37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. - Annual Report 2017

2017 Annual Report

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Wuhu Shunrong Sanqi Interactive Entertainment Network

Technology Co., Ltd.

2017 Annual Report

April 2018

2017 Annual Report

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Section I Table of Contents and Definitions

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Section I Table of Contents and Definitions ............................................................................................................................................2 Section II Company Profile and Main Financial Indicators .....................................................................................................................7 Section III Summary of the Company’s Business ................................................................................................................................. 14 Section IV Discussion and Analysis of Operations ................................................................................................................................ 20 Section V Financial Reports .................................................................................................................................................................. 76

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Definitions

Term		Definition
CSRC		China Securities Regulatory Commission
SZSE		Shenzhen Stock Exchange
Company/the Company/Listed Company/Sanqi		Wuhu Shunrong Auto Parts Co., Ltd./Wuhu Shunrong Sanqi Interactive

Interactive Entertainment		Entertainment Network Technology Co., Ltd.

Shanghai Sanqi Interactive Entertainment		Sanqi Interactive Entertainment (Shanghai) Technology Co., Ltd.
Company Law		The Company Law of the People’s Republic of China
Securities Law		The Securities Law of the People’s Republic of China
		Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd. / Articles
Articles of Association		of Association of Wuhu Shunrong Sanqi Interactive Entertainment
		Network Technology Co., Ltd.
Auditor		GP Certified Public Accountants (Special General Partnership)
Legal counsel		Beijing Tian Yuan Law Firm
Sponsor (lead underwriter)		GF Securities Co., Ltd.
GF Securities		GF Securities Co., Ltd.
Yuan or 10,000 Yuan		RMB yuan or RMB 10,000 yuan
Reporting Period/this Reporting Period		From January 1, 2017 to December 31, 2017
End of Reporting Period/End of this Reporting
		December 31, 2017
Period

		A game that is based on web technologies, uses standard protocols as the
		basic transmission form, and does not require any client software or
Browser game
		requires a mini client based on browser kernel. Game users can directly

		play the game over the Internet using a web browser.
		A game that is downloaded over mobile network and runs on a mobile
Mobile game
		phone or other mobile terminals.

RPG		Role-playing games
ARPG		Action role-playing game
SLG		Strategy games
MMOARPG		Massive multiplayer on-line action role-playing game
Shanghai Mokun		Shanghai Mokun Digital Technology Co., Ltd.
Jiangsu Zhiming		Jiangsu Zhiming Network Technology Co., Ltd.

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Shunrong Investment		Wuhu Shunrong Investment Co., Ltd.
Shunrong Yonghong		Shanghai Shunrong Yonghong Technology Development Co., Ltd.
Guangzhou Senyun		Guangzhou Senyun Auto Parts Co., Ltd.
Shunrong Auto Parts		Wuhu Shunrong Auto Parts Co., Ltd.
Yanling Investment		Shanghai Yanling Investment Management Co., Ltd.
Tibet Xintai		Tibet Xintai Culture & Media Co., Ltd.
Anhui Vogue Entertainment		Anhui Vogue Entertainment Network Technology Co., Ltd.
Vogue Entertainment International		Vogue Entertainment International Limited.
G-MEI Network		G-MEI Network Technology Co., Ltd.
Guangzhou Sanqi		Guangzhou Sanqi Network Technology Co., Ltd.
Guangzhou Xingzhong		Guangzhou Xingzhong Information Technology Co., Ltd.
Anhui Xuhong		Anhui Xuhong Information Technology Co., Ltd.
ENP Games		ENP Games Co., Ltd.
Anhui Sanqi		Anhui Sanqi Network Technology Co., Ltd.
Jiangsu Aurora		Jiangsu Aurora Network Technology Co., Ltd.
Shanghai Yingtong		Shanghai Yingtong Network Technology Co., Ltd.
Wisdom Entertainment International		Wisdom Entertainment Online International Limited.
Wisdom Game International		Wisdom Game Online International Limited.
Shanghai Guanhang		Shanghai Guanhang Network Technology Co., Ltd.
Anhui Jiashang		Anhui Jiashang Network Technology Co., Ltd.
Chengdu Shengge		Chengdu Shengge Times Network Technology Co., Ltd.
Beijing Shangheng		Beijing Shangheng Jiatian Network Technology Co., Ltd.
Jiangsu Jiaqu		Jiangsu Jiaqu Network Technology Co., Ltd.
Shanghai Zhiren		Shanghai Zhiren Culture & Media Co., Ltd.
Tibet Taifu		Tibet Taifu Culture & Media Co., Ltd.
37 Games Entertainment		37 Games Entertainment Limited
Shanghai Mobile Game		Shanghai Mobile Game Digital Technology Co., Ltd.
Anhui Guanyu		Anhui Guanyu Culture & Media Co., Ltd.
Tibet Yaotong		Tibet Yaotong Network Technology Co., Ltd.
Tibet Shengge		Tibet Shengge Network Technology Co., Ltd.
Guangzhou Jisheng		Guangzhou Jisheng Network Technology Co., Ltd.
Guangzhou Sanqi Interactive Entertainment		Guangzhou Sanqi Interactive Entertainment Technology Co., Ltd.
Guangzhou Huoshanhu		Guangzhou Huoshanhu Information Technology Co., Ltd.

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Guangzhou Jishi		Guangzhou Jishi Network Technology Co., Ltd.
Huoerguosi Qianyu		Huoerguosi Qianyu Network Technology Co., Ltd.
Huoerguosi Xinghui		Huoerguosi Xinghui Network Technology Co., Ltd.
Huoerguos Xinrui		Huoerguosi Xinrui Network Technology Co., Ltd.
Top Increase		Top Increase Global Limited
Lihui Venture		Huoerguosi Lihui Venture Investment Co., Ltd.
Anhui Aurora		Anhui Sanqi Aurora Network Technology Co., Ltd.
Shanghai Langkun		Shanghai Langkun Digital Technology Co., Ltd.
Shanghai Kunkun		Shanghai Kunkun Digital Technology Co., Ltd.
Shanghai Miji		Shanghai Miji Digital Technology Co., Ltd.
Shanghai Aojue		Shanghai Aojue Digital Technology Co., Ltd.
Huoerguosi Jiaji		Huoerguosi Jiaji Digital Technology Co., Ltd.
Guangzhou Jisheng		Guangzhou Jisheng Co., Ltd.
Chengdu Pengwan Technology Co., Ltd.		Chengdu Pengwan Technology Co., Ltd. and its subsidiaries
Shenzhen Moklyin Technology Co., Ltd.		Shenzhen Moklyin Technology Co., Ltd. and its subsidiaries
		Zhangshu Wangzhong Investment Management Center (Limited
Wangzhong Investment
		Partnership)

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Section II Company Profile and Main Financial Indicators

I. Company Information

Stock Name	Sanqi Interactive Entertainment	Stock Code	002555
Place of Listing	Shenzhen Stock Exchange
Chinese Name of the	芜湖顺荣三七互娱网络科技股份有限公司
Company
Abbreviation of the Chinese
	三七互娱
Name of the Company

	WUHU SHUNRONG SANQI INTERACTIVE ENTERTAINMENT NETWORK
Name in English
	TECHNOLOGY CO.，LTD.

Legal Representative	Li Weiwei
Registered Address	Nanling County Economic Development Zone, Wuhu City, Anhui Province
Postal Code of the Registered
	243000
Address

	11/F, Tower A1, Wanjiang Fortune Plaza, No. 88, Ruixiang Road, Jiujiang District, Wuhu City,
Business Address
	Anhui Province

Postal Code of the Business	241000

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Address
Website	www.37.com
Email	[email protected]

II. Contact Persons and Contact Details

	Secretary to the Board of Directors	Securities Affairs Representative
Name	Ye Wei	Chen Zhenhua
	11/F, Tower A1, Wanjiang Fortune Plaza,	11/F, Tower A1, Wanjiang Fortune Plaza,
Address	No. 88, Ruixiang Road, Jiujiang District,	No. 88, Ruixiang Road, Jiujiang District,
	Wuhu City, Anhui Province	Wuhu City, Anhui Province
Tel	0553-7653737	0553-7653737
Fax	0553-7653737	0553-7653737
Email	[email protected]	[email protected]

III. Information Disclosure and Location

Newspapers designated by the Company for China Securities Journal, Shanghai Securities News and Securities Times information disclosure Website designated by CSRC for publication of http:∥www.cninfo.com.cn ∥www.cninfo.com.cn www.cninfo.com.cn annual reports 11/F, Tower A1, Wanjiang Fortune Plaza, No. 88, Ruixiang Road, Jiujiang Location of annual reports of the Company District, Wuhu City, Anhui Province

IV. Changes in Registration Information

Organization Code	71392778-9
	1. On March 2, 2011, the Company issued its IPO on SME Board of Shenzhen Stock
	Exchange. The Company is mainly engaged in manufacturing and sales of plastic fuel
	tanks of automobiles. 2. On May 27, 2014, the material asset restructuring of the
	Company involving IPO, assets purchase with cash, supporting fund raising, and
	related-party transactions was conditionally passed at the 22th Session of 2014 of the
Changes in the principal businesses of the	Review Board for Merger, Acquisition, and Restructuring of Listed Companies, China
Company since listing of its shares (if any)	Securities Regulatory Commission. On December 2, 2014, the Company received the
	Reply of CSRC Regarding Wuhu Shunrong Auto Parts Co., Ltd. Issuing Shares to Li
	Weiwei and Others, Purchasing Assets, and Raising Supporting Funds. Through
	purchase of 60% of the share in Shanghai Sanqi Interactive Entertainment, the
	Company grew from single main business of automotive plastic fuel tanks
	manufacturing to two main businesses, advanced manufacturing and modern cultural

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creativity industry. 3. On December 18, 2015, the Company received the Reply of China Securities Regulatory Commission Regarding Approval of Non-public Offering of Shares of Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. (Zheng Jian Xu Ke [2015] No. 2941), according to which, the Company was approved to issue not more than 165,289,300 shares by non-public offering and the funds raised would be used for purchasing 40% of the share in Shanghai Sanqi Interactive Entertainment. Shanghai Sanqi Interactive Entertainment has become a wholly-owned subsidiary of the Company since 2016. Changes in controlling shareholders (if None any)

V. Other Relevant Information

The accounting firm employed by the Company

Name of the accounting firm	GP Certified Public Accountants (Special General Partnership)
Business address	10/F, Yuehai Group Building, No.555 Dongfeng East Road, Yuexiu, Guangzhou
Name of the signature auditor	Xiong Yongzhong, Yang Xinchun

Sponsor institute employed by the Company to perform the duty of continuous supervision in the auditing period

√ Applicable □ Not applicable

		Name of Sponsor	Period of Continuous
Name of Sponsor Institute	Business Address
		Representative	Supervision

	Metro Plaza, No. 183-187,
	Tianhe Road North, Tianhe		From January 12, 2016 to
GF Securities Co., Ltd.		Yuan Ruobin and Zhu Baoli
	District, Guangzhou City,		December 31, 2017

	Guangdong Province

Financial advisor employed by the Company to perform the duty of continuous supervision in the auditing period.

√Applicable □ Not applicable

		Name of Sponsor	Period of Continuous
Name of Sponsor Institute	Business Address
		Representative	Supervision

	Metro Plaza, No. 183-187,
	Tianhe Road North, Tianhe		From May 9, 2017 to December
GF Securities Co., Ltd.		Lv Shaoyi and Tian Li
	District, Guangzhou City,		31, 2018

	Guangdong Province

VI. Key Accounting Data and Financial Indicators

Does the Company need to retroactively adjust or restate accounting data of previous years?

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□ Yes √ No
			Variance in
	2017	2016	comparison with the	2015
			previous year
Operating income (yuan)	6,188,828,116.75	5,247,893,728.73	17.93%	4,656,787,281.09
Net income attributable to	1,620,582,427.47	1,070,162,324.07
shareholders of the listed company			51.43%	506,016,504.78
(yuan)
Net income attributable to
shareholders of the listed company
	1,048,251,240.84	1,010,769,599.36	3.71%	449,076,050.96
net of non-recurring profit and loss

(yuan)
Net cash flow from operating	1, 831,895,928.30	1,051,939,577.83
			74.14%	1,081,238,239.96
activities (yuan)

Basic earnings per share	0.76	0.51
			49.02%	0.29
(yuan/share)

Diluted earnings per share	0.76	0.51
			49.02%	0.29
(yuan/share)

Return on weighted average net
	28.12%	26.56%	1.56%	17.58%
assets

			Variance in
			comparison with the
	End of 2017	End of 2016		End of 2015
			end of the previous

			year
Total assets (yuan)	9,160,137,685.38	6,386,216,011.34	43.44%	4,623,310,755.63
Net assets attributable to	7,016,770,210.85	4,523,665,282.04
shareholders of the listed company			55.11%	3,563,355,144.71
(yuan)

The Company considers and uses one non-GAAP measure, Adjusted Net Income/ (Loss), as supplemental measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with China Accounting Standards. The Company's Adjusted Net Income is RMB 1,408,706,561.26 for the year 2017, which is defined as net income attributable to shareholders of the listed company of RMB1, 620,582,427.47 excluding performance compensation income/expenses of RMB 397,608,243.44 and related goodwill impairment of RMB 299,457,551.04 generated by business acquisitions, after tax income/loss from disposal of equity investments of RMB 199,561,658.81 and share-based compensation of RMB 85,836,485.00. The Adjusted Net Income for the year 2016 is RMB 1,060,713,029.67. The Adjusted Net Income for the reporting period increased by 32.81% compared to last year.

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VII. Differences in Accounting Data under Domestic and Overseas Accounting Standards

1. The differences in net income and net assets in the financial statements disclosed in accordance with international accounting standards and in accordance with Chinese accounting standards

□ Applicable √ Not applicable

The Company did not have any discrepancies in net income and net assets in the financial reports disclosed in accordance with international accounting standards and the Chinese accounting standards during the reporting period.

2. The differences in net income and net assets in the financial statements disclosed in accordance with overseas accounting standards and in accordance with Chinese accounting standards

□ Applicable √ Not applicable

The Company did not have any discrepancies in net income and net assets in the financial reports disclosed in accordance with overseas accounting standards and in accordance with Chinese accounting standards during the reporting period.

VIII. Key Quarterly Financial Indicators

Unit: yuan

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Operating income	1,618,738,028.51	1,460,690,875.99	1,384,968,829.74	1,724,430,382.51
Net income attributable to
	433,033,150.06	417,517,368.31	360,788,807.71	409,243,101.39
shareholders of the listed company

Net income attributable to
shareholders of the listed company	345,442,083.59	413,305,351.97	311,725,820.31	-22,222,015.03
net of non-recurring profit and loss
Net cash flow from operating
	638,703,409.51	458,143,900.12	319,124,714.02	415,923,904.65
activities

The Company’s net income attributable to the shareholders of the listed company after deducting non-recurring gains and losses is RMB -22,222,015.03 in Quarter 4, which was mainly due to the recognition as non-recurring gains and losses by the Company of the

compensation of RMB 401,364,984.06 arising from Shanghai Mokun’s failure to meet the performance commitment, and due to the inclusion of the goodwill impairment of RMB 299,457,551.04 corresponding to the asset in recurring gains and losses.

The Company considers and uses one non-GAAP measure, Adjusted Net Income/ (Loss), as supplemental measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with China Accounting Standards. The Company's Adjusted Net Income is RMB 1,408,706,561.26 for the year 2017, which is defined as net income attributable to shareholders of the listed company of RMB1, 620,582,427.47 excluding performance compensation income/expenses of RMB 397,608,243.44 and related goodwill impairment of RMB 299,457,551.04 generated by business acquisitions, after tax income/loss from disposal of equity investments of RMB 199,561,658.81 and share-based compensation of RMB 85,836,485.00. The Adjusted Net Income for the Quarter 1 to Quarter 4 are RMB 350,533,150.06, RMB 418,801,935.61, RMB 328,279,066.60 and RMB 311,092,408.99 respectively.

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Is there major discrepancy between above financial indicators or the sum of their direct aggregate and relevant financial indicators in quarterly reports and semi-annual reports disclosed by the Company?

□ Yes √ No

IX. Non-Recurring Items and Amounts

√ Applicable □ Not applicable

Unit: yuan

Item	Amount of 2017	Amount of 2016	Amount of 2015	Remarks
	200,975,719.36			Mainly the profits and losses from disposal of long-term equity investment and disposal of fixed assets
Profits and losses on disposal of non-current
assets (including the part written-off with
		7,667,198.02	557,400.93
the provision for impairment loss on assets

accrued)

Government subsidy recorded in current	29,695,208.76			Mainly government subsidies other than VAT refunds
profits and losses (except government
subsidy closely related to company business		68,413,211.24	60,066,571.65
and granted according to the unified quota
or ration of the national standard)
Payment for use of funds that is recorded in	15,607,133.62			Mainly income from borrowing interest
current profits and losses and is collected
from non-financial businesses
	13,370,838.07			Mainly the income of bank financial products
Profits and losses from entrusting others to
		6,931,102.57	3,411,610.12
invest in or manage assets


Profits and losses on changes in fair value	40,268,035.00			Mainly the investment income from disposal of available-for-sale financial assets
arising from holding of trading financial
assets and trading financial liabilities and
return on investment from disposal of
trading financial assets, trading financial		3,608,355.70	1,287,609.34
liabilities, and available-for-sale financial
assets, except for effective hedging business
relating to the normal operating business of
the Company
Other non-operating incomes and	1,251,440.52
		-8,461,639.08	-2,191,357.89
expenditures except above items

	296,624,143.44			Mainly performance compensation income (The amount of
Other profits and losses items that fit the

definition of non-recurring profits and losses

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				impairment loss of RMB 299,457,551.04 provided by the Company on the goodwill of Shanghai Mokun was included in current profit or loss), the share payment expenses, and performance compensation expenses
Less: affected amount of income tax	36,707,567.83	10,764,962.34	3,021,230.09
Affected amount of minority equity	-11,246,235.69
		8,000,541.40	3,170,150.24
(after-tax)

Total	572,331,186.63	59,392,724.71	56,940,453.82	--

The reason shall be specified for items of non-recurring profit and loss defined in accordance with definition in Explanatory Announcement No.1 on Information Disclosure for Companies Offering their Securities to the Public - Non-recurring Profit and Loss and items of non-recurring profit and loss listed in the above announcement that are defined to be recurrent profit and loss. □ Applicable √ Not applicable

The Company did not define items of non-recurring profit and loss defined and listed in Explanatory Announcement No.1 on Information Disclosure for Companies Offering their Securities to the Public - Non-recurring Profit and Loss to be items of recurrent profit and loss in the reporting period.

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Section III Summary of the Company’s Business

I. Main Business in the Reporting Period

Does the Company need to comply with the disclosure requirements for special industries?

The Company is principally engaged in interactive entertainment business and manufacturing and sales of plastic fuel tanks for automobiles. The interactive entertainment business mainly focuses on the research, development, publishing and operation of mobile games and browser games, while arranging pan-entertainment business including film and TV, animation, music and VR.

The Company steadily promoted the development strategy of “platformization, globalization and pan-entertainment” for interactive entertainment business based on IP during the reporting period. Its overall strength ranked the 18[th] among the top 100 Internet companies in China; the auto parts business developed steadily.

During the reporting period, the Company achieved an operating revenue of RMB 6.189 billion with a year-on-year increase of 17.9%, a pretax income of RMB 1.917 billion with a year-on-year increase of 45.3%, and the net income attributable to shareholders of the listed company of RMB 1.621 billion with a year-on-year increase of 51.4%. The main reasons for the Company’s increase in the net income attributable to the shareholders of the listed company include: (1) The Company’s game R&D business and mobile game publishing business achieved great development during the reporting period. R&D products represented by Yong Heng Ji Yuan, Swords of Archangels H5 and Mobile Game Chuan Qi Ba Ye have significantly increased the Company’s profitability in the mobile game business; (2) The Company confirmed related performance compensation gains and goodwill impairment losses for the reason that Shanghai Mokun, its subsidiary, failed to achieve the performance commitments. The main reason for Shanghai Mokun’s failure to reach the performance commitments is that the product launch time was postponed. Shanghai Mokun had successfully launched the major product and has achieved impressive billing as of the release date of this report.

II. Significant Changes in Main Assets

1. Significant changes in main assets



Main Assets	Description of Significant Changes

	Equity assets increased RMB 312 million in the reporting period, which was mainly due
	to the inclusion of Shanghai Mokun, an original JV of the Company, into the
Equity assets	consolidation scope within the reporting period. For details, see the Note 10
	Available-For-Sale Financial Assets and Note 11 Long-Term Equity Investment in the
	Notes to the Consolidated Financial Statements in part II of Section V Financial Report.
Fixed assets	No major change during the reporting period.
Intangible assets	No major change during the reporting period.
Construction in progress	Construction in process increased RMB 20 million in the reporting period , which was

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mainly due to the Company’s investment in second-phase equipment project. For details, see the Note 13 Construction in Progress in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report. monetary funds increased RMB 762 million in the reporting period, which was mainly due to the increase in cash inflow generated by the Company's operating activities during Monetary funds the reporting period. For details, see the Item 5 Consolidated Cash Flow Statement in II. Financial Statements of Section V Financial Report. other current assets increased RMB 357 million in the reporting period, which was mainly due to the Company’s confirmation of performance compensation related to the failure of Shanghai Mokun, acquired by the Company during the reporting period, to Other current assets fulfil its performance commitments. For details, see the Note 9 Other Current Assets in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report. Other receivables increased RMB 265 million in the reporting period, mainly because the Company’s loans to others and relevant interest due within 1 year was reclassified from Other receivables other non-current assets to this item. For details, see the Note 6 Other Receivables in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report. Goodwill increased RMB 960 million in the reporting period, which was mainly due to the new consolidation of the goodwill of Shanghai Mokun. For details, see the Note 16 Goodwill Goodwill in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report. Other non-current assets increased RMB 594 million in the reporting period, which was mainly due to the prepayment for the purchase of office buildings and parking spaces. Other non-current assets For details, see the Note 19 Other Non-Current Assets in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report.

2. Main overseas assets

□ Applicable √ Not applicable

III. Analysis of Core Competitiveness

Does the Company need to comply with the disclosure requirements for special industries?

The Company steadily promoted the development strategy of “platformization, globalization and pan-entertainment” for interactive entertainment business based on IP and formed the following core competitiveness:

1. Team Strengths

The Company's core team consists of the experienced publishing team of mobile games and browser games, and the R&D team with

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leading technology. The core team members have years of experience in publishing, operation and R&D of games, as well as numerous successful products. The core team has a prospective insight, full of creativity and efficient execution. It always upholds the marathon-type entrepreneurial spirit and leads the Company to keep up with the industry leader: (1) mobile game R&D and publishing. The Company's publishing business of domestic mobile games caught up from behind. It achieved a market share of 5.2% in 2017, becoming the leading mobile game publisher after Tencent and NetEase (source: 2017-2018 Research Report of China’s Mobile Games Market from iiMedia Research). The Company’s billing of overseas mobile games publishing business also realized a year-on-year increase of nearly 80%. Yong Heng Ji Yuan and Swords of Archangels H5, which are researched and developed by the Company based on its accumulated strength, have respectively obtained a monthly gross billing of more than RMB 350 million globally in the reporting period and a monthly gross billing of over RMB 180 million during the reporting period. Mobile Game Chuan Qi Ba Ye broke RMB 100 million after releasing on the Tencent platform in 30 days. (2) Browser games. The Company’s browser game platform ranked second in terms of market share, just behind Tencent. The Company opened a total of nearly 28,000 groups of servers in China in 2017, ranking first in the ranking list of server quantity of operating platforms in 2017. (Source: 2017 Browser Game Data Report from 9K9K.COM).

The Company Achieved Differentiated Competitive Advantages in the Mobile Game Publishing Business and Established A Good Brand Image

The Company is experienced in the mobile game publishing business and formed strong differentiated competitive advantages, mainly reflected in:

(1) The Company specializes in mobile game traffic operation and has efficient traffic conversion capabilities. The Company is capable of continuously introducing sufficient users to target games to maintain a healthy growth of active players in an environment where mobile internet traffic prices continue to rise. At the same time, the Company has extensively covered downstream partners in the industry chain and established sustainable cooperation with mainstream channels domestically, to ensure that the Company’s mobile game products continue to acquire users. The mobile game products launched by the Company achieved high levels of billing in channels such as Tencent, Huawei and OPPO during the reporting period. The newly added registered users of mobile games through traffic operations reached more than 86 million in the reporting period, taking the leading place in the industry;

(2) The Company is able to dig deep into the upper stream of the industry chain for high-quality products, has strong capabilities of adjustment, optimization and operation of products, which continuously improves the quality of games and guarantees a longer life cycle and high cumulative billing of games. The Company’s self-developed Yong Heng Ji Yuan has been launched for more than one and a half years. Its users and billing remain stable; newly registered users of the self-developed Swords of Archangels H5 reached 8 million within 3 months after launch at the end of September 2017, with a total top-up billing of over RMB 500 million, which has set a benchmark for H5 game category of the mobile network.

(3) The accumulated registered mobile game users owned by the Company have reached 189 million. The Company, given the circumstances where traffic prices continue to rise, provides players with diversified game options and operation services to attend players’ needs through a rich product reserve and customer service system, demonstrating the capability of further improving game experience, activity degree and retention rate. 1) The gameplay provided by the Company includes ARPGs (action role-playing games), SLGs (simulation games) and turn-based RPGs (turn-based role-playing games). Game categories consist of ancient fantasy games, card games, female-oriented games, and games adapted from cartoons and animations, etc. The Company is one of the few publishing company in the industry that can provide comprehensive game categories and one-stop services besides Tencent and NetEase; 2) The Company has a complete player account system, customer service system and experienced customer service team. Combined with sufficient product offerings, it has the ability to further enhance game experience, activity degree and retention rate and increase the Company’s revenue and advertising effectiveness under the "platformization" strategy.

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Relying on the publishing with differentiated

competitive advantages during the reporting period, the Company was awarded “2017 China’s Top 10 Mobile Game Operators” and “2017 China’s Top 10 Mobile Game Operating Platforms” in 2017 China “Top Ten Games” Grand Celebration which was guided by the Digital Publishing Division of the State Administration of Press, Publication, Radio, Film and Television, hosted by China Audio-Video and Digital Publishing Association and organized by the Game Committee of the China Audio-Video and Digital Publishing Association. It also won the

“Top Ten Mobile Game Companies” in 2017

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China Game Billboard. The Company achieved a market share of 5.2% of the domestic mobile game publishing market in 2017 as of December 31, 2017 and is expected a continuous increase of the market share.

Brouser Game Operation Business Kept Leading in China and Fine Operation Created Long-Term Income-Generating Competitive Products

The Company’s browser game platform ranked second in terms of market share, just behind Tencent. The Company opened a total of nearly 28,000 groups of servers domestically in 2017, ranking first in the ranking list of group quantity of operating platforms in 2017. The Company has formed the following competitive advantages with respect to browser game business:

(1) The sound brand reputation of the Company helped establishment of brand barriers for its browser game platform, brought more players with self-owned flow and reduced the Company's costs of acquisition of players;

(2) Leading market position and market share has attracted more R&D manufacturers and companies to cooperate, while strengthening the Company's bargaining power over R&D manufacturers and media channels;

(3) The pragmatic business style and excellent performance have enabled the Company to establish a close cooperative relationship with multiple Internet media channels and enhance the Company’s bargaining power over Internet channel suppliers. It can obtain more and better channel resources at the same price.

(4) The Company specializes in fine-quality game operation. The games such as Swords of Archangels and Chuan Qi Ba Ye etc. launched in 2014 still showed strong and lasting vitality. They became rare long-term revenue-generating products in the field of browser games; The new products achieving the total billing of over RMB 10 million in 2017 include: Jin Zhuang Chuan Qi, Mo Yu, Browser Game Yong Heng Ji Yuan, Nine Gods, Journey to the West: The Demons Strike Back and Princess Agents.

(5) The Company's core operating practices for different game genre and different player types accumulated over many years of continuous game operation experience have been widely recognized in the industry. It has acquired the operation rights of multiple gaming platforms such as Jinshan Liebao, 2345 and Douyu, further enriching the publishing channels and increasing market share of the Company. Relying on the outstanding performance of its browser game business during the reporting period, the Company won the “2017 Top 10 Most Popular Browser Games” for Swords of Archangels and Chuan Qi Ba Ye and the "2018 Top 10 Most

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Anticipated Browser Games" for A Step into the Past and Jin Zhuang Chuan Qi in 2017 China “Top Ten Games” Grand Celebration; Chuan Qi Ba Ye was awarded the "Favorite Browser Game of Players" and Xue Meng Rong Yao was awarded “The Most Anticipated Browser Game of Players” in 2017 Golden Plume Award.

4. Development Capabilities for High-Quality Games

The Company's researched and developed series of core technologies such as game engines and game frameworks with excellent performance and stability can support the development of high-quality online games with engaging gameplay, which is an important guarantee for the Company's continued introduction of delicate games. The mature core technology and rich product experience enable the Company to control costs and shorten the product development period, timely launch of fine games that meet the development direction of the industry and seize the market opportunities with guaranteed quality. The Company implements the principle of market orientation and sustainable development and balances the commercial nature and entertainment of game products with a deep understanding of player needs in the game operation business, making the R&D games launched have the following features:

(1) The life circle of games is long and the players’ activity degree is stable. The browser games including Swords of Archangels and Chuan Qi Ba Ye launched in 2014 and the mobile game Yong Heng Ji Yuan launched in June 2016 remained stable and high billing and continued to contribute profits during the reporting period.

(2) The games meet the market demands and have a high success rate. Five web and mobile games launched from 2014 to the release date of this report achieved the monthly gross billing of more than RMB 100 million, realizing a high success rate.

(3) Long-term player recognition forms brand barriers. The Company's self-developed browser games including Chuan Qi Ba Ye and Swords of Archangels have maintained a stable and high billing through excellent self-developed quality since their launch in 2014. They receive continuous recognition from core players as the domestic representatives of "Mir" and "MU" games. Mobile Game Chuan Qi Ba Ye broke through RMB 100 million in 30 days after launch and the gross billing of Swords of Archangels H5 in a single month surpassed RMB 180 million in the reporting period, which verifies the word-of-mouth effect and brand barriers of self-developed games.

The Company completed the acquisition of Shanghai Mokun and strengthened the Company's R&D capabilities for high-quality games during the reporting period. As of the report date, the Company was researching and developing three browser games including Tu Long Rong Yao, Xue Meng Rong Yao and MU X, and nine mobile games including Mobile Game MU Miracle, Huang Jin Cai Jue, Ling Yu, Fighter of the Desti hny, H-GAME, Mobile Game T, Mobile Game F, Legend Mobile Game Y and Project X - Legend H5, which are expected to be launched in succession in 2018. Based on its strong development capabilities for delicate games, the Company expects to continue to produce long-term high-quality games just like Yong Heng Ji Yuan, Chuan Qi Ba Ye and Swords of Archangels.

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Section IV Discussion and Analysis of Operations

I. Overview

The Company focused on IP and steadily promoted the development strategy of “platformization, globalization and pan-entertainment” for interactive entertainment business during the reporting period. Its overall strength ranks the 18[th] among the top 100 Internet companies in China; its auto parts business achieved a steady development. The Company achieved an operating revenue of RMB 6.189 billion with a year-on-year increase of 17.9%, a pretax income of RMB 1.917 billion with a year-on-year increase of 45.3% and the net income attributable to shareholders of the listed company of RMB 1.621 billion with a year-on-year increase of 51.4%. The Company completed the overall acquisition of Shanghai Mokun and Jiangsu Zhiming in May 2017, enhancing the Company’s capabilities of game R&D and publishing.

i. Interactive Entertainment Business

Mobile game business. The Company continued to defend the position of first-tier publishers of mobile games in markets at home and abroad. Its investment in mobile game R&D continued to increase.

(1) The Company’s mobile game business obtained an operating revenue of RMB 3.284 billion and the gross profit of RMB 2.512 billion during the reporting period, achieving a year-on-year increase of 100.4% and 147.7% respectively.

a. Domestic Publishing.

During the reporting period, the Company successfully launched long-term and high-quality games including Yong Heng Ji Yuan, Swords of Archangels H5 and Xian Ling Jue Xing. The highest number of monthly active users (MAU) exceeded 13 million. The highest monthly billing surpassed RMB 500 million. The highest record of single-day billing of Yong Heng Ji Yuan as a representative work broke through RMB 70 million during the reporting period.

The domestic mobile game publishing industry during the reporting period was highly competitive with the following characteristics:

(1) The continuous increase in traffic costs has caused industry reshuffle and survival of the fittest. The Company is strong on traffic operation and product operation. The number of its newly registered users of mobile games in the report period exceeded 74 million, leading the industry. Its market share has maintained a steady growth to 5.2%, second only to Tencent and NetEase, and was expected to increase during the reshuffle process in the market. Its influence on the flow end and product end will also be enhanced thereby.

(2) Leading products have obvious effects. According to the China’s Game Industry Report for January-June 2017 released jointly by GPC (Game Committee of the China Audio-Video and Digital Publishing Association), CNG and IDC (International Data Corporation), the proportion of total billing of the top 10 products among the total market billing increased from 52.9% to 54.9%, showing a significant leading product effect. The Company is expected to expand the competitive advantages in the publishing business relying on the products already released such as Yong Heng Ji Yuan, Swords of Archangels H5 and Xian Ling Jue Xing, reserved self-developed products such as Mobile Game MU Miracle, Project X - Legend H5, and Legend Mobile Game Y, as well as authorized products such as Ming Yun Xian Feng, Sword and Rebirth, Code M - MMO, Code X - Cards, Code H -legend and Code S - SLG.

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(3) The Company has rapidly expanded its game genre. The Company specializes in product such as ARPG, SLG and turn-based RPG, etc. According to the China’s Game Industry Report for January-June 2017 released jointly by GPC, CNG and IDC, ARPG, SLG and turn-based RPG totally accounted for more than 50% of the market share, which will benefit the further increase of the Company’s market share. As for game themes, the Company is expected to further expand the market share by publishing multi-category mobile games such as Xian Ling Jue Xing, Ling Yu, Sword and Rebirth and other ancient fantasy games, card games, female-oriented games, and games adapted from cartoons and animations.

b. Overseas publishing. The Company adopted to the strategy of “localized operation + multi-dimensional marketing” and has accumulated rich experience in overseas game business operation. During the reporting period, the Company's billing of overseas publishing business of mobile games broke through RMB 1 billion, achieving an increase of nearly 80% over the same period of last year. Yong Heng Ji Yuan reached a maximum billing of RMB 70 million in a single month overseas during the reporting period and took the first place in the best-selling list of Hong Kong, Macao and Taiwan, Singapore, Malaysia, Vietnam and Philippines etc., the second place in Indonesia and Turkey, the third place in Thailand and South Korea and the fifth place in a number of overseas markets. In addition, Demon Seals, Age of Immortals, Zhu Xian, Loongcraft and other games released by the Company also achieved good results overseas, among which, Demon Seals ranked the 3rd in the best-selling list in Taiwan. Age of Immortals ascended to the second in Singapore and Malaysia. Zhu Xian won the 4th place in Thailand. The Company will continue to explore overseas markets in 2018 and bring together various products to the overseas markets such as Clans of Intrigue, Kun Lun Xu, Divine, Qing Yun Jue and Mo San Guo. At the same time, it will launch Lords of Conquest, Primal Wars: Dino Age and other European and American custom products, and release Demon Seals in Korea and Yong Heng Ji Yuan in Japan to further consolidate the strategic layout of globalization.

(2) With respect to products, the Company’s self-developed Yong Heng Ji Yuan has achieved a cumulative global billing of over RMB 3.41 billion and a global maximum monthly billing of over RMB 350 million during the reporting period, which laid a solid foundation for the Company’s mobile game R&D business. The Company’s overall acquisition of Shanghai Mokun during the reporting period strengthened the Company's game R&D capabilities. As of the end of the reporting period, the Company was researching and developing nine mobile games including Mobile Game MU Miracle, Ling Yu, Fighter of the Destiny, Huang Jin Cai Jue, H-Game, Mobile Game T, Mobile Game F, Legend Mobile Game Y and Project X - Legend H5. It has signed a number of mobile games with the exclusive right, tentatively known as Ming Yun Xian Feng, Sword and Rebirth, Code M - MMO, Code X - Cards, Code H -legend and Code S - SLG, which will be launched in 2018 in succession. Based on the competitive advantages formed by the publishing and R&D business, the Company expects to continue to bring to the market long-term and global high-quality mobile games that are comparable to Yong Heng Ji Yuan and Swords of Archangels H5.

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Browser game business. 1) The Company’s browser game platform ranked second in terms of market share, just behind Tencent. The Company opened a total of nearly 28,000 groups of servers in China in 2017, ranking first in the ranking list of group quantity of operating platforms in 2017. 2) Its 37GAMES international platform market covers more than 180 countries, making it one of the most popular game platforms in the world. The Company’s browser game business generated revenue of RMB 2.298 billion and gross profit of RMB 1.537 billion during the reporting period, which was lower than the same period of 2016. The main reasons included:

(1) Browser game users have fallen in size. With the habit of users moving from personal computers to mobile phones and other mobile devices, the scale of browser game users declined during the reporting period;

(2) In the past few years, some browser game R&D companies have turned to mobile game R&D due to the rapid demand increase in the mobile game market, which caused a decline in the number of high-quality products on the market and also on the Company.

The Company adopted a proactive strategy to respond to market changes during the reporting period. 1) With respect to authorized products, the Company cooperated closely with the top domestic browser game R&D teams and successively launched Moyu, Journey to the West: The Demons Strike Back, Nine Gods, Princess Agents, and Jue Shi Xian Wang and other products in 2017 combining its IP advantages, which stabilized operating income. It will launch a variety of browser game products in 2018 including Rise of Taichi, One Piece Online, A Step into the Past and The Legendary Swordsman; 2) with respect to R&D, the Company stepped up its efforts to practice R&D. The self-developed games which were launched in the reporting period included Jin Zhuang Chuan Qi and Browser Game Yong Heng Ji Yuan. Browser games under research and development include Tu Long Rong Yao, Xue Meng Rong Yao and MU X, which are expected to launch in 2018 successively; 3) with respect to strategic investment, the Company and invested companies including Chengdu Pengwan Technology Co., Ltd., Longzhang Animation (Shanghai) Co., Ltd., Chengdu Modu Technology Co., Ltd. and Chengdu Mofei Technology Co., Ltd. actively participate in browser game cooperation and business synergy.

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Pan-entertainment interaction. 1) With respect to endogenous development, the Company has formed three business segments including mobile game publishing, browser game publishing and game R&D. Each business segment supports each other, which achieves efficient resource integration in product R&D, marketing and business cooperation, creating a closed loop of the game industry chain and promote the continuous growth of the Company's income level. 2) With respect to outreach development, the Company newly participated in a series of game R&D and publishing companies with equity during the reporting period, including XD Network Co., Ltd. (game R&D and publishing), Najia Technology (Shenzhen) Co., Ltd. (game R&D), Shanghai Yuhouyi Network Technology Co., Ltd. (game publishing), Chengdu Modu Technology Co., Ltd. (game R&D), Chengdu Mofei Technology Co., Ltd. (game R&D) and Shenzhen Zen Game Technology Co., Ltd. (game R&D). Such a series of game R&D investment increased the sustainable growth capacity of upstream high-quality contents and guaranteed the continuous supply of diversified contents. At the same time, such a series of game publishing investment to jointly explore the market formed a good complement to R&D. The Company completed the overall acquisition of Shanghai Mokun and Jiangsu Zhiming in the reporting period, enhancing the Company’s capabilities of game R&D and publishing. 3) With respect to pan-entertainment layout, the Company has invested in film, television, animation, music, VR and other fields. the Company invested and released Reset, a domestic sci-fi movie, in the reporting period through New Clues (Beijing) Film & TV Investment Co., Ltd. indirectly invested by Huai'an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership); Forever Young, invested by the Company and jointly produced with Hangzhou Southern Pictures Co., Ltd., has grossed over RMB 700 million as of the release day of this report and received favorable comments in the market. At the same time, Till the End of the World, as the first domestic romance film with a background story based on Antarctica, was produced by Beijing C2M Media Co., Ltd, which was invested by the Company. It gained a positive reputation in the market and earned a total revenue of more than RMB 200 million. King of Fighters: Destiny, an animation which was produced by Shanghai Jueli Culture Co., Ltd., where the Company held shares was launched in the reporting period; the Company achieved a breakthrough in digital music business through Shanghai Rock Forward Entertainment Co., Ltd. indirectly invested by Huai'an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership); VR content R&D teams of both Archiact Interactive Ltd. and Tianshe (Shanghai) Cultural Media Co., Ltd. where the Company held shares continued to produce Hidden Fortune, a VR game of treasure-hunting, League of Guardians, a VR game of tower defense and other products; 4) The Company established Yangzhou Fuhai Sanqi Internet Culture Investment Center (Limited Partnership) with Shenzhen Oriental Fortune Capital Investment Management Co., Ltd., a leading entertainment investment institution in China, to jointly focus on the investment in the Internet entertainment industry under the hot trend of pan-entertainment.

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IP strategy. The Company continued to explore quality IPs to produce quality games in combination of its own advantages in the game business. In addition to direct purchase of high-quality IPs, the Company has reached a good cooperation with partners such as Mango Media. They will continue to have more cooperation on IP. The Company built an pan-entertainment strategy system based on high-quality IP strategy to meet the diversified entertainment needs of users, and further explored the value of IP in the fields of film and television, games, animation, live broadcasting, music and VR etc. At present, the Company reserves a large number of quality IPs:

(1) Game IP: MU, World of Legend, Lineage II , Wu Yi, Asura, Seal online, The King of Fighters, Samurai Shodown and Nekketsu Kouha Kunio-kun Series etc.

(2) Film and TV IP: Princess Agents, Fighter of the Destiny, Chinese Hero Zhao Zilong, Journey to the West: the Demons Strike Back, The Monkey King 2 in 3D, Taichi, and Nirvana in Fire etc.

(3) Literature IP: A Step into the Past, Transcending the Nine Heavens, and Gate of Revelation etc.

(4) Animation IP: One Piece and Astro Boy etc.

ii. Auto Parts Business

The Company achieved positive results in the auto parts business in the reporting period by constantly increasing technical investment, optimizing the technological process and improving its management level.

II. Analysis of Principal Business

1. Overview

Refer to relevant contents in “I. Overview” of “Discussion and Analysis of Operations”

2. Revenue and Costs

(1) Composition of operating revenue

Unit: yuan

	2017	2017	2016	2016
					Year-on-year
		Proportion in the		Proportion in the
	Amount		Amount		Increase (Decrease)
		Operating Revenue		Operating Revenue

Total of operating	6,188,828,116.75		5,247,893,728.73
		100%		100%	17.93%
revenue

By Industries
Online game	5,628,616,443.76	90.95%	4,622,288,449.71	88.08%	21.77%
Auto parts	560,211,672.99	9.05%	625,605,279.02	11.92%	-10.45%
By Products
Browser game	2,298,860,026.39	37.15%	2,948,803,661.57	56.19%	-22.04%

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2017 Annual Report

3,283,622,990.10	53.06%	1,639,185,366.69	31.24%	100.32%
560,211,672.99	9.05%	625,605,279.02	11.92%	-10.45%
46,133,427.27	0.74%	34,299,421.45	0.65%	34.50%

5,269,286,525.60	85.14%	4,500,535,129.96	85.76%	17.08%
919,541,591.15	14.86%	747,358,598.77	14.24%	23.04%

(2) Industries, products, or regions taking up more than 10% of the Company’s operating revenue or profits

√ Applicable □ Not applicable

Does the Company need to comply with the disclosure requirements for special industries?

No

Unit: yuan

	Operating Revenue	Operating Cost	Gross Margin	Increased or Decreased Rate of Operating Revenue over the Same Period of the Previous Year	Increased or Decreased Rate of Operating Costs over the Same Period of the Previous Year	Increased or Decreased Rate of Gross Margin over the Same Period of the Previous Year
By Industries
Online game	5,628,616,443.76	1,533,843,501.10	72.75%	21.77%	2.10%	5.25%
Auto parts	560,211,672.99	414,353,738.66	26.04%	-10.45%	-5.60%	-3.80%
By Products
Browser games	2,298,860,026.39	761,943,558.28	66.86%	-22.04%	-13.12%	-3.40%
Mobile games	3,283,622,990.10	771,899,942.82	76.49%	100.32%	23.43%	14.64%
Auto parts	560,211,672.99	414,353,738.66	26.04%	-10.45%	-5.60%	-3.80%
Other	46,133,427.27		100.00%	34.50%	0.00%	0.00%
By Regions
Domestic market	5,269,286,525.60	1,745,664,356.75	66.87%	17.08%	7.07%	3.10%
Overseas market	919,541,591.15	202,532,883.01	77.97%	23.04%	-34.85%	19.56%

In case of any adjustment to the statistical caliber of the Company’s main business data in the report period, the Company’s main

business data in the latest one year after adjustment by the end of the reporting period shall prevail.

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□Applicable √ Not applicable

(3) Is the sales proceeds in kind of the Company more than service revenue?

□ Yes √ No

(4) Performance of important sales contracts signed by the Company as of current reporting period

□ Applicable √ Not applicable

(5) Composition of operating costs

By Industries and Products

Unit: yuan

		2017	2017	2016	2016	Year-on-year
Industries	Item		Proportion in the		Proportion in the	Increase
		Amount		Amount
			Operating Costs		Operating Costs	(Decrease)

Online game	Online game	1,533,843,501.10	78.73%	1,502,334,412.70	77.39%	2.10%
Auto parts	Auto parts	414,353,738.66	21.27%	438,952,363.96	22.61%	-5.60%

		2017	2017	2016	2016	Year-on-year
Product Types	Item		Proportion in the		Proportion in the	Increase
		Amount		Amount
			Operating Costs		Operating Costs	(Decrease)

Browser games	Browser games	761,943,558.28	39.11%	876,972,214.03	45.18%	-13.12%
Mobile games	Mobile games	771,899,942.82	39.62%	625,362,198.67	32.21%	23.43%
Auto parts	Auto parts	414,353,738.66	21.27%	438,952,363.96	22.61%	-5.60%

Note:

(6) Is there any change in the scope of consolidation in the reporting period?

√ Yes □ No

In May 2017, the company acquired 68.43% of the equity in Shanghai Mokun, and the company began to include Shanghai Mokun and its subsidiaries including Shanghai Langkun, Shanghai Miji, Shanghai Kunkun, Shanghai Aojue and Huoerguosi Jiaji, in the scope of consolidated statements from May 31, 2017.

2. Newly-established subsidiary in the current period:

In February 2017, Tibet Xintai, the company’s first-tier subsidiary, established Lihui Venture. The company holds 100% of the equity in this newly-established subsidiary and has included it in the scope of consolidation since February 2017.

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In March 2017, Jiangsu Aurora, the company’s second-tier subsidiary, established Anhui Aurora. The company holds 80% of the equity in this newly-established subsidiary and has included it in the scope of consolidation since March 2017.

In April 2017, Top Increase, the company’s third-tier subsidiary, established 37 Games company. The company holds 100% of the share in this newly-established subsidiary and has included it in the scope of consolidation since April 2017.

In August 2017, Jiangsu Aurora, the company’s second-tier subsidiary, established Guangzhou Jisheng. The company holds 80% of the share in this newly-established subsidiary and has included it in the scope of consolidation since August 2017.

(7) Significant changes or adjustments of the Company’s businesses, products, or services in the reporting period

□ Applicable √ Not applicable

(8) Major customers and suppliers

Major customers

Major customers
Total sales amount of top 5 customers (yuan)	2,437,105,234.58
Proportion of the total sales amount of top 5 customers in annual gross sales	39.38%
Proportion of related-party sales amount in sales amount of top 5 customers in annual gross sales	0.00%

Information of top 5 customers

		Sales amount (yuan)
S/N	Name of Customer		Proportion in annual gross sales


1	No. 1	883,130,692.89	14.27%
2	No. 2	698,031,405.69	11.28%
3	No. 3	367,434,362.57	5.94%
4	No. 4	328,889,590.32	5.31%
5	No. 5	159,619,183.11	2.58%
Total	--	2,437,105,234.58	39.38%

Other information of the major customers

□ Applicable √ Not applicable

Major suppliers

Major suppliers
Total purchase amount of top 5 suppliers (yuan)	570,457,026.86
Total purchase amount of top 5 suppliers in annual gross purchases	29.66%
Proportion of related-party purchase amount in the purchase amount of top 5 suppliers in annual gross	0.00%

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purchases

Information of top 5 suppliers

S/N	Name of supplier	Purchase amount (yuan)	Proportion in annual gross purchases
1	No. 1	259,137,583.55	13.47%
2	No. 2	131,887,811.91	6.86%
3	No. 3	63,933,766.07	3.32%
4	No. 4	61,580,079.92	3.20%
5	No. 5	53,917,785.41	2.80%
Total	--	570,457,026.86	29.66%

Other information of the major suppliers □ Applicable √ Not applicable

3. Expenses

Unit: yuan

			Year-on-year
	2017	2016		Description of significant changes
			increase (decrease)

	1,908,207,466.32	1,607,745,221.19		The variation mainly results from the
				increase in internet traffic charges in
				the reporting period. For details, see
Operating expenses			18.69%	the Note 41 Operating Expenses in the
				Notes to the Consolidated Financial
				Statements in part II of Section V
				Financial Report.
	776,659,541.86	514,933,615.17		The variation mainly results from
				increase in R&D costs and share-based
				payment expense in the reporting
General and				period. For details, see the Note 42
			50.83%
administrative expenses				General and Administrative Expenses

				in the Notes to the Consolidated
				Financial Statements in part II of
				Section V Financial Report.
	28,555,783.27	-5,460,395.61		The variation mainly results from the
				increase in interest expenditure due to
				additional bank loans and great
Financial expenses			-622.96%
				exchange losses arising from

				depreciation of the U.S. dollar against
				RMB in the reporting period. The

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variation in the prior year mainly resulted from exchange gains. For details, see the Note 43 Financial Expenses in the Notes to the Consolidated Financial Statements in part II of Section V Financial Report.

4. Investment in research & development

√ Applicable □ Not applicable

i. Mobile Game R&D Projects

Project 1: MU (Mobile Game)

MU is an ARPG mobile game that is licensed by Webzen with the theme of miracle client game. With the support of the Unity3D engine, the game not only allows players to experience the classic on-hook treasure hunting, but also restore partial dress-up and a variety of magnificent streamer effects of equipment.

Project 2: Search for Gold (Huang Jin Cai Jue)

Search for Gold (Huang Jin Cai Jue) is a magical ARPG mobile game. The triad of heaven, human and demons constitutes a huge world view. Warriors, wizards and Taoist priests are destined to fight against the demons and recast the heaven! The game not only authentically presents the classic PK, but also creates unique gameplay including capture of the BOSS as a fight pet, cross-server winning and awarding of gold ingots for equipment recovery. It strives to present players with a wonderful world of games.

Project 3: Ling Yu

Ling Yu is a 2D H5 mobile game with a theme of immortal cultivation. It's easy to hang up for treasure hunting without burden, which is unique and breaks the traditional features of games. Different choices made by players in the game will affect their own characters, while changing the game's storyline. When the character reaches a certain level, the player will activate the hidden immortal and gain the exclusive and powerful secrets specially for immortals, making the player a unique immortal.

Project 4: Fighter of the Destiny

Fighter of the Destiny is adapted from a novel of the same name from Mao Ni, an author of Tencent Literature. It is a MMORPG mobile game developed based on the Unity engine. It perfectly restores the characters, plots and scenes of the TV series. Chen Changsheng, Xu Yourong and other partners accompany the players to practice, fight against the destiny and change their lives in the game; Qing Gong of four levels in the game help players free to soar the eastern continent. Abundant partners, implements and other game features help players practice and break the predicaments. Furthermore, family, couples and other rich social gameplay allow players to find a good partner to practice together.

Project 5: H-Game

H-Game is an anime IP-based 3D ARPG mobile game based on the Unity engine. It is rich in characters, has a strong sense of fighting and exquisitely reproduces the feelings of adventure in the fantasy world. It satisfies most of the players for experiencing the story and is also integrated with team cooperation, wrestle competition and fighting against people, which greatly enhance the fun of the game.

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Project 6: Mobile Game T

Mobile Game T is a competitive game of top-view team shooting based on Unity3D. The game brings brand-new 5v5PVP gameplay through exquisite levels and hero designs, so that players can experience the hot shooting fun through the top-level view. The game adopts the next-generation art production method to present cartoons and powerful scenes and characters, magnifies the drama experience of some of the core battles, and combine multiple layers of light and shadow effects, striving to provide players with a sense of reality and stunning visual experience.

Project 7: Mobile Game F

Mobile Game F is a competitive and turn-based 3D card games featuring next-generation screen effects and fighting theme developed based on the Unity3D engine. The R&D team has made a deep customization of the Unity3D engine, and developed specifications for art resources and development standards in line with the future high-quality mobile game market based on the project type. The game fully exploits players’ free and fragmented time. It solves tedious repetitive operation behaviors with humanized system design such as "mopping-up" and automatic fighting. It always focuses players’ interest on the core gameplay, allowing the players to obtain the best gaming experience within a limited time.

Project 8: Legend Mobile Game Y

Legend Mobile Game Y is produced by the company's R&D team. The classic combination battle of warriors, wizards and Taoist priests is reproduced in the game, following the grand and free world outlook and iterative update of the technical level, so that the PK is more exciting and the siege is more refreshing, with rich and varied BOSS gameplay and a wide variety of luxury equipment. In addition, more layers of remodeling of screen effects and 3D modeling of characters give more freedom of battle experience, satisfying the warriors' pursuit of the game.

Project 9: Project X - Legend H5

Project X - Legend H5 is an ARPG mobile game independently researched and developed by the Company. The screen effects are based on nostalgic realism. It reproduces the classic gameplay including killing the BOSS and PK of miracle games. The brand new placement design, creative combination battle of warriors, wizards and Taoist priests, and the special three-in-one ring help the players to easily upgrade and enjoy PK.

ii. Browser Game R&D Projects

Project 1: Tu Long Rong Yao

Tu Long Rong Yao is an ARPG browser game with the theme of oriental magical realism. The game offers three kinds of occupations for players to choose from. Each profession has its own unique skills and distinctive style equipment to play its own role in the classic system gameplay, giving players a different gaming experience. The game has exquisite scenes, realistic sound effects, gorgeous skill effects and various forms of monsters and characters, allowing players to enjoy the visual and auditory effects while playing the game.

Project 2: Xue Meng Rong Yao

Xue Meng Rong Yao is a 3D MMOARPG browser game that is authorized by NCSOFT Lineage II of South Korea. It successfully restores the classic gameplay and top-level game screen effects of the original client game. The advanced settings and transition of the professions, creation of the equipment and stunning fights fully guarantee the fighting fun of the original client game.

Project 2: MU X

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

MU X is a miracle-type 3D ARPG browser game that uses advanced self-developed 3D game engine to restore the miraculous images of miracle-type games. While continuing to maintain the classic gameplay of miracle-type games, it also features cross-server free trade, multiple roles and other industry-leading and innovative gameplay.

Investment in research & development

	2017	2016	Changes in proportion
Number of R&D personnel
	1, 461	1,004	45.52%
(person)

Proportion of R&D personnel	54.05%	45.72%	8.33%
Amount of R&D investment
	439,094,559.01	317,670,122.59	38.22%
(yuan)

Proportion of R&D investment
	7.09%	6.05%	1.04%
in operating revenue

Amount of capitalized R&D
	7,663,076.06	7,073,030.69	8.34%
investment (yuan)

Proportion of capitalized R&D
	1.75%	2.23%	-0.48%
investment in R&D investment

Reason for significant changes in the proportion of total R&D investment in operating revenue compared to the previous year

□ Applicable √ Not applicable

Reasons for significant changes in capitalization rate of R&D investment and their rationality

□ Applicable √ Not applicable

5. Cash flow

Unit: yuan

			Year-on-year increase
Item	2017	2016
			(decrease)

Subtotal of cash inflows from	6, 764,509,897.17	5,304,046,606.31
			27. 53%
operating activities

Subtotal of cash outflows from	4, 932,613,968.87	4,252,107,028.48
			16. 00%
operating activities

Net cash flow from operating	1, 831,895,928.30	1,051,939,577.83
			74.14%
activities

Subtotal of cash inflows from	2, 567,482,176.55	872,586,555.02
			194.24%
investment activities

Subtotal of cash outflows from	3, 935,420,406.47	2,390,119,798.33
			64.65%
investment activities

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2017 Annual Report

Net cash flow from investment	-1, 367,938,229.92	-1,517,533,243.31
			-3.98%
activities

Subtotal of cash inflows from	1, 344,262,496.88	449,463,250.61
			199.08%
financing activities

Subtotal of cash outflows from	1,034,016,584.46	280,642,645.46
			268.45%
financing activities

Net cash flow from financing	310,245,912.42	168,820,605.15
			83.77%
activities

Net increase of cash and cash	761,697,925.86	-286,575,995.03
			-365.79%
equivalents

Main factors affecting significant changes year on year in relevant data

√Applicable □ Not applicable

The net cash flow from operating activities increased by 74.14%, mainly due to the increase in operating revenue during the reporting period.
The subtotal of cash inflows from investing activities increased by 194.24%, mainly due to the increase in the amount of redemption of financial products by the company, the sale of equity of Shanghai Zheyuan Culture & Media Co., Ltd. and Tianjin Zilong Jidian Interactive Entertainment Co., Ltd.
The subtotal of cash outflows from investing activities increased by 64.65%, mainly due to the increase in the purchase of financial products by the company and the prepayment for the purchase of office buildings and parking spaces.
The subtotal of cash inflows from financing activities increased by 199.08%, mainly due to the increase in bank loans and share issuance for financing during the reporting period.
The subtotal of cash outflows from financing activities increased by 268.45%, mainly due to the increase in repayment of bank loans due by the Company, increase in payment of dividends, and the payment for acquisition of minority equity during the reporting period.

Reasons for significant discrepancy between the net cash flow from operating activities and net income of the current year in the reporting period.

□ Applicable √ Not applicable

III. Analysis of Non-Principal Business

√ Applicable □ Not applicable

Unit: yuan

		Proportion in Pre-tax
	Amount		Reasons for formation	Sustainable or not
		incomes

			Mainly the investment income
Investment income	256,030,245.92	13.36%		No
			from disposal of equity

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2017 Annual Report

			investment and performance
			compensation
			Mainly the impairment loss
Impairment loss on
	351,295,883.79	18.33%	on goodwill of Shanghai	No
assets
			Mokun .

			Mainly the performance
			compensation recognized for
Non-operating
	403,057,922.86	21.03%	the failure of Shanghai	No
income
			Mokun to fulfil its

			performance commitments
			Mainly the VAT refunds and
Other income	111,259,077.18	5.80%	other government grants	Yes
			related to daily operations

IV. Analysis of Assets and Liabilities

1. Significant changes in composition of assets

Unit: yuan

	December 31,2017	December 31,2017	December 31,2016	December 31,2016	Increase
					and
					decrease
		Proportion in		Proportion in		Description of significant changes
	Amount		Amount		in
		total assets		total assets
					proportio

					n
	1,580,910,931. 98		819,213,006.12			The proportion of monetary funds in
						total assets on December 31, 2017
						increased by 4.43% from that of
Monetary funds		17.26%		12.83%	4.43%	December 31, 2016, mainly due to the
						increase in cash inflow generated by
						the company's operating activities
						during the reporting period.
	884,909,012.7		81564575468			The proportion of accounts receivable
						in total assets on December 31, 2017
						decreased by -3.11% from that of
Accounts						December 31, 2016, mainly due to an
		966%		1277%	311%
receivable	7	.	,,.	.	-.	increase in total assets arising from the

						accelerated collection of accounts
						receivable during the reporting period
						and increase in total assets arising from

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

						increase in other assets such as
						goodwill and other non-current assets.
						.
	101,828,085.3 1		71,481,925.54			No major changes of the proportion of
						inventories in total assets on December
Inventory		1.11%		1.12%	-0.01%
						31, 2017 from that of December 31,

						2016.
Investment real
		0.00%		0.00%	0.00%
estate

	376,972,832.0 8		786,567,839.80			The proportion of long-term equity
						investments in total assets on
						December 31, 2017 decreased by
Long-term equity						-8.20% from that of December 31,
		4.12%		12.32%	-8.20%
investment						2016, mainly due to the inclusion of

						Shanghai Mocun, the original JV of the
						Company, in the consolidation scope
						within the reporting period.
	292,395,887.1 7		271,491,379.50			The proportion of fixed assets in total
						assets on December 31, 2017 decreased
						by -1.06% from that of December 31,
Fixed assets		3.19%		4.25%	-1.06%	2016, mainly due to an increase in total
						assets arising from increase in assets
						such as goodwill and other non-current
						assets.
	50,672,878.42		31,078,391.88			No major changes of the proportion of
Construction in						construction in process in total assets
		0.55%		0.49%	0.06%
process						on December 31, 2017 from that of

						December 31, 2016.
	372,054,500.0 0		372,878,500.00			The proportion of short-term loans in
						total assets on December 31, 2017
						decreased by -1.78% from that of
Short-term loans		4.06%		5.84%	-1.78%	December 31, 2016, mainly due to an
						increase in total assets arising from
						increase in assets such as goodwill and
						other non-current assets.
	310,775,272.0 6					The proportion of newly-added
						long-term loans in total assets
Long-term loans		3.39%		0.00%	3.39%	accounted for 3.39% by December 31,
						2017, mainly due to the new mortgage
						borrowings for purchase of office

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

						space.
						The proportion of the other non-current
						assets in total assets on December 31,
						2017 increased by 2.78% from that of
						December 31, 2016, mainly due to the
Other non-current	592,189,323.9
		6.46%	234,948,261.89	3.68%	2.78%	Company’s recognition of performance
assets	9
						compensation related to the failure of

						Shanghai Mokun, acquired by the
						Company during the reporting period,
						to fulfil its performance commitments.
						The proportion of goodwill in total
						assets on December 31, 2017 increased
	2,540,312,996.		1,579,976,961.			by 2.99% from that of December 31,
Goodwill		27.73%		24.74%	2.99%
	76		87			2016, mainly due to recognition of the

						goodwill generated by the
						consolidation of Shanghai Mokun.
						The proportion of other non-current
						assets in total assets on December 31,
Other non-current	914,263,967.1					2017 increased by 4.96% from that of
		9.98%	320,590,794.35	5.02%	4.96%
assets	6					December 31, 2016, mainly due to

						prepayment for purchase of office
						buildings and parking spaces.
						The proportion of accounts payable in
						total assets on December 31, 2017
						decreased by -2.87% from that of
	741,792,973.3
Accounts payable		8.10%	700,713,118.00	10.97%	-2.87%	December 31, 2016, mainly due to an
	3
						increase in total assets arising from

						increase in assets such as goodwill and
						other non-current assets.
						The proportion of other payables in
						total assets on December 31, 2017
Other payables	61,572,020.26	0.67%	293,166,635.18	4.59%	-3.92%	decreased by -3.92% from that of
						December 31, 2016, mainly due to
						decrease of investment payable.

2. Assets and liabilities measured at fair values

√ Applicable □ Not applicable

Unit: yuan

Item Beginning Current profits Cumulative Impairment Purchase Sales amount in Ending

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2017 Annual Report

	balance	and losses from	changes in fair	accrued in	amount in	current period	balance
		variation in fair	value recorded	current period	current period
		value	in profits and
			gains
Financial assets
3. Financial
							57,541,101.9
assets available	5,445,472.73		-24,337,628.17		80,189,997.98	3,756,740.62
							2
for sale

Total of the							57,541,101.9
	5,445,472.73		-24,337,628.17		80,189,997.98	3,756,740.62
above							2

Is there significant change in the measurement attribute of the Company’s main assets in the reporting period?

□ Yes √ No

3. Limitation of assets rights as of the end of the reporting period

The Company is free from any limitation of assets right as of the end of the reporting period.

V. Analysis of Investments

1. General

√ Applicable □ Not applicable

Investment amount in the reporting period	Investment amount in the same period of
		Variation
(yuan)	the previous year (yuan)

2,401,535,373.99	1,426,943,171.05	68.30%

2. Important equity investment in the reporting period

√ Applicable □ Not applicable

Unit: yuan

		Invest ment method									Investm
Name									Progre
											ent
of the	Princip							Types	ss as of			Involve		Disclos
			Invest	Shareh			Invest			Antici	profit		Disclosu
compan	al				Capital			of	the			ment in		ure
			ment	olding		Partner	ment			pated	and loss		re date
y	busines				source			product	balanc			litigatio		index
			amount	ratio			horizon			income	in the		(if any)
investe	s							s	e sheet			n		(if any)
											current
d in									date
											period

Shangh	Technic	Acquisi	952,74
				68.43%	Share	No	Long	Game	Compl		-24,826,	No
ai	al		9,968.6						td
					payme				ee

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

develop	nt and	industr
ment	private	ial and
and	offerin	comme
services	g	rcial
in the		change
fields of		s`
digital
technol
ogy and
comput
er
science;
comput
er
network
enginee
ring;
comput
er
system
integrat
ion;
corpora
te
marketi
ng
plannin
g; sales
of
digital
product
s,
comput
er
hardwar
e and
softwar
e,
periphe
ral
equipm
ent,

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	commu
	nication
	equipm
	ent,
	commu
	nication
	equipm
	ent, and
	electron
	ic
	product
	s;
	design
	of
	comput
	er
	hardwar
	e and
	softwar
	e; data
	processi
	ng
	services
	; import
	and
	export
	busines
	s of
	goods
	and
	technol
	ogy.
	Technic
	al								Compl
	develop				Share			Game	eted
	ment,				payme			distribu	industr
Jiangsu			254,79
	transfer	Acquisi		--49.00	nt and		Long	tion	ial and	19,165,2
Zhimin			9,990.8			No					No
	and	tion		%	private		term	and	comme	38.82
g			0
	consulti				offerin			operati	rcial

	ng				g			on	change
	services								s
	in the

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

fields of network technol ogy and comput er technol ogy; comput er system integrat ion and network enginee ring services ; animati on design; graphic design and product ion; sales of comput er softwar e and ancillar y equipm ent; operatio n of game product s with informa tion

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	network
	(includi
	ng
	distribu
	tion of
	virtual
	currenc
	y of
	online
	games).
	Cultural
	industry
	investm
	ent on
	the
	Internet
	, film
	and
	televisi
	on
Yangzh
	investm					Shenzh
ou
	ent					en
Fuhai
	busines					Orienta			Compl
Sanqi
	s,					l			eted
Internet
	investm					Fortune		Invest	industr
Culture		Newly
	ent		50,000,		Proprie	Capital	Long	ment	ial and
Investm		establis		64.52%						0.00	No
	manage		000.00		tary	Invest	term	manage	comme
ent		hed
	ment					ment		ment	rcial
Center
	busines					Manag			change
(Limite
	s,					ement			s
d
	investm					Co.,
Partners
	ent					Ltd.
hip)
	consulti

	ng
	busines
	s, asset
	manage
	ment
	services
	, and
	other
	investm

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	ent
	busines
	s
	permitt
	ed by
	laws
	and
	adminis
	trative
	regulati
	ons.
	Technic
	al
	develop
	ment,
	transfer,
	consulti
	ng and
	services												http://w
	in the												ww.cnin
	fields of												fo.com.
	comput												cn/cninf
	er												o-new/d
									Compl
	science												isclosur
									eted
	and							Game					e/fulltex
XD									industr
	technol		100,05					R&D				Februar	t/bulleti
Networ					Proprie		Long		ial and
	ogy and	Other	0,000.0	2.38%		No		and		0.00	No	y 06,	n_detail
k Co.,					tary		term		comme
	network		0					distribu				2017	/true/12
Ltd.									rcial
	technol							tion					030650
									change
	ogy;												44?anno
									s`
	sales of												unceTi

	comput												me=201
	ers,												7-02-06
	softwar												%2007:
	e and												55
	auxiliar
	y
	equipm
	ent
	(except
	for
	special

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

product s for informa tion system security of comput ers); comput er system integrat ion; web design; softwar e develop ment; design , product ion, agency services and publishi ng of various types of advertis ements; investm ent manage ment; busines s consulti ng (except for

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	brokera
	ge);
	clothing
	sales;
	telecom
	municat
	ions
	busines
	s.
	Product
	ion and
	distribu
	tion of
	broadca
	sting,
	film,
	televisi
	on and
	music
	progra
	ms;
	corpora
									Compl
Zhongn	te
									eted
an	image
									industr
Hong	plannin							Culture
			80,189,		Proprie		Long		ial and
Culture	g;	Other		0.52%		No		and		0.00	No
			997.98		tary		term		comme
Group	organiz							media
									rcial
Co.,	ation of
									change
Ltd.	cultural
									s
	and

	artistic
	exchan
	ge
	activitie
	s;
	technol
	ogy
	develop
	ment
	and
	sales of
	mobile

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

phones, comput er hardwar e and softwar e, ancillar y equipm ent, electron ic product s, and commu nication product s; design, product ion, agency services and distribu tion of various types of advertis ements; confere nce and etiquett e services ; investm ent in foreign countrie s using

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

its own funds; equity investm ent; educati onal informa tion consult ation (excludi ng interme diary services for self-fun ded oversea s study); manufa cturing of pipe fittings, steel pipes, mechan ical parts, expansi on joints, prefabri cated and directly buried insulati on pipes;

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	Propriet
	ary
	trading
	and
	agency
	services
	for
	import
	and
	export
	of
	various
	types of
	goods
	and
	technol
	ogies
	(except
	for
	product
	s and
	technol
	ogies
	that the
	state
	restricts
	enterpri
	ses to
	operate
	or are
	prohibit
	ed from
	import
	and
	export)
Guangz	Product								Compl
hou	ion of								eted
								Invest
Haojiah	radio								industr
			5,000,0		Proprie		Long	ment
uo Yiqi	and	Other		20.00%		No			ial and	0.00	No
			00.00		tary		term	manage
Media	televisi								comme
								ment
Partners	on								rcial

hip	progra								change

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2017 Annual Report

(Limite	ms								s`
d	(specifi
Partners	c scope
hip)	of
	busines
	s is
	subject
	to the
	Permit
	for
	Product
	ion and
	Operati
	on of
	Radio
	and
	Televisi
	on
	Progra
	ms);
	advertis
	ing
	busines
	s;
	movie
	and
	televisi
	on
	agency
	services
	;
	organiz
	ation
	and
	plannin
	g
	services
	for
	large-sc
	ale
	events
	(large-s

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

cale events refer to parties, sports games, celebrat ions, art and model contests , art festival s, film festival s, public welfare perform ances, exhibiti ons, etc. Activiti es that are subject to special examin ation and approva l may only be operate d after acquisit ion of relevant approva l; cultural

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

and artistic consulti ng services ; plannin g and creative services ; plannin g of non-pro fit cultural activitie s particip ated by the masses includin g literary perform ances and competi tions; investm ent with the compan y's own capital; investm ent consulti ng services ;

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	busines
	s
	manage
	ment
	consulti
	ng
	services
	;
	Comput
	er
	system
	integrat
	ion;
	researc
	h and
	develop
	ment,
	sales of
	comput
	er
	hardwar
	e and								Compl
Chengd	softwar								eted
u Modu	e and								industr
		Capital
Technol	electron		12,000,		Proprie		Long	Game	ial and	-1,030,0
		increas		20.00%		No					No
ogy	ic		000.00		tary		term	R&D	comme	25.53
		e
Co.,	product								rcial

Ltd.	s;								change
	comput								s
	er
	network
	technol
	ogy
	services
	; basic
	softwar
	e
	services
	;
	applicat
	ion
	softwar

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	e
	services
	; import
	and
	export
	of
	goods
	and
	technol
	ogy;
	leasing
	of
	network
	connect
	ion
	equipm
	ent,
	furnitur
	e and
	househ
	old
	applian
	ces.
	Researc
	h and
	develop
	ment,
	sales of
	comput
									Compl
	er
Chengd									eted
	hardwar
u Mofei									industr
	e and	Capital
Technol			12,000,		Proprie		Long	Game	ial and	-1,037,5
	softwar	increas		20.00%		No					No
ogy			000.00		tary		term	R&D	comme	01.22
	e and	e
Co.,									rcial
	electron
Ltd.									change
	ic
									s
	product

	s;
	services
	,
	develop
	ment,

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	promoti
	on and
	transfer
	of
	comput
	er
	network
	technol
	ogy;
	comput
	er
	system
	integrat
	ion;
	basic
	softwar
	e
	services
	;
	applicat
	ion
	softwar
	e
	services
	;
	technol
	ogy
	import
	and
	export;
	leasing
	of
	furnitur
	e and
	househ
	old
	applian
	ces.
Shangh	Investm							Invest	Compl

ai Fuhai	ent	Newly	3,000,0		Proprie		Long	ment	eted
		bli		3000%		N				419.01	No
Sanqi	manage	estas	00.00	.	tary	o	term	manage	industr
		hd
Asset	ment,	e						ment	ial and

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2017 Annual Report

Manage	investm								comme
ment	ent								rcial
Co.,	consulti								change
Ltd.	ng,								s
	asset
	manage
	ment,
	busines
	s
	manage
	ment
	consulti
	ng,
	busines
	s
	consulti
	ng,
	financia
	l
	consulti
	ng.
	Technic
	al
	develop
	ment,
	transfer,
	consulti
	ng and
									Compl
	services
Najia									eted
	in the
Technol									industr
	fields of	Newly
ogy			40,000,		Proprie		Long	Game	ial and
	digital	establis		7.20%		No				0.00	No
(Shenzh			000.00		tary		term	R&D	comme
	technol	hed
en) Co.,									rcial
	ogy and
Ltd.									change
	comput
									s
	er

	science
	and
	technol
	ogy;
	comput
	er

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

network enginee ring; comput er system integrat ion; design of comput er softwar e and hardwar e; data processi ng services ; marketi ng plannin g; sales of comput er hardwar e and softwar e and auxiliar y equipm ent, telecom municat ions equipm ent and electron ic

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

product s, and import and export of goods and technol ogies. Adverti sing busines s; flat and three-di mensio nal design; web design; researc h and develop ment, technic al mainten ance of social network ing platfor ms; sales of toys, artware (excludi ng gold and silver jewelry

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

), digital electron ic product s, statione ry, plastic product s and hardwar e product s. Design and technic al consulti ng of animati on product s. (Items that are subject to approva l accordi ng to the law may only be carried out after approva l by the relevant

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

departm ent) ^ Product ion of radio and televisi on progra ms; film product ion; manufa cturing and processi ng of toys, artware (excludi ng gold and silver jewelry ), digital electron ic product s, statione ry, plastic product s and hardwar e product s; publicat ion

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	product
	ion and
	distribu
	tion;
	online
	game
	product
	ion.
	Technic
	al
	develop
	ment,
	transfer,
	consulti
	ng and
	services
	in the
	fields of
	network
	technol
	ogy and
Shangh
	comput								Compl
ai
	er								eted
11wan
	technol								industr
Networ		Capital						Game
	ogy;		23,500,		Proprie		Long		ial and	-1,633,1
k		increas		25.00%		No		distribu			No
	comput		000.00		tary		term		comme	40.77
Technol		e						tion
	er								rcial
ogy
	system								change
Co.,
	integrat								s
Ltd.
	ion;

	network
	enginee
	ring;
	animati
	on
	design;
	creative
	services
	;
	graphic
	design
	and

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	product
	ion;
	sales of
	comput
	ers,
	softwar
	e and
	auxiliar
	y
	equipm
	ent;
	import
	and
	export
	of
	goods
	and
	technol
	ogies.
									Compl
									eted
	Supply
Archiac									industr
	of VR	Capital						VR
t			6,858,8		Proprie		Long		ial and
	game	increas		10.00%		No		Game		0.00	No
Interact			00.00		tary		term		comme
	content	e						R&D
ive Ltd.									rcial
	s
									change

									s`
	Technol
	ogy
	services
	of
									Compl
	comput
Chengd									eted
	er
u 91Act									industr
	hardwar	Capital
Technol			11,500,		Proprie		Long	Game	ial and	1,001,26
	e and	increas		20.50%		No					No
ogy			000.00		tary		term	R&D	comme	0.32
	softwar	e
Co.,									rcial
	e; R&D
Ltd.									change
	and
									s`
	sales of

	comput
	er
	hardwar

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

e and softwar e and auxiliar y equipm ent, electron ic product s, office equipm ent and commu nication s equipm ent (excludi ng wireless broadca st televisi on transmi ssion equipm ent and satellite ground receptio n equipm ent); network technol ogy develop ment, technic al

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	consulti
	ng,
	technol
	ogy
	transfer
	;
	multim
	edia
	design;
	animati
	on
	design;
	import
	and
	export
	of
	goods
	and
	technol
	ogies.
	Technic
	al
	develop
	ment,
	technic
	al
	transfer
Shenzh	and								Compl
en	related								eted
Chanyo	informa								industr
		Capital
u	tion		18,000,		Proprie		Long	Game	ial and
		increas		2.78%		No				0.00	No
Technol	consult		000.00		tary		term	R&D	comme
		e
ogy	ation of								rcial

Co.,	online								change
Ltd.	games								s`
	and
	comput
	er
	softwar
	e;
	design
	of web

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

pages; domesti c trade (except for the above items that are subject to examin ation and approva l before registrat ion accordi ng to the laws and regulati ons as well as decisio ns of the State Council ); import and export busines s (except for items that are prohibit ed by laws,

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

adminis trative regulati ons and State Council . The restricte d items may be operate d after acquisit ion of relevant approva l); plannin g of cultural activitie s (excludi ng restricte d items); advertis ing busines s (The items that are subject to examin ation and approva l of advertis ing

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

busines s accordi ng to laws, adminis trative regulati ons and decisio ns of the State Council may be operate d upon acquisit ion of relevant approva l.) ^ Informa tion service busines s (Interne t informa tion services only); operatio n of game product s with Internet (includi ng distribu

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

	tion of
	virtual
	currenc
	y of
	online
	games).
	Design,
	develop
	ment
	and
	sales of
	comput
	er
	hardwar
	e and
	softwar
	e;
	comput
	er
	system
Chengd	integrat								Compl
u	ion;								eted
Pengwa	network								industr
		Capital
n	enginee		33,021,		Proprie		Long	Game	ial and	2,076,42
		increas		22.34%		No					No
Technol	ring		823.48		tary		term	R&D	comme	6.17
		e
ogy	design								rcial

Co.,	and								change
Ltd.	constru								s`
	ction
	(operati
	ng with
	qualific
	ations
	and
	licenses
	); web
	design;
	technic
	al
	support
	services
	,

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

==> picture [480 x 398] intentionally omitted <==

----- Start of picture text -----

technic
al
consulti
ng,
technic
al
services
and
technol
ogy
promoti
on for
comput
ers;
digital
content
services
;
animati
on
design.
1,
602,67 -6,283,7
Total -- -- -- -- -- -- -- -- 0.00 -- -- --
0,580.9 75.68
5
----- End of picture text -----

Important non-equity investment in the reporting period
√ Applicable □ Not applicable

Unit: yuan

	Investme									Reasons
					Cumulati
										for
					ve				Cumulati
										failure to
				Investme	investme				ve
		Investme	Industrie							achieve
				nt	nt				returns
		nt in	s of the					Anticipat		schedule	Disclosu	Disclosu
				amount	amount	Capital	Project		as of the
Projects	nt	fixed	investme					ed		d	re date	re index
				in this	as of the	source	progress		end of
	method	assets or	nt					income		progress	(if any)	(if any)
				reporting	end of				this
		not	projects							and
				period	this				reporting
										anticipat
					reporting				period
										ed
					period
										income

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2017 Annual Report

==> picture [480 x 385] intentionally omitted <==

----- Start of picture text -----

12/F,
14/F,
17/F to
23/F of
Office http://w
Building ww.cninf
and -3/F o.com.cn
and -4/F /cninfo-n
of ew/discl
undergro osure/szs
Commer
und 795,864, 795,864, Mortgag April 26, e_sme/b
Other Yes cial real 0.00 0.00 N/A
parking 793.02 793.02 e loan 2017 ulletin_d
estate
spaces of etail/true
Zhongro /120338
ng Plaza, 7463?an
No. 666 nounceTi
Huangpu me=201
Road 7-04-26
Middle,
Tianhe,
Guangzh
ou
795,864, 795,864,
Total -- -- -- -- -- 0.00 0.00 -- -- --
793.02 793.02
----- End of picture text -----

4. Financial assets measured at fair value

√ Applicable □ Not applicable

Unit: yuan

		Profits and	Cumulative		Sales
				Purchase
	Initial	losses from	changes in fair		amount in	Cumulative
				amount in the			Ending	Capital
Category of assets	investment	change in fair	value recorded		the	returns on
				reporting			balance	source
	cost	value in the	in profits and		reporting	investment
				period
		current period	gains		period

	81,100,692	0.00			3,756,740.6	0.00	57,541,101.
Shares			-23,559,590.80	80,189,997.98				Proprietary
	.72				2		92

	81,100,692	0.00			3,756,740.6	0.00	57,541,101.
Total			-23,559,590.80	80,189,997.98				--
	.72				2		92

2017 Annual Report

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5. Use of raised funds

√ Applicable □ Not applicable

(1) Overall use of raised funds

√ Applicable □ Not applicable

Unit: 10,000 yuan

					Total
							Proportion
			Total		amount of
						Cumulativ	of		Purpose
			amount of		raised fund			Total		Amount of
		Total		Cumulativ		e amount	cumulative		and
Year of			raised		with			amount of		raised fund
	Fundraisin	amount of		e amount		of raised	amount of		direction
fundraisin			funds used		purposes			raised		s idle for
	g mode	raised		of raised		fund with	raised fund		of raised
g			in the		changed in			funds not		over two
		funds		funds used		purposes	with		funds not
			current		the			used		years
						changed	purposes		used
			period		reporting
							changed
					period

	Private
2017		45,596.25	45,596.25	45,596.25	0	0	0.00%	0	--	0
	offering

Total -- 45,596.2 5 45,596.2 5 45,596.2 5 0 0 0.00% 0 -- 0
Overall use of raised funds
With the Reply of China Securities Regulatory Commission on Approving the Share Issuance of Wuhu Shunrong Sanqi Interactive
Entertainment Network Technology Co., Ltd. to Yang Dongmai etc. for Purchasing Assets and Raising Supporting Funds (Zheng
Jian Permit [2017] No. 579), Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. offered to 2 specific
targets including Shenzhen Guodiao Investment M&A Equity Investment Fund Partnership (Limited Partnership) and Shenzhen
Yidun Media Investment Fund Partnership (Limited Partnership) 17,866,869 RMB common shares (A shares) of non-public
issuance shares (with a nominal value of RMB 1 per share). The issue price was RMB 25.52 per share and the total funds raised
were RMB 455,962,496.88. After deduction of the issuance costs of RMB 31,313,316.06 (including tax) and the VAT input tax of
RMB 1,768,867.9. The net amount of funds was RMB 426,418,048.75. As of June 30, 2017, the supporting funds raised by the
above issuance had been put in place and examined by Pan-China Certified Public Accountants (Special General Partnership). It
issued the Tianjian Yan [2017] No. 3-64 Capital Verification Report on July 1, 2017. The funds raised were mainly used for the
cash consideration of RMB 422,642,500.00 for purchasing 68.43% of the equity of Shanghai Mokun and 49.00% of the equity of
Jiangsu Zhiming and RMB 33,320,000.00 for related intermediary agency expenses of the transaction.

(2) Projects to be invested in with raised funds

√ Applicable □ Not applicable

Unit: 10,000 yuan

Projects to be invested Change Total Total Investme Cumulati Investme Date Benefit in Whether Significa

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

and investment	of project	amount	investme	nt	ve	nt	when the	this	the	nt change
direction of excess	or not	of raised	nt after	amount	investme	progress	project	reporting	expected	in
funds	(includin	fund to	adjustme	in this	nt	by the	reaches	period	benefit is	feasibility
	g partial	be	nt (1)	reporting	amount	end of the	the		reached	of the
	change)	invested		period	as of the	current	expected		or not	project or
					end of the	period (3)	serviceab			not
					current	＝(2)/(1)	le
					period (2)		condition
							s
Projects to be invested in
Cash consideration for
purchasing 68.43% of							May 31,
	No	33,346.25	33,346.25	28,346.25	33,346.25	100.00%		-2,482.65	No	No
the equity of Shanghai							2017

Mokun
Cash consideration for
purchasing 49.00% of						--100.00	May 31,
	-- No	8,918	8,918	8,918	8,918			1,916.52	--Yes	--No
the equity of Jiangsu						%	2017

Zhiming
Payment for related
intermediary agency							June 30,
	No	3,332	3,332	3,332	3,332	100.00%		0	Yes	No
expenses of the							2017

transaction
Subtotal of the projects
	--	45,596.25	45,596.25	40,596.25	45,596.25	--	--		--	--
to be invested in

Subtotal of projects to
	--					--	--	-566.13	--	--
be invested in

Investment direction of	excess funds
No
Repayment of bank
	--	0	0	0	0	0.00%	--	--	--	--
loan (if any)

Supplement of current
	--	0	0	0	0	0.00%	--	--	--	--
funds (if any)

Subtotal of investment
direction of excess	--	0	0	0	0	--	--	0	--	--
funds
Total	--	45,596.25	45,596.25	40,596.25	45,596.25	--	--	-566.13	--	--
Failure to meet	Shanghai Mokun Digital Technology Co., Ltd., a subsidiary of the Company, failed to fulfil its
scheduled progress or	performance commitments during the reporting period, the main reason of which was that its product

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

anticipated income and	launch schedule was postponed. It has successfully launched its main products and achieved impressive
reasons (specific	billing as of the date of this report, which was expected to have a positive effect on its future performance.
projects)
Description of
significant changes in	No
project feasibility
Amount, purpose, and	N/A
progress of excess
funds
Change in place of	N/A
implementation of
projects invested in

with raised funds
Adjustment of	N/A
implementation
method of projects

invested in with raised
funds
	Applicable
	In order to ensure the successful implementation of the Company's restructuring before the raised funds arrived, the Company had invested in the fundraising projects at the earlier stage with self-raised funds according to the actual situation, including the payment of cash consideration of RMB 50 million and related intermediary agency expenses of RMB 4.466 million for this transaction, totaling RMB 54.466 million. After the raised funds were in place, the 7th meeting of the 4th Board of Directors of the Company reviewed and approved the Proposal on Replacing the Up-Front Funds Invested in the Fundraising Project with the Funds Raised, agreeing that the company would use the raised funds of RMB54.466 million to replace the self-raised funds invested in advance.
Up-front cost and
replacement of projects
invested in with raised
funds

Temporary supplement	N/A
of current funds with
idle raised funds
Amount of surplus	N/A
raised funds in project
implementation and the
reason
Purpose and direction
	The funds raised have all been used up during the reporting period without surplus.
of unused raised funds

Problems or other
situations in use and	No
disclosure of raised

2017 Annual Report

funds

==> picture [122 x 30] intentionally omitted <==

(3) Change in projects invested in with raised funds

□ Applicable √ Not applicable

There is no change in projects invested in with raised funds in the reporting period.

VI. Sales of Major Assets and Equity

1. Sales of major assets

□ Applicable √ Not applicable

The Company did not sell any major asset in the reporting period.

2. Sales of major equity

√ Applicable □ Not applicable

				Net
				income
				realized							Implem
				by the							entation
						Proporti
				equity							of the
						on of
				for the							sales as
						net
				listed							planned
						income				Transfer
				compan							or not,
					Impact	from	Pricing	Related-	Relation	of the
				y from							and
			Price		of sales	equity	principl	party	ship	equity			Disclos
Counter	Equity	Date of		the							explain	Disclos
			(10,000		on the	sales in	e for	transacti	with the	involve			ure
party	sold	sales		beginni							the	ure date
			yuan)		Compan	Pre-tax	equity	on or	counter	d in			index
				ng of							reasons
					y	income	sales	not	party	whole
				the							and
						of the				or not
				current							measure
						listed
				period							s taken
						compan
				to the							by the
						y
				date of							compan

				sales							y if not.
				(10,000
				yuan)
Zhongn	Shangha				No
		March					Market		Non-rel
an Hong	i Aurora				effect						As
		31,	13,365	29.3		5.36%	fair	No	ated	Yes
Culture	Networ				on the						planned
		2017					value		parties
Group	k				Compan

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

Co.,	Technol				y's
Ltd.	ogy Co.,				business
	Ltd.				;
					increase
					its
					current
					net
					income
					No
					effect
	Shangha
					on the
Tianjin	i
					Compan
Kale	Haoyua
					y's
Interacti	n	January					Market		Non-rel			January
					business						As
ve	Culture	13,	19,500	0		4.49%	fair	No	ated	Yes		05,
					;						planned
Technol	&	2017					value		parties			2017
					increase
ogy Co.,	Media
					its
Ltd.	Co.,
					current
	Ltd.
					net

					income
					No
					effect
	Tianjin
					on the
	Zilong
Huaren					Compan
	Qidian
Culture					y's
	Interacti	August					Market		Non-rel
Limited					business						As
	ve	21,	5,500	0		1.00%	fair	No	ated	Yes
Liability					;						planned
	Entertai	2017					value		parties
Compan					increase
	nment
y					its
	Co.,
					current
	Ltd.
					net

					income

VII. Analysis of Main Controlling and Shareholding Companies

√ Applicable □ Not applicable

Main subsidiaries and shareholding companies contributing to more than 10% of the net income of the Company

Unit: yuan

Company	Type of the	Principal	Registered		Operating	Operating
				Net assets			Net income
name:	Company	business	capital		revenue	profit

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

==> picture [481 x 84] intentionally omitted <==

----- Start of picture text -----

Shanghai
Sanqi 1,
10,000,000.0 6,080,611,03 3,321,683,31 5,619,311,64 1,514,053,82
Interactive Subsidiary On-line game 575,879,628.
0 8.82 7.25 4.89 6.46
Entertainmen 50
t
----- End of picture text -----

Subsidiaries acquired and disposed in the reporting period

√ Applicable □ Not applicable

	Methods of subsidiary acquisition and	Impact on overall production, operation,
Company name:
	disposal in the reporting period	and performance

		Shanghai Mokun’s ability of high-quality
		game R&D effectively enhances the R&D
Shanghai Mokun	Acquisition
		ability of the listed company and improves

		users' willingness to pay.

Description of main controlling and shareholding companies

VIII. Structured Entities Controlled by the Company

□ Applicable √ Not applicable

IX. Prospect for Future Development of the Company

i. Development Strategy and Business Plan of the Company

1. Development Strategy

The Company will adhere to the development strategy of “platformization, globalization and pan-entertainment”, uphold the marathon-type entrepreneurial spirit, and lead the Company to keep catching and surpassing the industry leader under the trend that the global online game industry still maintains growth. The Company will create brand barriers by leveraging team strengths, differentiated competitive advantages of mobile game publishing business, leading advantages in the browser game industry and R&D advantages of superior games, and will enhance operating performance through endogenous and outreach development. Looking into the future, the Company will further develop its IP strategy and customize more premium games with high-quality IPs to become the world's leading developer, operator and distributor of mobile games and browser games, and will continue to increase its presence in the interactive entertainment industry and improve its interactive entertainment ecosystem.

2. Business Plan

(1) Further Promote the “ARPG+ Multi-Category” Product Strategy of Mobile Game

The achievements of games such as Yong Heng Ji Yuan, Swords of Archangels H5, Xian Ling Jue Xing and King of Avalon in R&D and publishing business verified the "ARPG+ multi-category" product strategy of the Company for mobile game R&D and publishing and the Company's capacities of purchase and conversion of traffic and channel cooperation. Accordingly, the Company will further strengthen its R&D and publishing competitive advantages in mobile games and make full use of its abundant product reserves. It will make greater efforts to expand the leading edge in superior ARPG game products with Mobile Game Chuan Qi Ba

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Ye, Swords of Archangels H5 and Yong Heng Ji Yuan etc. Meanwhile, it will occupy a larger market share by publishing multi-category mobile games such as Fighter of the Destiny, Xian Ling Jue Xing, Ling Yu, Sword and Rebirth and other ancient fantasy games, card games, female-oriented games, and games adapted from cartoons and animations.

(2) Adequate Browser Game Product Reserves and Continuous Elaborate Operation on High-Quality Products

The Company will conduct elaborate operation on high-quality browser games in 2018. The main products that will be released in 2018 include Rise of Taichi, One Piece Online, A Step into the Past, The Legendary Swordsman and Xue Mai and self-developed Tu Long Rong Yao, Xue Meng Rong Yao and MU X.

(3) In-Depth Localization and Operation on High-Quality Products to Increase Overseas Market Share

The Company will expand the countries and regions covered by the 37GAMES platform to dig deep into the European and American market using English, Asia market, as well as the markets using minor languages such as German, French and Turkish etc. The Company will further leverage its first-mover advantage in overseas markets and rely on advanced game R&D capabilities and localization capabilities to expand its overseas business scale and increase its overseas market share.

(4) Strengthen R&D of Mobile Games and Browser Games and Consolidate Brand Barriers of Self-Developed Games

The Company will continue to consolidate its R&D capabilities in mobile games and browser games, enhance the performance of its product engines, improve the artistic quality of its products, and actively carry out design innovations in 2018. Meanwhile, it will conduct multi-platform and multi-gameplay development for the Company's self-developed premium games such as Chuan Qi Ba Ye, Swords of Archangels and Yong Heng Ji Yuan etc. to enhance the core user stickiness, accumulate reputation and further consolidate brand barriers. In addition, the Company will further recruit excellent R&D talents, expand R&D teams and further enrich the product lines.

(5) Strengthen Cooperation with R&D Manufacturers and Media Channels, and Consolidate the Company’s Bargaining Power in the Industry Chain

The Company will continue to strengthen cooperation with R&D manufacturers and media channels, and expand the Company’s market share through benign cooperation in 2018, thereby further enhancing its bargaining power in the industry chain.

(6) Maintain Synergy among Business Segments and Enhance Complementarity between Endogenous Development and Outreach Development

While maintaining the rapid growth of endogenous development, the Company will focus on its development strategy and plans and actively accelerate the Company's layout of the upstream and downstream of the industrial chain through investment, equity participation, mergers and acquisitions and other means, including media channels, game videos, andfilm and TV, animation and other interactive entertainment industries, to maximize the value of the platform users and the Company.

(7) Continue to Implement the IP Strategy and Reserve Premium Contents Customized and Developed based on IPs

Based on the pan-entertainment layout such as animation, film and TV, the Company actively seeks ways including investment, mergers and acquisitions to increases investment in animation, VR and other fields to carry out the layout of pan-entertainment industries. Relying on IP, it will develop and publish premium pan-entertainment contents of new areas. In particular, it will soon introduce finished product contents of the animation industry to further expand the Company's brand strength in the game market.

iii. Future Challenges Faced by the Company and Countermeasures

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

1. Market Competition Risks and Countermeasures

The online game industry has formed fierce competition in products and market channels. With the development of various entertainment industries and the Internet industry, online game users are also upgrading their requirements of products. If market competition is further intensified, it will exert pressure on the Company's development from the aspects of products and market channels.

With respect to countermeasures, the Company needs to maintain its existing brand advantages and bargaining power and accelerate the integration of upstream and downstream of the industry chain, while leveraging its first-mover advantage in overseas game markets to accelerate the expansion of overseas business scale. In addition, it should constantly introduce more exquisite mobile games and browser games by virtue of continuously successful product R&D experience and accumulation and through targeted development with abundant IP resources, so as to achieve continuous connection with users through ceaseless boutique games and maintain improvement of core competitiveness in the market.

2. Operational Risks and Countermeasures

The online game industry has the characteristics of fast product replacement, limited life cycle and fast change of user preferences. Game-related companies need to increase investment in technology development and keep up with industry technology trends. If the game industry's technology, products and other aspects undergo major changes, but the Company fails to keep up with the pace of industrial technology development, resulting in failure of products to meet market demand, significant negative impact may generate on user experience of the original business and brand image etc., thereby affecting the Company's operating performance.

With respect to countermeasures, the Company needs to increase its investment in product R&D and should, at the same time, continue outreach development and deploy the upstream of the industrial chain through investment, equity participation, mergers and acquisitions.

3. Loss of Core Personnel and Countermeasures

A stable and high-quality game development talent team is an important guarantee for the Company, as a light-asset online game company, to maintain its leading edge in technology. If the Company cannot effectively maintain the incentive mechanism of the core personnel and constantly improve it in accordance with changes in the market environment, it will affect the enthusiasm and creativity of the core personnel, and even result in the loss of core personnel. If the Company cannot externally introduce technical and operational talents that are closely related to the Company's development and retain them, the Company's business operation, development space and profitability levels will be adversely affected.

In response, the Company attaches great importance to training and seeking of professional talents. It has built a platform-based talent management mechanism in an innovative manner to inspire outstanding game producers through high project awards while giving them great space for R&D and freedom of creation. The Company maintains the stability of core technology and management personnel by signing agreements with key personnel, creating a sound working environment and establishing a good corporate culture. At the same time, the Company has always paid attention to the training and increase of sense of belonging of employees, especially the core employees and managers, to help them build a sense of ownership of the Company and increase their loyalty to the Company.

2017 Annual Report

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Section V Financial Reports

I. Financial Statements

Numbers in the financial statements and notes thereto are expressed in Renminbi yuan.

Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. CONSOLIDATED BALANCE SHEET

31 December 2017

(Expressed in Renminbi yuan)

Item	Closing balance	Opening balance
Current assets:
Monetary funds	1,580,910,931.98	819,213,006.12
Notes receivable	55,340,000.00	94,638,841.21
Accounts receivable	884,909,012.77	815,645,754.68
Advance payments	283,516,789.29	291,963,008.64
Interests receivable	582,592.17
Other receivables	388,111,919.85	122,662,618.02
Inventory	101,828,085.31	71,481,925.54
Held-for-sale assets	75,066,714.34
Other current assets	592,189,323.99	234,948,261.89
Total current assets	3,962,455,369.70	2,450,553,416.10
Non-current assets:
Available-for-sale financial assets	882,481,586.86	785,068,643.78
Long-term equity investment	376,972,832.08	786,567,839.80
Fixed assets	292,395,887.17	271,491,379.50
Construction in progress	50,672,878.42	31,078,391.88
Intangible assets	44,898,112.29	43,864,656.11
Development expenditure	4,070,272.43	8,689,105.40
Goodwill	2,540,312,996.76	1,579,976,961.87

2017 Annual Report

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Long-term deferred expenses	79,803,089.59	101,966,657.36
Deferred income tax assets	11,810,692.92	6,368,165.19
Other non-current assets	914,263,967.16	320,590,794.35
Total non-current assets	5,197,682,315.68	3,935,662,595.24
Total assets	9,160,137,685.38	6,386,216,011.34
Current liabilities:
Short-term loans	372,054,500.00	372,878,500.00
Notes payable		17,414,395.42
Accounts payable	741,792,973.33	700,713,118.00
Payments received in advance	84,886,734.84	59,679,946.95
Payroll payable	113,480,021.50	81,943,285.80
Taxes payable	58,281,315.47	53,798,244.69
Interests payable	390,533.38	411,567.28
Other payables	61,572,020.26	293,166,635.18
Non-current liabilities due within
	28,117,893.57
one year

Other current liabilities	57,738,251.19	44,259,562.28
Total current liabilities	1,518,314,243.54	1,624,265,255.60
Non-current liabilities:
Long-term loans	310,775,272.06
Bonds payable	27,163,239.26	23,757,428.88
Deferred income	17,226,474.44	9,039,043.38
Total non-current liabilities	355,164,985.76	32,796,472.26
Total liabilities	1,873,479,229.30	1,657,061,727.86
Owner’s equity:
Share capital	2,148,110,844.00	2,084,794,788.00
Other equity instruments	1,947,846.62	1,947,846.62
Capital reserves	1,972,639,580.66	934,484,599.29
Other comprehensive incomes	-25,087,592.30	-4,618,535.07
Surplus reserves	99,561,946.09	93,488,947.26
Undistributed profit	2,819,597,585.78	1,413,567,635.94
Total owner’s equity attributable to
	7,016,770,210.85	4,523,665,282.04
parent company

Minority interests	269,888,245.23	205,489,001.44

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	2017 Annual Report	2017 Annual Report	2017 Annual Report
Total owner's equity	7,286,658,456.08	4,729,154,283.48
Total liabilities and owner's equity	9,160,137,685.38	6,386,216,011.34

Legal representative: Li Weiwei Person in charge of accounting: Ye Wei Person in charge of the accounting Department: Ye Wei

BALANCE SHEET OF THE PARENT COMPANY

(Expressed in Renminbi yuan)

Item	Closing balance	Opening balance
Current assets:
Monetary capital	5,437,518.91	15,360,874.41
Advance payments		1,886,792.45
Dividends receivable		500,000,000.00
Other receivables	1,655,547,345.04	49,248,886.95
Assets held for sale	69,996,897.11
Other current assets	403,527,827.28	299,277.50
Total current assets	2,134,509,588.34	566,795,831.31
Non-current assets:
Available-for-sale financial assets	60,000,000.00	189,996,897.11
Long-term equity investment	5,754,424,925.15	5,586,179,960.15
Deferred income tax assets	3,334,186.37
Other non-current assets	50,000,000.00	298,500,000.00
Total non-current assets	5,867,759,111.52	6,074,676,857.26
Total assets	8,002,268,699.86	6,641,472,688.57
Current liabilities:
Short-term loans	369,000,000.00	370,000,000.00
Payroll payable	539,632.89	208,649.67
Taxes payable	17,271,522.21	133,574.94
Interests payable	390,533.38	411,567.28
Other payables	565,086,466.06	285,250,797.14
Other current liabilities	936,428.02
Total current liabilities	953,224,582.56	656,004,589.03
Non-current liabilities:
Total liabilities	953,224,582.56	656,004,589.03

2017 Annual Report

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Owner’s equity:
Share capital	2,148,110,844.00	2,084,794,788.00
Capital reserves	4,401,934,248.25	3,253,924,796.01
Surplus reserves	99,561,946.09	93,488,947.26
Undistributed profit	399,437,078.96	553,259,568.27
Total owner's equity	7,049,044,117.30	5,985,468,099.54
Total liabilities and owner's equity	8,002,268,699.86	6,641,472,688.57

CONSOLIDATED INCOME STATEMENT

(Expressed in Renminbi yuan)

Item	Accruals in the current period	Accruals in the prior period
I. Total operating revenue	6,188,828,116.75	5,247,893,728.73
Including: operating revenue	6,188,828,116.75	5,247,893,728.73
II. Total operating costs	5,039,424,012.89	4,137,677,116.62
Including: operating costs	1,948,197,239.76	1,941,286,776.66
Taxes and surcharges	26,508,097.89	29,714,525.49
Operating expenses	1,908,207,466.32	1,607,745,221.19
General and administrative
	776,659,541.86	514,933,615.17
expenses

Financial expenses	28,555,783.27	-5,460,395.61
Impairment loss on assets	351,295,883.79	49,457,373.72
Investment income
	256,030,245.92	54,668,504.76
(represented in "-" for loss)

Including: investment income
from associated enterprise and joint	-11,139,329.07	33,654,987.57
venture
Gains and losses on asset
	1,055,284.09	1,316,063.68
disposal (represented in “-” for loss)

Other incomes	111,259,077.18
III. Operating profit (represented in "-"
	1,517,748,711.05	1,166,201,180.55
for loss)

Add: Non-operating income	403,057,922.86	162,018,871.61
Less: Non-operating expenditures	4,187,038.90	9,448,442.14
IV. Pre-tax profit (represented in "-" for
	1,916,619,595.01	1,318,771,610.02
total loss)

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2017 Annual Report

Less: Income tax expense	80,119,872.98	102,102,999.99
V. Net profit (represented in “-” for net
	1,836,499,722.03	1,216,668,610.03
loss)

(I) Net profit of continued
operations (represented in “-” for net	1,836,499,722.03	1,216,668,610.03
loss)
Net income attributable to owners
	1,620,582,427.47	1,070,162,324.07
of parent company

Minority interest income	215,917,294.56	146,506,285.96
VI. Other net comprehensive incomes
	-19,783,336.38	-14,243,985.29
after tax

Other comprehensive incomes after
tax attributable to owners of parent	-20,469,057.23	-8,895,261.69
company
(II) Other comprehensive incomes
that can be reclassified as profit or loss in	-20,469,057.23	-8,895,261.69
the future
2. Profit and loss on
changes in fair value of available-for-sale	-21,799,686.38	-7,908,783.53
financial assets
5. Converted difference in
	1,330,629.15	-986,478.16
foreign currency statements

Other comprehensive incomes after
	685,720.85	-5,348,723.60
tax attributable to minority shareholders

VII. Total comprehensive incomes	1,816,716,385.65	1,202,424,624.74
Total comprehensive income
	1,600,113,370.24	1,061,267,062.38
attributable to owners of parent company

Total comprehensive incomes
	216,603,015.41	141,157,562.36
attributable to minority shareholders

VIIII. Earnings per share:
(1) Basic earnings per share	0.76	0.51
(2) Diluted earnings per share	0.76	0.51

In case of business combination under common control in the current period, the combined party realized a net profit of RMB 0.00 yuan prior to the combination and it realized a net profit of RMB 0.00 yuan in the prior period.

Legal representative: Li Weiwei Person in charge of accounting: Ye Wei Person in charge of the accounting department: Ye Wei

2017 Annual Report

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INCOME STATEMENT OF PARENT COMPANY

(Expressed in Renminbi yuan)

Item	Accruals in the current period	Accruals in the prior period
I. Operating revenue	751,646.53	124,856,929.57
Less: Operating cost	31,646.53	123,665,864.69
Taxes and surcharges	1,349,357.00	46,078.86
Operating expenses		491,661.09
General and administrative
	17,159,274.42	10,613,763.22
expenses

Financial expenses	4,144,539.06	8,035,038.84
Impairment loss on assets	10,753,616.43	2,581,848.90
Investment income
	-294,252,732.59	607,782,394.69
(represented in "-" for loss)

Including: investment
income from associated enterprise and	-1,555,025.80	-940,529.89
joint venture
Other incomes	156,969.20
II. Business profit (represented in “-”
	-326,782,550.30	587,205,068.66
for loss )

Add: Non-operating revenue	401,364,984.06	178,189.52
Less: Non-operating expenditures		2,000,000.00
III. Pre-tax profit (represented in “-” for
	74,582,433.76	585,383,258.18
total loss)

Less: Income tax expense	13,852,445.44	1,019,059.92
IV. Net profit (represented in “-” for net
	60,729,988.32	584,364,198.26
loss)

(I) Net profit of continued
operations (represented in “-” for net	60,729,988.32	584,364,198.26
loss)
VI. Total comprehensive incomes	60,729,988.32	584,364,198.26
VII. Earnings per share:

CONSOLIDATED CASH FLOW STATEMENT

(Expressed in Renminbi yuan)

Item	Accruals in the current period	Accruals in the prior period
I. Cash flows from operating activities:

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Cash received from the sales of
	6,627,148,304.92	5,123,965,167.21
goods or rendering services

Cash received from tax refunds	81,575,068.42	92,618,857.31
Other cash received relating to
	55,786,523.83	87,462,581.79
operating activities

Sub-total of cash inflow from operating
	6,764,509,897.17	5,304,046,606.31
activities

Cash paid for goods acquired and
	1,918,243,942.60	1,847,381,195.05
services received

Cash paid to and on behalf of
	597,184,300.24	401,186,834.55
employees

Taxes paid	363,818,448.62	288,953,619.88
Other cash paid relating to
	2,053,367,277.41	1,714,585,379.00
operating activities

Sub-total of cash outflow from
	4,932,613,968.87	4,252,107,028.48
operating activities

Net cash flows from operating activities	1,831,895,928.30	1,051,939,577.83
II. Cash flows from investing activities
Cash received from withdrawal of
	304,550,800.00	33,610,847.31
investment

Cash received from return on
	25,999,566.33	11,350,004.68
investment

Net cash received from disposal
of fixed assets, intangible assets and	8,909,245.08	13,257,703.03
other long-term assets
Other cash received relating to
	2,228,022,565.14	814,368,000.00
investing activities

Sub-total of cash inflow from investing
	2,567,482,176.55	872,586,555.02
activities

Cash paid for purchase of fixed
assets, intangible assets and other	1,018,821,190.70	209,226,627.28
long-term assets
Cash paid for investment	344,220,277.93	1,225,093,171.05
Net cash paid for acquisition of
	450,009,937.84
subsidiaries and other business entities

Other cash paid relating to
	2,122,369,000.00	955,800,000.00
investing activities

2017 Annual Report

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Sub-total of cash outflow from
	3,935,420,406.47	2,390,119,798.33
investing activities

Net cash flows from investing activities	-1,367,938,229.92	-1,517,533,243.31
III. Cash flows from financing

activities:

Cash received from absorbing
	433,862,496.88	16,002,903.80
investment

Including: cash received from
subsidiary investment from minority	4,900,000.00
shareholders
Cash received from borrowings	910,400,000.00	406,600,775.46
Cash received from issuing bond		26,859,571.35
Sub-total of cash inflow from financing
	1,344,262,496.88	449,463,250.61
activities

Cash paid for repayment of debts	572,506,834.37	65,116,982.42
Cash paid for distribution of
	368,016,434.03	215,525,663.04
dividends or profits or interest payment

Including: dividend and profit
paid to minority shareholders by	128,000,000.00	100,931,000.00
subsidiaries
Other cash paid relating to
	93,493,316.06
financing activities

Sub-total of cash outflow from
	1,034,016,584.46	280,642,645.46
financing activities

Net cash flows from financing activities	310,245,912.42	168,820,605.15
IV. Effect of changes in foreign
exchange rate on cash and cash	-12,505,684.94	10,197,065.30
equivalents
V. Net increase in cash and cash
	761,697,925.86	-286,575,995.03
equivalents

Add: Opening balance of cash
	819,213,006.12	1,105,789,001.15
and cash equivalents

VI. Closing balance of cash and cash
	1,580,910,931.98	819,213,006.12
equivalents

CASH FLOW STATEMENT OF PARENT COMPANY

(Expressed in Renminbi yuan)

Item Accruals in the current period Accruals in the prior period

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

I. Cash flows from operating activities:
Cash received from the sales of
	831,026.44	56,370,508.35
goods or rendering services

Other cash received relating to
	1,173,262,433.61	6,684,417.01
operating activities

Sub-total of cash inflow from operating
	1,174,093,460.05	63,054,925.36
activities

Cash paid for goods acquired and
	31,646.53	60,632,762.92
services received

Cash paid to and on behalf of
	3,096,452.80	6,895,773.15
employees

Taxes paid	1,484,543.09	2,105,246.44
Other cash paid relating to
	1,204,811,508.30	106,063,884.41
operating activities

Sub-total of cash outflow from
	1,209,424,150.72	175,697,666.92
operating activities

Net cash flows from operating activities	-35,330,690.67	-112,642,741.56
II. Cash flows from investing activities
Cash received from withdrawal of
	195,000,000.00
investment

Cash received from return on
	1,582,261.90	108,722,924.58
investment

Other cash received relating to
	6,000,000.00
investing activities

Sub-total of cash inflow from investing
	202,582,261.90	108,722,924.58
activities

Cash paid for investment		474,642,388.20
Net cash paid for acquisition of
	372,642,500.00
subsidiaries and other business entities

Other cash paid relating to
		51,500,000.00
investing activities

Sub-total of cash outflow from
	372,642,500.00	526,142,388.20
investing activities

Net cash flows from investing activities	-170,060,238.10	-417,419,463.62
III. Cash flows from financing

activities:

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Cash received from absorbing
	428,962,496.88
investment

Cash received from borrowings	560,000,000.00	370,000,000.00
Sub-total of cash inflow from financing
	988,962,496.88	370,000,000.00
activities

Cash paid for repayment of debts	561,000,000.00
Cash paid for distribution of
	228,181,607.55	111,921,553.41
dividends or profits or interest payment

Other cash paid relating to
	4,313,316.06
financing activities

Sub-total of cash outflow from
	793,494,923.61	111,921,553.41
financing activities

Net cash flows from financing activities	195,467,573.27	258,078,446.59
IV. Effect of changes in foreign
exchange rate on cash and cash		5.12
equivalents
V. Net increase in cash and cash
	-9,923,355.50	-271,983,753.47
equivalents

Add: Opening balance of cash
	15,360,874.41	287,344,627.88
and cash equivalents

VI. Closing balance of cash and cash
	5,437,518.91	15,360,874.41
equivalents

CONSOLIDATED STATEMENT OF CHANGES IN OWNER'S EQUITY

Current Amount

(Expressed in Renminbi yuan)

		Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period
		Owner’s equity attributable to parent company
		Other equity
		instruments
Item			Perpet				Other			Provisio		Minorit	Total
						Less:					Undistri
	Share	Prefer	ual		Capital	treasury	compre	Special	Surplus	ns for	buted	y	owner's
	capital		capita	Other	reserves		hensive	reserves	reserves	general		interests	equity
		red				stocks					profit
			l	s			incomes			risks
		Share
			securi

			ties
I. Closing balance	2,084,			1,947,	934,484		-4,618,5		93,488,		1,413,5	205,489	4,729,1

of the prior year	794,78			846.6	,599.29		35.07		947.26		67,635.	,001.44	54,283.

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2017 Annual Report

	8.00	2				94		48
II. Opening	2,084,	1,947,				1,413,5		4,729,1
			934,484	-4,618,5	93,488,		205,489
balance of current	794,78	846.6				67,635.		54,283.
			,599.29	35.07	947.26		,001.44
year	8.00	2				94		48

III. Increase and
decrease of current	63,316		1,038,1			1,406,0		2,557,5
				-20,469,	6,072,9		64,399,
year (represented	,056.0		54,981.			29,949.		04,172.
				057.23	98.83		243.79
in “-” for	0		37			84		60

decrease)
(I) Total						1,620,5		1,816,7
				-20,469,			216,603
comprehensive						82,427.		16,385.
				057.23			,015.41
incomes						47		65

(II) Capital input	63,316		1,038,1					1,077,2
							-24,203,
and reduced by	,056.0		54,981.					67,265.
							771.62
owners	0		37					75

1. Common shares	63,316		1,148,0					1,216,2
							4,900,0
input by	,056.0		09,452.					25,508.
							00.00
shareholders	0		24					24

2. Amount of
share-based			85,836,				15,147,	100,984

payment recorded			485.00				615.00	,100.00

in owner's equity
			-195,69					-239,94
							-44,251,
3. Others			0,955.8					2,342.4
							386.62
			7					9

						-214,55	-128,00	-336,47
(III) Profit					6,072,9
						2,477.6	0,000.0	9,478.8
distribution					98.83
						3	0	0

1. Appropriation					6,072,9	-6,072,9

of surplus reserves					98.83	98.83

2. Distribution to						-208,47	-128,00	-336,47
owners (or						9,478.8	0,000.0	9,478.8
shareholder)						0	0	0
IV. Closing	2,148,	1,947,	1,972,6			2,819,5		7,286,6 58,456. 08
				-25,087,	99,561,		269,888
balance of current	110,84	846.6	39,580.			97,585.
				592.30	946.09		,245.23
period	4.00	2	66			78

Amount of Prior Period

(Expressed in Renminbi yuan)

Item Prior period

2017 Annual Report

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		Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company	Owner’s equity attributable to parent company
		Other equity
		instruments
												Minorit
			Perpet				Other			Provisio			Total
						Less:					Undistri	y
	Share	f	ual		Capital	treasury	compre	Special	Surplus	ns for	buted	interest	owner's
	capital	Preer red	capita	Other	reserves	stocks	hensive	reserves	reserves	general	profit	s	equity
			l	s			incomes			risks
		Share
			securi

			ties
	1,042,				1,975,5								3,710,9
I. Closing balance							4,276,7		35,052,		506,077	147,570
	397,39				51,294.								25,416.
of the prior year							26.62		527.43		,201.90	,271.88
	4.00				76								59

II. Opening	1,042,				1,975,5								3,710,9
							4,276,7		35,052,		506,077	147,570
balance of current	397,39				51,294.								25,416.
							26.62		527.43		,201.90	,271.88
year	4.00				76								59

III. Increase and
decrease of current	1,042,			1,947,	-1,041,0								1,018,2
							-8,895,2		58,436,		907,490	57,918,
year (represented	397,39			846.6	66,695.								28,866.
							61.69		419.83		,434.04	729.56
in “-” for	4.00			2	47								89

decrease)
(I) Total											1,070,1		1,202,4
							-8,895,2					141,157
comprehensive											62,324.		24,624.
							61.69					,562.36
incomes											07		74

(III) Capital input				1,947,
					1,330,6							17,692,	20,970,
and reduced by				846.6
					98.53							167.20	712.35
owners				2

1. Common shares
					-259,66							2,030,1	1,770,4
input by
					1.93							60.70	98.77
shareholders

2. Capital input by				1,947,
												15,539,	17,486,
owners of other				846.6
												105.81	952.43
equity instruments				2

					1,590,3							122,900	1,713,2
3. Others
					60.46							.69	61.15

											-162,67	-100,93	-205,16
(III) Profit									58,436,
											1,890.0	1,000.0	6,470.2
distribution									419.83
											3	0	0

1. Appropriation									58,436,		-58,436,

of surplus reserves									419.83		419.83

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2. Distribution to						-104,23	-100,93	-205,16
owners (or						5,470.2	1,000.0	6,470.2
shareholder)						0	0	0
(IV) Internal	1,042,		-1,042,3
carryover of	397,39		97,394.
owner's equity	4.00		00
1. Capitalized	1,042,		-1,042,3
capital reserve (or	397,39		97,394.
stock capital)	4.00		00
IV. Closing	2,084,	1,947,				1,413,5		4,729,1
			934,484	-4,618,5	93,488,		205,489
balance of current	794,78	846.6				67,635.		54,283.
			,599.29	35.07	947.26		,001.44
period	8.00	2				94		48

STATEMENT OF CHANGES IN OWNER'S EQUITY OF PARENT COMPANY

Current Amount

(Expressed in Renminbi yuan)

					Current period	Current period	Current period
		Other equity instruments
			Perpetu				Other
						Less:				Undistri	Total
Item	Share		al		Capital		comprehe	Special	Surplus
		Preferre				treasury				buted	owner's
	capital		capital	Others	reserves		nsive	reserves	reserves
		d Share				stocks				profit	equity
			securiti				incomes

			es
I. Closing balance	2,084,79				3,253,924				93,488,94	553,259	5,985,468

of the prior year	4,788.00				,796.01				7.26	,568.27	,099.54

II. Opening
	2,084,79				3,253,924				93,488,94	553,259	5,985,468
balance of current
	4,788.00				,796.01				7.26	,568.27	,099.54
year

III. Increase and
										-153,82
decrease in current	63,316,0				1,148,009				6,072,998		1,063,576
										2,489.3
year (represented	56.00				,452.24				.83		,017.76
										1
in “-” for decrease)

(I) Total
										60,729,	60,729,98
comprehensive
										988.32	8.32
incomes

(III) Capital input
	63,316,0				1,148,009						1,211,325
and reduced by
	56.00				,452.24						,508.24
owners

1. Common shares	63,316,0				1,148,009						1,211,325

input by	56.00				,452.24						,508.24

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shareholders
				-214,55
(III) Profit			6,072,998		-208,479,
				2,477.6
distribution			.83		478.80
				3

1. Appropriation of			6,072,998	-6,072,9

surplus reserves			.83	98.83

2. Distribution to				-208,47
					-208,479,
owners (or				9,478.8
					478.80
shareholder)				0

IV. Closing					7,049,044 ,117.30
	2,148,11	4,401,934	99,561,94	399,437
balance of current
	0,844.00	,248.25	6.09	,078.96
period

Amount of Prior Period

(Expressed in Renminbi yuan)

					Prior period	Prior period	Prior period
		Other equity instruments
			Perpetu				Other
						Less:				Undistri	Total
Item	Share		al		Capital		comprehe	Special	Surplus
		Preferre				treasury				buted	owner's
	capital		capital	Others	reserves		nsive	reserves	reserves
		d Share				stocks				profit	equity
			securiti				incomes

			es
I. Closing balance	1,042,39				4,296,322				35,052,52	131,567	5,505,339

of the prior year	7,394.00				,190.01				7.43	,260.04	,371.48

II. Opening
	1,042,39				4,296,322				35,052,52	131,567	5,505,339
balance of current
	7,394.00				,190.01				7.43	,260.04	,371.48
year

III. Increase and
decrease of current	1,042,39				-1,042,39				58,436,41	421,692	480,128,7

year (represented	7,394.00				7,394.00				9.83	,308.23	28.06

in “-” for decrease)
(I) Total
										584,364	584,364,1
comprehensive
										,198.26	98.26
incomes

										-162,67
(II) Profit									58,436,41		-104,235,
										1,890.0
distribution									9.83		470.20
										3

1. Appropriation of									58,436,41	-58,436,

surplus reserves									9.83	419.83

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2017 Annual Report

2. Distribution to				-104,23
					-104,235,
owners (or				5,470.2
					470.20
shareholder)				0

(III) Internal
	1,042,39	-1,042,39
carryover of
	7,394.00	7,394.00
owner's equity

1. Capitalized
	1,042,39	-1,042,39
capital reserve (or
	7,394.00	7,394.00
stock capital)

IV. Closing
	2,084,79	3,253,924	93,488,94	553,259	5,985,468
balance of current
	4,788.00	,796.01	7.26	,568.27	,099.54
period

II. Notes to Items of Consolidated Financial Statements

1. Monetary funds

Unit: yuan

Item	Closing balance	Opening balance
Cash on hand	59,238.53	31,328.92
Bank deposit	1,573,326,143.60	809,039,113.18
Other monetary capital	7,525,549.85	10,142,564.02
Total	1,580,910,931.98	819,213,006.12
Including: total amount deposited
	309,430,937.71	156,677,334.45
overseas

Additional descriptions

Other monetary capital refers to the balance of the company and its subsidiaries in the third-party payment platform and securities investment accounts.

2. Notes receivable

(1) Presentation of notes receivable by categories

Unit: yuan

Item	Closing balance	Opening balance
Bank acceptance bill	55,340,000.00	94,638,841.21
Commercial acceptance bill	0.00	0.00
Total	55,340,000.00	94,638,841.21

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(2) Notes receivable that are endorsed or discounted by the company at the end of the period but are not mature on the balance sheet date

Unit: yuan

	Amount derecognized at the end of the	Amount note derecognized at the end of
Item
	period	the period

Bank acceptance bill	52,112,168.54	0.00
Total	52,112,168.54	0.00

3. Accounts receivable

(1) Disclosure of accounts receivable by categories

Unit: yuan

	Closing balance	Closing balance	Closing balance	Closing balance	Closing balance	Opening balance	Opening balance	Opening balance	Opening balance	Opening balance
			Provision for bad
	Book balance					Book balance		Provision for bad debt
Category			debt		Book
										Book value
				Provision	value				Provision
	Amount	Ratio	Amount			Amount	Ratio	Amount
				ratio					ratio

Accounts receivable
which are grouped
according to credit	932,039,		47,130,5		884,909,0	858,763		43,117,58		815,645,75
		99.73%		5.06%			99.74%		5.02%
risk features and for	535.47		22.70		12.77	,336.37		1.69		4.68

which provision for
bad debt is made
Accounts receivable
whose single
amounts are small
	2,493,58		2,493,58			2,220,4		2,220,496
but for which		0.27%		100.00%	0.00		0.26%		100.00%	0.00
	9.80		9.80			96.62		.62
provision for bad

debt is separately
made
	934,533,		49,624,1		884,909,0 12.77	860,983		45,338,07		815,645,75 4.68
Total		100.00%		5.31%			100.00%		5.27%
	125.27		12.50			,832.99		8.31

Accounts receivable whose single amounts are large and for which provision for bad debt is separately made at the end of the period:

□ Applicable √ Not applicable

In the group, accounts receivable for which provision for bade debt are made by aging-of-accounts-receivable method:

√ Applicable □ Not applicable

Unit: yuan

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	Closing balance	Closing balance	Closing balance
Age
	Accounts receivable	Provision for bad debt	Provision ratio

Accounts receivable due within	one year
Subtotal of accounts receivable
	927,992,733.55	46,399,636.66	5.00%
due within one year

1-2 years	2,664,303.53	266,430.36	10.00%
2-3 years	1,237,061.92	371,118.58	30.00%
Over 3 years	145,436.47	93,337.10	64.18%
3-4 years	76,706.96	38,353.49	50.00%
4-5 years	68,729.51	54,983.61	80.00%
Total	932,039,535.47	47,130,522.70	5.06%

Description of the basis of grouping:

Accounts receivable of the same age have similar credit risk characteristics.

In the group, the accounts receivable for which provision for bad debt is made by the percentage-of-balance method:

□ Applicable √ Not applicable

In the portfolios, accounts receivable for which provision for bad debt is made by other methods:

(2) Provision for bad debt made, recovered, or reversed in the current period

The provision for bad debt increases by RMB 420,382.55 for business combination not under common control in the current period; the provision for bad debt in the amount of RMB 4,491,422.56 yuan is made in the current period; and RMB 0.00 yuan of the provision for bad debt is recovered or reversed in the current period.

Among them, provisions for bad debt whose recovered or reversed amounts are large in the current period are:

Unit: yuan

Name of the entity Recovered or reversed amount Means of recovery

(3) Accounts receivable actually written off in the current period

Unit: yuan

Item	Amount written off
Accounts receivable	625,770.92

Of them, significant accounts receivable written off include:

Unit: yuan

					Amount arising from
	Nature of the			Write-off procedures
Name of the entity		Amount written off	Write-off reasons		related-party
	account receivable			performed
					transaction or not

Description of write-off of accounts receivable:

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(4) Top 5 accounts receivable in term of closing balance collected as per debtors

Debtor	Book balance	Proportion in the balance of accounts receivable	Provision for bad debt
No. 1	184,054,231.93	19.69%	9,202,918.96
No. 2	173,966,306.59	18.62%	8,698,315.33
No.3	45,409,205.50	4.86%	2,270,460.28
No. 4	38,441,674.46	4.11%	1,922,083.72
No. 5	38,107,381.33	4.08%	1,905,369.07
Subtotal	479,978,799.81	51.36%	23,999,147.36

4. Advance payments

(1) Advance payments presented by ages

Unit: yuan

	Closing balance	Closing balance	Opening balance	Opening balance
Age
	Amount	Ratio	Amount	Ratio

Within 1 year	198,328,892.96	69.95%	226,593,287.73	77.61%
1-2 years	56,723,653.42	20.01%	62,704,684.15	21.48%
2-3 years	28,413,652.41	10.02%	2,628,587.26	0.90%
Over 3 years	50,590.50	0.02%	36,449.50	0.01%
Total	283,516,789.29	--	291,963,008.64	--
Reasons for untimely settlement of advance payment whose age is over one year and whose amount is significant:

Entity	Advance payment whose age is over oneyear	Reason for no carry-over
TOEI ANIMATION CO., LTD.	20,294,889.79	Advance payment for new product design, and the game is not released.
Longzhang Animation (Shanghai) Co., Ltd.	14,485,783.74	Advance payment for entrusted R&D, and the game is not released.
Tencent Technology (Shenzhen) Co., Ltd.	6,937,000.00	Prepaid royalty, and the game is not released.
Chinese Gamer International Corporation	5,000,000.00	Advance payment for new product design, and the game is not released.
LEDO (HK)CO.,LIMITED.	4,535,092.02	Advance payment for game sharing, and the game is not releases.
Total	51,252,765.55

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(2) Advance payments whose closing balance is within top five and which are collected by payees of the advance payments

Entity	Book balance	Proportion in the balance of advance payment
No. 1	26,031,189.79	9.16%
No. 2	20,670,730.34	7.27%
No. 3	14,485,783.74	5.10%
No. 4	11,920,123.43	4.19%
No. 5	10,050,128.69	3.54%
Total	83,157,955.99	29.26%

Additional descriptions:

Provision for bad debt increased by RMB 0.00 yuan for business combination not under common control in the current period. Provision for bad debt in the amount of RMB 720,439.08 yuan was made in the current period, and the provision for bad debt in the amount of RMB 11,934,738.90 yuan was written off in the current period.

5. Interests receivable

(1) Classification of interest receivable

Unit: yuan

Item	Closing balance	Opening balance
Time deposit	582,592.17	0.00
Total	582,592.17

6. Other receivables

(1) Disclosure of other receivables by categories

Unit: yuan

	Closing balance	Closing balance	Closing balance	Closing balance	Closing balance	Opening balance	Opening balance	Opening balance	Opening balance	Opening balance
			Provision for bad
	Book balance					Book balance		Provision for bad debt
Category			debt		Book
										Book value
				Provision	value				Provision
	Amount	Ratio	Amount			Amount	Ratio	Amount
				ratio					ratio

Other receivables
	411,171,		23,059,3		388,111,9	131,367		8,705,376		122,662,61
which are grouped		100.00%		5.61%			100.00%		6.63%
	304.86		85.01		19.85	,994.36		.34		8.02
according to credit

2017 Annual Report

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risk features and for
which provision for
bad debt is made
	411,171,		23,059,3		388,111,9 19.85	131,367		8,705,376		122,662,61 8.02
Total		100.00%		5.61%			100.00%		6.63%
	304.86		85.01			,994.36		.34

Other receivables whose single amounts are significant and for which provision for bad debt is separately made at the end of the period:

□ Applicable √ Not applicable

In the portfolio, other receivables for which provision for bade debt is made by aging-of-other-receivables method:

√ Applicable □ Not applicable

Unit: yuan

	Closing balance	Closing balance	Closing balance
Age
	Other receivables	Provision for bad debt	Provision ratio

Accounts receivable due within	one year
Subtotal of accounts receivable
	396,403,847.19	19,820,192.36	5.00%
due within one year

1-2 years	11,706,554.31	1,170,655.44	10.00%
2-3 years	359,145.00	107,743.50	30.00%
Over 3 years	2,701,758.36	1,960,793.71	72.57%
3-4 years	670,709.95	335,354.98	50.00%
4-5 years	2,028,048.41	1,622,438.73	80.00%
Over 5 years	3,000.00	3,000.00	100.00%
Total	411,171,304.86	23,059,385.01	5.61%

Description of the basis of grouping:

Accounts receivable of the same age have similar credit risk characteristics.

In the portfolio, other receivables for which provision for bad debt is made by the percentage-of-balance method:

□ Applicable √ Not applicable

In the portfolios, other receivables for which provision for bad debt is made by other methods:

□ Applicable √ Not applicable

(2) Provisions for bad debt made, recovered, or reversed in the current period

The provision for bad debt increases by RMB 483.908.03 yuan for business combination not under common control in the current period; the provision for bad debt in the amount of RMB 13,871,106.48 yuan is made in the current period; and RMB 0.00 yuan of the provision for bad debt is recovered or reversed in the current period.

Among them, provisions for bad debt whose recovered or reversed amounts are of significance in the current period are:

Unit: yuan

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Name of the entity Recovered or reversed amount Means of recovery

(3) Other receivables actually written off in the current period

Unit: yuan

Item	Amount written off
Other receivables	1,005.84

Of them, significant other receivables written off include:

Unit: yuan

					Amount arising from
	Nature of other			Write-off procedures
Name of the entity		Amount written off	Write-off reasons		related-party
	receivables			performed
					transaction or not

Description of write-off of other receivables:

(4) Classification of other receivables by nature

Unit: yuan

Nature	Closing book balance	Opening book balance
Deposit, earnest money, and reserve	45,432,385.25	32,683,728.43
Investment in films		20,000,000.00
Intercompany lending	267,459,561.64	1,500,000.00
Receivables from disposal of fixed assets		7,700,000.00
Investment margin		65,000,000.00
Receivable sharing and royalty	33,849,014.57
Equity-related receivables	57,768,000.00
Others	6,662,343.40	4,484,265.93
Total	411,171,304.86	131,367,994.36

(5) Top 5 other receivables in term of closing balance collected as per debtors

Unit: yuan

				Proportion in total	Closing balance of
Entity	Nature	Closing balance	Age	closing balance of	provision for bad
				other receivables	debt
Shenzhen Zhonghui
	Intercompany
Television Culture		266,543,561.64	Within 1 year	64.83%	13,327,178.08
	lending
Communication Co.,

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2017 Annual Report

Ltd.
Zhongnan Red
	Receivables from
Culture Group Co.,		42,768,000.00	Within 1 year	10.40%	2,138,400.00
	equity disposal
Ltd.

Tibet Yifu	Deposit, earnest
		14,200,000.00	Within 1 year	3.45%	710,000.00
Advertising Co., Ltd.	money, and reserve

Shanghai Quwei
	Accounts to be
Network Technology		12,792,458.57	Within 1 year	3.11%	639,622.93
	recovered
Co., Ltd.

Shanghai Fizeo	Deposit, earnest
		10,000,000.00	1-2 years	2.43%	1,000,000.00
Advertising Co., Ltd.	money, and reserve

Total	--	346,304,020.21	--	84.22%	17,815,201.01

7. Inventory

Shall the company comply with the disclosure requirements for the real estate industry?

(1) Classification of inventory

Unit: yuan

	Closing balance	Closing balance	Closing balance	Opening balance	Opening balance	Opening balance
Item		Falling price			Falling price
	Book balance		Book value	Book balance		Book value
		reserve			reserve

Raw materials	54,932,578.33		54,932,578.33	22,718,587.77		22,718,587.77
Products
	3,074,467.07		3,074,467.07	1,289,419.12		1,289,419.12
in-progress

Goods on hand	45,497,455.50	1,676,415.59	43,821,039.91	49,805,352.24	2,331,433.59	47,473,918.65
Total	103,504,500.90	1,676,415.59	101,828,085.31	73,813,359.13	2,331,433.59	71,481,925.54

Shall the company comply with the disclosure requirements of the Guidelines of Shenzhen Stock Exchange for Industrial Information Disclosure No. 4 – Listed Company Engaged in Seeds and Planting Businesses ?

(2) Inventory falling price reserves

Unit: yuan

		Increase in the current period	Increase in the current period	Decrease in the current period	Decrease in the current period
Item	Opening balance					Closing balance
		Withdrawal	Others	Transfer or	Others

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				write-off
Goods on hand	2,331,433.59		66,962.78	721,980.78	1,676,415.59
Total	2,331,433.59		66,962.78	721,980.78	1,676,415.59

Item		Basis for inventory falling-price reserve		Reason for inventory falling-price reserve reversed or written off in the current period
Goods on hand		Realizable net value is lower than the book value.		For the inventory sold, inventory falling-price reserve is written off.

(3) Description of inclusion of the amount of borrowing costs capitalized in closing balance of inventory

(4) Completed and unaccounted assets formed from construction contract at the end of the period

Unit: yuan

Item amount

Additional descriptions:

8. Held-for-sale Assets

Unit: yuan

Item	Book value at the end of
		Fair value	Expected disposal costs	Expected disposal time
	the period

Long-term equity investment to be sold
	1,313,076.61	4,000,000.00	0.00	December 31, 2018

Available-for-sale financial assets to be sold
	73,753,637.73	86,778,813.76	0.00	December 31, 2018

Total	75,066,714.34	90,778,813.76	0.00	--

Additional descriptions:

The said assets are expected to be sold in the following 12 months.

9. Other current assets

Unit: yuan

Item	Closing balance	Opening balance
Wealth investment product of bank	110,000,000.00	170,000,000.00
Remaining VAT credit and VAT to be	76,813,938.41	60,590,757.42

2017 Annual Report

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credited
VAT prepaid	4,010,401.52	4,357,504.47
Performance compensation receivable	401,364,984.06
Total	592,189,323.99	234,948,261.89

Additional descriptions:

The performance compensation receivable means the amount receivable by the company according to the profit compensation agreement entered into by the company and the original shareholders, Yang Dongmai, Chen Wei, and Zhangshu Wangzhong Investment Management Center (Limited Partnership) when the company acquired 68.43% of the share in Shanghai Mokun in the current period. According to the calculation method agreed in the profit compensation agreement and in light with the audited net profits attributable to shareholders of parent company achieved by Shanghai Mokun in 2016 (the performance undertaking was fulfilled) and 2017, net of non-recurring profits and losses, the above three original shareholders of Shanghai Mokun shall compensate the company RMB 401,364,984.06 yuan in 2017.

10. Available-for-sale financial assets

(1) Details of available-for-sale financial assets

Unit: yuan

	Closing balance	Closing balance	Closing balance	Opening balance	Opening balance	Opening balance
Item	Book balance	Provision for			Provision for
			Book value	Book balance		Book value
		impairment			impairment

Available-for-sale equity	894,281,586.86
		11,800,000.00	882,481,586.86	796,868,643.78	11,800,000.00	785,068,643.78
instrument:

Measured at fair	57,541,101.92
			57,541,101.92	5,445,472.73		5,445,472.73
value

Measured at cost	836,740,484.94	11,800,000.00	824,940,484.94	791,423,171.05	11,800,000.00	779,623,171.05
Total	894,281,586.86	11,800,000.00	882,481,586.86	796,868,643.78	11,800,000.00	785,068,643.78

(2) Available-for-sale financial assets measured at fair value at the end of the period

Unit: yuan

Classification of available-for-sale financial assets
	Available-for-sale equity	Available-for-sale debt
			Total
	instrument	instrument


Cost of equity instrument
/ amortized cost of debt	81,100,692.72		81,100,692.72
instrument
Fair value	57,541,101.92		57,541,101.92

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Aggregate variation in
fair value recorded in
	-23,559,590.80	-23,559,590.80
other comprehensive

incomes

(3) Available-for-sale financial assets measured at costs at the end of the period

Unit: yuan

	Book balance	Book balance	Book balance	Book balance	Provision for impairment	Provision for impairment	Provision for impairment	Provision for impairment	Shareholdi	Cash
			Decrease				Decrease		ng ratio in	dividend
Invested		Increase in				Increase in
			in the				in the		the	in the
entity	Opening	the current		Closing	Opening	the current		Closing
			current				current		invested	current
		period	period			period	period		enterprise	period

Shenzhen
Mokylin	60,000,000			60,000,000						1,582,261.
									1.95%
Technolog	.00			.00						90

y Co., Ltd.
Tianjin
Purple
Dragon
Singular
	60,000,000		34,735,789	25,264,211
Point									2.00%
	.00		.00	.00
Interactive

Entertainm
ent Co.,
Ltd.
Hangzhou
Southern	69,996,897		69,996,897

Pictures	.11		.11

Co., Ltd.
Chengdu
Jule
	100,000.00			100,000.00	100,000.00			100,000.00	8.00%
Technolog

y Co., Ltd.
Beijing
Jizhi
	6,000,000.			6,000,000.	6,000,000.			6,000,000.
Xunyou									10.00%
	00			00	00			00
Technolog

y Co., Ltd.
Shenzhen	50,000,000			50,000,000					8.89%

100

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

QiFun	.00		.00
Network
Corp. Ltd.
Guangzho
u
	4,000,000.		4,000,000.	4,000,000.	4,000,000.
Joyegame						15.00%
	00		00	00	00
Software

Co., Ltd.
Chengdu
Pengwan	5,000,000.	5,000,000.

Technolog	00	00

y Co., Ltd.
Suzhou
Youge
Hulian
Venture
	5,000,000.		5,000,000.
Investment						2.98%
	00		00
Center

(Limited
Partnershi
p)
Chengdu
91ACT
	8,000,000.	8,000,000.
Technolog
	00	00
y

Company
Guangzho
u Xiaoyi
Network	200,000.00		200,000.00	200,000.00	200,000.00	10.00%
Technolog
y Co., Ltd.
Xiamen
Intensive
	8,000,000.		8,000,000.
Joint						10.00%
	00		00
Technolog

y Co., Ltd.
Beijing
Chinese
	50,000,000		50,000,000
Anci						16.67%
	.00		.00
Equity

Investment

101

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Fund
Manageme
nt Center
(Limited
Partnershi
p)
Hunan
Tianlei
	1,500,000.	1,500,000.	1,500,000.	1,500,000.
Network					10.00%
	00	00	00	00
Technolog

y Co., Ltd.
Shanghai
Mango
Creative
	240,000,00	240,000,00				8,769,681.
Equity					7.78%
	0.00	0.00				68
Investment

Fund
(L.P.)
Beijing
Colorful
	5,000,000.	5,000,000.
Game					8.54%
	00	00
Technolog

y Co., Ltd.
Jiangsu
Mingtong
Informatio	50,000,000	50,000,000
					5.00%
n	.00	.00

Technolog
y Co., Ltd.
Zhongshen
g Chunqiu
Film and
	9,000,000.	9,000,000.
TV					5.00%
	00	00
Culture

(Beijing)
Co., Ltd.
Shanghai
Mango
	42,000,000	42,000,000
Interactive					7.00%
	.00	.00
Entertainm

ent

102

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

Technolog
y Co., Ltd.
Archiact
	20,587,940	6,858,800.	6,858,800.	20,587,940
Interactive					10.00%
	.96	00	00	.96
Ltd.

Tianjin
Digital
Color	80,000,000			80,000,000
					1.55%
Interactive	.00			.00

Technolog
y Co., Ltd.
Tianshe
(Shanghai)
	10,000,000			10,000,000
Culture &					18.30%
	.00			.00
Media Co.,

Ltd.
Shanghai
Quwei
	7,000,000.			7,000,000.
Network					4.75%
	00			00
Technolog

y Co., Ltd.
Antic
gameworl	38,332.98			38,332.98	5.00%
d co.,ltd
X.D.
		100,050,00		100,050,00
Network					2.38%
		0.00		0.00
Co., Ltd.

Najia
Technolog
		40,000,000		40,000,000
y					7.20%
		.00		.00
(Shenzhen

) Co., Ltd.
Shenzhen
Zen-game		18,000,000		18,000,000
					2.78%
Technolog		.00		.00

y Co., Ltd.
Haojiahuo
Media		5,000,000.		5,000,000.
					20.00%
Fund I		00		00

Partners

103

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

(Limited
Partnershi
p)

Shenzhen
Chengwan
		3,000,000.	3,000,000.			3,000,000.	3,000,000.
Network
		00	00			00	00
Technolog

y Co., Ltd.
	791,423,17	172,908,80	127,591,48	836,740,48	11,800,000	3,000,000.	3,000,000.	11,800,000		10,351,943
Total									--
	1.05	0.00	6.11	4.94	.00	00	00	.00		.58

(4) Variation in impairment of available-for-sale financial assets in the reporting period

Unit: yuan

Classification of
	Available-for-sale equity	Available-for-sale debt
available-for-sale			Total
	instrument	instrument
financial assets

Opening balance of the
	11,800,000.00		11,800,000.00
provision for impairment

Withdrawal in current
	3,000,000.00		3,000,000.00
period

Decrease in the current
	3,000,000.00		3,000,000.00
period

Closing balance of the
	11,800,000.00		11,800,000.00
provision for impairment

11. Long-term equity investment

Unit: yuan

==> picture [480 x 171] intentionally omitted <==

----- Start of picture text -----

Increase/decrease in the current period
Gains or Closing
losses on balance
Adjustme
Additiona investmen Issuing Provision of
Invested Opening Negative nt to other Variation Closing
l t cash for provision
entity balance investmen comprehe in other Others balance
investmen recognize dividends impairme for
t nsive incomes
t d under or profits nt impairme
incomes
the equity nt
law
I. Cooperative enterprises
----- End of picture text -----

104

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

II. Associated enterprises	II. Associated enterprises	II. Associated enterprises	II. Associated enterprises	II. Associated enterprises
Yangzhou
Fuhai
Sanqi
Internet		50,000,00					50,000,00

Culture		0.00					0.00

Investme
nt Center
(L.P.)
Chengdu
Mixiusi
								2,205,871
Technolo
								.87
gy Co.,

Ltd.
Shenzhen
EONE
Network	4,338,029			1,192,297			5,530,326

Technolo	.22			.18			.40

gy Co.,
Ltd.
Shanghai
Aurora
Network	24,850,47		25,143,47	293,000.8
							0.00
Technolo	3.57		4.43	6

gy Co.,
Ltd.
Shanghai
Tingting
Network	7,870,181			-1,151,77		6,718,402		6,718,402

Technolo	.20			8.70		.50		.50

gy Co.,
Ltd.
Shanghai
Aoting
network								2,978,876

Technolo								.18

gy Co.,
Ltd.
Shanghai
	2,661,827			-1,808,70	1,609,702		2,462,825
Menggon
	.62			4.17	.28		.73
gfang

105

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Network
Technolo
gy Co.,
Ltd.
Beijing
Zhuayou
Interactiv
e	4,951,569	-76,654.7		4,874,914			4,874,914

Network	.26	1		.55			.55

Technolo
gy Co.,
Ltd.
Wuhan
Yihua
Kaitian
Culture	5,107,618	-1,045,75	3,081,218		-1,313,07	5,830,002

and	.78	7.92	.74		6.61	.99

Communi
cation
Co., Ltd.
Longzhan
g
Network
Technolo	5,979,810	-257,493.				5,722,316

gy	.31	62				.69

(Shanghai
) Co.,
Ltd.
Shenzhen
Zhanlong
Interactiv
e
	9,483,047	-2,169,47				7,313,570
Entertain
	.02	6.51				.51
ment

Technolo
gy Co.,
Ltd.
Huai’an
Sanqi	101,280,0	397,840.8				101,677,8

Jianyi	00.00	0				40.80

Pan-Inves

106

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

tment
Managem
ent
Center
(L.P.)
Xiamen
Yiqi
Investme
	1,875,924			249,334.0		2,125,258
nt
	.67			7		.74
Managem

ent Co.,
Ltd.
Mango
(Xiamen)
Incubatio
n and
	40,000,00			-1,353,23		38,646,76
Equity
	0.00			7.79		2.21
Investme

nt Fund
Partnershi
p (L.P.)
Shanghai
Jueli
	31,828,20			-2,098,33		29,729,86
Culture &
	7.79			7.87		9.92
Media

Co., Ltd.
Shanghai
Zheyuan
	84,456,68		85,000,00	543,312.0
Culture &						0.00
	7.93		0.00	7
Media

Co., Ltd.
Chengdu
91ACT
		11,500,00		1,001,260	11,000,00	23,501,26
Technolo
		0.00		.32	0.00	0.32
gy

Company
Chengdu
Modu
		12,000,00		-1,030,02		10,969,97
Technolo
		0.00		5.53		4.47
gy Co.,

Ltd.

107

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Chengdu
Mofei
		12,000,00		-1,037,50				10,962,49
Technolo
		0.00		1.22				8.78
gy Co.,

Ltd.
Shanghai
Fuhai
Sanqi
Investme		3,000,000						3,000,419
				419.01
nt		.00						.01

Managem
ent Co.,
Ltd.
Shanghai
11wan
Network		23,500,00		-1,633,14				21,866,85

Technolo		0.00		0.77				9.23

gy Co.,
Ltd.
Penta
	980,182.9			-467,875.				530,972.6
Game							18,665.48
	4			79				3
Co., Ltd.

Chengdu
Pengwan
		33,021,82		2,076,426			22,003,82	57,102,07
Technolo
		3.48		.17			4.00	3.65
gy Co.,

Ltd.
Shanghai	460,904,2		458,141,0	-2,763,23
								0.00
Mokun	79.49		44.54	4.95

Longzhan
g
Animatio
n
(Shanghai
) Co.,
Ltd.
	786,567,8	145,021,8	568,284,5	-11,139,3	4,690,921	11,593,31	31,709,41	376,972,8	16,778,06
Subtotal
	39.80	23.48	18.97	29.07	.02	7.05	2.87	32.08	5.10

	786,567,8	145,021,8	568,284,5	-11,139,3	4,690,921	11,593,31	31,709,41	376,972,8	16,778,06
Total
	39.80	23.48	18.97	29.07	.02	7.05	2.87	32.08	5.10

108

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

Additional descriptions

(1) When the company acquired the remaining 68.43% of Shanghai Mokun this year, it controlled Shanghai Mokun. Therefore, it is deemed that the investment originally accounted by equity method was disposed according to its fair value.

(2) The company increased its investment in Chengdu Pengwan Technology Co., Ltd. and Chengdu 91ACT Technology Co., Ltd. this year and thus had significant influence on them. The investment originally recorded in available-for-sale financial assets were re-measured and carried over to long-term equity investment accounted by equity method.

(3) As of the end of this reporting period, the excess deficit unrecognized by Longzhang Animation (Shanghai) Co., Ltd. amounted to RMB 5,201,916.08 yuan.

12. Fixed Assets

(1) Details of fixed assets

Unit: yuan

	Housing and	Machinery and		Electronics and
Item			Means of transport		Total
	building	equipment		office supplies

I. Original book

value

1.Opening balance	135,597,500.07	299,583,305.52	15,091,603.97	95,169,527.99	545,441,937.55
2.Increase in
	30,569,403.66	40,566,606.54	5,143,156.31	27,550,787.52	103,829,954.03
current period

(1) Purchase		24,551,151.32	1,224,917.85	21,445,588.39	47,221,657.56
(2) Construction in
	30,577,453.66	16,015,455.22			46,592,908.88
progress

(3) Increase of
business			3,918,238.46	6,097,149.13	10,015,387.59
combination

3.Decrease in
	1,558,469.66	18,999,213.43	2,195,248.91	2,686,244.15	25,439,176.15
current period

(1) Disposal or
	1,558,469.66	18,999,213.43	2,195,248.91	2,686,244.15	25,439,176.15
scrap


4.Ending balance	164,616,484.07	321,150,698.63	18,039,511.37	120,026,021.36	623,832,715.43
II Accumulated

depreciation

1. Opening
	35,534,828.04	162,506,051.43	8,817,796.12	67,091,882.46	273,950,558.05
balance

109

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

2.Increase in
	5,002,917.82	28,634,373.59	2,815,578.65	22,434,579.26	58,887,449.32
current period

(1) Provision	5,002,917.82	28,634,373.59	2,430,373.57	18,846,246.22	54,913,911.20
(2) Increase of
business			385,205.08	3,588,333.04	3,973,538.12
combination
3.Decrease in
	895,265.07	13,567,664.27	2,085,486.45	2,140,985.52	18,689,401.31
current period

(1) disposal or
	895,265.07	13,567,664.27	2,085,486.45	2,140,985.52	18,689,401.31
scrap


4.Ending balance	39,642,480.79	177,572,760.75	9,547,888.32	87,385,476.20	314,148,606.06
III. Provision for

impairment

1.Opening balance
2.Increase in
		17,288,222.20			17,288,222.20
current period

(1) Provision		17,288,222.20			17,288,222.20

3. Decrease in

current period

(1) Disposal or

scrap


4.Ending balance		17,288,222.20			17,288,222.20
IV. Book value
1.Ending book
	124,974,003.28	126,289,715.68	8,491,623.05	32,640,545.16	292,395,887.17
value

2.Opening book
	100,062,672.03	137,077,254.09	6,273,807.85	28,077,645.53	271,491,379.50
value

13. Construction in Progress

(1) Details of construction in progress

Unit: yuan

Item Closing balance Opening balance

110

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

		Provision for			Provision for
	Book balance		Book value	Book balance		Book value
		impairment			impairment

Second-phase
	51,102,382.68	429,504.26	50,672,878.42	31,078,391.88		31,078,391.88
equipment project

Total	51,102,382.68	429,504.26	50,672,878.42	31,078,391.88		31,078,391.88

(2) Details of current variation in important construction in progress

Unit: yuan

										Includin
							Proporti			g:
				Transfer-					Accumul		Capitaliz
							on of			amount
				ins of	Other				ated		ation
			Increase				accumul			of
				fixed	decrease				amount		ratio of
		Opening	in			Closing	ated	Project		capitaliz		Source
Project	Budget			assets in	s in the				of		interest
		balance	current			balance	project	progress		ed		of fund
				the	current				capitaliz		in the
			period				investme			interests
				current	period				ed		current
							nt in the			in the
				period					interests		period
							budget			current

										period
Second-
phase
		31,078,3	66,616,8	46,592,9		51,102,3						Others
equipme
		91.88	99.68	08.88		82.68
nt

project
												Others
		31,078,3	66,616,8	46,592,9		51,102,3
Total							--	--				--
		91.88	99.68	08.88		82.68

(3) Provision for impairment of construction in progress in the current period

Unit: yuan

Item	Provision withdrawn in current period	Reason for withdrawal of provision
Second-phase equipment project	429,504.26	Realizable net value less than book value
Total	429,504.26	--

Additional descriptions

111

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

14. Intangible assets

(1) Details of intangible assets

Unit: yuan

	Land use		Unpatented		Domain	Game		Office
Item		Patent		Edition fee			Trademark		Total
	right		technology		name	copyright		software

I. Original

book value

1.Opening	26,840,827.				12,778,182.	87,914,583.	1,014,267.7	7,827,547.7	137,075,932
		345,593.94		354,930.00
balance	98				04	37	1	8	.82

2.Increase
						14,374,586.		5,961,929.9	20,506,938.
in current		87,631.79					82,790.39
						06		3	17
period

(1)								5,949,549.9	6,451,472.1
		87,631.79				331,500.00	82,790.39
Purchase								3	1

(2)
						7,663,076.0			7,663,076.0
Internal
						6			6
R&D

(3)
Increase of						6,380,010.0			6,392,390.0
								12,380.00
business						0			0

combination


3.Decrease
							3,288.01		3,288.01
in current

period
(1)
							3,288.01		3,288.01
Disposal


4.Ending	26,840,827.				12,778,182.	102,289,169	1,093,770.0	13,789,477.	157,579,582
		433,225.73		354,930.00
balance	98				04	.43	9	71	.98

II.
Accumulate
d
amortizatio
n
1.Opening	4,499,882.0	60,351.11		353,680.11	1,757,000.1	50,241,477.	323,060.28	5,128,082.5	62,363,533.

112

==> picture [122 x 30] intentionally omitted <==

2017 Annual Report

balance	3			5	41		1	60
2.Increase
					15,492,058.		2,294,594.9	19,092,972.
in current	539,494.56	27,952.15	1,249.89	638,909.16		98,712.96
					99		3	64
period

(1)					15,492,058.		2,284,690.9	19,083,068.
	539,494.56	27,952.15	1,249.89	638,909.16		98,712.96
Provision					99		9	70

(2)
Increase of
							9,903.94	9,903.94
business

combination
3.Decrease
in current						137.00		137.00
period
(1)
						137.00		137.00
Disposal


4.Ending	5,039,376.5			2,395,909.3	65,733,536.		7,422,677.4	81,456,369.
		88,303.26	354,930.00			421,636.24
balance	9			1	40		4	24

III.
Provision

for

impairment
1. Opening					30,440,779.			30,847,743.
							406,963.12
balance					99			11

2. Increase
in current							377,358.34	377,358.34
period
(1)
							377,358.34	377,358.34
Provision


3. Ending					30,440,779.			31,225,101.
							784,321.46
balance					99			45

IV. Book

value

1. Closing	21,801,451.			10,382,272.	6,114,853.0		5,582,478.8	44,898,112.
		344,922.47				672,133.85
book value	39			73	4		1	29

2.Opening	22,340,945.			11,021,181.	7,232,325.9		2,292,502.1	43,864,656.
		285,242.83	1,249.89			691,207.43
book value	95			89	7		5	11

113

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

At the end of the period, the ratio of the intangible assets formed through internal research and development to the balance of intangible assets is 16.91%.

15. Development expenditures

Unit: yuan

		Increase in current period	Increase in current period	Decrease in current period	Decrease in current period
					Transferred i
	Opening	Internal deve		Recognized		Ending
Item
					nto current
	balance	lopment exp	Others	as intangible		balance
					profits or lo
		enditure		assets
					sses

I	6,137,026.43	762,426.06	0.00	6,899,452.49
II	763,623.57			763,623.57
III		3,951,558.23				3,951,558.23
IV	1,788,455.40	118,714.20			1,788,455.40	118,714.20
Total	8,689,105.40	4,832,698.49		7,663,076.06	1,788,455.40	4,070,272.43

Additional descriptions

16. Goodwill

(1) Original book value of goodwill

Unit: yuan

Name of the		Increase in current period	Decrease in current period
invested entity or	Opening balance	Formed by busin		Ending balance
goodwill			Disposal
		ess combination
formation


Shanghai 37
Interactive	1,578,065,048.53			1,578,065,048.53
Entertainment
ENP Games	1,911,913.34			1,911,913.34
Chengdu
	263,737.88			263,737.88
Shengge

Shanghai Mokun		1,259,793,585.93		1,259,793,585.93
Total	1,580,240,699.75	1,259,793,585.93		2,840,034,285.68

(2) Provision for impairment of goodwill

Unit: yuan

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Name of the		Increase in current period	Decrease in current period
invested entity or	Opening balance			Ending balance
goodwill		Provision	Disposal

formation

Chengdu
	263,737.88			263,737.88
Shengge

Shanghai Mokun		299,457,551.04		299,457,551.04
Total	263,737.88	299,457,551.04		299,721,288.92

The company shall specify the goodwill impairment test procedure, parameters, and recognition method of impairment loss on goodwill:

At the end of 2017, the book value of the goodwill formed by the aforesaid business combination has been allocated to the relevant asset group in a reasonable manner from the date of purchase, and the relevant asset group containing goodwill has been tested for impairment. The Company calculates the recoverable amount of the goodwill formed by the business combination in accordance with the present value of the estimated future cash flow, and determines the above-mentioned key data based on historical experience and market development forecast.

The Company will calculate the future recoverable amount of Shanghai Mokun Digital Technology Co., Ltd. based on the present value of the estimated future cash flow, and determine the above-mentioned key data based on historical experience and market development forecast. With reference to Evaluation Report (Huaxin Zhonghe Ping Bao Zi No. 1050) issued by Huaxin Zhonghe Assets Evaluation Co., Ltd., as the sum of the closing balance of goodwill and the fair value of identifiable net assets is higher than the appraised value of all shareholders' equity, the positive difference equals to the provision for impairment of goodwill made at the end of 2017. Except for the goodwill of Shanghai Mokun Digital Technology Co., Ltd., no impairment was found in other goodwill of the company upon test during the year.

Additional descriptions

17. Long-term deferred expenses

Unit: yuan

		Increase in the	Amortized amount
Item	Opening balance			Other decreases	Closing balance
		current period	in the current period

Copyright royalty	95,486,474.35	67,226,410.32	82,738,231.09	5,153,546.92	74,821,106.66
Trademark
	212,758.37		112,920.18		99,838.19
registration fee

Building renovation
	6,267,424.64	1,777,105.52	3,162,385.42		4,882,144.74
cost

Total	101,966,657.36	69,003,515.84	86,013,536.69	5,153,546.92	79,803,089.59

Additional descriptions

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18. Deferred income tax assets / deferred income tax liabilities

(1) Deferred income tax assets without offset

Unit: yuan

	Closing balance	Closing balance	Opening balance	Opening balance
Item	Deductible temporary	Deferred income tax	Deductible temporary	Deferred income tax
	difference	assets	difference	assets
Provisions for
	36,779,247.42	7,231,974.30	24,316,216.59	5,325,124.20
impairment of assets

Deductible loss	3,304,795.02	826,198.75
Changes in fair value of
available-for-sale	23,559,590.80	2,091,835.89
financial assets
Accrued compensation
	3,756,740.62	338,106.66
for performance

Government subsidies
included in deferred	8,817,182.16	1,322,577.32	4,172,163.95	1,043,040.99
income
Total	76,217,556.02	11,810,692.92	28,488,380.54	6,368,165.19

(2) Details of unrecognized deferred income tax assets

Unit: yuan

Item	Closing balance	Opening balance
Deductible temporary difference	114,160,721.60
Deducible losses	186,240,044.70	115,102,956.23
Total	300,400,766.30	115,102,956.23

(3) Deductible losses on unrecognized deferred tax assets due in the following years

Unit: yuan

Year	Closing balance	Opening balance
2018
2019	5,191,066.43	10,025,154.51
2020	29,786,482.41	30,548,602.85
2021	53,635,799.65	74,529,198.87

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Years after 2021	97,626,696.21
Total	186,240,044.70	115,102,956.23	--

Additional descriptions:

19. Other non-current assets

Unit: yuan

Item	Closing balance	Opening balance
Prepayment for engineering equipment	68,399,174.14	22,090,794.35
Prepayment for equity	50,000,000.00	298,500,000.00
Prepayment for housing purchase	795,864,793.02
Total	914,263,967.16	320,590,794.35

Additional descriptions:

20. Short-term loans

(1) Classification of short-term loans

Unit: yuan

Item	Closing balance	Opening balance
Guaranteed borrowings	372,054,500.00	372,878,500.00
Total	372,054,500.00	372,878,500.00

Description of the classification of short-term loans:

The company classifies short-term loans according to the borrowing conditions for short-term loans.

21. Notes payable

Unit: yuan

Type	Closing balance	Opening balance
Banker’s acceptance bill		17,414,395.42
Total		17,414,395.42

The total amount of matured notes payable unpaid at the end of the current period is 0.00.

22. Accounts payable

(1) Presentation of accounts payable

Unit: yuan

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Item	Closing balance	Opening balance
Amount payable for materials	78,742,772.74	131,694,803.22
Game sharing payable	406,735,668.55	387,526,162.21
Internet promotion and traffic costs
	219,833,849.91	167,461,532.64
payable

Other costs payable	36,480,682.13	14,030,619.93
Total	741,792,973.33	700,713,118.00

(2) Significant accounts payable whose age is over one year

Unit: yuan

Item	Closing balance	Reason for no payment or carry-down
Chengdu Molong Technology Co., Ltd	16,334,639.34	Settlement method is in negotiation
Shanghai Lingyao Network Technology
	3,472,410.00	Settlement method is in negotiation
Co., Ltd

Total	19,807,049.34	--

Additional descriptions:

23. Payments received in advance

(1) Presentation of payments received in advance

Unit: yuan

Item	Closing balance	Opening balance
Payment for goods received in advance	2,085,495.91	740,494.12
Game top-up received in advance	81,795,279.69	57,497,008.43
Sharing received in advance	1,005,959.24	1,442,444.40
Total	84,886,734.84	59,679,946.95

24. Payroll payable

(1) Presentation of payroll payable

Unit: yuan

		Increase in the current	Decrease in the current
Item	Opening balance			Closing balance
		period	period

I. Short-term
	81,585,709.27	586,309,688.88	555,086,412.23	112,808,985.92
compensation

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II. Post-employment
benefit – defined	243,576.53	36,417,719.81	36,064,510.76	596,785.58
contribution plan
III. Dismissal welfare	114,000.00	1,543,676.36	1,583,426.36	74,250.00
Total	81,943,285.80	624,271,085.05	592,734,349.35	113,480,021.50

(2) Presentation of short-term compensation

Unit: yuan

		Increase in the current	Decrease in the current
Item	Opening balance			Closing balance
		period	period

1. Salary, bonus,
	78,674,091.95	516,656,964.28	487,209,133.55	108,121,922.68
allowance, and subsidy

2. Employee welfare
	5,763.16	29,813,468.13	29,819,231.29
expenses

3. Social insurance
	169,523.89	18,479,368.51	18,306,127.47	342,764.93
premiums

Including: Medical
	150,195.68	15,989,060.75	15,839,817.19	299,439.24
insurance premium

Work-related injury
	6,437.23	538,528.07	538,732.12	6,233.18
insurance premium

Maternity insurance
	12,890.98	1,664,893.84	1,649,188.85	28,595.97
premium

Major disease insurance
		286,885.85	278,389.31	8,496.54
premium

4. Housing provident
	98,826.20	15,918,716.88	15,793,675.08	223,868.00
fund

5. Labor-union
expenditure and	2,637,504.07	5,441,171.08	3,958,244.84	4,120,430.31
personnel education fund
Total	81,585,709.27	586,309,688.88	555,086,412.23	112,808,985.92

(3) Presentation of defined contribution plan

Unit: yuan

		Increase in the current	Decrease in the current
Item	Opening balance			Closing balance
		period	period

1. Basic endowment	226,973.86	35,237,516.94	34,882,248.45	582,242.35

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insurance
2. Unemployment
	16,602.67	1,180,202.87	1,182,262.31	14,543.23
insurance premium

Total	243,576.53	36,417,719.81	36,064,510.76	596,785.58

Additional descriptions:

25. Taxes payable

Unit: yuan

Item	Closing balance	Opening balance
Value-added tax	22,778,212.15	20,166,324.01
Corporate income tax	31,249,164.08	26,758,616.95
Individual income tax	1,078,087.62	527,592.44
Urban construction and maintenance tax	929,920.78	2,540,913.79
Education surcharges	497,953.99	1,250,581.03
Local education surcharges	331,969.34	804,142.95
Property tax	454,278.16	455,002.54
Land use tax	253,945.28	253,945.34
Water conservancy fund	182,693.41	195,487.74
Stamp duty	485,653.80	371,327.30
River management fee	39,257.62	614.80
Embankment protection fee	179.24	179.23
Foreign income tax		402,862.35
Cultural construction costs		70,654.22
Total	58,281,315.47	53,798,244.69

Additional descriptions:

26. Interests payable

Unit: yuan

Item	Closing balance	Opening balance
Interest on the short-term loan	390,533.38	411,567.28
Total	390,533.38	411,567.28

Information of important overdue interest:

Unit: yuan

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Borrowing entity Overdue amount Overdue reason

Additional descriptions:

27. Other payables

(1) Other payables presented by natures of the accounts

Unit: yuan

Item	Closing balance	Opening balance
Deposit and earnest money	7,650,158.00	1,650,000.00
Temporary collection receivable	2,000,000.00	499,955.79
Freight and storage fees	9,825,807.62	10,634,324.38
Investment payable	35,448,685.81	276,200,000.00
Others	6,647,368.83	4,182,355.01
Total	61,572,020.26	293,166,635.18

28. Non-current liabilities due within one year

Unit: yuan

Item	Closing balance	Opening balance
Long-term loans due within one year	28,117,893.57
Total	28,117,893.57

Additional descriptions:

Non-current liabilities that are due within one year are corporate mortgage loans that are used by the company’s subsidiaries to purchase office space within one year.

29. Other current liabilities

Unit: yuan

Item	Closing balance	Opening balance
Temporary assessment of output tax	53,981,510.57	44,259,562.28
Performance compensation payable	3,756,740.62
Total	57,738,251.19	44,259,562.28

Increase or decrease in short-term bonds payable:

Bond name	Nomina l value	Issuanc e date	Bond term	Issuanc e amount	Openin g balance	Issuanc e in current	Interest provide d	Premiu m or discoun	Repay ment in current		Closing balance

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						period	accordi ng to nomina l value	t amortiz ation	period

==> picture [160 x 65] intentionally omitted <==

Additional description:

30. Long-term loans

(1) Classification of long-term loans

Unit: yuan

Item	Closing balance	Opening balance
Mortgaged or guaranteed loans	310,775,272.06
Total	310,775,272.06

Description of the classification of long-term loans:

The long-term loans are mortgage loans used by the company's subsidiaries to purchase office space, and the company assumed joint and several liabilities for the loans.

Additional descriptions, including the interest rate collars:

The interest rate is 5% above the benchmark interest rate for 5-year financial institutions' RMB loans.

31. Bonds payable

(1) Bonds payable

Unit: yuan

Item	Closing balance	Opening balance
Convertible corporate bonds	27,163,239.26	23,757,428.88
Total	27,163,239.26	23,757,428.88

(2) Increase / decrease in bonds payable (excluding preferred stock, perpetual capital securities, and other financial instruments classified as financial liabilities)

Unit: yuan

						Amount	Interests credited at par value			Closing balance
									Repayme
						issued in		Amortizat
Bond		Issuing	Bond	Issuing	Opening				nt in the
	Par value					the		ion of
name		date	period	value	balance				current
						current		premium
									period
						period

private	23,028,00		2021/12/1	20,237,72	20,368,37		1,151,400	1,768,572		23,288,34 9.08
		2016/12/2
convertibl	0.00			0.27	7.02		.00	.06

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e bonds
1st
private	3,831,571 .35		2021/12/1		3,389,051 .86			3,874,890 .18
convertibl				3,367,303		191,578.5	294,259.7
		2016/12/2
e bonds				.68		7	5

2nd
Total	--	--	--	23,605, 023.95	23,757, 428.88	1,342,9 78.57	2,062,8 31.81	27,163, 239.26

(3) Description of conditions and time of bond-for-share swap for convertible corporate bonds

The issuer of the convertible corporate bonds in this period is ENP Games, a subsidiary controlled by the company, whose convertible corporate bond holders can request conversion from the date of one year after the date of issue to one month before the expiry date. However, the conversion right may not be exercised within one year from the date of issuance.

32. Deferred income

Unit: yuan

Item		Increase in the current period	Decrease in the	Closing balance	Reason for formation
	Opening balance
			current period

Government subsidy	4,172,163.95	5,235,700.00	590,681.78	8,817,182.17	Related to assets
Deferred income from royalty income	4,866,879.43				Game royalty not amortized
		10,690,519.57	7,148,106.73	8,409,292.27

Total	9,039,043.38	15,926,219.57	7,738,788.51	17,226,474.44	--

Projects involving government subsidies:

Unit: yuan

Liability item		Amount of	Amount recorded	Amount recorded
						In relation to
		additional	in non-operating	in other incomes
	Opening balance				Closing balance	assets/in relation
		subsidies in the	revenue in the	in the current
						to incomes
		current period	current period	period

Subsidy for automobile fuel system R&D center project
	780,000.08			130,000.00	650,000.08	Related to assets

Subsidy for small and medium-sized enterprises single equipment acquisition
	180,347.19			27,450.92	152,896.27	Related to assets

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Anhui Province
"6+1"
Independent
Innovation	798,633.33		98,800.00	699,833.33	Related to assets
Capacity
Construction
Subsidy Fund
Nanling County
Economic and
Trade Committee
	433,333.35		50,000.00	383,333.35	Related to assets
Enterprise

Development
Special Fund
Provincial
Innovative
Enterprise R&D	242,812.50		27,750.00	215,062.50	Related to assets
Equipment
Subsidy
2015 Provincial
Special Funds for
the Construction	247,437.50		27,750.00	219,687.50	Related to assets
of Innovative
Provinces
Subsidies for
purchase of R&D	744,800.00		78,400.00	666,400.00	Related to assets
equipment
2016 Provincial
Special Funds for
the Construction	744,800.00		78,400.00	666,400.00	Related to assets
of Innovative
Provinces
Equipment
subsidy for
industrial
technology
reform project
		3,420,000.00	57,000.00	3,363,000.00	Related to assets
provided by the

strong province
construction fund
of Nanling
County Economic

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and Information
Commission in
2017
Industrial reform
subsidy of
Nanling County
		1,682,700.00	14,022.50	1,668,677.50	Related to assets
Economic and

Information
Commission
Special fund for
innovative
provisions
construction of
Nanling County		133,000.00	1,108.36	131,891.64	Related to assets
Economic and
Information
Commission in
2017
Total	4,172,163.95	5,235,700.00	590,681.78	8,817,182.17	--

Additional descriptions:

33. Capital stock

Unit: yuan

		Increase / decrease in current period (+/-)	Increase / decrease in current period (+/-)	Increase / decrease in current period (+/-)	Increase / decrease in current period (+/-)
	Opening						Closing
				Reserve-for-sh
		Offering of
	balance		Bonus shares	are swap	Others	Subtotal	balance
		new shares


Total number	2,084,794,788. 00						2,148,110,844. 00
		63,316,056.00				63,316,056.00
of share

Additional descriptions:

In this year, the company issued shares and paid cash to buy 68.43% shares in Shanghai Mokun and 49% shares in Jiangsu Zhiming, and raised funds by issuing 63,316,056.00 shares.

34. Other equity instruments

(1) Variations in preferred stock, perpetual debts, and other financial instruments outstanding at the end of the period

Unit: yuan

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Outstanding			Increase in the current	Increase in the current	Decrease in the current	Decrease in the current
	Opening						Closing
financial			period		period

instruments	Qty.	Book value	Qty.	Book value	Qty.	Book value	Qty.	Book value
Convertible
corporate
bond equity	1	1,947,846.62					1	1,947,846.62
component
value
Total	1	1,947,846.62					1	1,947,846.62

Description of current increase or decrease in other equity instruments and reasons for the variation and the basis of related accounting treatment:

Additional descriptions:

35. Capital reserves

Unit: yuan

		Increase in the current	Decrease in the current
Item	Opening balance			Closing balance
		period	period

Capital surplus (share
	931,765,345.03	1,251,820,587.00	218,356,526.65	1,965,229,405.38
premium)

Other capital reserves	2,719,254.26	4,690,921.02		7,410,175.28
	934,484,599.29			1,972,639,580.66
Total		1,256,511,508.02	218,356,526.65

Additional descriptions, including descriptions of current increase and decrease and reasons for the variation:

(1) The increase in the current year of capital surplus includes the increase in capital reserve of RMB 1,148,009,452.24 yuan generated from the company’s issuing shares and raising funds to purchase 68.43% equity in Shanghai Mokun and 49% equity in Jiangsu Zhiming, the increase in capital reserve of RMB 85,836,485.00 yuan resulted from the equity incentive of Guangzhou Sanqi, a subsidiary held by the company, the increase in capital reserve of RMB 17,826,400.46 yuan resulted from the aquisition of part of a subsidiary of Shanghai Mokun by other investors, the increase in capital reserve of RMB 148,249.30 yuan resulted from option exercise by employees of ENP Games, a subsidiary of the company;

The decrease in the current year of capital premium results from offset of capital reserve of RMB 216,666,155.75 yuan as the company purchases 49% share in Jiangsu Zhiming, and the offset of capital reserve-capital premium of RMB 1,690,370.90 yuan as the company transfers 5% share in Guangzhou 37, a subsidiary held by the Company.

(2) Other shareholders increase their capital in Wuhan Yihua Kaitian Culture Transmission Co., Ltd and Shanghai Menggongfang Network Technology Co., Ltd, affiliates of Tibet Taifu who is a subsidiary of the company, and thus cause other capital reserve to increase by RMB 4,690,921.02 yuan.

36. Other comprehensive incomes

Unit: yuan

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		Accruals in the current period	Accruals in the current period	Accruals in the current period	Accruals in the current period	Accruals in the current period
			Less: accounts
			recorded in
			other
		Accruals in
Item	Opening	the current	comprehensive	Less:	Attributable	Attributable	Closing
			incomes in the		to parent	to minority
	balance	period		Income tax			balance
			prior period		company	shareholder
		before		expense
			and carried		after tax	s after tax
		income tax
			down to

			current profits
			and losses
II. Other comprehensive incomes that					-20,469,057 .23
		-21,875,172		-2,091,835.			-25,087,5
can be reclassified as profits and	-4,618,535.07					685,720.85
		.27		89			92.30
losses in the future

Profits and losses on variation in					-21,799,686 .38
		-24,337,628		-2,091,835.			-25,470,4
fair value of available-for-sale	-3,670,780.00					-446,105.90
		.17		89			66.38
financial assets

Difference from translation of		2,462,455.9			1,330,629.1 5	1,131,826.7	382,874.0
	-947,755.07
foreign-currency financial statements		0				5	8

Total of other comprehensive	-4,618,535.07	-21,875,172		-2,091,835.	-20,469,057 .23	685,720.85	-25,087,5 92.30

incomes		.27		89

Additional descriptions, including adjustment to the effective part of profits and losses on cash flow hedging converted to initially recognized amount of hedged items:

37. Surplus reserves

Unit: yuan

		Increase in the current	Decrease in the current
Item	Opening balance			Closing balance
		period	period

Statutory surplus reserve	93,488,947.26	6,072,998.83		99,561,946.09
Total	93,488,947.26	6,072,998.83		99,561,946.09

Description of surplus reserves, including descriptions of current increase and decrease and reasons for the variation:

The increase in surplus reserve in the current period is the statutory surplus reserve of 10% of the net profit realized by the company in the current period.

38. Undistributed profit

Unit: yuan

Item Current period Prior period

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Undistributed profit at the end of the prior period
	1,413,567,635.94	506,077,201.90
before adjustment

Undistributed profit at the beginning of the period	1,413,567,635.94
		506,077,201.90
after adjustment

Add: net profit attributable to owner(s) of the
	1,620,582,427.47	1,070,162,324.07
parent company in the current period

Less: Provision of statutory surplus reserve	6,072,998.83	58,436,419.83
Dividend payable on common stock	208,479,478.80	104,235,470.20
Undistributed profit at the end of the year	2,819,597,585.78	1,413,567,635.94

Ledger of undistributed profit at the beginning of the period after adjustment:

1) Due to retrospective adjustment according to the accounting standards for enterprises and their applicable new regulations, undistributed profit of RMB 0.00 at the beginning of the period is affected.

2) Due to changes in the accounting policies, undistributed profit of RMB 0.00 at the beginning of the period is affected.

3) Due to correction of significant accounting errors, undistributed profit of RMB 0.00 at the beginning of the period is affected.

4) Due to changes in the consolidation scope as a result of the common control, undistributed profit of RMB 0.00 at the beginning of the period is affected.

5) A total of undistributed profit of RMB 0.00 at the beginning of the period is affected by other adjustments.

39. Operating revenues and costs

Unit: yuan

	Accruals in the current period	Accruals in the current period	Accruals in the prior period	Accruals in the prior period
Item
	Revenue	Cost	Revenue	Cost

Main businesses	6,188,729,008.57	1,948,067,595.79	5,247,426,215.96	1,940,783,836.36
Other businesses	99,108.18	129,643.97	467,512.77	502,940.30
Total	6,188,828,116.75	1,948,197,239.76	5,247,893,728.73	1,941,286,776.66

40. Taxes and surcharges

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Urban construction and maintenance tax	7,941,837.63	9,792,292.91
Educational surcharge	3,518,238.96	4,546,187.19
Property tax	1,145,438.72	790,118.01
Land use tax	3,207,777.30	2,140,781.70
Vehicle and vessel tax	20,389.47	12,458.00
Stamp tax	6,703,094.58	2,572,252.86

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Local educational surcharge	2,345,492.62	3,184,179.41
Water conservancy fund	1,404,336.13	1,518,937.12
Construction costs of cultural undertakings	104,319.98	88,523.15
River management fee	7,404.96	135,997.02
Business tax		4,932,798.12
Others	109,767.54
Total	26,508,097.89	29,714,525.49

Additional descriptions:

41. Operating expenses

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Salary and benefits	89,002,610.72	69,275,392.58
Depreciation	2,452,462.02	2,261,428.79
Office cost	2,294,285.34	3,910,249.66
Internet promotion and traffic cost	1,767,614,006.47	1,480,035,900.50
Travel cost	2,725,380.16	2,745,335.60
Insurance premium	7,521,664.12	6,317,205.24
Transportation and storage fees	27,201,590.38	31,710,085.98
Packaging fee	1,135,941.11	3,533,778.77
Material consumption	2,269,378.06	2,730,746.55
Three-guarantee cost	415,210.57	690,279.56
Entertainment cost	4,151,221.02	1,819,112.94
Others	1,423,716.35	2,715,705.02
Total	1,908,207,466.32	1,607,745,221.19

Additional descriptions:

During the reporting period, labor dispatch expenses were classified as "wage and welfare expenses". The amount of RMB 18,542,124.59 in the prior period was reclassified from "other" items to "wage and welfare expenses" items.

42. General and administrative expenses

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Salary and benefits	108,714,662.59	78,106,747.94

129

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2017 Annual Report

Office cost	34,206,282.94	36,843,326.62
Travel and meeting cost	12,278,341.07	8,892,605.81
Depreciation and amortization	13,818,326.98	13,134,251.68
Trade union and educational funds	5,001,412.49	4,073,229.32
Business entertainment cost	13,901,648.09	8,708,914.97
Taxes		3,789,460.86
Labor insurance premium	9,014,592.10	6,183,170.17
Lease cost	20,591,183.94	15,864,767.85
Agency fees and consulting fees	15,404,989.50	9,397,473.36
R&D cost	436,169,030.12	310,597,091.90
Share-based compensation	100,984,100.00
Others	6,574,972.04	19,342,574.69
Total	776,659,541.86	514,933,615.17

Additional description:

During the reporting period, Shanghai 37 Interactive Entertainment, a first-level subsidiary of the company, transferred 5% share in Guangzhou 37, a second-level subsidiary of the company, to Huai’an Shunjing Enterprise Management Partnership (Limited Partnership) for the consideration of RMB10,000,000.00 yuan in cash. The partners of Huai’an Shunjing Enterprise Management Partnership (Limited Partnership) are all major managers of Guangzhou 37. After deducting the cash consideration based on the fair value of Guangzhou Sanqi on the reference date, the company recognizes the share-based payment cost of RMB 100,984,100.00 yuan.

43. Financial expenses

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Interest expenditure	32,858,899.90	10,629,855.46
Formality charges or other expenses of
	606,729.28	1,088,513.84
financial institution

Less: interest income	24,363,295.31	5,952,056.07
Exchange gains and losses	19,453,449.40	-11,226,708.84
Total	28,555,783.27	-5,460,395.61

Additional descriptions:

44. Impairment loss on assets

Unit: yuan

130

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2017 Annual Report

Item	Accruals in the current period	Accruals in the prior period
I. Loss on bad debts	19,082,968.12	37,088,335.72
II. Inventory falling price loss	66,962.78	2,095,172.29
III. Impairment loss on available-for-sale
	3,000,000.00	1,700,000.00
financial assets

V. Impairment loss on long-term equity
	11,593,317.05	7,150,283.00
investment

VII. Impairment loss on fixed assets	17,288,222.20
IX. Impairment loss on construction in
	429,504.26
progress

XII. Impairment loss on intangible assets	377,358.34	1,423,582.71
XIII. Impairment loss on goodwill	299,457,551.04
Total	351,295,883.79	49,457,373.72

Additional descriptions:

45. Investment income

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Income from long-term equity investment
	-11,139,329.07	33,654,987.57
calculated by equity method

Investment income from disposal of long-term
	218,512,763.55	6,351,134.34
equity investment

Investment income from available-for-sale
	10,503,501.81	3,722,924.58
financial assets during holding

Investment income from disposal of
	20,264,211.00	3,608,355.70
available-for-sale financial assets

Interest income arising from bank financial
	13,370,838.07	6,931,102.57
products

Investment income arising from changes in fair
	1,411,495.72
value of original equity

Others	3,106,764.84	400,000.00
Total	256,030,245.92	54,668,504.76

Additional descriptions:

131

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46. Incomes from assets disposal

Unit: yuan

Source of incomes from assets disposal	Accruals in the current period	Accruals in the prior period
Profit or loss arising from fixed asset disposal	1,055,284.09	1,316,063.68

47. Other incomes

Unit: yuan

Sources of other incomes	Accruals in current period	Accruals of last period
VAT refund immediately after collection	81,575,068.42
Support subsidy of Huai’an Software Park	10,516,637.23
Other government subsidy relating to operation (see Note 48 for details)	19,167,371.53
Total	111,259,077.18

48. Non-operating income

Unit: yuan

			Amount included in current
Item	Accruals in the current period	Accruals in the prior period
			non-recurring profits and losses

Government subsidy	11,200.00	161,032,068.55	11,200.00
Infringement compensation	1,528,930.43		1,528,930.43
Performance compensation
	401,364,984.06		401,364,984.06
receivable

Others	152,808.37	986,803.06	152,808.37
Total	403,057,922.86	162,018,871.61	403,057,922.86

Government subsidies recorded in current profits and losses:

Unit: yuan

				Will the
				subsidy affect	Special	Accruals in	Accruals in	Related to
			Nature of the
Subsidy item	Granted by	Granted for		the current	subsidy or	the current	the prior	assets/related
			subsidy
				profits and	not?	period	period	to incomes

				losses
Refund of	The state		The subsidy
						81,575,068.4	92,618,857.3	Related to
VAT tax	taxation	Subsidy	received for	No	No
						2	1	income
immediately	bureaus of		engaging in

132

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after	Shanghai,		the trade or
collection	Guangzhou		industry
	and Huai’an		encouraged
	etc.		or supported
			by the state
			(according to
			the state-level
			policy
			provisions)
			Subsidy
			received in
			accordance
	Huai'an
Support			with local
	Software
subsidy of			government
	Park					10,516,637.2	26,076,899.9	Related to
Huai'an		Subsidy	support	No	No
	Management					3	6	income
Software			policies such
	Development
Park			as investment
	Co., Ltd.
			promotion by

			local
			governments
			The subsidy
			received for
			assuming the
			state’s role in
Refund of			guaranteeing
	The local
formality			a utility or					Related to
	taxation	Subsidy		No	No	1,135,760.56
charges of			socially					income
	bureaus
individual tax			necessary

			product
			supply or
			price control
			function
			Subsidy
			received in
Support			accordance
subsidy of	The Finance		with local
The Finance	Bureau of		government					Related to
		Subsidy		No	No	1,339,770.00	8,072,920.00
Bureau of	Jiading,		support					income

Jiading,	Shanghai		policies such
Shanghai			as investment
			promotion by
			local

133

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==> picture [122 x 30] intentionally omitted <==

			governments
			Subsidy
Subsidy of			received in
	Wuhu
Wuhu			accordance
	Machinery
Machinery			with local
	Industrial
Industrial			government
	Development						19,252,000.0	Related to
Development		Subsidy	support	No	No	4,935,700.00
	Zone Finance						0	income
Zone Finance			policies such
	and Taxation
and Taxation			as investment
	Service
Service			promotion by
	Center
Center			local

			governments
			The subsidy
			received for
			engaging in
			the trade or
Copyright
			industry
subsidy of	Shanghai
			encouraged					Related to
Shanghai	Copyright	Subsidy		No	No	3,500.00
			or supported					income
Copyright	Association
			by the state
Association
			(according to

			the state-level
			policy
			provisions)
			Subsidy
	Huai'an City
Excellent			received for
	Bureau of
Copyright of			research and
	Culture,
Huai’an City			development,					Related to
	Radio, and	Award		No	No	3,000.00
2016, the			technology					income
	TV News
Legendary			renewal and
	Publishing
Dominance			transformatio
	(Copyright)
			n, etc.

			Subsidy
Special
			received for
subsidy fund	Guangzhou
			research and
of	Science and
			development,					Related to
Guangzhou	Technology	Award		No	No	100,000.00
			technology					income
Enterprise	Innovation
			renewal and
R&D	Commission
			transformatio
Investment
			n, etc.

Special	Technology	Award	Subsidy	No	No	100,000.00		Related to

134

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

subsidy fund	Industry and		received for					income
of	Information		research and
Guangzhou	Bureau of		development,
Enterprise	Tianhe		technology
R&D	District		renewal and
Investment			transformatio
			n, etc.
			Subsidy
Project
			received in
supporting
	Huai'an		accordance
subsidy of
	Overseas		with local
Huai'an
	Students		government
Overseas								Related to
	Pioneering	Subsidy	support	No	No	3,540,171.40	6,105,251.40
Students								income
	Park		policies such
Pioneering
	Management		as investment
Park
	Committee		promotion by
Management
			local
Committee
			governments

			Subsidy
			received in
	Jishan		accordance
	Township		with local
	Government,		government
Refund of								Related to
	Nanling	Subsidy	support	No	No	1,411,521.00	668,615.54
land use tax								income
	County,		policies such

	Anhui		as investment
	Province		promotion by
			local
			governments
			Subsidy
			received in
“Four
	Nanling		accordance
Standards”
	Economic		with local
enterprise
	Development		government
reward of								Related to
	Zone	Award	support	No	No	120,000.00	90,000.00
Nanling								income
	Construction		policies such
Economic
	Investment		as investment
Development
	Co., Ltd.		promotion by
Zone
			local

			governments
Special	Science and
		Subsidy	Subsidy	No	No	90,100.00	90,100.00	Related to
subsidy for	Technology		received in

135

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==> picture [122 x 30] intentionally omitted <==

rent of key	Industry and		accordance					income
industry	Information		with local
enterprises of	Bureau of		government
Tianhe	Tianhe		support
Finance	District,		policies such
Bureau	Guangzhou		as investment
			promotion by
			local
			governments
			The subsidy
			received for
Employment
			assuming the
stabilization
	Guangzhou		state’s role in
subsidy of
	Social		guaranteeing
Guangzhou
	Insurance		a utility or					Related to
Social		Subsidy		No	No	580,232.70	1,184,923.56
	Fund		socially					income
Insurance
	Management		necessary
Fund
	Center		product
Management
			supply or
Center
			price control

			function
	Human
Supporting
	Resources
fund of the
	and Social		Subsidy
Finance
	Security		received in
Bureau of
	Bureau of		accordance
Horgos
	Horgos		with local
Economic
	Economic		government
Development								Related to
	Development	Subsidy	support	No	No	118,857.00
Zone								income
	Zone		policies such
Management
	Management		as investment
Committee,
	Committee,		promotion by
Xinjiang
	Xinjiang		local
Uygur
	Uygur		governments
Autonomous
	Autonomous
Region
	Region

Special			Subsidy
subsidy of	Tianhe		received in
Tianyinghui	Finance		accordance					Related to
		Subsidy		No	No	500,000.00
Brand	Bureau of		with local					income

Building	Guangzhou		government
Services for			support

136

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2017			policies such
			as investment
			promotion by
			local
			governments
			Subsidy
			received in
			accordance
	Wuhu
Tax refund of			with local
	Advertising
Wuhu			government
	Industrial						Related to
Advertising		Subsidy	support	No	No	268,618.87
	Park Asset						income
Industrial			policies such
	Management
Park			as investment
	Co., Ltd.
			promotion by

			local
			governments
			Subsidy
			received in
Anime
			accordance
support funds
	Shanghai		with local
of Shanghai
	Culture		government
Culture							Related to
	Radio TV	Subsidy	support	No	No	235,849.06
Radio TV							income
	Management		policies such
Management
	Bureau		as investment
Bureau for
			promotion by
2017
			local

			governments
			Subsidy
			received in
			accordance
Tax refund of	The		with local
the	government		government
							Related to
government	of Jiading	Subsidy	support	No	No	518,800.00
							income
of Jiading	District,		policies such

District	Shanghai		as investment
			promotion by
			local
			governments
Municipal	Huai'an		Subsidy
Cultural	Software		received in				Related to
		Award		No	No	400,000.00
Industry	Park		accordance				income

Development	Management		with local

137

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Guidance	Committee of		government
Fund 2016	Jiangsu		support
	Province		policies such
			as investment
			promotion by
			local
			governments
	Huai’an
	Economic		Subsidy
	and		received for
	Technologica		research and
Overseas
	l		development,					Related to
outsourcing		Award		No	No	400,000.00	410,000.00
	Development		technology					income
reward
	Zone		renewal and

	Economic		transformatio
	Development		n, etc.
	Bureau
			Subsidy
			received in
			accordance
	Talent Work		with local
	Leading		government
Huai’s Talent								Related to
	Group Office	Subsidy	support	No	No	150,000.00
Plan Subsidy								income
	of Huai’an		policies such

	City		as investment
			promotion by
			local
			governments
Special			Subsidy
reward for			received in
introducing			accordance
key			with local
enterprises	Tianhe		government
								Related to
provided by	Finance	Award	support	No	No	122,100.00
								income
the Business	Bureau		policies such

and Finance			as investment
Bureau of			promotion by
Tianhe			local
District			governments
Fashion
	Guangzhou		Subsidy					Related to
creative		Sbid		N	N	40000000
	Finance	usy	received in	o	o	,.		income
animation			accordance

138

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==> picture [122 x 30] intentionally omitted <==

support of	Bureau		with local
Guangzhou			government
Culture			support

Radio and			policies such
Television			as investment
Press			promotion by
			local
			governments
			Subsidy
			received in
“Four			accordance
Standards”			with local
enterprise			government
	Wuhu Bureau							Related to
reward of the		Award	support	No	No	2,000.00	5,000.00
	of Statistics							income
Bureau of			policies such

Statistics of			as investment
Wuhu County			promotion by
			local
			governments
Technology			Subsidy
Innovation			received for
Award of	Wuhu Bureau		research and
Wuhu Bureau	of Science		development,					Related to
		Award		No	No	50,000.00
of Science	and		technology					income

and	Technology		renewal and
Technology			transformatio
2016			n, etc.
			Subsidy
			received in
			accordance
	Wuhu		with local
Subsidy fund
	Economic		government
of strong								Related to
	and	Award	support	No	No	500,000.00
manufacturin								income
	Information		policies such
g province
	Committee		as investment

			promotion by
			local
			governments
Refund of			Subsidy
formality fees	Huai’an State		received in					Related to
		Ad		No	No	25,238.00
for	Tax Bureau	war	accordance					income

withholding			with local

139

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taxes and			government
refund of			support
taxes by			policies such
Huai’an State			as investment
Administratio			promotion by
n of Taxation			local
of Jiangsu			governments
Province
Employment
stabilization
	Human
subsidy of
	Resources
Human			The subsidy
	and Social
Resources			received for
	Security
and Social			assuming the
	Bureau of
Security			state’s role in
	Horgos
Bureau of			guaranteeing
	Economic
Horgos			a utility or				Related to
	Development	Subsidy		No	No	940.75
Economic			socially				income
	Zone
Development			necessary
	Management
Zone			product
	Committee,
Management			supply or
	Xinjiang
Committee,			price control
	Uygur
Xinjiang			function
	Autonomous
Uygur
	Region
Autonomous

Region
			The subsidy
Employment			received for
stabilization			assuming the
	Nanling
subsidy of			state’s role in
	County
Nanling			guaranteeing
	Social
County			a utility or				Related to
	Insurance	Subsidy		No	No	81,015.00
Social			socially				income
	Fund
Insurance			necessary
	Management
Fund			product
	Center
Management			supply or

Center			price control
			function
Supporting	The taxation		Subsidy
fund of Guro	bureau and		received in				Related to
		Subsidy		No	No	1,348,511.17
District,	the		accordance				income

Seoul, South	government		with local

140

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Korea	of Guro		government
	District,		support
	Seoul, South		policies such
	Korea		as investment
			promotion by
			local
			governments
			The subsidy
Employment			received for
stabilization			assuming the
	Shenzhen
subsidy of			state’s role in
	Municipal
Shenzhen			guaranteeing
	Social
Municipal			a utility or					Related to
	Insurance	Subsidy		No	No	2,856.24	24,042.83
Social			socially					income
	Fund
Insurance			necessary
	Management
Fund			product
	Bureau
Management			supply or

Bureau			price control
			function
			Subsidy
Provincial			received in
Foreign			accordance
Trade			with local
	Nanling
Promotion			government
	County							Related to
Policy Fund		Subsidy	support	No	No	64,500.00
	Bureau of							income
of Nanling			policies such
	Commerce
County			as investment

Bureau of			promotion by
Commerce			local
			governments
Blue Collar
			Subsidy
Apartment
			received in
Rental
	Nanling		accordance
Subsidy of
	Economic		with local
Nanling
	Development		government
Economic								Related to
	Zone	Subsidy	support	No	No	27,648.00
Development								income
	Construction		policies such
Zone
	Investment		as investment
Construction
	Co., Ltd.		promotion by
Investment
			local
Co., Ltd.
			governments

141

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			The subsidy
			received for
Refund of
			assuming the
individual
	Jiading		state’s role in
income tax of
	Branch of		guaranteeing
Jiading
	Shanghai		a utility or				Related to
Branch of		Subsidy		No	No	1,568,532.21
	Local		socially				income
Shanghai
	Taxation		necessary
Local
	Bureau		product
Taxation
			supply or
Bureau
			price control

			function
			Subsidy
			received in
Reward fund
			accordance
of Anhui	Anhui Xinwu
			with local
Xinwu	Economic
			government
Economic	Development						Related to
		Subsidy	support	No	No	1,554,900.00
Development	Zone						income
			policies such
Zone	Management
			as investment
Management	Committee
			promotion by
Committee
			local

			governments
			The subsidy
Employee			received for
training			assuming the
	The Finance
subsidy of			state’s role in
	Office of
the Finance			guaranteeing
	Nanxiang
Office of			a utility or				Related to
	Town,	Subsidy		No	No	1,123,603.08
Nanxiang			socially				income
	Jiading
Town,			necessary
	District,
Jiading			product
	Shanghai
District,			supply or

Shanghai			price control
			function
			The subsidy
Supporting			received for
	China
fund of China			engaging in
	Culture						Related to
Culture		Subsidy	the trade or	No	No	80,000.00
	Industry						income
Industry			industry
	Association
Association			encouraged

			or supported

142

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==> picture [122 x 30] intentionally omitted <==

			by the state
			(according to
			the state-level
			policy
			provisions)
			The subsidy
			received for
Employment			assuming the
stabilization			state’s role in
	Wuhu Social
subsidy of			guaranteeing
	Insurance
Wuhu Social			a utility or				Related to
	Treatment	Subsidy		No	No	49,423.00
Insurance			socially				income
	and Payment
Treatment			necessary
	Center
and Payment			product

Center			supply or
			price control
			function
			Subsidy
			received in
Construction			accordance
subsidy of	Nanling		with local
non-public	County Party		government
							Related to
building of	Committee	Subsidy	support	No	No	40,000.00
							income
parties “Big	Organization		policies such

Four	Department		as investment
Centers”			promotion by
			local
			governments
			Subsidy
	Nanling		received for
Provincial
	County		research and
Technologica
	Economic		development,				Related to
l Innovation		Subsidy		No	No	300,000.00
	and		technology				income
Demonstratio
	Information		renewal and
n Enterprise
	Commission		transformatio

			n, etc.
			Subsidy
	Nanling
			received in
Anhui	County
			accordance				Related to
Industrial	Economic	Subsidy		No	No	50,000.00
			with local				income
Boutique	and
			government
	Information
			support

143

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==> picture [122 x 30] intentionally omitted <==

	Commission		policies such
			as investment
			promotion by
			local
			governments
			Subsidy
			received in
Special			accordance
subsidy fund			with local
	Wuhu Bureau
for talents of			government
	of Human						Related to
Wuhu Bureau		Subsidy	support	No	No	20,000.00
	and Social						income
of Human			policies such
	Affairs
and Social			as investment

Affairs			promotion by
			local
			governments
			Subsidy
The country			received in
government’s			accordance
quality	Nanling		with local
reward of	County		government
							Related to
Nanling	Market	Award	support	No	No	300,000.00
							income
County	Supervision		policies such

Market	Bureau		as investment
Supervision			promotion by
Bureau			local
			governments
			Subsidy
	Nanling		received for
High-tech	County		research and
product	Economic		development,				Related to
		Subsidy		No	No	100,000.00
subsidies (2)	and		technology				income

for 2015	Information		renewal and
	Commission		transformatio
			n, etc.
			Subsidy
Subsidy of
	Nanling		received in
Nanling
	County		accordance
County							Related to
	Environment	Subsidy	with local	No	No	22,400.00
Environment							income
	al Protection		government
al Protection
	Bureau		support
Bureau
			policies such

144

2017 Annual Report

==> picture [122 x 30] intentionally omitted <==

			as investment
			promotion by
			local
			governments
Advanced			Subsidy
grassroots			received in
Party			accordance
organization	Nanling		with local
reward of	County Party		government
							Related to
Nanling	Committee	Award	support	No	No	3,000.00
							income
Economic	Organization		policies such

Development	Department		as investment
Zone and			promotion by
Nanling			local
County			governments
Advanced			Subsidy
grassroots			received in
Party			accordance
organization	Nanling		with local
reward of	County Party		government
							Related to
Nanling	Committee	Award	support	No	No	10,000.00
							income
Economic	Organization		policies such

Development	Department		as investment
Zone and			promotion by
Nanling			local
County			governments
			Subsidy
			received in
Special			accordance
publication			with local
	Shanghai
fund of			government
	Press and						Related to
Shanghai		Subsidy	support	No	No	300,000.00
	Publication						income
Press and			policies such
	Bureau
Publication			as investment

Bureau			promotion by
			local
			governments
Provincial	Tianhe		Subsidy
subsidy for	District		received in
							Related to
entrepreneurs	Human	Subsidy	accordance	No	No	300,000.00
							income
hip	Resources		with local

promoting	and Social		government

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employment	Security		support
of Tianhe	Bureau of		policies such
District	Guangzhou		as investment
Human			promotion by
Resources			local
and Social			governments
Security
Bureau of
Guangzhou
Subsidy for
			Subsidy
entrepreneurs
			received in
hip
			accordance
promoting	Guangzhou
			with local
employment	Labor
			government
of	Employment						Related to
		Subsidy	support	No	No	120,000.00
Guangzhou	Service						income
			policies such
Labor	Management
			as investment
Employment	Center
			promotion by
Service
			local
Management
			governments
Center

			Subsidy
			received in
			accordance
			with local
	Shanghai
Special fund			government
	Municipal						Related to
for service		Subsidy	support	No	No	21,200.00
	Bureau of						income
trade			policies such
	Finance
			as investment

			promotion by
			local
			governments
Employment	Jiangsu		The subsidy
stabilization	Huai'an		received for
subsidy of	Economic		assuming the
Jiangsu	and		state’s role in
Huai'an	Technologica		guaranteeing				Related to
		Subsidy		No	No	12,392.10
Economic	l		a utility or				income

and	Development		socially
Technologica	Zone Social		necessary
l	Insurance		product
Development	Fund		supply or

146

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==> picture [122 x 30] intentionally omitted <==

Zone Social	Management		price control
Insurance	Center		function
Fund
Management
Center
			Subsidy
Work-related			received in
injury reward			accordance
	Guangzhou
of			with local
	Social
Guangzhou			government
	Insurance							Related to
Social		Award	support	No	No		7,856.62
	Fund							income
Insurance			policies such
	Management
Fund			as investment
	Center
Management			promotion by

Center			local
			governments
Bigger and
stronger	Huai'an
			Subsidy
innovation	Economic
			received for
development	and
			research and
reward of and	Technologica
			development,					Related to
Technologica	l	Award		No	No		10,000.00
			technology					income
l	Development
			renewal and
Development	Zone
			transformatio
Zone	Management
			n, etc.
Management	Committee

Committee
			Subsidy
			received for
Automotive	Anhui		research and
Fuel System	Science and		development,					Related to
		Subsidy		No	No	130,000.00	130,000.00
R&D Center	Technology		technology					assets

Project	Department		renewal and
			transformatio
			n, etc.
			Subsidy
Subsidy for	Wuhu City		received for
purchase of	Economic		research and
								Related to
single	and	Subsidy	development,	No	No	27,450.92	27,450.94
								assets
equipment in	Information		technology

SMEs	Committee		renewal and
			transformatio

147

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==> picture [122 x 30] intentionally omitted <==

			n, etc.
			Subsidy
Provincial
	Nanling		received for
"6+1"
	County		research and
Independent
	Economic		development,					Related to
Innovation		Subsidy		No	No	98,800.00	98,800.00
	and		technology					assets
Capacity
	Information		renewal and
Building
	Commission		transformatio
Subsidy Fund
			n, etc.

Special
provincial
			Subsidy
fund for
	Nanling		received for
enterprise
	County		research and
development
	Economic		development,					Related to
of Nanling		Subsidy		No	No	50,000.00	50,000.00
	and		technology					assets
County
	Information		renewal and
Economic
	Commission		transformatio
and
			n, etc.
Information

Commission
			Subsidy
Provincial			received for
Innovative	Wuhu		research and
Enterprise	Science and		development,					Related to
		Subsidy		No	No	27,750.00	27,750.00
R&D	Technology		technology					assets

Equipment	Bureau		renewal and
Subsidy			transformatio
			n, etc.
			Subsidy
2015
	Nanling		received for
Provincial
	County		research and
Special
	Economic		development,					Related to
Funds for the		Subsidy		No	No	27,750.00	27,750.00
	and		technology					assets
Construction
	Information		renewal and
of Innovative
	Commission		transformatio
Provinces
			n, etc.

Subsidy for	Nanling		Subsidy
purchase of	County		received for
								Related to
R&D	Economic	Subsidy	research and	No	No	78,400.00	39,200.00
								assets
equipment	and		development,

and appliance	Information		technology

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	Commission		renewal and
			transformatio
			n, etc.
			Subsidy
2016
			received for
Provincial
	Wuhu		research and
Special
	Science and		development,					Related to
Funds for the		Subsidy		No	No	78,400.00	39,200.00
	Technology		technology					assets
Construction
	Bureau		renewal and
of Innovative
			transformatio
Provinces
			n, etc.

Equipment
subsidy for
industrial
technology
reform
project			Subsidy
provided by	Nanling		received for
the strong	County		research and
province	Economic		development,					Related to
		Subsidy		No	No	57,000.00
construction	and		technology					assets

fund of	Information		renewal and
Nanling	Commission		transformatio
County			n, etc.
Economic
and
Information
Commission
in 2017
Industrial
Technology			Subsidy
Award	Nanling		received for
Subsidy of	County		research and
Nanling	Economic		development,					Related to
		Subsidy		No	No	14,022.50
County	and		technology					assets

Economic	Information		renewal and
and	Commission		transformatio
Information			n, etc.
Commission
2017	Nanling		Subsidy
								Related to
Provincial	County	Subsidy	received for	No	No	1,108.36
								assets
Special	Economic		research and

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Funds for the	and		development,
Construction	Information		technology
of Innovative	Commission		renewal and
Provinces of			transformatio
Nanling			n, etc.
County
Economic
and
Information
Commission
(Bureau of
Science and
Technology)
			The subsidy
Subsidy for			received for
the			assuming the
elimination			state’s role in
of yellow car	Wuhu City		guaranteeing
provided by	Environment		a utility or					Related to
		Subsidy		No	No	11,200.00
Wuhu Air	al Protection		socially					income

Pollution	Bureau		necessary
Control Joint			product
Conference			supply or
Office			price control
			function
						111,270,277.	161,032,068.
Total	--	--	--	--	--			--
						18	55

Additional descriptions:

The amount of government subsidies included in current profits and losses includes government subsidies included in other income and non-operating income.

49. Non-operating expenditures

Unit: yuan

			Amount included in current
Item	Accruals in the current period	Accruals in the prior period
			non-recurring profits and losses

Donations	134,259.40	8,830,161.71	134,259.40
Fines and late fees	219,253.60	391,027.78	219,253.60
Compensations payable	3,756,740.62		3,756,740.62
Others	76,785.28	227,252.65	76,785.28

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Total	4,187,038.90	9,448,442.14	4,187,038.90
Additional descriptions:

50. Income tax expense

(1) Details of income tax expense

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Income tax expense in the current period	83,470,564.82	105,142,968.87
Deferred income tax expense	-3,350,691.84	-3,039,968.88
Total	80,119,872.98	102,102,999.99

(2) Adjustment process of accounting profit and income tax expense

Unit: yuan

Item	Accruals in the current period
Total profit	1,916,619,595.01
Income tax expense calculate at statutory / applicable tax rate	479,154,898.75
Effect of application of a different tax rate to the subsidiaries	-380,387,821.90
Effect of income tax before adjustment	3,630,801.13
Effect of non-taxable revenue	-101,659,205.72
Effect of non-deductible costs, expenses, and losses	115,616,753.32
Effect of use of deductible losses on unrecognized deferred
	-32,822,639.08
income tax assets in the prior period

Effect of deductible temporary difference or deductible losses on
	26,863,431.99
unrecognized deferred income tax assets in the current period

R&D plus deductions	-31,796,610.81
Change in the balance of deferred income tax resulting from tax
	1,520,265.30
rate adjustment

Income tax expense	80,119,872.98

Additional descriptions

51. Other comprehensive incomes

Refer to the Note 39 “Other comprehensive incomes”

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52. Items of cash flow statement

(1) Other cash receipts relating to operating activities

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Received operating exchange amount	3,000,000.00	6,042,338.29
Received government subsidy	29,104,526.97	67,973,060.30
Received interest	8,756,161.69	8,036,639.40
Received deposit and earnest money	6,814,202.79	4,000,001.00
Housing rent		423,739.74
Received others	8,111,632.38	986,803.06
Total	55,786,523.83	87,462,581.79

Description of other cash receipts relating to operating activities:

(2) Other cash payments relating to operating activities

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Out-of-pocket general and administrative
	247,180,669.80	155,615,103.85
expenses

Out-of-pocket operating expenses	1,782,270,017.79	1,548,433,319.17
Deposit and reserve fund paid	19,562,859.61
Formality charges	606,729.28	1,088,513.84
Non-operating expenditures	430,298.28	9,448,442.14
Other payments	3,316,702.65
Total	2,053,367,277.41	1,714,585,379.00

Description of other cash payments relating to operating activities:

(3) Other cash receipts relating to investing activities

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Government subsidies received relating to
	5,235,700.00	1,568,000.00
assets

Bank financial products	2,212,369,000.00	807,800,000.00
Recovered movie investment		5,000,000.00

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Refunded royalty	4,417,865.14
Earnest money for equity repurchase	6,000,000.00
Total	2,228,022,565.14	814,368,000.00

Description of other cash receipts relating to investing activities:

(4) Other cash payments relating to investing activities

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Bank financial products	2,122,369,000.00	889,300,000.00
Lending to Zhonghui Film and TV		1,500,000.00
Investment deposit		65,000,000.00
Total	2,122,369,000.00	955,800,000.00

Description of other cash payments relating to investing activities:

(5) Other cash receipts relating to financing activities

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Issuance cost for raising capital	4,313,316.06
Cash paid for purchasing the minority
	89,180,000.00
equity of the subsidiaries

Total	93,493,316.06

Description of other cash receipts relating to financing activities:

53. Supplements to cash flow statement

(1) Supplements to cash flow statement

Unit: yuan

Supplementary information	Current amount	Amount of prior period
1. Reconciliation of net profit to cash flows
	--	--
of operating activities:

Net income	1,836,499,722.03	1,216,668,610.03
Add: Provisions for asset impairment	351,295,883.79	49,457,373.72
Depreciation of fixed assets , depletion of oil
	54,913,911.20	60,373,166.14
& gas assets, and depreciation of productive

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2017 Annual Report

living assets
Amortization of intangible assets	19,083,068.70	10,449,990.71
Amortization of long-term advance
	86,013,536.69	102,681,716.87
payments

Losses on disposal of fixed assets, intangible
assets, and other long-term assets	-1,055,284.09	-1,316,220.96
(represented with “-” for gains)
Losses on scrapping of fixed assets
		157.28
(represented with “-” for gains)

Financial expenses (represented with “-” for
	45,364,584.84	-596,853.38
gains)

Investment loss (represented with “-” for
	-256,030,245.92	-54,668,504.76
gains)

Decrease in deferred income tax assets
	-3,350,691.84	-3,039,968.88
(represented with “-” for increase)

Decrease in inventory (represented with “-”
	-30,413,122.55	-6,022,126.05
for increase)

Decrease in operating receivables
	-244,342,642.44	-474,333,644.72
(represented with “-” for increase)

Decrease in operating payables (represented
	270,541,351.33	148,829,490.37
with “-” for decrease)

Others	-296,624,143.44	3,456,391.46
Net cash flows from operating activities	1,831,895,928.30	1,051,939,577.83
2. Investing and financing activities not
	--	--
concerning cash income and expenses

3. Net change in cash and cash equivalents:	--	--
Closing balance of cash	1,580,910,931.98	819,213,006.12
Less: Opening balance of cash	819,213,006.12	1,105,789,001.15
Net increase in cash and cash equivalents	761,697,925.86	-286,575,995.03

(2) Net cash payment for acquisition of subsidiaries in the current period

	Unit: yuan Amount 483,462,500.00 --
	Amount
Cash or cash equivalent payments in the current period for business
	483,462,500.00
combination occurred in the current period

Including:	--

154

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2017 Annual Report

Shanghai Mokun	483,462,500.00
Less: Cash and cash equivalents held by the subsidiary on the
	33,452,562.16
acquisition date

Including:	--
Shanghai Mokun	33,452,562.16
Including:	--
Net cash payment for acquisition of the subsidiary	450,009,937.84

Additional descriptions:

(3) Components of cash and cash equivalents

Unit: yuan

Item	Closing balance	Opening balance
I. Cash	1,580,910,931.98	819,213,006.12
Including: cash on hand	59,238.53	31,328.92
deposit payable on demand	1,573,326,143.60	809,039,113.18
Other monetary funds payable on
	7,525,549.85	10,142,564.02
demand

III. Closing balance of cash and cash	1,580,910,931.98	819,213,006.12
equivalents

Additional descriptions:

54. Notes to items of statement of changes in owner’s equity

The company shall specify items of “Others”, under which the closing balance of the prior period is adjusted, and the adjustment amount:

None

55. Assets with restricted ownership or limited right of use

Unit: yuan

Item	Book value at the end of the period	Reason for limitation
Other non-current assets	795,864,793.02	Loans borrowed by the company’s subsidiary with mortgage on the office building for which pre-paid housing payment is made
Total	795,864,793.02	--

Additional descriptions:

155

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56. Foreign-currency monetary items

(1) Foreign-currency monetary items

Unit: yuan

	Balance of foreign currency at		Closing balance translated into
Item		Exchange rate for translation
	the end of the period		Renminbi

Monetary capital	--	--	334,644,180.37
Including: US dollar	16,185,840.93	6.5342	105,761,521.80
Euro	2.94	8.1374	23.92
Hong Kong dollar	235,790,101.01	0.8359	197,096,945.43
KRW	3,854,375,104.36	0.0061	23,511,688.14
NTD	26,038,334.73	0.2199	5,725,829.81
JPY	37,709,336.00	0.05789	2,182,993.46
THB	1,836,910.50	0.1988	365,177.81
Accounts receivable	--	--	123,507,712.82
Including: US dollar	2,457,373.75	6.5342	16,056,971.56
Euro	38,021.31	8.1374	309,394.61
Hong Kong dollar	37,760,965.30	0.8359	31,564,390.89
NTD	104,687,702.67	0.2199	23,020,825.82
PHP	8,977,590.17	0.1309	1,175,166.55
MYR	7,188,832.80	1.6071	11,553,173.19
THB	52,087,462.01	0.1988	10,354,987.45
Turkish lira	56,150.34	1.7291	97,089.55
SGD	178,838.80	4.8831	873,287.74
Indonesian Rupiah (Indonesian
	5,051,975,939.23	0.000482	2,435,052.40
Rupees)

Vietnamese Dong	6,820,135,176.34	0.0003	2,046,040.55
KRW	3,263,549,732.00	0.0061	19,907,653.37
AUD	6,266.48	5.0928	31,913.93
JPY	70,190,217.98	0.05789	4,063,311.72
GBP	414.65	8.7792	3,640.30
AED	182.45	1.7790	324.58
Polish Zloty	979.53	1.8509	1,813.01
DKK	676.50	1.0479	708.90

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2017 Annual Report

HUF	2,548.00	0.0255	64.97
Brazil Real	5,976.02	1.9725	11,787.70
CAD	21.89	5.2090	114.03
Other receivables			1,577,191.56
Including: US dollar	3,000.00	6.5342	19,602.60
KRW	223,946,568.00	0.0061	1,366,074.06
JPY	3,188,599.95	0.05789	184,588.05
SGD	31,500.00	0.2199	6,926.85
Accounts receivable			153,823,142.89
Including: NTD	112,113,636.17	0.2199	24,653,788.59
USD	14,513,527.35	6.5342	94,834,290.41
EURO	7,984.30	8.1374	64,971.44
THB	28,007.57	0.1988	5,567.90
Vietnamese Dong	4,676,607,625.40	0.0003	1,402,982.29
KRW	4,901,100,543.09	0.0061	29,896,713.31
JPY	51,214,872.14	0.05789	2,964,828.95
Other payables			859,006.92
Including: USD	90,000.00	6.5342	588,078.00
GBP	44,414,577.00	0.0061	270,928.92
Short-term borrowing			3,054,500.00
Including: KRW	500,000,000.00	0.0061	3,054,500.00

Additional descriptions:

(2) Description of overseas business entities, including disclosure of the principal places of business overseas, recording currencies, and basis for selection of recording currencies for important overseas business entities, as well as reasons for any change in the recording currency.

□ Applicable √ Not applicable

III. Change in the Scope of Consolidation

1 ． Business combination not under common control

(1) Business combination not under common control occurred in the current period

Unit: yuan

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							Revenue of	Net profit of
							the acquired	the acquired
						Basis for
							party from	party from
Name of the	Time of	Cost of	Proportion of	Method of		determination
					Acquisition		the	the
acquired	equity	equity	the equity	equity		of the
					date		acquisition	acquisition
party	acquisition	acquisition	acquired	acquisition		acquisition
							date to the	date to the
						date
							end of the	end of the

							period	period
Shanghai Mokun				Acquisition	May 31, 2017	Date of exercising control	9,541,311.27	-36,280,070.8 4
		952,749,968.		by share
	May 31, 2017		68.43%
		69		issuance and

				cash payment
	March 3,	430,000,000.		Acquisition
			31.57%
	2016	00		with cash

Additional descriptions:

According to the Agreement on Assets Acquisition by Share Issuance and Cash Payment by and between Rest Shareholders of Shanghai Mokun Digital Technology Co., Ltd. and Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. singed by the company and Yang Dongmai, Chen Wei, and Wangzhong Investment on July 31, 2016, the company acquires 68.42% share in Shanghai Mokun by means of share issuance and cash paying. Of the transaction consideration, 65% (RMB 619,287,500.00 yuan) is paid by share issuance, and a total of 35,809,147 shares are issued; the remaining 35% (RMB 333,462,500.00 yuan) is paid with cash. The transaction price of the assets to be purchased is determined with reference to the results of the Evaluation Report (Zhong Qi Hua Ping Bao Zi (2017) No. 3021) issued by China Enterprise Appraisals (CEA).

The company originally held 31.57% share in Shanghai Mokun. After the purchase of the remaining 68.43% share by share issuance and cash payment, Shanghai Mokun became a subsidiary wholly owned by the Company.

(2) Consolidated costs and goodwill

Unit: yuan

Consolidated costs	Shanghai Mokun
-- Cash	333,462,500.00
-- Fair value of equity securities issued	619,287,468.69
-- Fair value of the share held prior to the acquisition date on the
	439,548,684.96
acquisition date

Total combination cost	1,392,298,653.65
Less: fair value of identifiable net assets acquired	132,505,067.72
Balance between the goodwill/consolidated costs and the fair
	1,259,793,585.93
value of the identifiable net assets acquired

Description of the method to determine the fair value of consolidated costs and contingent considerations and their variations:

Method to determine the consolidated costs:

158

2017 Annual Report

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The transaction price of the assets to be purchased is determined by reference to the evaluation results of the evaluation report of CEA (Zhong Qi Hua Ping Bao Zi (2017) No. 3021) , and is determined by the parties to the reorganization as RMB 952,750,000.00 yuan.

Method to determine the fair value of equity instruments:

According to applicable provisions of the Accounting Standards for Business Enterprises No. 20 – Business Combination , the company needs to determine the fair value of the equity instruments issued. In the process of determining the fair value of equity instruments issued, the management of the company gives consideration to the following factors:

As provided in Article 45 of the Administrative Measures for Material Assets Reorganization of Listed Companies, the price of the share issued by the listed company shall not be 90% lower than the market reference price, which shall be any of the average stock trading prices of 20, 60, or 120 trading days before the date when the resolution of the Board on this asset acquisition by stock issuance is announced. In determining the price of the stocks issued for asset acquisition, on the basis of full consideration to the price-to-earning ratio of the stock of the listed company and valuation of comparable listed companies, the listed company, through full negotiation with its counterparties and taking the interests of all parties into account, determines to use the average stock trading price of 20 trading days prior to the date when the resolution of the Board on this asset acquisition by share issuance is announced as the market reference price and determines that the issuing price is 90% of such market reference price. The average stock trading price of 20 trading days prior to the date when the resolution of the Board on this asset acquisition by stock issuance (total amount of traded stock of 20 trading days prior to the resolution announcement date / total volume of traded stock of 20 trading days prior to the resolution announcement date) is RMB 19.30 yuan / stock. The price of the share issued for asset acquisition is determined to be 90% of the market reference price, that is, RMB 17.37 yuan / stock. After distribution of stock dividend of RMB 0.10 yuan / stock, the issuing price of the stock is RMB 17.27 yuan / stock.

Taking the above into consideration, the management of the company deems it inappropriate to use the stock price of the company to determine the fair value of the equity instrument issued. The company shall use the stock issuing price as the fair value of the equity instrument issued for acquisition of Shanghai Mokun.

Major reasons for formation of huge goodwill:

On the acquisition date, the net book value of Shanghai company is RMB 126,125,057.72 yuan. According to the “Evaluation Report on the Value of All Equities in Shanghai Mokun Involved in the Assets to be Acquired by Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. through Share Issuance and Cash Payment” [Zhong Qi Hua Ping Bao Zi (2017) No. 3021] issued by Beijing China Enterprise Appraisals Co., Ltd., the appreciation of intangible assets upon evaluation is recognized to be RMB 6,380,010.00 yuan, and the fair value of the identifiable net assets on the acquisition date is RMB 132,505,067.72 yuan. The balance between the consolidated cost and the fair value of the identifiable net assets is recognized as goodwill. Additional descriptions:

(3) Identifiable assets and liabilities of the acquired party on the acquisition date

Unit: yuan

	Shanghai Mokun	Shanghai Mokun
	Fair value on the acquisition date	Book value on the acquisition date
Assets:	151,999,008.48	145,618,998.48
Monetary funds	33,452,562.16	33,452,562.16
Accounts receivable	7,987,268.45	7,987,268.45

159

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2017 Annual Report

Inventory	0.00	0.00
Fixed assets	6,041,849.47	6,041,849.47
Intangible assets	6,382,486.06	2,476.06
Advance payments	7,600.00	7,600.00
Interest receivable	364,624.11	364,624.11
Other receivables	5,063,444.43	5,063,444.43
Non-current assets due within one year	12,000,000.00	12,000,000.00
Other current assets	80,086,426.81	80,086,426.81
Long-term deferred expenses	612,746.99	612,746.99
Liabilities:	19,493,940.76	19,493,940.76
Loans	0.00	0.00
Accounts payable	173,180.00	173,180.00
Deferred income tax liabilities	0.00	0.00
Payments received in advance	1,716,467.56	1,716,467.56
Payroll payable	6,103,707.09	6,103,707.09
Taxes payable	634,016.72	634,016.72
Other payables	78,245.86	78,245.86
Deferred income	10,788,323.53	10,788,323.53
Net Asset	132,505,067.72	126,125,057.72
Less: Minority interest	0.00	0.00
Net assets acquired	132,505,067.72	126,125,057.72

Determination method of the fair value of identifiable assets and liabilities:

Contingent liabilities of the acquired party assumed in business combination: Additional descriptions:

(4) Gains or losses on remeasurement of the share held prior to the acquisition date at the fair value

Is there more than one transaction for realization of business combination in steps and acquisition of the control in the reporting period?

√ Yes □ No

Unit: yuan

	Book value of the	Fair value of the	Gains or losses on	Determination	Amount of other
Name of the	share originally held	share originally held	remeasurement of	method of the fair	comprehensive
acquiree	prior to the	prior to the	the share held prior	value of the share	incomes relating to
	acquisition date on	acquisition date on	to the acquisition	originally held prior	the share originally

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2017 Annual Report

	the acquisition date	the acquisition date	date at the fair value	to the acquisition	held prior to the
				date on the	acquisition date
				acquisition date and	converted to
				main assumptions	investment income
Shanghai Mokun	458,141,013.24	439,548,684.96	-18,592,328.28	Equity trading price	0.00

Additional descriptions:

2. Change in the combination scope arising from other reasons

Describe any change in the combination scope arising from other reasons (such as establishment of a new subsidiary, liquidation of a subsidiary) and relevant details:

In February 2017, Tibet Xintai, the first-tier subsidiary of the company, established Lihui Venture. The company holds 100% of the share in this newly-established subsidiary and has included it in the scope of consolidation since February 2017.

In March 2017, Jiangsu Aurora, the second-tier subsidiary of the company, Anhui Aurora. The company holds 80% of the share in this newly-established subsidiary and has included it in the scope of consolidation since March 2017.

In April 2017, Top Increase, the third-tier subsidiary of the company, establishes 37 Games company. The company holds 100% of the share in this newly-established subsidiary and has included it in the scope of consolidation since April 2017.

In August 2017, Jiangsu Aurora, the second-tier subsidiary of the company, established Guangzhou Jisheng. The company holds 80% of the share in this newly-established subsidiary and has included it in the scope of consolidation since August 2017.

See Note IX “Equity in Other Entities” for details.

IV. Equity in Other Entities

1. Equity in subsidiaries

(1) Composition of enterprise group

Name of the	Principal place of	Place of	Nature of	Shareholding ratio	Shareholding ratio	Way of
subsidiary	business	registration	business	Direct	Indirect	acquisition
First-tier

subsidiary

						Business
Shanghai Sanqi
						combination not
Interactive	Guangzhou	Shanghai	Software	100.00%
						under common
Entertainment
						control

Shunrong Auto
	Wuhu	Wuhu	Manufacturing	100.00%		Establishment
Parts

Tibet Xintai	Tibet	Tibet	Investment	100.00%		Establishment
Second-tier

subsidiary

161

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					Business
Shunrong			Investment,		combination
	Wuhu	Wuhu		100.00%
Investment			Manufacturing		under common

					control
Shunrong
	Shanghai	Shanghai	Manufacturing	100.00%	Establishment
Yonghong

Guangzhou
	Guangzhou	Guangzhou	Manufacturing	100.00%	Establishment
Senyun

Yanling
	Shanghai	Shanghai	Investment	100.00%	Establishment
Investment

					Business
Anhui Vogue					combination not
	Guangzhou	Wuhu	Software	100.00%
Entertainment					under common

					control
					Business
Shanghai					combination not
	Guangzhou	Shanghai	Software	100.00%
Yingtong					under common

					control
					Business
					combination not
Guangzhou Sanqi	Guangzhou	Guangzhou	Software	80.00%
					under common

					control
					Business
Vogue
					combination not
Entertainment	BVI	BVI	Software	100.00%
					under common
International
					control

					Business
Guangzhou					combination not
	Guangzhou	Guangzhou	Software	100.00%
Xingzhong					under common

					control
					Business
					combination not
Anhui Sanqi	Guangzhou	Wuhu	Software	100.00%
					under common

					control
					Business
					combination not
Jiangsu Aurora	Guangzhou	Huai’an	Software	80.00%
					under common

					control
Shanghai	Guangzhou	Shanghai	Software	100.00%	Business

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Guanhang					combination not
					under common
					control
					Business
					combination not
Anhui Jiashang	Guangzhou	Wuhu	Software	100.00%
					under common

					control
					Business
					combination not
ENP Games	South Korea	South Korea	Software	54.90%
					under common

					control
					Business
Easy Gaming,					combination not
	USA	USA	Software	100.00%
Inc.					under common

					control
Lihui Venture	Xinjiang	Xinjiang	Investment	100.00%	Establishment
Third-tier

subsidiary

					Business
AZA Games Co.					combination not
	South Korea	South Korea	Software	54.90%
Ltd					under common

					control
BRAEVE Co.,
	Japan	Japan	Software	53.33%	Establishment
Ltd

					Business
					combination not
G-MEI Network	Taiwan	BVI	Software	100.00%
					under common

					control
					Business
					combination not
Chengdu Shengge	Chengdu	Chengdu	Software	80.00%
					under common

					control
					Business
Beijing					combination not
	Guangzhou	Beijing	Software	80.00%
Shangheng					under common

					control
					Business
Jiangsu Jiaqu	Guangzhou	Huai’an	Software	80.00%	combination not
					under common

163

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2017 Annual Report

					control
					Business
					combination not
Shanghai Zhiren	Guangzhou	Shanghai	Software	100.00%
					under common

					control
					Business
Shanghai Mobile					combination not
	Guangzhou	Shanghai	Software	80.00%
Game					under common

					control
Anhui Xuhong	Guangzhou	Wuhu	IT	100.00%	Establishment
					Business
					combination not
Anhui Guanyu	Guangzhou	Wuhu	Advertising	100.00%
					under common

					control
Guangzhou Sanqi
Interactive	Guangzhou	Guangzhou	Software	80.00%	Establishment
Entertainment
					Business
					combination not
Top Increase	BVI	BVI	Software	100.00%
					under common

					control
Anhui Aurora	Guangzhou	Wuhu	Software	80.00%	Establishment
Guangzhou
	Guangzhou	Guangzhou	Software	80.00%	Establishment
Jisheng

Fourth-tier

subsidiary

					Business
					combination not
Jiangsu Zhiming	Guangzhou	Huai’an	Software	100.00%
					under common

					control
					Business
37 Games					combination not
	HK	HK	Software	100.00%
Entertainment					under common

					control
					Business
Wisdom Game					combination not
	BVI	BVI	Software	100.00%
International					under common

					control
Wisdom	HK	HK	Software	100.00%	Business

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Entertainment					combination not
International					under common
					control
					Business
					combination not
Tibet Taifu	Tibet	Tibet	Software	100.00%
					under common

					control
Guangzhou
	Guangzhou	Guangzhou	Software	80.00%	Establishment
Jisheng Network

Guangzhou
	Guangzhou	Guangzhou	Software	85.00%	Establishment
Huoshanhu

Guangzhou Jishi	Guangzhou	Guangzhou	Software	80.00%	Establishment
Huoerguosi
	Xinjiang	Xinjiang	Software and IT	100.00%	Establishment
Xinghui

Huoerguosi
	Xinjiang	Xinjiang	Software and IT	80.00%	Establishment
Xinrui

37 Games
	South Korea	South Korea	Software	100.00%	Establishment
Company

Fifth-tier

subsidiary

Tibet Yaotong	Guangzhou	Tibet	Software	100.00%	Establishment
Tibet Shengge	Guangzhou	Tibet	Software	100.00%	Establishment
Huoerguosi
	Xinjiang	Xinjiang	Software and IT	100.00%	Establishment
Qianyu

					Business
					combination not
Shanghai Mokun	Shanghai	Shanghai	Software	100.00%
					under common

					control
Sixth-tier

subsidiary

					Business
Shanghai					combination not
	Shanghai	Shanghai	Software	76.50%
Langkun					under common

					control
					Business
					combination not
Shanghai Kunkun	Shanghai	Shanghai	Software	100.00%
					under common

					control

165

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2017 Annual Report

									Business
									combination not
Shanghai Miji	Shanghai		Shanghai		Software		100.00%
									under common

									control
									Business
									combination not
Shanghai Aojue	Shanghai		Shanghai		Software		100.00%
									under common

									control
Seventh-tier

subsidiary

									Business
									combination not
Huoerguosi Jiaji	Xinjiang		Xinjiang		Software		76.50%
									under common

									control
Description of shareholding ratio in the subsidiary inconsistent with the percentage of voting rights: Basis for control on the investee with a half or less of the voting rights and no control on the investee with more than a half of the voting rights: Basis of control over significant structure entity included in the scope of consolidation: Basis for identifying the company as an agent or a trustor: (2) Significant non-wholly-owned subsidiaries Unit: yua
						Current dividends

		Shareholding ratio of		Current profits and losses		announced to be		Closing balance of
Name of the subsidiary				attributable to minority
		minority shareholders				distributed to minority		minority interest
				shareholders
						shareholders

Jiangsu Aurora		20.00%		136,927,678.24		98,000,000.00		140,264,144.76
Guangzhou Sanqi		20.00%		88,541,223.83		30,000,000.00		118,675,816.34

Unit: yuan

Description of shareholding ratio of minority shareholders in the subsidiary inconsistent with the percentage of voting rights: Additional descriptions:

(3) Major financial information of significant non-wholly-owned subsidiaries

Unit: yuan

Name of			Closing balance	Closing balance	Closing balance	Closing balance		Opening balance	Opening balance	Opening balance	Opening balance	Opening balance
the		Non-curr			Non-curr			Non-curr			Non-curr
	Current		Total	Current		Total	Current		Total	Current		Total
subsidiar		ent			ent			ent			ent
	assets		assets	liabilities		liabilities	assets		assets	liabilities		liabilities
y		assets			liabilities			assets			liabilities

166

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==> picture [122 x 30] intentionally omitted <==

Jiangsu	695,370,	290,177	, 985,548,	161,313,	122,914,	284,228,	588,863,	12,653,2	601,516,	83,911,3	10,922,5	94,833,9
Aurora	986.38	856.65	843.03	849.14	270.08	119.22	073.64	07.39	281.03	76.34	72.09	48.43
Guangzh	1,043,43	115,896	, 1,159,32	531,531,	34,416,6	565,948,

ou Sanqi	0,956.42	348.84	7,305.26	578.14	45.44	223.58

												Unit: yuan

	Accruals in the current period	Accruals in the current period	Accruals in the current period	Accruals in the current period	Accruals in the prior period	Accruals in the prior period	Accruals in the prior period	Accruals in the prior period
				Cash flows			Total	Cash flows
Name of the			Total
	Business			from	Business			from
subsidiary		Net profit	comprehensi			Net profit	comprehensi
	revenue			operating	revenue			operating
			ve income				ve income
				activities				activities

Jiangsu	1,014,730,24	684,638,391.	684,638,391.	797,291,694.	713,291,613.	482,429,940.	482,429,940.	317,079,561.
Aurora	2.51	21	21	37	54	94	94	41
Guangzhou	2,098,517,90	470,530,214.	470,530,214.	863,880,248.

Sanqi	6.50	76	76	47

Additional descriptions:

In the prior year, Guangzhou Sanqi was not disclosed as a significant non-wholly-owned subsidiary of the company. Thus the data of the prior year in the statements are absent.

2. Transactions resulting in change in share of owner’s equity in a subsidiary with the company still controlling the subsidiary

(1) Details of change in the share of owner’s equity in the subsidiary

Name of subsidiary	Change date	Shareholding ratio before change	Shareholding ratio after change
ENP Games	March 2017	55.41%	54.99%
	August 2017	54.99%	54.90%
Guangzhou Sanqi	May 2017	85.00%	80.00%
Jiangsu Zhiming	May 2017	51.00%	100.00%

(2) Effect of the transaction on minority interest and owner’s equity attributable to the parent company

Unit: yuan

	Guangzhou Sanqi	Jiangsu Zhiming
-- Cash	10,000,000.00	89,180,000.00
-- Fair value of non-cash assets		165,619,990.80
Total of acquisition cost /
	10,000,000.00	254,799,990.80
disposal consideration

167

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Less: net assets of the
subsidiary calculate at the ratio	148,249.30	11,690,370.90	38,133,835.05
of the share acquired/disposed
Difference	-148,249.30	-1,690,370.90	216,666,155.75
Included: adjusted capital
	-148,249.30	-1,690,370.90	216,666,155.75
reserve

Additional descriptions:

(1) The company paid RMB 254,799,999.80 yuan to Hu Yuhang by issuing shares and paying cash to purchase 49% share he held in Jiangsu Zhiming. The formalities for industrial and commercial registration of changes was completed on May 10, 2017. Tianjian Accounting Firm issued the Audit Report (Tian Jian Shen (2017) No. 3-460) for the transitional period (from September 1, 2016 to May 31, 2017) .

(2) The company transferred 5% share it held in Guangzhou Sanqi Network Technology Co., Ltd. to Huai’an Shunjing Enterprise Management Partnership (Limited Partnership) for RMB 10 million yuan, whose partners are key managers of Guangzhou Sanqi.

3. Equity in joint ventures or associated enterprises

(1) Significant joint ventures or associated enterprises

				Shareholding ratio	Shareholding ratio	Accounting
Name of the joint						method of
venture or	Principal place of	Place of	Nature of			investment in the
associated	business	registration	business	Direct	Indirect	joint venture or
enterprise						associated
						enterprise
Yangzhou Fuhai
Sanqi Internet
Culture
	Yangzhou	Yangzhou	Investment		64.52%	Equity method
Investment

Center (Limited
Partnership)
Huai’an Sanqi
Yijian
Entertainment
Assets	Huai’an	Huai’an	Investment		39.70%	Equity method
Management
Center (Limited
Partnership)
Mango (Xiamen)
Creative
	Xiamen	Xiamen	Investment		31.75%	Equity method
Incubation Equity

Investment Fund

168

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2017 Annual Report Partnership (Limited Partnership)

Description of the shareholding ratio in the joint venture or associated enterprise inconsistent with the percentage of voting rights:

(1) The company held 64.52% share in Yangzhou Fuhai Sanqi Internet Culture Investment Center (Limited Partnership), which is not included in the scope of consolidation because: A. according to the joint venture agreement, the joint venture will set up an Investment Decision-making Committee to take charge of making decisions regarding investment and other businesses of the joint venture. The Committee consists of five members, who are appointed upon the internal resolution of Shanghai Fuhai Sanqi Enterprise Management Co., Ltd. Decisions on investment are adopted upon the consent of four-fifths or more of the members of the Committee; B. Partners’ meeting, the supreme authority of the joint venture, is set up. Resolutions of the partners’ meetings are adopted upon the consent of the partners jointly holding more than two-thirds of the paid-up contribution. Based on the foregoing agreements, Tibet Taifu, a wholly-owned subsidiary of the company, does not control Yangzhou Fuhai Sanqi Internet Culture Investment Center (Limited Partnership).

(2) In December 2016, Tibet Taifu, a subsidiary of the company, as the junior limited partner, entered into the Partnership Agreement with Guangdong Yijian Investment Co., Ltd., the general partner, and China Resources SDIC Trust Co., Ltd., the senior partner, to established Huai’an Sanqi Yijian Entertainment Assets Management Center (limited partnership) (“Huai’an Sanqi”). The term of the partnership is 3 years. Tibet Taifu invested RMB 101,280,000.00 yuan and held 39.70% of share in the partnership. The profit distribution of Huai’an on the project during the investment period shall be decided by the Investment Decision-making Committee (composed of 3 members, with each partner appointing one member) . The specific profit distribution plan shall be passed only after the above members approve it unanimously. The profit distribution order agreed in the agreement is as follows: ① the profit obtained during the investment period shall be distributed to the senior limited partner in the first place on a quarterly basis, Huai’an Sanqi shall distribute the profit on the 21st day in the end of each quarter; ② If there is any balance in the distributable profit of the project, the paid-up contribution shall be returned to the senior limited partner as profit and shall be paid when the term of operation expires; ③ The remaining distributable profit after the above distributions as set out in the foregoing two points shall be distributed according to the negotiation and decision of the junior limited partner and the general partner; ④ 5% of the distributable profit remaining after distributions as set out in the foregoing two points shall be distributed to the general partner, and 95% to the junior limited partner.

Basis for holing less than 20% of the voting rights with significant influence or holding 20% or more of the voting rights without significant influence:

(2) Principal financial information of important associated enterprises

Unit: yuan

Closing balance / accruals in the current period	Closing balance / accruals in the current period	Closing balance / accruals in the current period	Opening balance / accruals in the prior	Opening balance / accruals in the prior	Opening balance / accruals in the prior	period
		Mango
Yangzhou	Huai’an Sanqi
		(Xiamen)				Shenzhen
Fuhai Sanqi	Yijian
		Creative	Shanghai	Shanghai		Zhanlong
Internet	Entertainment		A		hhi li
		Incubation	urora	Mokun Digital	Sanga Jue	Interactive
Culture	Assets		k		l di
		Equity	Networ	Technology	Cuture Mea	Entertainment
Investment	Management		Thl		C Ld
		Investment	ecnoogy	Co., Ltd.	o., t.	Technology
Center (limited	Center (limited		C Ltd
		Fund	o., .			Co., Ltd.
partnership)	partnership)
		Partnership

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			(limited
			partnership)
Current assets	72,887,128.32	2,530,160.27	116,887,443.92	107,556,399.76	137,637,440.10	33,366,022.25	8,538,795.74
Non-current
	37,750,000.00	233,574,085.99	9,300,000.00	4,117,539.68	19,276,139.27	2,415,000.56	249,820.75
assets

Total assets	110,637,128.32	236,104,246.26	126,187,443.92	111,673,939.44	156,913,579.37	35,781,022.81	8,788,616.49
Current
			4,465,358.22	4,615,752.89	7,795,268.18	5,948,397.93	361,793.08
liabilities

Non-current
					14,240,430.36
liabilities

Total liabilities			4,465,358.22	4,615,752.89	22,035,698.54	5,948,397.93	361,793.08
Owner’s equity
attributable to
shareholders of	110,637,128.32	236,104,246.26	121,722,085.70	107,058,186.55	134,877,880.83	29,832,624.88	8,426,823.41
parent
company
Share in net
assets
calculated by	50,000,000.00	101,677,840.80	38,646,762.21	19,270,473.58	42,580,946.98	8,949,787.46	2,528,047.02
shareholding
ratio
-- Goodwill				7,750,000.00	418,323,332.51	22,878,457.62	6,955,000.00
Book value of
equity
investment in	50,000,000.00	101,677,840.80	38,646,762.21	24,850,473.57	460,904,279.49	31,828,207.79	9,483,047.02
associated
enterprises
Operating
				75,183,236.39	162,330,711.71	35,901,885.79
revenue

Net profit	137,128.32	11,067,234.25	-4,262,166.26	69,220,185.99	109,611,612.86	-3,110,158.15	-1,723,176.59
Total
comprehensive	137,128.32	11,067,234.25	-4,262,166.26	69,220,185.99	109,611,612.86	-3,110,158.15	-1,723,176.59
incomes
Dividend
obtained from
associated			8,769,681.68
enterprises in
the current year

Additional descriptions

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(3) Summary of financial information of insignificant joint ventures and associated enterprises

Unit: yuan

	Closing balance / accruals in the current	Opening balance / accruals in the prior

	period	period

Joint ventures:	--	--
Total of the following calculated by
	--	--
shareholding ratio

Associated enterprises:	--	--
Total book value of investments	186,648,229.07	259,501,831.93
Total of the following calculated by
	--	--
shareholding ratio

- Net profit	-10,183,932.08	26,091,438.40
- Total comprehensive incomes	-10,183,932.08	26,091,438.40

Additional description

Insignificant associated enterprises include: Shenzhen EONE Network Technology Co., Ltd., Penta Game Co., Ltd., Shanghai Tingting Network Technology Co., Ltd., Shanghai Menggongfang Network Technology Co., Ltd., Beijing Zhuayou Interactive Network Technology Co., Ltd., Wuhai Yihua Kaitian Culture and Communication Co., Ltd., Longzhang Network Technology (Shanghai) Co., Ltd., Longzhang Animation (Shanghai) Co., Ltd., Shenzhen Zhanlong Interactive Entertainment Technology Co., Ltd., Xiamen Yiqi Investment Management Co., Ltd., Chengdu 91ACT Technology Co., Ltd., Chengdu Mofei Technology Co., Ltd., Chengdu Modu Technology Co., Ltd., Shanghai Fuhai Sanqi Investment Management Co., Ltd., Shanghai 11wan Network Technology Co., Ltd., Chengdu Pengwan Technology Co., Ltd., and Shanghai Jueli Culture & Media Co., Ltd. Total net profits and comprehensive incomes calculated by shareholding ratio include the returns on investment in Shanghai Aurora Network Technology Co., Ltd., Shanghai Zheyuan Culture & Media Co., Ltd., and Shanghai Mokun.

(4) Excess loss occurred to joint ventures or associated enterprises

Unit: yuan

		Derecognized loss in the current	Accumulated derecognized
Name of the joint venture or	Accumulated derecognized
		period (or net profit shared in	losses at the end of the current
associated enterprise	losses in the prior period
		the current period)	period

Longzhang Animation
	-1,554,329.50	-3,647,586.58	-5,201,916.08
(Shanghai) Co., Ltd.

Additional description

V. Risks in Relation to Financial Instruments

The company's goal in risk management is to strike a balance between risk and return, minimize the adverse impact of the risk on the company's operating performance, and maximize the benefits of shareholders and other equity investors. Based on this risk management objective, the basic strategy of the company's risk management is to identify and analyze various risks faced by the

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company, establish a proper risk tolerance floor and conduct risk management, and supervise various risks in a timely and reliable manner, and control risks within a limited range.

The company faces various risks relating to financial instruments in its day-to-day activities, which mainly include credit risk, liquidity risk and market risk. The management has reviewed and approved the policies for managing these risks, as summarized below.

(I) Credit risk

Credit risk refers to the risk that one party to a financial instrument cannot perform its obligations and causes financial losses to the other.

The company's credit risk mainly comes from bank deposits and receivables. In order to control the above related risks, the company has taken the following measures respectively.

1. Bank deposit

The company deposits bank deposits in financial institutions with high credit ratings, so that its credit risk is low.

2. Receivables

The company conducts regular credit evaluations on customers who use credit transactions. According to the results of the credit assessment, the company elects to conduct transactions with approved and well-credited customers and monitors the balance of its receivables to ensure that the Company will not face significant bad debt risks.

As the Company’s accounts receivable risk points are distributed among multiple partners and multiple customers, as of December 31, 2017, 51.36% (December 31, 2016: 52.79%) of the Company’s accounts receivable comes from the top five customers in respect of balance, and the Company does not have significant credit concentration risk.

(1) The Company’s receivables that are not past due and not yet impaired, as well as the amounts that are past due but not impaired, and the overdue ageing analysis are as follows:

Item	Closing balance	Closing balance	Closing balance	Closing balance
	Not overdue and not impaired	Overdue but not impaired			Total
		Less than 1 year	1-2 years	Over 2 years
Notes receivable	55,340,000.00	-	-	-	55,340,000.00
Other current assets - Bank financial products	110,000,000.00	-	-	-	110,000,000.00
Subtotal	165,340,000.00	-	-	-	165,340,000.00

(continued)

(continued)
Item	Opening balance
	Not overdue and not impaired	Overdue but not impaired			Total
		Less than 1 year	1-2 years	Over 2 years
Notes receivable	94,638,841.21	-	-		- 94,638,841.21
Other current assets - Bank financial products	170,000,000.00	-	-		- 170,000,000.00
Subtotal	264,638,841.21	-	-		- 264,638,841.21

(2) Please refer to the notes to this financial statement (explanation of receivables in the note to items of the consolidated financial

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statements) for the details of the individually accrued receivables.

(II) Liquidity risk

Liquidity risk refers to the risk of shortage of funds when the company fulfills its obligations to settle cash or other financial assets. Liquidity risk may arise from the inability to sell financial assets at fair value as soon as possible; or from the other party’s inability to repay its contractual obligations; or from early maturity debt; or from the inability to generate expected cash flows.

The company's current financial assets can meet working capital requirements and capital expenditures, and the liquidity risks it bears are not significant.

Financial liabilities classified by remaining due dates

Financial liabilities	classified by remaining due dates	classified by remaining due dates	classified by remaining due dates	classified by remaining due dates	classified by remaining due dates
Item	Closing balance
	Book value	Undiscounted contract amount	Less than 1 year	1-3 years	Over 3 years
Short-term loan	372,054,500.00	372,054,500.00	372,054,500.00	-	-
Notes payable	-	-	-	-	-
Accounts payable	741,792,973.33	741,792,973.33	704,225,674.10	37,567,299.23	-
Other payables	61,572,020.26	61,572,020.26	35,957,715.81	25,614,304.45	-
Subtotal	1,175,419,493.59	1,175,419,493.59	1,112,237,889.91	63,181,603.68	-

(continued)

(continued)
Item	Opening balance
	Book value	Undiscounted contract amount	Less than 1 year	1-3 years	Over 3 years
Short-term loan	372,878,500.00	372,878,500.00	372,878,500.00	-	-
Notes payable	17,414,395.42	17,414,395.42	17,414,395.42	-	-
Accounts payable	700,713,118.00	700,713,118.00	700,713,118.00	-	-
Other payables	293,166,635.18	293,166,635.18	293,166,635.18	-	-
Subtotal	1,384,172,648.60	1,384,172,648.60	1,384,172,648.60	-	-

(III) Market risks

Market risk refers to the risk that the fair value or future cash flow of a financial instrument will fluctuate due to changes in market prices. Market risk mainly includes interest rate risk and foreign exchange risk.

1. Interest risk

Interest rate risk refers to the risk that the fair value or future cash flow of a financial instrument will fluctuate due to changes in market interest rates. The company does not have the risk of changes in market interest rates.

2. Foreign exchange risk

Foreign exchange risk refers to the risk that the fair value or future cash flow of a financial instrument will fluctuate due to changes in foreign exchange rates. The risk of exchange rate changes faced by the company is mainly related to the company's foreign currency monetary assets and liabilities. The company is mainly operating in the Mainland of China and its major activities are denominated in RMB. Therefore, the foreign exchange market risk assumed by the company is not significant.

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In respect of the foreign-currency monetary assets and liabilities of the company at the end of the period, please refer to the notes to the financial statements (explanation of foreign-currency monetary items in the notes to items of consolidated financial statement).

VI. Disclosure of Fair Value

1. Closing fair value of assets and liabilities measured at fair value

Unit: yuan

	Fair value at the end of the period	Fair value at the end of the period	Fair value at the end of the period
Item	Measurement of Level 1	Measurement of Level 2	Measurement of Level 3
				Total
	fair value	fair value	fair value

I. Recurring fair value
	--	--	--	--
measurement

(II) Available-for-sale
	57,541,101.92			57,541,101.92
financial assets

(2) Investment in equity
	57,541,101.92			57,541,101.92
instruments

II. Non-recurring fair
	--	--	--	--
value measurement

2. Determination basis for market price of items measured at recurring and non-recurring Level 1 fair value

The fair value of available-for-sale financial assets is determined based on the open market value.

VII. Related Parties and Related-party Transactions

1. Parent company of the Company


Name of the parent				Shareholding ratio of
	Place of registration	Nature of business	Registered capital
company				the parent company


Details of the parent company of the company

The final controllers of the company are Wu Xushun, Wu Weihong, and Wu Weidong.

Additional descriptions:

1. De facto controllers of the company

Name of de facto controllers	Shareholding ratio in the company (%)	Percentage of voting rights in the company
		(%)
Wu Xushun	9.50	9.50

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	2017 Annual Repor	2017 Annual Repor
Wu Weihong	7.83	7.83
Wu Weidong	7.76	7.76

Wu Xushun and Wu Weihong are father and daughter; and Wu Xushun and Wu Weidong are father and son. These three shareholders together hold 25.09% of the share in the company.

2. Subsidiaries of the company

See Note IX “Equity in Other Entities” for the details of the company’s subsidiaries.

3. Joint ventures and associated enterprises of the company

See Note IX “Equity in Other Entities” for the details of the significant joint ventures and associated enterprises of the company.

The information is as follow of other joint ventures or associated enterprises that made related-party transactions with the company during the current period or that made related-party transactions with the company in prior periods and the balance of such transactions remains:

Name of joint venture or associated enterprise	Relationship with the Company
Shenzhen EONE Network Technology Co., Ltd.	Associated enterprise of the company
Shanghai Aurora Network Technology Co., Ltd.	Associated enterprise of the company before March 31, 2017
Shanghai Aoting Network Technology Co., Ltd.	Associated enterprise of the company
Shanghai Tingting Network Technology Co., Ltd.	Associated enterprise of the company
	Associated enterprise of the company May 31, 2017，and
Shanghai Mokun
	subsidiary of the Company after May 31, 2017

Chengdu Modu Technology Co., Ltd.	Associated enterprise of the company
Chengdu Mofei Technology Co., Ltd.	Associated enterprise of the company
Shanghai 11wan Network Technology Co., Ltd.	Associated enterprise of the company
Mango (Xiamen) Creative Incubation Equity Investment Fund
	Associated enterprise of the company
Partnership (Limited Partnership)

Huai’an Sanqi Yijian Entertainment Assets Management Center
	Associated enterprise of the company
(Limited Partnership)

Longzhang Animation (Shanghai) Co., Ltd.	Associated enterprise of the company
Longzhang Network Technology (Shanghai) Co., Ltd.	Associated enterprise of the company
Yangzhou Fuhai Sanqi Internet Culture Investment Center
	Associated enterprise of the company
(Limited Partnership)

	a related party before May 31, 2017 (the director and vice
	general manager of the company act as directors of the
Chengdu 91ACT Technology Co., Ltd.
	company) , and an associated enterprise of the company as of

	May 31, 2017
Chengdu Pengwan Technology Co., Ltd.	a related party before May 31, 2017 (the director and vice

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general manager of the company act as directors of the company) , and an associated enterprise of the company

Additional description

The company disposed of Shanghai Aurora Network Technology Co., Ltd. on March 31, 2017, and the related-part transactions disclosed in this reporting period is the accruals between January and March of 2017.
The company completed its acquisition of Shanghai Mokun on May 31, 2017, and the related-part transactions disclosed in this reporting period is the accruals between January and May of 2017.

4. Information of other related parties

Name of other related parties	Relationship with the Company
	Related party for the past 12 months (vice chairman and general
Shenzhen Moklyin Technology Co., Ltd.
	manager of the Company act as directors of this company)

	Related party (director and vice general manager of the Company
Guangzhou Joyegame Software Co., Ltd.
	act as directors of this company)

	Related party (The director and vice general manager of the
Shanghai Mango Interactive Technology Co., Ltd.
	Company act as directors of this company)

	Related party (The director and vice general manager of the
Shenzhen Qifan Network Co., Ltd.
	Company act as directors of this company)

	Related party (The director and vice general manager of the
Wuhan Yihua Kaitian Culture and Communication Co., Ltd.
	Company act as directors of this company)

	Related party (The vice general manager of the Company acts as
Beijing Colorful Game Technology Co., Ltd.
	a director of this company)

	A natural person who holds no less than 5% shares in the listed
Li Weiwei
	company, vice chairman, general manager

	A natural person who holds no less than 5% shares in the listed
Zeng Kaitian
	company

Additional description

5. Information of related-party transactions

(1) Related-party transactions on sale and purchase of goods, and rendering and acceptance of services

List of purchased goods/accepted services

Unit: yuan

				Exceeding the
	Transaction	Accruals in current	Approved transaction
Related party				approved transaction	Accruals in last period
	content	period	amount
				amount?

Chengdu Pengwan	Game commission	26,751,740.93	32,158,950.00	No	28,173,467.03

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2017 Annual Report

Technology Co.,	fee and royalty
Ltd.	acquisition
Shanghai Aurora
Network	Game commission
Technology Co.,	fee and royalty	11,932,597.82	155,185,950.00	No	76,699,082.85
Ltd.	acquisition

Shanghai Tingting
	Game commission
Network
	fee and entrusted	7,495,417.36	14,640,750.00	No	985,902.83
Technology Co.,
	R&D expense
Ltd.

	Game commission
Shenzhen Moklyin	fee, royalty
Technology Co.,	acquisition and	5,490,077.96	28,512,450.00	No	41,851,736.17
Ltd.	entrusted R&D
	expense
Shanghai Mango
	Game commission
Interactive
	fee and new
Entertainment		4,228,519.65	7,304,400.00	No	13,496,263.50
	product design
Technology Co.,
	cost
Ltd.

	Game commission
	fee, royalty
Shanghai Mokun	acquisition and	1,051,125.60	8,560,500.00	No	5,779,419.80
	entrusted R&D
	expense
Beijing Colorful
	Game commission
Game Technology		952,493.00		Yes
	fee
Co., Ltd.

Longzhang
	Game commission
Animation		514,216.26		Yes
	fee
(Shanghai) Co., Ltd.

Chengdu 91ACT
	Game commission
Technology Co.,		255,657.80		Yes	1,744,822.46
	fee
Ltd.

Shenzhen EONE
	Game commission
Network
	fee and royalty	212,164.40	10,545,000.00	No	1,417,026.79
Technology Co.,
	acquisition
Ltd.

Chengdu Mofei	Game commission	157,157.40		Yes

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2017 Annual Report

Technology Co.,	fee and entrusted
Ltd.	R&D expense
	Game commission
Shenzhen Qifan
	fee and royalty	121,757.67	Yes	5,165,805.91
Network Co., Ltd.
	acquisition

Shanghai Aoting
	Game commission
Network
	fee and entrusted	38,453.71	Yes	287,608.96
Technology Co.,
	R&D expense
Ltd.

Guangzhou	Game commission
Joyegame Software	fee and entrusted	8,279.46	Yes	235,273.11
Co., Ltd.	R&D expense

List of sold goods/ rendered services

Unit: yuan

Related party	Transaction content	Accruals in current period	Accruals in last period
Shanghai 11wan Network
	Software operation revenue	5,545,397.18	0.00
Technology Co., Ltd.

Shanghai Mango Interactive
Entertainment Technology Co.,	Software operation revenue	840,274.48	970,760.13
Ltd.
Shenzhen Moklyin Technology	Evaluation service revenue,
		473,057.78	482,984.47
Co., Ltd.	technical service fee

Beijing Colorful Game
	Software operation revenue	12,466.87
Technology Co., Ltd.

Description of the related-party transactions of purchasing or selling goods and rendering and accepting services

(2) Information of related-party security

The Company provides security for others

Unit: yuan

				Whether the security is
The secured party	Security amount	Security start date	Security expiration date
				performed fully

The Company is secured by others				Unit: yua
				Whether the security is
Securing party	Security amount	Security start date	Security expiration date
				performed fully

Li Weiwei and Zeng	300,000,000.00	May 19, 2016	May 19, 2017	Yes

Unit: yuan

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2017 Annual Report

Kaitian
Li Weiwei and Zeng
	70,000,000.00	October 28, 2016	October 27, 2017	Yes
Kaitian

Li Weiwei and Zeng
	100,000,000.00	January 23, 2017	July 24, 2017	Yes
Kaitian

Li Weiwei and Zeng
	91,000,000.00	April 14, 2017	October 28, 2017	Yes
Kaitian

Li Weiwei and Zeng
	210,000,000.00	May 23, 2017	May 22, 2018	No
Kaitian

Li Weiwei and Zeng
	90,000,000.00	May 24, 2017	May 22, 2018	No
Kaitian

Li Weiwei, Zeng Kaitian	69,000,000.00	June 9, 2017	June 8, 2018	No

Description of related-party security

(3) Details of related-party asset transfer and debt restructuring

Unit: yuan

Related party Transaction content Accruals in current period Accruals in last period

(4) Compensation of key executives

Unit: yuan

Item	Accruals in current period	Accruals in last period
Compensation of key executives	14,575,100.00	13,058,900.00

6. Receivables and payables of related party

(1) Receivables

Unit: yuan

		Closing balance	Closing balance	Opening balance	Opening balance
Item	Related party
		Book balance	Bad-debt provision	Book balance	Bad-debt provision

	Shenzhen Moklyin
Accounts receivable		0.00		689.45	34.47
	Technology Co., Ltd.

	Shanghai Mango
	Interactive
Accounts receivable		141,403.60	7,070.18	391,386.80	19,569.34
	Entertainment

	Technology Co., Ltd.

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	Shanghai 11wan
Accounts receivable	Network Technology	5,473,326.88	273,666.34
	Co., Ltd.
	Beijing Colorful
Accounts receivable	Game Technology	13,214.88	660.74
	Co., Ltd.
	Total	5,627,945.36	281,397.27	392,076.25	19,603.81
	Shenzhen EONE
Advance payment	Network Technology	1,757,963.61
	Co., Ltd.
	Chengdu 91ACT
Advance payment		1,450,617.07		1,706,274.87
	Technology Co., Ltd.

	Longzhang
Advance payment	Animation	14,485,783.74		15,000,000.00
	(Shanghai) Co., Ltd.
	Longzhang Network
Advance payment	Technology	1,982,010.00
	(Shanghai) Co., Ltd.
Advance payment	Shenzhen Qifan
		1,978,994.10		2,228,123.37
	Network Co., Ltd.

Advance payment	Chengdu Modu
		1,000,000.00
	Technology Co., Ltd.

Advance payment	Chengdu Mofei
		842,842.60
	Technology Co., Ltd.

	Total	23,498,211.12		18,934,398.24

(2) Payables

Unit: yuan

Item	Related party	Closing book balance	Opening book balance
	Chengdu Pengwan Technology
Account payable		11,622,401.24	1,327,086.55
	Co., Ltd.

	Guangzhou Joyegame Software
Account payable		3,951.38	55,465.52
	Co., Ltd.

	Shanghai Aoting Network
Account payable		7,360.48	96,522.00
	Technology Co., Ltd.

	Shanghai Tingting Network
Account payable		727,664.83	480,918.00
	Technology Co., Ltd.

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	Shenzhen Moklyin Technology
Account payable		14,717,281.13	20,795,442.37
	Co., Ltd.

	Shenzhen EONE Network
Account payable			82,480.17
	Technology Co., Ltd.

	Shanghai Mango Interactive
Account payable	Entertainment Technology Co.,	346,198.97	1,163,676.82
	Ltd.
	Beijing Colorful Game
Account payable		1,138,598.90
	Technology Co., Ltd.

	Total	28,563,456.93	24,001,591.43
	Shenzhen Moklyin Technology
Other payables		0.00	200,000,000.00
	Co., Ltd.

	Huai’an Sanqi Yijian
	Entertainment Assets
Other payables		19,032,685.81	31,789,000.00
	Management Center (limited

	partnership)
	Mango (Xiamen) Creative
	Incubation Equity Investment
Other payables		0.00	40,000,000.00
	Fund Partnership (limited

	partnership)
	Chengdu Modu Technology
Other payables		6,000,000.00
	Co., Ltd.

	Chengdu Mofei Technology
Other payables		6,000,000.00
	Co., Ltd.

	Wuhan Yihua Kaitian Culture
Other payables		2,000,000.00
	Transmission Co., Ltd.

	Total	33,032,685.81	271,789,000.00

VIII. Share-based Payments

1. General of share-based payments

√ Applicable □ Not applicable

√ Applicable □ Not applicable
	Unit: yuan 110,984,100.00 110,984,100.00 0.00
Total equity instruments granted by the company in the current period	110,984,100.00
Total equity instruments granted by the company in the current period	110,984,100.00
Total equity instruments granted by the company in the current period	0.00

Additional description

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2. Details of share-based payments settled by equity

√ Applicable □ Not applicable

Unit: yuan Determination basis for the quantity of exercisable equity Equity transfer contract instruments Reason for significant discrepancy between current estimate and Not applicable prior estimate Accumulated share-based payments settled by equity recorded in 100,984,100.00 capital surplus Total expense for recognition of share-based payments settled by 100,984,100.00 equity in the current period

Additional description

During the reporting period, Shanghai Sanqi Interactive Entertainment, a first-tier subsidiary of the company, transferred 5% share held by it in Guangzhou Sanqi, a second-tier subsidiary of the company, to Huai’an Shunjing Enterprise Management Partnership (Limited Partnership) for the consideration of RMB 10,000,000.00 yuan in cash. Partners of Huai’an Shunjing Enterprise Management Partnership (Limited Partnership) are key executives of Guangzhou Sanqi. The company recognized the share-based payment cost of RMB 100,984,100.00 yuan based on the fair value of Guangzhou Sanqi on the pricing reference date deducting the cash consideration.

3. Details of share-based payments settled with cash

□ Applicable √ Not applicable

4. Details of alteration and termination of share-based payments

None

5 Others

None

IV. Commitments and Contingencies

1. Significant commitments

Significant commitments as of the balance sheet date

Item	December 31, 2017
Capital commitments for which contracts are signed but no	138,617,129.96

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provision is made

Note: it mainly includes the final payment for purchase of office building and equipment.

2. Contingencies

(1) Significant contingencies as of the balance sheet date

There is no significant commitment that may affect the normal production or operation of the company and need to be disclosed as of December 31, 2017.

(2) The company shall clarify if there is no significant contingency to be disclosed.

The company does not have significant contingencies that need to be disclosed.

3. Others

None

X. Matters after the Balance Sheet Date

1. Significant non-adjustment matter

Unit: yuan

		Effect on the financial status	Reason why the effect is unable
Item	Content
		and operating result	to bed estimated

2. Profit distribution

	Unit: yuan 214,811,084.40 214,811,084.40
Profit or dividend to be distributed	214,811,084.40
Profit or dividend declared upon approval	214,811,084.40

3. Sales return

None

4. Description of other matters after the balance sheet date

None

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XI. Other Significant Matters

1. Correction of previous accounting errors

(1) Retrospective restatement method

			Unit: yuan Cumulative effect
Contents of the accounting error		Report item names affected in
	Procedure		Cumulative effect
correction		each comparison period

(2) Future application method

		Reason for adopting the future application
Contents of the accounting error correction	Approval procedure
		method

2. Debt restructuring

None

3. Asset replacement

(1) Non-monetary asset exchange

None

(2) Other asset replacement

None

4. Annuity plan

None

5. Discontinued operations

Unit: yuan

						Profit attributable
						to the owner of
Item	Income	Expense	Pre-tax profit	Income tax cost	Net profit	the parent
						company for
						discontinued

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operations

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Additional description

None

6. Segment information

(1) The determination basis and accounting policy of the report segment

The company determines the reporting segment based on its internal organizational structure, management requirements, internal reporting system, etc., and determines the reporting segment on the basis of the industry segment. The performance of auto parts business and online game business will be assessed separately. Each segment uses assets and liabilities separately.

(2) Financial information of the report segment

	Unit: yuan Automotive parts business division Online game business division Offset between divisions Total 560,211,672.99 5,628,616,443.76 6,188,828,116.75 414,353,738.66 1,533,843,501.10 1,948,197,239.76 9,255,079.58 9,251,421,700.56 100,539,094.76 9,160,137,685.38 120,816,292.16 1,853,202,031.90 100,539,094.76 1,873,479,229.30	Unit: yuan Automotive parts business division Online game business division Offset between divisions Total 560,211,672.99 5,628,616,443.76 6,188,828,116.75 414,353,738.66 1,533,843,501.10 1,948,197,239.76 9,255,079.58 9,251,421,700.56 100,539,094.76 9,160,137,685.38 120,816,292.16 1,853,202,031.90 100,539,094.76 1,873,479,229.30	Unit: yuan Automotive parts business division Online game business division Offset between divisions Total 560,211,672.99 5,628,616,443.76 6,188,828,116.75 414,353,738.66 1,533,843,501.10 1,948,197,239.76 9,255,079.58 9,251,421,700.56 100,539,094.76 9,160,137,685.38 120,816,292.16 1,853,202,031.90 100,539,094.76 1,873,479,229.30	Unit: yuan Automotive parts business division Online game business division Offset between divisions Total 560,211,672.99 5,628,616,443.76 6,188,828,116.75 414,353,738.66 1,533,843,501.10 1,948,197,239.76 9,255,079.58 9,251,421,700.56 100,539,094.76 9,160,137,685.38 120,816,292.16 1,853,202,031.90 100,539,094.76 1,873,479,229.30
	Automotive parts	Online game business
Item			Offset between divisions	Total
	business division	division

Operating income	560,211,672.99	5,628,616,443.76		6,188,828,116.75
Operating cost	414,353,738.66	1,533,843,501.10		1,948,197,239.76
Total assets	9,255,079.58	9,251,421,700.56	100,539,094.76	9,160,137,685.38
Total liabilities	120,816,292.16	1,853,202,031.90	100,539,094.76	1,873,479,229.30

7. Other important transactions and events that affect the decision-making of the investors

On February 7, 2018, the company and Hu Yuhang signed the Asset Acquisition Agreement and Profit Compensation Agreement between Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. and Jiangsu Aurora’s shareholder Hu Yuhang , providing that the company will purchase 20% share held by Hu Yuhang in Jiangsu Aurora by paying RMB 1.4 billion yuan in cash. After completion of this transaction, Jiangsu Aurora will become a subsidiary wholly owned by the company. As of the issuance date of this report, the formalities for industrial and commercial registration of changes in relation to Jiangsu Aurora have been completed.

XII. Notes to Main Items of the Financial Statements of Parent Company

1. Other receivables

(1) Disclosure of other receivables by categories

Unit: yuan

Category Closing balance Opening balance

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			Provision for bad	Provision for bad
	Book balance					Book balance		Provision for bad debt
			debt		Book
										Book value
				Provision	value				Provision
	Amount	Ratio	Amount			Amount	Ratio	Amount
				ratio					ratio

Other receivables	1,668,88 4,090.50
which are grouped
according to credit			13,336,7		1,655,547	51,832,		2,583,129		49,248,886.
		100.00%		0.80%			100.00%		4.98%
risk features and for			45.46		,345.04	015.98		.03		95

which provision for
bad debt is made
	1,668,88 4,090.50		13,336,7		1,655,547 ,345.04	51,832,		2,583,129		49,248,886. 95
Total
			45.46			015.98		.03

Other receivables whose single amounts are significant and for which provision for bad debt is separately made at the end of the period:

□ Applicable √ Not applicable

In the portfolio, other receivables for which provision for bad debt is made by aging-of-other-receivables method:

√ Applicable □ Not applicable

Unit: yuan

	Closing balance	Closing balance	Closing balance
Age
	Other receivables	Provision for bad debt	Provision ratio

Accounts receivable due within o	ne year
	266,584,909.29	13,329,245.46	5.00%
Subtotal of accounts receivable	266,584,909.29
		13,329,245.46	5.00%
due within one year

2-3 years	25,000.00	7,500.00	30.00%
Total	266,609,909.29	13,336,745.46

Description of the basis of grouping:

Other accounts receivable of the same age have similar credit risk characteristics.

In the portfolio, other receivables for which provision for bad debt is made by the percentage-of-balance method:

□ Applicable √ Not applicable

In the portfolios, other receivables for which provision for bad debt is made by other methods:

□ Applicable √ Not applicable

(2) Provisions for bad debt made, recovered, or reversed in the current period

The provision for bad debt in the amount of RMB 10,753,616.43 yuan is made in the current period; and RMB 0.00 yuan of the provision for bad debt is recovered or reversed in the current period.

Among them, provisions for bad debt whose recovered or reversed amounts are of significance in the current period are:

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		Unit: yuan Means of recovery
Entity	Recovered or reversed amount	Means of recovery

(3) Other receivables actually written off in the current period

Unit: yuan

Item	Item	Item		Amount written off	Amount written off
Of them, significant other receivables written off include:					Unit: yua
					Amount arising from
	Nature of other		Reasons for	Write-off procedures
Entity		Amount written off			related-party
	receivables		write-off	performed
					transaction or not

Unit: yuan

Description of write-off of other receivables:

(4) Classification of other receivables by nature

Unit: yuan

Nature	Closing book balance	Opening book balance
Deposit and earnest money	65,000.00	50,116,233.00
Receivables and payables of related parties	1,402,274,181.21	194,435.33
Intercompany lending	266,543,561.64	1,500,000.00
Others	1,347.65	21,347.65
Total	1,668,884,090.50	51,832,015.98

(5) Top 5 other receivables in term of closing balance collected as per debtors

Unit: yuan

				Proportion in total	Closing balance of
Entity	Nature	Closing balance	Age	closing balance of	provision for bad
				other receivables	debt
	Accounts receivable
Tibet Taifu Culture &
	from and payable by	1,102,274,181.21	Within 1 year	66.05%
Media Co., Ltd.
	related parties

Shenzhen Zhonghui
Television Culture	Intercompany
		266,543,561.64	Within 1 year	15.97%	13,327,178.08
Communication Co.,	lending

Ltd.

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Jiangsu Zhiming	Accounts receivable
Network Technology	from and payable by	178,000,000.00	Within 1 year	10.66%
Co., Ltd.	related parties
Anhui Xuhong	Accounts receivable
Information	from and payable by	102,000,000.00	Within 1 year	6.11%
Technology Co., Ltd.	related parties
Jiangsu Jiaqu	Accounts receivable
Network Technology	from and payable by	20,000,000.00	Within 1 year	1.20%
Co., Ltd.	related parties
Total	--	1,668,817,742.85	--	99.99%	13,327,178.08

2. Long-term equity investment

Unit: yuan

	Closing balance	Closing balance		Opening balance	Opening balance
Item		Provision for			Provision for
	Book balance		Book value	Book balance		Book value
		impairment			impairment

Investment in
	5,724,695,055.23		5,724,695,055.23	5,469,895,064.43		5,469,895,064.43
subsidiaries

Investment in
joint ventures and
	29,729,869.92		29,729,869.92	116,284,895.72		116,284,895.72
associated

enterprises
Total	5,754,424,925.15		5,754,424,925.15	5,586,179,960.15		5,586,179,960.15

(1) Investment in subsidiaries

Unit: yuan

				Provision for	Closing balance
		Decrease in the
Invested entity	Opening balance		Closing balance	impairment in the	of provision for
		current period
				current period	impairment

Sanqi Interactive
Entertainment
(Shanghai)	4,720,000,000.00		4,720,000,000.00
Technology Co.,
Ltd.
Wuhu Shunrong
Auto Parts Co.,	749,895,064.43		749,895,064.43
Ltd.

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Jiangsu Zhiming
Network
		254,799,990.80	254,799,990.80
Technology Co.,

Ltd.
Total	5,469,895,064.43	254,799,990.80	5,724,695,055.23

(2) Investment in joint ventures and associated enterprises

Unit: yuan

==> picture [480 x 428] intentionally omitted <==

----- Start of picture text -----

Increase/decrease in the current period
Gains or Closing
losses on balance
Adjustme
Additiona investmen Issuing Provision of
Opening Negative nt to other Variation Closing
Investor l t cash for provision
balance investmen comprehe in other Others balance
investmen recognize dividends impairme for
t nsive incomes
t d under or profits nt impairme
incomes
the equity nt
law
I. Joint ventures
II. Associated enterprises
Shanghai
Jueli
31,828,20 -2,098,33 29,729,86
Culture &
7.79 7.87 9.92
Media
Co., Ltd.
Shanghai
Zheyuan
84,456,68 85,000,00 543,312.0
Culture &
7.93 0.00 7
Media
Co., Ltd.
116,284,8 85,000,00 -1,555,02 29,729,86
Subtotal
95.72 0.00 5.80 9.92
116,284,8 85,000,00 -1,555,02 29,729,86
Total
95.72 0.00 5.80 9.92
----- End of picture text -----

(3) Additional descriptions

The company is not subject to significant restrictions on investment realization and repatriation of investment income.

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3. Operating revenues and costs

Unit: yuan

	Accruals in the current period	Accruals in the current period	Accruals in the prior period	Accruals in the prior period
Item
	Revenue	Cost	Revenue	Cost

Main businesses	751,646.53	31,646.53	124,584,039.53	123,392,974.65
Other businesses			272,890.04	272,890.04
Total	751,646.53	31,646.53	124,856,929.57	123,665,864.69

Additional descriptions:

4. Investment income

Unit: yuan

Item	Accruals in the current period	Accruals in the prior period
Income from long-term equity investment
		605,000,000.00
calculated by cost method

Income from long-term equity investment
	-1,555,025.80	-940,529.89
calculated by equity method

Investment income from disposal of
	-295,279,968.69
long-term equity investment

Investment income from available-for-sale
	1,582,261.90	3,722,924.58
financial assets during holding

Investment income from disposal of
	1,000,000.00
available-for-sale financial assets

Total	-294,252,732.59	607,782,394.69

5. Others

XIII. Supplementary Information

1. Statement of non-recurring profits and losses in the current period

√ Applicable □ Not applicable

Unit: yuan

Item	Amount	Remarks
		It mainly includes profits and losses on
Profits and losses on disposal of non-current
	200,975,719.36	disposal of long-term equity investment
assets
		and on disposal of fixed assets

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Government subsidiesrecorded in current
profits and losses (except those closely		It mainly includes other government
related to the business and received as per	29,695,208.76	subsidies except refund of value-added tax
the national unified standard quota or		upon collection.
quanta)
Payment for the use of state funds collected
		It mainly includes income from interest of
from non-financial enterprises recorded in	15,607,133.62
		intercompany borrowings.
current profits and losses

Profits and losses on assets entrusted to		It mainly includes profits and losses on
	13,370,838.07
others for investment or management		finance products of banks.

Profit and loss on variation in fair value of
held-for-trade financial assets or
held-for-trade financial liabilities, and
		It mainly includes investment income from
investment income from disposal of
	40,268,035.00	disposal of available-for-sale financial
held-for-trade financial assets, held-for-trade
		assets.
financial liabilities, or salable financial

assets, in addition to the effective hedging
related to normal operations of the Company
Other non-operating revenues or
	1,251,440.52
expenditures except the above items

		Mainly performance compensation income
		(The amount of impairment loss of RMB
Other profits and losses items conforming to		299,457,551.04 provided by the Company
the definition of non-recurring profits and	296,624,143.44	on the goodwill of Shanghai Mokun was
losses		included in current profit or loss), the share
		payment expenses, and performance
		compensation expenses
Less: impact on income tax	36,707,567.83
Impact on minority interest	-11,246,235.69
Total	572,331,186.63	--

The Company shall specify the reasons for definition of non-recurring profits and losses items according to Explanatory

Announcement on Information Disclosure by Companies Offering Securities to the Public No. 1 – Non-recurring profits and losses and defining non-recurring profits and losses items listed in Explanatory Announcement on Information Disclosure by Companies Offering Securities to the Public No. 1 – Non-recurring profits and losses as recurring profits and losses items. □ Applicable √ Not applicable

2. Return on equity (ROE) and earnings per share

Earnings per share Profits in the reporting period ROE Basic earnings per share Diluted earnings per

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2017 Annual Report

		(yuan/share)	share (yuan/share)
Net profit attributable to ordinary		0.76	0.76
shareholder(s) of the parent	28.12%
company
Net profit attributable to common
shareholder(s) of the Company net	18.19%	0.49	0.49
of recurring profits and losses

The Company’s ROE calculated by net profit attributable to the shareholders of the listed company after deducting non-recurring gains and losses is 18.19% in the reporting period, which was mainly due to the recognition as non-recurring gains and losses by the Company of the compensation of RMB 401,364,984.06 arising from Shanghai Mokun’s failure to meet the performance commitment, and due to the inclusion of the goodwill impairment of RMB 299,457,551.04 corresponding to the asset in recurring gains and losses. The Company considers and uses one non-GAAP measure, Adjusted Net Income/ (Loss), as supplemental measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with China Accounting Standards. The Company's Adjusted Net Income is RMB 1,408,706,561.26 for the year 2017, which is defined as net income attributable to shareholders of the listed company of RMB1, 620,582,427.47 excluding performance compensation income/expenses of RMB 397,608,243.44 and related goodwill impairment of RMB 299,457,551.04 generated by business acquisitions, after tax income/loss from disposal of equity investments of RMB 199,561,658.81 and share-based compensation of RMB 85,836,485.00. ROE for the year 2017 adjusted on this basis is 24.44% (Adjusted ROE for the year 2016 is 26.33%). Adjusted basic earnings per share and diluted earnings per share for the year 2017 both are 0.66 yuan (Adjusted basic EPS diluted EPS for the year 2016 both are 0.51 yuan).

3. Others

192

AI assistant

37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. — Annual Report 2017

54581_rns_2018-04-23_40bca2ba-f806-4c55-a5a9-6383fee110a7.PDF

Wuhu Shunrong Sanqi Interactive Entertainment Network

2017 Annual Report

Section I Table of Contents and Definitions

Contents

Definitions

Section II Company Profile and Main Financial Indicators

I. Company Information

II. Contact Persons and Contact Details

III. Information Disclosure and Location

IV. Changes in Registration Information

V. Other Relevant Information

√ Applicable □ Not applicable

√Applicable □ Not applicable

VI. Key Accounting Data and Financial Indicators

VII. Differences in Accounting Data under Domestic and Overseas Accounting Standards

1. The differences in net income and net assets in the financial statements disclosed in accordance with international accounting standards and in accordance with Chinese accounting standards

□ Applicable √ Not applicable

2. The differences in net income and net assets in the financial statements disclosed in accordance with overseas accounting standards and in accordance with Chinese accounting standards

□ Applicable √ Not applicable

VIII. Key Quarterly Financial Indicators

IX. Non-Recurring Items and Amounts

Section III Summary of the Company’s Business

I. Main Business in the Reporting Period

II. Significant Changes in Main Assets

1. Significant changes in main assets

2. Main overseas assets

III. Analysis of Core Competitiveness

1. Team Strengths

4. Development Capabilities for High-Quality Games

Section IV Discussion and Analysis of Operations

I. Overview

i. Interactive Entertainment Business

a. Domestic Publishing.

II. Analysis of Principal Business

1. Overview

2. Revenue and Costs

(1) Composition of operating revenue

(2) Industries, products, or regions taking up more than 10% of the Company’s operating revenue or profits

√ Applicable □ Not applicable

No

(3) Is the sales proceeds in kind of the Company more than service revenue?

□ Yes √ No

(4) Performance of important sales contracts signed by the Company as of current reporting period

(5) Composition of operating costs

(6) Is there any change in the scope of consolidation in the reporting period?

√ Yes □ No

2. Newly-established subsidiary in the current period:

(7) Significant changes or adjustments of the Company’s businesses, products, or services in the reporting period

(8) Major customers and suppliers

3. Expenses

4. Investment in research & development

√ Applicable □ Not applicable

Project 1: MU (Mobile Game)

Project 2: Search for Gold (Huang Jin Cai Jue)

Project 3: Ling Yu

Project 4: Fighter of the Destiny

Project 5: H-Game

Project 6: Mobile Game T

Project 7: Mobile Game F

Project 8: Legend Mobile Game Y

Project 9: Project X - Legend H5

ii. Browser Game R&D Projects

Project 1: Tu Long Rong Yao

Project 2: Xue Meng Rong Yao

Project 2: MU X

5. Cash flow

III. Analysis of Non-Principal Business

IV. Analysis of Assets and Liabilities

1. Significant changes in composition of assets

2. Assets and liabilities measured at fair values

3. Limitation of assets rights as of the end of the reporting period

V. Analysis of Investments

1. General

2. Important equity investment in the reporting period

4. Financial assets measured at fair value

5. Use of raised funds

√ Applicable □ Not applicable

37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. Annual Report 2017