cautionary statements included in this Prospectus. Without

prejudice to its obligations under Dutch law in relation to disclosure and on-going information, the Company and

Vivendi undertake no obligation to update publicly or revise any forward-looking statements, whether as a result

of new information, future events or otherwise.

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4. REASONS FOR THE DISTRIBUTION AND USE OF PROCEEDS

4.1 Reasons for the Distribution

Prior to the date of the Prospectus, financial analysts highlighted that Vivendi’s stock market price per

share was approximately 10% to 30% lower than the sum of all of Vivendi’s businesses divided by its number of

shares. For a number of years, Vivendi’s leading institutional shareholders have been seeking a spin-off from or

a distribution of UMG by Vivendi to reduce such conglomerate discount and to allow for a valuation of UMG,

and for UMG to further develop, on a stand-alone basis.

The 99.98% and 99.88% positive votes, respectively, at the March 29, 2021 Vivendi’s extraordinary

shareholders meeting approving an amendment to Vivendi’s bylaws allowing a dividend to be paid in kind and

June 22, 2021 Vivendi’s annual general shareholder’s meeting approving the Distribution confirmed the high

interest from Vivendi Shareholders to have direct access to UMG’s shares and reduce such conglomerate discount.

Prior to considering a favorable response to this request, Vivendi’s management board wished to obtain a fair

value for UMG to better serve the interests of Vivendi Shareholders and therefore support the fulfilment of

Vivendi’s development plan to become a global leader in content, media and communications.

The transactions, closed in March 2020 and January 2021 respectively, which resulted in 20% of the

share capital of the Company being acquired by the Tencent-led Consortium on the basis of an enterprise value

of €30 billion for 100% of UMG led Vivendi’s management board to conclude that the time was ripe for a

distribution of up to 60% of the Company’s share capital to the Vivendi Shareholders, which resulted in Vivendi’s

pursuance of the Distribution. Such distribution aims at emphasizing the valuation of, on the one hand, UMG on

a stand-alone basis and, on the other hand, Vivendi’s other subsidiaries and activities. That goal can only be fully

achieved by admitting the Distribution Shares to trading on a regulated stock market as a result of the Distribution.

Whilst the Company will not receive any proceeds from the Admission, it believes that the Admission is

well aligned to the Company’s continued growth ambitions and will help to maximize shareholder value over

time, including by addressing the aforementioned conglomerate discount highlighted by financial analysts in

relation to Vivendi’s stock market price per share. In addition, Vivendi and the Company believe that the

Distribution and Admission is also a significant step for UMG and presents a new opportunity to UMG, which

will allow it to broaden artist opportunities and enrich experiences for music fans, further promoting a thriving

music and entertainment industry and further solidifying UMG’s position as an industry leader. The Admission is

expected to further increase the Company’s profile with the music and entertainment industry, investors, business

partners and customers, brand recognition and credibility. The Admission is also expected to provide additional

financial flexibility and diversity to UMG through access to capital markets. For illustrative purposes, based on

the recent acquisition of a 10% stake in the Company by the Pershing Entities, implemented over two tranches,

the market capitalization of the Company would be approximately €33 billion on the First Trading Date.

4.2 Proceeds of the Distribution

No proceeds shall be raised pursuant to the Admission and the Distribution due to its character of a

distribution to Vivendi Shareholders.

4.3 Use of Proceeds

No proceeds shall be raised pursuant to the Admission and the Distribution.

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5. DIVIDEND POLICY

5.1 General

Pursuant to Dutch law and the Articles of Association, the distribution of profits will take place following

the adoption of the Company’s financial statements by the General Meeting, from which the Company will

determine whether such distribution is permitted. Distribution of profits shall be made after the adoption of the

financial statements from which it appears that the distribution is allowed. The Company may only make

distributions to the extent the Company’s equity exceeds the sum of the paid-up and called-up part of its issued

capital and the reserves which must be maintained by law. Distributions shall be made pro rata to the respective

shareholdings.

5.2 Entitlement to Dividends

All Shares, including the Distribution Shares, are equally entitled to dividends and other distributions, if

and when declared.

5.3 Dividend Policy and History

The Company plans, as from the Admission, to annually declare and pay dividends to all holders of the

Shares on a pro rata basis in two semi-annual instalments, in the aggregate amount of no less than 50% of the

Company’s net profits realized during the relevant financial year, subject to agreed non-cash items. The dividend

payments by the Company shall equal in the aggregate an amount of no less than 50% of the amount calculated

as follows:

(i) consolidated net profits of the most recent audited consolidated financial statements of

the Company as of December 31

, prepared in accordance with IFRS and certified by

a firm of independent public accountants of internationally recognized standing,

plus

(ii) (a) any loss arising on any change in fair value of any intangible assets, tangible assets

or financial assets, (b) any amortization or impairment of intangible assets, (c) share

based compensation expenses, (d) net losses related to non-consolidated companies

consolidated under the equity method deducted, (e) net losses related to minority

interest, (f) net provisions for inventories, (g) any unrealized loss related to derivative

financial instruments; and

minus

(iii) (h) any gain arising on any change in fair value of any intangible assets, tangible assets

or financial assets, (i) any unrealized gain related to derivative financial instruments,

(j) income or reversal related to share based compensation, (k) net profits related to

non-consolidated companies consolidated under the equity method and (l) net profits

related to minority interest.

The Company intends to pay an interim dividend in the fourth quarter of each financial year, after the

publication of the half-year figures of the Company, and a final dividend in the second quarter of the following

financial year, to be paid following approval of the Company’s financial statements at its annual General Meeting.

On July 28, 2021, the Board resolved to make a distribution for an amount in cash of €362,648,232 to all

Shareholders by way of an interim dividend distribution at the charge of the Company’s current profits in the

current financial year that started on January 1, 2021, provided that in the event that after adoption of the annual

accounts for the financial year of the Company that started on January 1, 2021, the Company’s profits shall appear

to be less than the amount of such interim dividend distribution, the balance shall be deemed to have been a

distribution from the Company’s freely distributable reserves. With regard to such distribution: (i) the ex-dividend

date will be October 25, 2021; (ii) the record date will be October 26, 2021; and (iii) the payment date will be

October 28, 2021.

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There can be no assurances that in any given year a dividend will be paid. The determination of the Board

as to whether to resolve upon a dividend will depend upon many factors, including UMG’s future revenue,

financial conditions, general economic and business conditions, earnings, corporate strategy, the capital required

by the Company’s operating subsidiaries to conduct their business, legal requirements to which the Company is

subject, and prospects and such other factors deemed relevant by the Board. In addition, subject to Dutch law and

the Articles of Association, the Board may resolve to make an interim distribution of profits, provided that it

appears from an interim statement of financial position signed by the Board that the Company’s equity does not

fall below the sum of called-up and paid-in share capital and any statutory reserves. There can be no assurances

that the Group’s performance will facilitate adherence to the dividend policy or any increase in the pay-out ratio

and, in particular, the Company’s ability to pay dividends may be impaired if any of the risks described in this

Prospectus were to occur (See Section 1 (Risk Factors) and Section 1 (Risk Factors), Section 1.5.9 (No assurance

can be given that the Company will pay or declare dividends)). Furthermore, the Company’s dividend policy is

subject to change as the Board may revisit the Company’s dividend policy from time to time.

The Company was incorporated on December 4, 2020 and paid dividends of €422 million on April 29,

2021, which is the only dividend which it has paid since its date of incorporation.

Each of UMGI, UIM and the Company paid dividends in each of the periods covered by the Combined

Financial Statements and the Interim Financial Statements as follows:

EUR (millions)

2021 2020 2019 2018

UMGI ................................................... - - 758 735

UIM ...................................................... - 283 244 246

UMG or the Company ..........................

422 - -

5.4 Dividend Ranking

All Shares, including the Distribution Shares, rank equally in all respects and will be eligible for any

dividend distribution that may be declared on the Shares in the future.

5.5 Manner and Time of Dividend Payments

Payment of any dividend on the Shares in cash will be made in euro. Any dividends on the Shares that

are paid to the Shareholders through Euroclear France, the French centralized securities custody and

administration system, will be credited automatically to the Shareholders’ accounts without the need for the

Shareholder to present documentation proving ownership of the Shares. The Board may set a record date for

dividend and other distributions. In relation to dividend distributions, there are no restrictions under Dutch law in

respect of holders of Shares who are non-residents of the Netherlands. However, see Section 15 (Taxation) for a

discussion of certain aspects of taxation of dividends paid on the Shares.

Payment of dividends on the Shares not held through Euroclear France will be made directly to the

relevant shareholder using the information contained in the Company’s shareholders’ register and records.

The date on which dividends and other distributions shall be payable shall be announced in accordance

with applicable law and published on the Company’s website. Distributions shall be payable on the date

determined by the Board.

5.6 Uncollected Dividends

Distributions which have not been claimed upon the expiry of five years and one day after the date when

they became payable will be forfeited to the Company and will be carried to the reserves.

5.7 Taxation of Dividends

Dividends paid on the Shares may be subject to withholding tax in the Netherlands. See Section 15

(Taxation) for a discussion of certain aspects of taxation of dividends paid on the Shares.

-38-

6. CAPITALISATION AND INDEBTEDNESS

6.1 Capitalisation

The table below sets out the capitalization of the Group as at June 30, 2021.

Investors should read this table in conjunction with Section 7 (Selected Financial Information) and

Section 8 (Operating and Financial Review).

As at June 30,

2021

Unaudited

€ millions

Total current debt (including current portion of non-current debt)

(1)

........................ 2,917

Guaranteed........................................................................................................... 2,914

Secured ......................................................................................................................... -

Unguaranteed/unsecured ................................................................................................. 3

Total non-current debt (excluding current portion of non-current debt)

(2)

.................. 1

Guaranteed.............................................................................................................. -

Secured ............................................................................................................................ -

Unguaranteed/unsecured ................................................................................................. 1

Shareholder’s equity

(3)

........................................................................................................ 1,487

Share capital .................................................................................................................... 33,000

Legal reserve(s) ............................................................................................................... -

Other reserves .................................................................................................................. (31,513)

Total ......................................................................................................

4,405

Notes

(1) Guaranteed debt consists of Vivendi borrowings (€2,368 million) and credit lines drawn by UMGI (€546 million). For

more information, see note 12 of the unaudited Interim Financial Statements.

(2) Unguaranteed/unsecured consists of bank overdrafts (€2 million) and other (€2 million). For more information, see note

12 of the unaudited Interim Financial Statements.

(3) For more information, see the Statement of Changes in Equity and Note 13 of the unaudited Interim Financial Statements.

There has been no material change in the Company’s capitalization since June 30, 2021.

6.2 Indebtedness

The table below sets out the net indebtedness of the Company.

Investors should read this table in conjunction with Section 7 (Selected Financial Information) and

Section 8 (Operating and Financial Review).

As at June

30, 2021

Unaudited

€ millions

A. Cash ................................................................................................................................

.....................

454

B. Cash equivalents ................................................................................................

................................

301

C. Other current financial assets ................................................................................................

...............

146

D. Liquidity (A + B + C) ................................................................................................

........................

901

-39-

As at June

30, 2021

Unaudited

€ millions

E. Current Financial debt (including debt instruments, but excluding current portion of non-

current

financial debt) ................................................................................................................................

...........

2,917

F. Current portion of non-current financial debt ................................................................

.......................

G. Current financial indebtedness (E + F) ................................................................

...........................

2,917

H. Net current financial indebtedness (G - D) ................................................................

......................

2,016

I. Non-current financial debt (excluding current portion and debt instruments)

................................

J. Debt instruments ................................................................................................

................................

K. Non-current trade and other payables ................................................................

................................

L. Non-current financial indebtedness (I + J + K) ................................................................

................

M. Total financial indebtedness (H + L) ................................................................

..............................

2,017

Note: For all figures in the table above, please see note 12 of the unaudited Interim Financial Information for more information.

As of June 30, 2021, the Company has no indirect indebtedness and no contingent indebtedness.

In the context of the planned Distribution and Admission, UMG entered into a Facilities Agreement

concerning a five-year €3 billion syndicated bank credit facility, comprising: a revolving credit facility of €2

billion and a term loan of €1 billion. UMG’s ability to draw on these bank credit facilities was conditional upon

its strict ring fencing from Vivendi, in particular the termination of UMG’s cash pooling agreement with Vivendi,

UMGI’s inability to draw on Vivendi’s bilateral credit facilities, and the repayment of UIM’s intra-group debt

from Vivendi. On July 7, 2021, Vivendi and UMG completely separated their cash pooling and financing

arrangements.

Since 2020, UMGI has been an additional borrower under five of Vivendi’s eight bilateral credit facilities

up to the aggregate limit of €750 million as of December 31, 2020, which was reduced to €450 million as of June

30, 2021. As of June 30, 2021, three of these credit facilities were drawn by UMG for €216 million.

In addition, UMGI had its own credit facilities maturing in 2021 for an aggregate amount of $570 million

(or €470 million) as of June 30, 2021, including a committed credit facility of €247 million maturing in September

2021. As of June 30, 2021, UMGI had drawn on these credit facilities for an amount of €330 million, and on July

7, 2021, it repaid and cancelled them.

The Facilities Agreement provides for: (i) a syndicated revolving bank credit facility of €2 billion

(drawings made in euros for the Company and in US dollars for UMGI) for a five-year period, with two one-year

extension options, and (ii) a term loan of €1 billion maturing in October 2026. As mentioned above, the ability

for the Company to draw on these bank credit facilities was conditional upon its strict ring fencing from Vivendi.

On July 7, 2021, Vivendi and UMG completely separated their cash pooling and financing arrangements after the

following transactions were implemented:

 the termination of Universal Music Group Treasury S.A.S.’s cash pooling agreement with

Vivendi, with Vivendi returning the deposited amount of €146 million as of June 30, 2021;

 the repayment by UMGI of its drawings on Vivendi’s bilateral bank credit facilities for €216

million as of June 30, 2021; and

 the repayment by UIM of its intra-group borrowing from Vivendi, for €2,368 million. Further

details in relation to this amount are provided at Section 8.9.10 (Facilities Agreement and

repayment of Vivendi Loan Agreements).

-40-

On July 7, 2021, to finance the repayment of UIM’s intra-group borrowing from Vivendi, the Company

drew on its term loan of €1 billion, as well as on the revolving credit facility for €1.24 billion. In addition, UMGI

drew on the same credit facility for $500 million (or €416 million).

For more information on the Facilities Agreement, see section 16.5.3 (Facilities Agreement).

-41-

7. SELECTED FINANCIAL INFORMATION

Prospective investors should read this Section 7 (Selected Financial Information) in conjunction with

Section 8 (Operating and Financial Review) and Section 18 (Historical Financial Information) and additional

financial information contained elsewhere in this Prospectus. Prospective investors should read the entire

Prospectus and not just rely on the information contained in this section.

The financial information set forth below is extracted or derived from, and should be read in conjunction

with, the audited Combined Financial Statements and the unaudited Interim Financial Statements. The Combined

Financial Statements have been prepared in accordance with IFRS as endorsed in the EU and the Interim

Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The Combined

Financial Statements have been audited by the Joint Auditors. The Interim Financial Statements have been

reviewed by the Joint Auditors.

Where financial information in the following tables is labelled “audited”, this means that it has been

extracted from the Combined Financial Statements. The label “unaudited” is used in the following tables to

indicate financial information that was taken from the above-mentioned Interim Financial Statements.

7.1 Summary combined / consolidated statements of profit or loss

6 months ended

June 30

Year ended December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions)

Revenues ............................................................... 3,831 3,459 7,432 7,159 6,023

Cost of revenues .................................................... (2,047) (1,820) (3,917) (3,818) (3,110)

Selling, general and administrative expenses ........ (1,090) (1,104) (2,265) (2,276) (2,062)

Restructuring charges ............................................ (9) (8) (20) (24) (29)

Impairment losses on intangible assets acquired

through business combinations .............................. - - - - -

Income from equity affiliates - operational ........... (1) (11) (9) (2) (1)

Earnings before interest and income taxes

(EBIT) ...................................................................

684 516 1,221 1,039 821

Interest ................................................................... (9) (6) (15) 14 27

Income from investments ...................................... - - - - 1

Other financial income .......................................... 105 453 603 174 333

Other financial charges .......................................... (183) (13) (28) (57) (29)

(87) 434 560 131 332

Earnings before provision for income taxes ......

597 950 1,781 1,170 1,153

Provision for income taxes .................................... (144) (214) (412) (195) (251)

Earnings from continuing operations ................

453 736 1,369 975 902

Earnings from discontinued operations ................. - - - - -

Earnings ...............................................................

453 736 1,369 975 902

of which

Earnings attributable to shareowners ...............

452 735 1,366 972 897

Non-controlling interests ....................................... 1 1 3 3 5

-42-

7.2 Summary combined / consolidated statements of financial position

As at June 30 As at December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions)

ASSETS

Goodwill .................................................. 1,386 1,466 1,369 1,488 1,378

Non-current content assets ...................... 3,523 2,451 3,512 2,269 1,808

Other intangible assets............................. - 1 1 1 1

Property, plant and equipment ................. 247 268 254 267 262

Rights-of-use relating to leases ............... 406 434 416 472 -

Investments in equity affiliates ................ 95 76 72 88 97

Non-current financial assets .................... 1,782 1,733 1,962 1,103 873

Deferred tax assets .................................. 369 420 414 367 330

Non-current assets ................................. 7,808 6,849 8,000 6,055 4,749

Current assets

Inventories ............................................... 85 81 79 90 84

Current tax receivables ............................ 3 2 1 - -

Current content assets .............................. 729 575 677 591 601

Trade accounts receivable and other ....... 1,112 949 1,088 1,058 997

Current financial assets ........................... 35 29 1 28 30

Shareowners loans ................................... 146 695 815 672 1,260

Cash and cash equivalents ....................... 755 417 326 336 276

Current assets ........................................ 2,865 2,748 2,987 2,775 3,248

TOTAL ASSETS ...................................

10,673 9,597 10,987 8,830 7,997

EQUITY AND LIABILITIES

Share Capital 18,132 - - - -

Additional paid-in capital 14,868 - - - -

Combined retained earnings .................... (31,513) 1,253 1,432 2,981 3.074

of which earnings attributable to

Vivendi shareowners .........................

452 735 1,366 972 897

Non-controlling interests ......................... - - - 3 3

Total equity ............................................ 1,487 1,253 1,432 2,984 3,077

Non-current provisions 342 371 335 437 370

Long-term borrowings and other

financial liabilities ...................................

1 1 1 1 1

Shareowners borrowings ......................... - 2,368 2,368 - -

Deferred tax liabilities ............................. 774 797 828 659 608

Long-term lease liabilities ....................... 440 470 447 510 -

Other non-current liabilities 751 107 851 106 159

Non-current liabilities ...........................

2,308 4,114 4,830 1,713 1,138

Current provisions 98 99 137 63 79

Short-term borrowings and other

financial liabilities ...................................

549 196 640 15 17

Short-term borrowings with Vivendi SE 2,368 - - - -

Trade accounts payable and other ........... 3,741 3,819 3,843 3,981 3,638

Short-term lease liabilities ....................... 78 85 78 86 -

-43-

As at June 30 As at December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions)

Current tax payables ................................ 44 31 27 (12) 48

Current liabilities ..................................

6,878 4,230 4,725 4,133 3,782

Total liabilities ....................................... 9,186 8,344 9,555 5,846 4,920

TOTAL EQUITY AND LIABILITIES

10,673 9,597 10,987 8,830 7,997

7.3 Summary combined / consolidated statements of cash flows

6 months ended

June 30 Year ended December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions)

Operating activities

EBIT ....................................................................

684 516 1,221 1,039 821

Adjustments

.......................................................

88 94 213 201 106

Content investments, net

.................................... (173) (352) (1,517) (465) (161)

Gross cash provided by operating activities

before income tax paid ......................................

599 258 (83) 775 766

Other changes in net working capital (172) (118) 287 82 179

Net cash provided by operating activities

before income tax paid ......................................

427 140 204 857 945

Income tax (paid)/received, net ........................... (118) (64) (207) (172) (198)

Net cash provided by operating activities........

309 76 (3) 685 747

Investing activities

Capital expenditures ............................................ (23) (37) (66) (75) (110)

Purchases of consolidated companies, after

acquired cash ....................................................... (2) (1) (4) (50) (12)

Investments in equity affiliates ............................ (23) (1) (2) - -

Increase in financial assets ..................................

(47) -

(3) (13) (12)

Investments ........................................................

(95) (39) (75) (138) (134)

Proceeds from sales of property, plant,

equipment and intangible assets ..........................

5 - - 3 -

Proceeds from sales of consolidated companies,

after divested cash ............................................... 117 - 11 (2) 1

Disposal of equity affiliates ................................. - 1 1 - -

Decrease in financial assets ................................. - - 15 6 19

Divestitures ........................................................

122 1 27 7 20

Dividends received from equity affiliates ........... 1 - 2 2 2

Dividends received from unconsolidated

companies ............................................................

1 1 - - 1

Net cash provided by/(used for) investing

activities ..............................................................

29 (37) (46) (129) (111)

Financing activities

Distributions to shareowners ............................... (422) - (283) (1,002) (981)

Other transactions with shareowners ................... - (11) (11) - (1,414)

-44-

6 months ended

June 30 Year ended December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions)

Dividends paid by consolidated companies to

their non-controlling interests ............................. (1) (3) (5) (5) (5)

Transactions with shareowners ........................

(423) (14) (299) (1,007) (2,400)

Principal payment on short-term borrowings ...... - - - - (57)

Other changes in short-term borrowings and

other financial liabilities ...................................... (103) 149 625 2 46

Interest paid, net .................................................. (9) (6) (15) 14 27

Other cash items related to financial activities .... (9) (1) (3) (2) (3)

Transactions on borrowings and other

financial liabilities .............................................

(121) 142 607 14 13

Repayment of lease liabilities and related

interest expenses ..................................................

(40) (43) (91) (83) -

Net cash provided by/(used for) financing

activities ..............................................................

(584) 85 217 (1,076) (2,387)

Foreign currency translation adjustments of

continuing operations .......................................... 6 (20) (35) (8) (19)

Change in cash and cash equivalents and

shareowners loans .............................................

(240) 104 133 (528) (1,770)

Cash and cash equivalents and shareowners

loans

At beginning of the period ................................... 1,141 1,008 1,008 1,536 3,306

At end of the period ............................................. 901 1,112 1,141 1,008 1,536

of which Shareowners loans

At beginning of the period ................................... 815 672 672 1,260 3,059

At end of the period ............................................. 146 695 815 672 1,260

of which Cash and cash equivalent

At beginning of the period ................................... 326 336 336 276 247

At end of the period .............................................

755 417 326 336 276

Note

(1) Adjustments relate to: (i) amortization and depreciation of intangible and tangible assets; (ii) change in provision, net;

(iii) operational income from equity affiliates; (iv) and proceeds from sales of property, plant, equipment and intangible

assets.

(2) Content investments, net is comprised of net music content advances and catalog investments, net, which is split as

follows for the periods provided: (i) 6 months ended June 30, 2021: (a) net music content advances - €130 million; and

(b) catalog investments, net - €43 million; (ii) 6 months ended June 30, 2020: (a) net music content advances - €266

million; and (b) catalog investments, net - €86 million; (iii) year ended December 31, 2020: (a) net music content advances

- €588 million; and (b) catalog investments, net - €929 million; (iv) year ended December 31, 2019: (a) net music content

advances - €192 million; and (b) catalog investments, net - €273 million; and (v) year ended December 31, 2018: (a) net

music content advances - €121 million; and (b) catalog investments, net - €40 million.

7.4 Other financial data

The Group considers the following metrics to be the non-IFRS financial measures used by the Group to

help evaluate growth trends, establish budgets and assess operational performance and efficiencies. The Group

believes that these non-IFRS performance measures, in addition to IFRS measures, provide an enhanced

understanding of the Group’s results and related trends, therefore increasing transparency and clarity into the core

-45-

results of the business. The Group believes the following metrics are useful in evaluating the Group’s operating

performance:

For the 6 months ended

June 30

For the year ended

December 31

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions, unless otherwise indicated)

EBITA

(1)

753 567 1,329 1,124 902

EBITA margin

(2)

19.7% 16.4% 17.9% 15.7% 15.0%

EBITDA

(3)

822 649 1,487 1,267 979

EBITDA margin

(4)

21.5% 18.8% 20.0% 17.7% 16.3%

Notes

(1) To calculate EBITA, the accounting impact of the following items is excluded from the income from EBIT: (i) the

amortization of intangible assets acquired through business combinations as well as other rights catalogs acquired; (ii)

impairment losses on goodwill, other intangibles acquired through business combinations and other rights catalogs

acquired; and (iii) other income and charges related to transactions with shareowners (except when directly recognized

in equity).

(2) EBITA margin represents EBITA as a percentage of revenues. EBITA margin is unaudited.

(3) To calculate EBITDA, the accounting impact of the following items is excluded from the income from EBIT: (i) the

depreciation of tangible, intangible and right of use assets; (ii) gains/(losses) on the sale of tangible, intangible and right

of use assets; (iii) the amortization of intangible assets acquired through business combinations as well as other rights

catalogs acquired; (iv) impairment losses on goodwill, other intangibles acquired through business combinations and

other rights catalogs acquired; (v) income from equity affiliates having similar operating activities; and (vi) restructuring

charges, and other non-recurring items.

(4) EBITDA margin represents EBITDA as a percentage of revenues. EBITDA margin is unaudited.

7.5 Selected Non-IFRS Financial Measures

Certain of the KPIs tracked by UMG and certain financial measures included in this Prospectus are not

defined or recognized under IFRS, including EBITA, EBITA margin, EBITDA and EBITDA margin. Definitions

of these non-IFRS metrics, as well as reconciliations to the nearest IFRS figures, are provided below. UMG uses

these metrics, in addition to IFRS measures, to help evaluate growth trends, establish budgets and assess

operational performance and efficiencies in relation to UMG. UMG considers that these metrics, in addition to

IFRS measures, provide an enhanced understanding of the Group’s results and related trends, therefore increasing

transparency and clarity into the core results of the business of the Group. There are no generally accepted

principles governing the calculation of these measures and the criteria upon which these measures are based can

vary from company to company. These measures, by themselves, do not provide a sufficient basis to compare the

UMG’s performance with that of other companies and should not be considered in isolation or as a substitute for

operating profit or loss after tax or any other measure as an indicator of operating performance, or as an alternative

to cash generated from operating activities as a measure of liquidity. UMG does not regard these non-IFRS

financial measures as a substitute for, or superior to, the equivalent measures that are calculated in accordance

with IFRS. The non-IFRS financial measures presented in this Prospectus may not be comparable to other

similarly titled measures used by other companies and have limitations as analytical tools and should not be

considered in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS.

7.5.1 EBITA and EBITA margin

UMG defines EBITA as EBIT, excluding amortization of intangible assets, impairment losses on

intangible assets and other charges and income. UMG considers EBITA to be a relevant measure to assess the

performance of its operating segments as reported in the segment data. It enables UMG to compare the operating

performance of operating segments regardless of whether their performance is driven by the operating segment’s

organic growth or by acquisitions.

EBITA margin is calculated as EBITA as a percentage of revenues and is used by UMG as a supplemental

measure of operating performance.

7.5.2 EBITDA and EBITDA margin

UMG defines EBITDA as EBIT, excluding amortization of intangible assets, impairment losses on

intangible assets, other charges and income, restructuring charges, sale of tangible and intangible assets, right-of-

-46-

use – depreciation of tangible assets, depreciation and other non-recurring items. UMG considers this adjusted

EBITDA metric to be a relevant measure to compare the operating performance of operating segments regardless

of whether their performance is driven by the operating segment’s organic growth or by acquisitions, which can

differ across different companies. This metric will be referred to as “EBITDA” throughout the Prospectus for the

sake of readability.

EBITDA margin is calculated as EBITDA as a percentage of revenues and is used by UMG as a

supplemental measure of operating performance.

7.5.3 EBIT

UMG defines EBIT, as earnings, excluding taxes, interest, income from investments, and other financial

income or expenses. EBIT is shown on the face of the Statement of Earnings. UMG considers EBIT to be a

relevant measure to assess performance of its operating activities and before any gains or losses on its equity

holdings. EBIT is further elaborated upon at Note 3 to the Combined Financial Statements page F-89 of this

Prospectus.

7.5.4 Net Working Capital

UMG defines net working capital, as the sum of inventories, trade accounts and other receivables, trade

accounts and other payables (including royalty payables) and other non-current liabilities. Net Working Capital

excludes any content investments. UMG considers Net Working Capital to be a relevant measure to assess the

movement in its working capital assets and operational efficiency. Net Working Capital is shown on the face of

the Statement of Cash Flows included in the Combined Financial Statements at pages F-9 and F-66 of this

Prospectus.

7.6 Reconciliations of selected non-IFRS measures to IFRS

The following table defines and presents a reconciliation of EBIT to EBITA to EBITDA and EBITDA

margin.

6 months ended June 30, Year ended December 31,

2021 2020 2020 2019 2018

Unaudited Audited

(€ millions, unless otherwise indicated)

Earnings before provision for income taxes.... 597 950 1,781 1,170 1,153

Other financial charges ....................................... 183 13 28 57 29

Other financial income ........................................ (105) (453) (603) (174) (333)

Income from investments .................................... - - - - (1)

Interest ................................................................ 9 6 15 (14) (27)

EBIT ................................................................... 684 516 1,221 1,039 821

Adjustments .........................................................

Amortization of intangible assets ....................... 69 51 108 85 80

Impairment losses on intangible assets .............. - - - - -

Other charges and income ...................................

- - - - 1

EBITA ................................................................

753 567 1,329 1,124 902

Revenues ............................................................. 3,831 3,459 7,432 7,159 6,023

EBITA margin (%)

(1)

........................................

19.7% 16.4% 17.9% 15.7% 15.0%

EBITA 753 567 1,329 1,124 902

Adjustments .........................................................

Restructuring charges (a) .................................... 9 8 20 24 29

Sale of tangible and intangible assets .................. (3) 1 1 - 1

Right-of-use - Depreciation of tangible assets

(2)

. 34 35 69 64 -

Depreciation ........................................................ 32 28 59 53 46

-47-

Other non-recurring items including income

from equity affiliates ........................................... (3) 10 9 2 1

EBITDA 822 649 1,487 1,267 979

Revenues ............................................................. 3,831 3,459 7,432 7,159 6,023

EBITDA margin (%)

(3)

21.5% 18.8%

20.0% 17.7% 16.3%

Notes

(1) EBITA margin is unaudited.

(2) Due to the adoption of IFRS 16 in January 2019, these measures are non-comparable for 2018 and further years.

(3) EBITDA margin is unaudited.

7.7 Non-Current and content assets by segment

The below table provides an overview of the Group’s non-current and content assets by segment, as well

as its corporate center, for the periods indicated.

6 months ended June 30 Year ended December 31

2021 2020 2020 2019 2018

(€ millions, unless otherwise indicated)

(unaudited) (audited)

Recorded music

Non-current assets

Goodwill...................................................... 608 639

601

647 574

Non-current content assets .......................... 1,676 1,453 1,663 1,356 983

Property, plant and equipment ..................... 128 147 137 136 129

Right-of-use relating to leases ..................... 248 289 256 315 -

Content assets

Music catalogs and publishing rights .......... 1,012 1,010 1,026 985 813

Advances to artists and repertoire owners ... 1,019 729 941 653 448

of which non-current .......................... 664 443 637 371 171

of which current ................................. 335 286 304 282 277

Merchandising contracts and artist services - - - - -

Content assets, net .....................................

2,031 1,739 1,967 1,638 1,261

Current content assets, net ........................... 355 286 304 282 278

Non current content assets, net .................... 1,676 1,453 1,663 1,356 983

Music publishing

Non-current assets

Goodwill...................................................... 680 731 674 740 721

Non-current content assets .......................... 1,749 900 1,747 832 812

Property, plant and equipment ..................... 24 22 23 22 17

Right-of-use relating to leases ..................... 28 9 30

10 -

Content assets

Music catalogs and publishing rights .......... 1,310 615 1,304

609 551

Advances to artists and repertoire owners ... 768 530 781 488 444

of which non-current .......................... 439 285 443

223 261

of which current ................................. 329 245 338

265 183

Merchandising contracts and artist services - - - - -

Content assets, net .....................................

2,079 1,145 2,086 1,097 995

Current content assets, net ........................... 329 245 338 265 183

Non current content assets, net .................... 1,749 900 1,747 832 812

Merchandising

Non-current assets

-48-

Goodwill...................................................... 98 96 94 101 83

Non-current content assets .......................... 98 98 102 81 13

Property, plant and equipment ..................... - - - - -

Right-of-use relating to leases ..................... - 1 - - -

Content assets

Music catalogs and publishing rights .......... - - - - -

Advances to artists and repertoire owners ... 143 142 137 125 153

of which non-current .......................... 98 98 102

81 13

of which current ................................. 45 44 35

44 140

Merchandising contracts and artist services - - - - -

Content assets, net .....................................

143 142 136 125 153

Current content assets, net ........................... 45 44 35 44 140

Non current content assets, net .................... 98 98 102 81 13

Corporate center

Non-current assets

Goodwill...................................................... - - - - -

Non-current content assets .......................... - - - - -

Property, plant and equipment ..................... 95 99 94 109 116

Right-of-use relating to leases ..................... 130 135 130 147 -

Content assets

Music catalogs and publishing rights .......... - - - - -

Advances to artists and repertoire owners ... - - - - -

Merchandising contracts and artist services - - - - -

Content assets, net .....................................

- - - - -

Current content assets, net ........................... - - - - -

Non current content assets, net .................... - - - - -

Total

Non-current assets

Goodwill...................................................... 1,386 1,466 1,369 1,488 1,378

Non-current content assets .......................... 3,523 2,451 3,512 2,269 1,808

Property, plant and equipment ..................... 247 268 254 267 262

Right-of-use relating to leases ..................... 406 434 416 472 -

Content assets

Music catalogs and publishing rights .......... 2,322 1,625 2,330 1,594 1,364

Advances to artists and repertoire owners ... 1,930 1,401 1,859 1,266 1,045

of which non-current .......................... 1,201 827 1,182 675 444

of which current ................................. 729 575 677 591 601

Merchandising contracts and artist services - - - - -

Content assets, net .....................................

4,252 3,026 4,189 2,860 2,409

Current content assets, net ........................... 729 575 677 591 601

Non current content assets, net .................... 3,523 2,451 3,512 2,269 1,808

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8. OPERATING AND FINANCIAL REVIEW

This Section 8 (Operating and Financial Review) should be read in conjunction with Section 2.5

(Presentation of Financial Information), Section 7 (Selected Financial Information), Section 9 (UMG Profit

Forecast), Section 10 (Industry Overview), Section 11 (Business Description) and Section 18 (Historical

Financial Information). Prospective investors should read the entire document and not just rely on the information

set out below. Except as stated otherwise, the financial information considered in this Section 8 (Operating and

Financial Review) is extracted from the financial information set out in Section 18 (Historical Financial

Information) or from UMG’s internal financial reporting.

The following discussion of UMG’s results of operations and financial condition contains forward-

looking statements that are based on assumptions and estimates and are subject to known and unknown risks and

uncertainties. Prospective investors should read Section 3 (Forward-looking Statements) for a discussion of the

risks and uncertainties related to these statements. UMG’s actual results and the timing of events could differ

materially from those that are discussed or implied in these forward-looking statements. Factors that could cause

or contribute to such differences include those discussed below and elsewhere in this Prospectus, particularly

under Section 1 (Risk Factors), and Section 2.5 (Presentation of Financial Information). In addition, certain

industry issues also affect UMG’s results of operations and are described in Section 9 (UMG Profit Forecast)

and Section 10 (Industry Overview). Neither UMG’s independent auditors, nor any other independent

accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial

information contained herein, nor have they expressed any opinion or any other form of assurance on such

information or its achievability, and assume no responsibility for, and disclaim any association with, the forward-

looking financial information.

8.1 Overview

According to Music & Copyright, based on revenue, UMG is a world leader in music-based

entertainment, with a broad array of businesses engaged in recorded music, music publishing, merchandising and

audiovisual content through offices in more than 60 territories, covering approximately 200 markets. Featuring

the most comprehensive catalog of recordings and songs across every musical genre, UMG identifies and develops

artists and produces and distributes the most critically acclaimed and commercially successful music in the world.

Committed to artistry, innovation and entrepreneurship, UMG fosters the development of services, platforms and

business models in order to broaden artistic and commercial opportunities for its artists and create new experiences

for fans.

8.2 Components of UMG’s Operating Results

8.2.1 Recorded Music Operations

UMG’s recorded music business primarily consists of the discovery and development of recording artists

and the related marketing, promotion, distribution, sale and licensing of music created by such recording artists.

UMG’s activities have also extended to other areas, such as live events, sponsorship and film and television.

UMG’s roster of recording artists includes major global superstars such as J Balvin, Justin Bieber, Luke

Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish, Eminem, Selena Gomez, Ariana Grande,

Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone, Shawn Mendes, Kacey Musgraves,

Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie Underwood, Keith Urban and The

Weeknd and successful local artists such as Celeste, Mabel and Stormzy in the UK, Slimane and Vitaa in France,

Capital Bra, Sarah Connor and Helene Fischer in Germany, backnumber and King & Prince in Japan, and Karol

G and Sebastián Yatra in Latin America.

UMG’s catalog includes timeless performers such as ABBA, Louis Armstrong, The Beatles, The Beach

Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton

John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The Rolling Stones, Frank Sinatra, U2,

Amy Winehouse and Stevie Wonder.

UMG’s diverse range of labels helps the business consistently cater to changing consumer trends. Its

major record labels and label groups include Capitol Music Group, Interscope Geffen A&M, Republic Records,

Island Records, Motown Records, Def Jam Recordings, Universal Music Group Nashville, Universal Music Latin

Entertainment, EMI Records and Polydor, and its classical and jazz labels are Blue Note Records, Decca, Deutsche

Grammophon and Verve Label Group.

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With a diverse range of labels, UMG operates offices in more than 60 territories across approximately

200 markets, where markets may be defined by a number of factors, including language and dialects – more than

any other recorded music company in the world. UMG has licensed local and global streaming platforms to help

establish legal music markets in countries that have not traditionally been major markets for recorded music sales,

such as the BRIC countries (Brazil, Russia, India and China), Latin America, Africa, the Middle East, Southeast

Asia and Eastern Europe. These partnerships have led to greater investment in developing local talent and have

helped make music more accessible to fans.

UMG employs a comprehensive approach to marketing and promoting its artists, which combines global

planning and execution with a robust network of local presence around the world.

UMG’s recorded music business’ distribution operations includes entering into agreements with digital

music services to make its music available to users. UMG also sells its physical recorded music products through

a variety of different retail and wholesale outlets including music specialty stores, general entertainment specialty

stores, supermarkets, mass merchants and discounters, independent retailers and other traditional retailers.

UMG believes existing and new digital businesses will be a significant source of growth and will provide

new opportunities to successfully monetize its assets and create new revenue streams. The proportion of digital

revenues attributable to each distribution channel varies by region and proportions may change as the introduction

of new technologies continues. As one of the world’s largest music entertainment companies, UMG believes it is

well positioned to take advantage of growth in digital distribution and emerging technologies such as social media,

digital health and fitness and gaming to maximize the value of its assets.

UMG has diversified its revenues beyond its traditional businesses by entering into expanded-rights deals

with recording artists in order to partner with such artists in other aspects of their careers. Under these agreements,

UMG provides services to and participates in recording artists’ activities outside the traditional recorded music

business such as touring, merchandising and sponsorships. UMG believes that entering into expanded-rights deals

and enhancing its artist services capabilities in areas such as merchandising, VIP ticketing, fan clubs, concert

promotion and management has permitted UMG to diversify revenue streams and capitalize on other revenue

opportunities.

Recorded music revenues are derived from three main sources:

 Digital: UMG enters into license agreements with digital music services to make its music and

audio-visual content available for access in digital formats (e.g., streaming and downloads).

Streaming services stream UMG’s music on an ad-supported or paid subscription basis.

Downloading services sell downloads of UMG’s music on a per-album or per-track basis. UMG

currently partners with a broad range of digital music services that are both established and

emerging in the market;

 Physical: UMG sells its physical recorded music products (principally CDs, vinyl, DVDs and

Blu-Ray discs) through a variety of different retail and wholesale outlets through traditional

retail distribution both in store and online, through online physical retailers and direct to

customers through UMG online websites; and

 Licensing and other: UMG enters into licensing agreements to license the use of sound

recordings in combination with visual images such as in films or television programs, television

commercials and video games; UMG as rightsholder also receives royalties if sound recordings

are performed publicly through broadcast of music on television, radio and cable, and in public

spaces such as shops, workplaces, restaurants, bars and clubs. UMG partners with artists to

provide services to and participate in recording artists’ activities outside the traditional recorded

music business such as touring, and sponsorships. Revenues are earned for participation in

expanded rights, including sponsorship, fan clubs, artist websites, touring, concert promotion,

ticketing and artist and brand management. UMG also develops and produces music-based

audio-visual content, including music documentaries, feature films, musicals, music-based

television series and reality shows which are licensed for broadcast.

The principal costs associated with its recorded music business are as follows:

 A&R costs: the costs associated with (i) paying royalties to recording artists, producers,

songwriters, third party repertoire owners, other copyright holders and trade unions; (ii) signing

and developing recording artists; and (iii) creating master recordings in the studio;

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 Product costs: the costs to manufacture, package and distribute products to wholesale and retail

distribution outlets, as well as the costs related to its artist services business;

 Selling and marketing expenses: the costs associated with the promotion and marketing of

recording artists and music, including costs to produce music videos for promotional purposes

and artist tour support; and

 General and administrative expenses: the costs associated with general overhead, depreciation

and amortizations and other administrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years covered

by the Combined Financial Statements.

8.2.2 Music Publishing Operations

UMPG believes that it is one of the world’s largest and fastest-growing major music publishing

companies, acquiring and administering rights to musical compositions (as opposed to recordings) and licensing

those musical compositions for use in a variety of formats. UMPG licenses musical compositions for use in sound

recordings, films, television, advertisements, video games, concerts and in other public performances. It also

licenses compositions for use in printed sheet music and song folios. UMPG owns and controls a vast catalog of

original music and arrangements and its focus is to offer this music for use in films, television, advertising and

new media industries. Based on its extensive administration of its catalog to the vast majority of studios, UMPG

is a leader in working with film and television studios, worldwide brands and digital service providers to effectuate

their licensing goals.

UMPG’s global publishing catalog contains close to four million owned and administered titles,

including some of the world’s most popular songs from major songwriters and artists such as ABBA, Adele, The

Beach Boys, Beastie Boys, The Bee Gees, Irving Berlin, Leonard Bernstein, Justin Bieber, Benny Blanco, Mariah

Carey, Coldplay, Neil Diamond, Dua Lipa, Bob Dylan, Billie Eilish, Eminem, Future, Billy Joel, Elton

John/Bernie Taupin, Alicia Keys, Kendrick Lamar, Dave Matthews, Pearl Jam, Post Malone, Britney Spears,

Harry Styles, Taylor Swift, Justin Timberlake, U2 and many more.

In 2020, UMPG signed partnerships with numerous songwriters and artists ranging from legendary talent

to today’s superstars and promising names: Taylor Swift, Kendrick Lamar, Megan Thee Stallion, Brandi Carlile,

Kenny Chesney, Luke Combs, Bad Bunny, Andrew Lloyd Webber, Van Halen, Louis Bell, Dave Cobb, Billy

Walsh, Lil Mosey and Rina Sawayama, among many others. The company also reached a historically significant

deal to acquire the iconic song catalog of Bob Dylan.

Music publishing revenues are derived from five main sources:

 Performance: the rightsholder receives revenues if the musical composition is performed

publicly through broadcast of music on television, radio, live performance at a concert or other

venue (e.g., arena concerts and nightclubs) and in public spaces such as bars, restaurants, hotels

and retailers;

 Digital: the rightsholder receives revenues with respect to musical compositions distributed

through audio and video streaming services, download services, social networks and other

digital music services;

 Mechanical: the rightsholder receives revenues with respect to musical compositions embodied

in recordings sold in any physical format or configuration such as CDs, vinyl and DVDs;

 Synchronization: the rightsholder receives revenues for the right to use the musical composition

in combination with visual images such as in films or television programs, television

commercials and video games as well as from other uses such as in toys or novelty items and

merchandise; and

 Other: the rightsholder receives revenues for use in sheet music and other uses.

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The principal costs associated with UMG’s music publishing business are as follows:

 A&R costs: costs associated with (i) paying royalties to songwriters, co-publishers and other

signing and developing songwriters; and

 Selling and marketing, general overhead and other administrative expenses: costs associated

with selling and marketing, general overhead, depreciation and amortization and other

administrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years covered

by the Combined Financial Statements.

8.2.3 Merchandising

Bravado is UMG’s wholly owned, global, full-service merchandise and brand-management company

that represents the merchandising rights of new and established artists as well as longstanding and more recent

entertainment brands and properties. Bravado provides an end-to-end merchandising ecosystem including creative

design, production and distribution for its clients. It utilizes UMG’s global network to provide services including

sales, licensing, branding, marketing, eCommerce and creative resources to its clients, as well as to devise

innovative cultural and retail experiences for fans throughout the world. Bravado’s merchandise is sold globally

through various channels including in-store retailers, online retailers, direct-to-consumer, limited-edition retail

experiences and artist tours. It also licenses rights to an extensive global network of third-party licensees.

Merchandise revenues are derived from the following sources:

 Touring Income: sales of physical merchandise product (usually tour specific) direct to

consumers at venues during tours;

 Concession Income: sales of physical merchandise product direct to consumers at concessions

within venues. Right to sell at concession is not limited to specific tours but usually

encompasses all events at the venue;

 Retail: sales of physical merchandise product to wholesalers and retailers;

 Licensing: fees receivable from third party licensees for the use of the Company's merchandising

rights in products sold by the licensee (or further sub-licensed); and

 eCommerce / Direct to Consumer: sales of physical merchandise product through an online

DtoC channel.

The principal costs associated with UMG’s Merchandising business are as follows:

 A&R costs: the costs associated with paying royalties to artists and other rights holders;

 Product costs: the costs to manufacture, package and distribute products for sale at venues, to

wholesale and retail distribution outlets or online through DtoC channels as well as fees paid to

venues; and

 General and administrative expenses: the costs associated with general overhead, depreciation

and amortizations and other administrative expenses.

The revenue sources and principal costs mentioned above were applicable to each of the years covered

by the Combined Financial Statements.

8.3 Prospects and Outlook

As part of its business plan, the Company has established certain ambitions and targets, including those

set out below, which it will monitor its performance against to measure operational and managerial performance

on a Group-wide level. The below financial ambitions and targets are the Company’s internal targets for revenue

growth, EBITDA and EBITDA margin. EBITDA and EBITDA margin are defined in Section 7.5 (Selected Non-

IFRS Financial Measures). The Group has not defined, and does not intend to define, medium -term and these

financial ambitions and targets should not be read as indicating that the Company is targeting such metrics for any

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particular financial year. The Group’s actual results may vary from the targets and ambitions set out below and

those variations may be material. The Group’s ability to achieve the below financial ambitions and targets is

inherently subject to significant business, economic and competitive uncertainties and contingencies, many of

which are beyond the control of the Company, and upon assumptions with respect to future business decisions

that are subject to change. Many of these business, economic and competitive uncertainties and contingencies are

described in Section 1 of this Prospectus entitled “Risk Factors”. The Company does not intend to publish revised

financial ambitions and targets to reflect events or circumstances existing or arising after the date of this

Prospectus or to reflect the occurrence of unanticipated events. The financial ambitions and targets set out below

should not be regarded as a representation by the Company or any other person that the Company will achieve

these ambitions and targets in any time period. Readers are cautioned not to place undue reliance on these financial

ambitions and targets.

Subject to the above and assuming anticipated market conditions and anticipated macro-economic

conditions, the Company has developed the following medium-term targets for purposes of measuring operational

and managerial performance on a Group-wide level:

 Revenue compound annual growth rate in the high single digits. While the achievement of this

targeted revenue growth rate may be influenced by market and macro-economic conditions, it

is principally based on UMG’s ability to continue to successfully develop and break new artists

and market and promote established artists, the targeted release of high quality music content

by UMG’s artists and UMG’s ability to continue and expand its partnerships with digital music

services; and

 EBITDA margin in the mid-twenties. This targeted EBITDA margin is principally based on

UMG’s targeted revenue growth described above, coupled with continued cost-control

measures expected to be applied by the Group.

8.4 Factors Affecting Results of Operations and Comparability

8.4.1 Consumer spending patterns and macro trends, including the impact of the COVID-19 pandemic