37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. - Annual Report 2018

2018 Annual Report

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Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd.

2018 Annual Report

April, 2019

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2018 Annual Report

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Section I Contents and Interpretation

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Section I Contents and Interpretation ...................................................................................................................................................... 2 Section II Company Profile and Key Financial Indicators ...................................................................................................................... 7 Section III Business Overview .............................................................................................................................................................. 13 Section V Discussion and Analysis of Operation Status ........................................................................................................................ 18 Section V Financial Report .................................................................................................................................................................... 52

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Definitions

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

Shanghai Sanqi Interactive Entertainment	means	Sanqi Interactive Entertainment (Shanghai) Technology Co., Ltd.
Company Law	means	Company Law of the People's Republic of China
Securities Law	means	Securities Law of the People's Republic of China
		Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd./Articles of
Articles of Association	means	Association of Wuhu Shunrong Sanqi Interactive Entertainment Network
		Technology Co., Ltd.
Audit Institution	means	GP Certified Public Accountants Co., Ltd. (Special General Partnership)
RMB/RMB 10,000	means	Chinese yuan/10,000 Chinese yuan
Reporting Period	means	January 1st, 2018 to December 31st, 2018
End of Reporting Period	means	December 31st, 2018
		Clientless or browser kernel-based micro-client games that are based on
		web development technologies and utilize standard protocols as basic
Browser games	means
		transmission modes. Game users can play browser games directly through

		an Internet browser
		Games that are downloaded via mobile network and run on mobile phones
Mobile games	means
		or other mobile terminals.

RPG	means	Role playing game
ARPG	means	Action role playing game
SLG	means	Simulation game
		Net profit attributable to ordinary shareholders of the Company, net of
		performance compensation due to mergers and acquisitions and related
Non-GAAP net profit	means
		goodwill impairment, after-tax income of accidental equity investment

		disposal, and equity incentive fees
Domestic	means	Mainland China
Overseas	means	Outside of mainland China
Shanghai Mokun	means	Shanghai Mokun Digital Technology Co., Ltd.
Jiangsu Zhiming	means	Jiangsu Zhiming Network Technology Co., Ltd.

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Shunrong Investment Company	means	Wuhu Shunrong Investment Co., Ltd.
Shunrong Yonghong Company	means	Shanghai Shunrong Yonghong Technology Development Co., Ltd.
Guangzhou Senyun Co., Ltd.	means	Guangzhou Senyun Auto Parts Co., Ltd.
Shunrong Auto Parts	means	Wuhu Shunrong Auto Parts Co., Ltd.
Yanling Investment Co., Ltd.	means	Shanghai Yanling Investment Management Co., Ltd.
Tibet Xintai	means	Tibet Xintai Culture Media Co., Ltd.
Anhui Vogue Entertainment	means	Anhui Vogue Entertainment Network Technology Co., Ltd.
Vogue Entertainment International	means	Vogue Entertainment International Limited
G-MEI Network	means	G-MEI Network Technology Co., Ltd.
Guangzhou Sanqi	means	Guangzhou Sanqi Network Technology Co., Ltd.
Guangzhou Xingzhong	means	Guangzhou Xingzhong Information Technology Co., Ltd.
Anhui Xuhong	means	Anhui Xuhong Information Technology Co., Ltd.
Wuji Entertainment Games Co., Ltd.	means	Wuji Entertainment Games Co., Ltd.
Anhui Sanqi	means	Anhui Sanqi Network Technology Co., Ltd.
Jiangsu Aurora	means	Jiangsu Aurora Network Technology Co., Ltd.
Shanghai Yingtong	means	Shanghai Yingtong Network Technology Co., Ltd.
Wisdom Entertainment International	means	Wisdom Entertainment Online International Limited
Wisdom Game International	means	Wisdom Game Online International Limited
Shanghai Guanhang	means	Shanghai Guanhang Network Technology Co., Ltd.
Anhui Jiashang	means	Anhui Jiashang Network Technology Co., Ltd.
Chengdu Shengge Times Network Technology
	means	Chengdu Shengge Times Network Technology Co., Ltd.
Co., Ltd.

Beijing Shangheng	means	Beijing Shangheng Jiatian Network Technology Co., Ltd.
Jiangsu Jiaqu	means	Jiangsu Jiaqu Network Technology Co., Ltd.
Shanghai Zhiren	means	Shanghai Zhiren Culture Media Co., Ltd.
Tibet Taifu	means	Tibet Taifu Culture Media Co., Ltd.
37Games Entertainment Co., Ltd.	means	37 Games Entertainment Limited
Shanghai Mobile Game	means	Shanghai Shouyou Tianxia Digital Technology Co., Ltd.
Anhui Guanyu	means	Anhui Guanyu Culture Media Co., Ltd.
Tibet Yaotong	means	Tibet Yaotong Network Technology Co., Ltd.
Tibet Shengge	means	Tibet Shengge Network Technology Co., Ltd.
Guangzhou Sanqi Interactive Entertainment	means	Sanqi Interactive Entertainment (Guangzhou) Technology Co., Ltd.
Guangzhou Huoshanhu	means	Guangzhou Huoshanhu Information Technology Co., Ltd.
Guangzhou Jisheng	means	Guangzhou Jisheng Network Technology Co., Ltd.

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Guangzhou Jishi	means	Guangzhou Jishi Network Technology Co., Ltd.
Khorgas Qianyu	means	Khorgos Entertainment Network Technology Co., Ltd.
Khorgas Xinghui	means	Khorgos Xinghui Network Technology Co., Ltd.
Khorgos Xinrui	means	Khorgos Xinrui Network Technology Co., Ltd.
Top Increase	means	Top Increase Global Limited
Khorgas Sanqi	means	Khorgos Sanqi Entertainment Venture Capital Co., Ltd.
Anhui Aurora	means	Anhui Sanqi Aurora Network Technology Co., Ltd.
Shanghai Langkun	means	Shanghai Langkun Digital Technology Co., Ltd.
Shanghai Kunkun	means	Shanghai Kunkun Digital Technology Co., Ltd.
Shanghai Miji	means	Shanghai Miji Digital Technology Co., Ltd.
Shanghai Aojue	means	Shanghai Aojue Digital Technology Co., Ltd.
Khorgas Jiaji	means	Khorgos Jiaji Digital Technology Co., Ltd.
Khorgas Mopeng	means	Khorgos Mopeng Digital Technology Co., Ltd.
Guangzhou Jisheng	means	Guangzhou Jisheng Network Technology Co., Ltd.
Anhui Wanhu	means	Anhui Wanhu Information Technology Co., Ltd.
Zhuhai Miaohu	means	Zhuhai Miaohu Network Technology Co., Ltd.
Zhuhai Shangjie	means	Zhuhai Shangjie Network Technology Co., Ltd.
Ningbo Langkun	means	Ningbo Langkun Digital Technology Co., Ltd.
Shanghai Jiakun	means	Shanghai Jiakun Digital Technology Co., Ltd.
		Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center
Huai’an Sanqi	means
		(Limited Partnership)

Anhui Zhusheng	means	Anhui Zhusheng Network Technology Co., Ltd.
Guangzhou Sanqi Culture & Entertainment	means	Sanqi Entertainment Network Technology (Guangzhou) Co., Ltd.
Chengdu Pengwan Technology Co., Ltd.	means	Chengdu Pengwan Technology Co., Ltd. and its subsidiaries
Shenzhen Mokylin Technology Co., Ltd.	means	Shenzhen Mokylin Technology Co., Ltd. and its subsidiaries
		Zhangshu Wangzhong Investment Management Center (Limited
Wangzhong Investment	means
		Partnership)

		The proportion of transaction amount from the Company’s domestic
Market share of the Company’s domestic		mobile game business during the reporting period to actual sales revenue
	means
mobile game business		of mobile game market indicated in the China Game Industry Report of

		2018

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Section II Company Profile and Key Financial Indicators

I. Company profile

Stock abbreviation	Sanqi Interactive Entertainment	Stock code	002555
Place of Listing	Shenzhen Stock Exchange
Company name in Chinese	芜湖顺荣三七互娱网络科技股份有限公司
Company short name in
	三七互娱
Chinese

Company name in English (if	WUHU SHUNRONG SANQI INTERACTIVE ENTERTAINMENT NETWORK
any)	TECHNOLOGY CO., LTD.
Legal representative	Li Weiwei
Registered address	Nanling County Economic Development Zone, Wuhu City, Anhui Province
Post code of registered
	243000
address

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

Zip Code of business address	241000
Website	www.37.com
Email	[email protected]

Note: The Company held the 3rd Extraordinary General Meeting of Shareholders on April 8th, 2019, during which the Proposal on Changing the Name of the Company was reviewed and approved. It is proposed to change its Chinese name to “芜湖三七互娱网络科技集团股份有限公司 ” and its English name to “WUHU SANQI INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO., LTD.”. The Company is currently completing relevant procedures for industrial and commercial registration of changes.

II. Contact person and contact information

	Secretary of the Board of Directors	Securities Affairs Representative
Name	Ye Wei	Wang Sijie
	11/F, Tower A1, Wanjiang Fortune Plaza,	11/F, Tower A1, Wanjiang Fortune Plaza,
Contact 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
Facsimile	0553-7653737	0553-7653737
Email	[email protected]	[email protected]

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III. Information disclosure and designated place

Name of newspaper designated by the Company for	China Securities Journal, Securities Times, Shanghai Securities News,
information disclosure	Securities Daily
Website designated by CSRC for publication of
	http://www.cninfo.com.cn
annual reports

	11/F, Tower A1, Wanjiang Fortune Plaza, No. 88, Ruixiang Road, Jiujiang
Designated place of annual reports
	District, Wuhu City, Anhui Province

IV. Changes in Registration Information

Organization code	71392778-9
	1. On March 2nd, 2011, the Company issued its IPO on SME Board of Shenzhen Stock
	Exchange. The Company is mainly engaged in manufacturing and selling plastic fuel
	tanks of automobiles. 2. On May 27th, 2014, the material asset restructuring of the
	Company involving shares issuance, assets purchase with cash, supporting fund
	raising, and related-party transactions was conditionally approved by the 22nd Session
	in 2014 of the Merger, Acquisition and Reorganization Examination Committee of
	Listed Companies of the CSRC. On December 2nd, 2014, the Company received from
	CSRC the Reply Regarding Wuhu Shunrong Auto Parts Co., Ltd. Issuing Shares to Li
	Weiwei and Others, Purchasing Assets, and Raising Supporting Funds. Through
	purchase of 60% shares of Shanghai Sanqi Interactive Entertainment, the Company
	developed its single main business of manufacturing automotive plastic fuel tanks into
	dual main businesses of advanced manufacturing and modern cultural creativity. 3. On
Changes to main business after IPO (if	December 18th, 2015, the Company received the Reply Regarding Approval of
any)	Non-public Offering of Shares of Wuhu Shunrong Sanqi Interactive Entertainment
	Network Technology Co., Ltd. (Z.J.X.K. [2015] No. 2941) from CSRC , thus being
	approved to issue at most 165,289,300 new shares by non-public offering and the funds
	raised would be used for purchasing 40% shares of Shanghai Sanqi Interactive
	Entertainment. Shanghai Sanqi Interactive Entertainment has become a wholly-owned
	subsidiary of the Company since 2016. 4. On October 8th, 2018, as approved by the
	Company’s 4th general meeting of shareholders in 2018, 100% shares of Wuhu
	Shunrong Auto Parts Co., Ltd. (hereinafter referred to as “Auto parts Company”) held
	by the Company were transferred. On November 29th, 2018, the industrial and
	commercial registration of changes for the equity transfer of Auto parts Company was
	completed. Since then, the Company will no longer hold the equity of Auto parts
	Company, and exclude the financial information of Auto parts Company from its
	consolidated financial statements.
Changes to controlling shareholders (if
	None
any)

Note: On April 8th, 2019, the Company held the 3rd Extraordinary General Meeting of 2019, at which the Proposal on Advancing the General Election of Non-independent Directors for the Fifth Board of Directors and the Proposal on Advancing the General Election of Independent Directors for the Fifth Board of Directors were reviewed and approved. Seven directors nominated by Li Weiwei

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were elected in the general election of Board of Directors and secured more than half of the seats on the Board of Directors. The voting rights held by Li Weiwei have had a material influence on the resolution of the Company’s 3rd Extraordinary General Meeting of 2019, played a decisive role in electing more than half of the members of the Company’s Board of Directors through this meeting, and effectively controlled the majority of the new Board of Directors. Therefore, the controlling shareholders and actual controllers of the Company were changed from Wu Xushun, Wu Weidong and Wu Weihong to Li Weiwei.

V. Other relevant information

Accounting Firm appointed by the Company

Name of the Accounting Firm	GP Certified Public Accountants Co., Ltd. (Special General Partnership)
Business address of Accounting
	10/F, Guangdong Holdings Tower, No. 555, East Dongfeng Road, Yuexiu District, Guangzhou
Firm

Signature of Certified Public
	Xiong Yongzhong & Yang Xinchun
Accountant

Sponsors performing duty of continuous supervision employed by the Company during the reporting period

□Applicable √Not Applicable

Financial consultants performing duty of continuous supervision employed by the Company during the reporting period

√Applicable □Not Applicable

Name of financial consultant	Business address	Name of representative	Continuous supervision period
	GF Securities Headquarters,
	No. 26, Machang Road, Tianhe		May 9th, 2017 to December
GF Securities Co., Ltd.		Lyu Shaoyu & Tian Li
	District, Guangzhou City,		31st, 2018

	Guangdong Province

VI. Main accounting data and financial index

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

□ Yes √ No

			Increase or decrease of
	2018	2017	current year against	2016
			previous year
Operating income (RMB)	7,632,679,668.47	6,188,828,116.75	23.33%	5,247,893,728.73
Net profits attributable to the listed	1,008,503,357.80	1,620,582,427.47
			-37.77%	1,070,162,324.07
company shareholders (RMB)

Net profits attributable to listed
company shareholders after
	474,909,138.00	1,048,251,240.84	-54.70%	1,010,769,599.36
deducting non-recurring profits and

losses (RMB)
Net cash flows from operating	1,954,433,620.84	1,831,895,928.30
			6.69%	1,051,939,577.83
activities (RMB)

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Basic earning per share	0.47	0.76
			-38.16%	0.51
(yuan/share)

Diluted earning per share	0.47	0.76
			-38.16%	0.51
(yuan/share)

Weighted average rate of return on
	16.59%	28.12%	-11.53%	26.56%
equity

			Increase or decrease
	End of 2018	End of 2017	compared with the end	End of 2016
			of previous year
Total assets (RMB)	8,395,761,716.98	9,160,137,685.38	-8.34%	6,386,216,011.34
Net assets attributable to listed	5,972,675,405.86	7,016,770,210.85
			-14.88%	4,523,665,282.04
company shareholders (RMB)

The Company uses the non-GAAP adjusted net profit attributable to common shareholders as a complementary indicator to measure its actual operating results. The non-GAAP adjusted net profit attributable to common shareholders is not an independent indicator, and its presentation does not imply replacement of the financial information prepared in accordance with the requirements of ASBE. The non-GAAP adjusted net profit attributable to common shareholders of the Company during the current period was RMB 1,501,161,065.93, which was equal to the net profit attributable to common shareholders (RMB 1,008,503,357.80) less the performance compensation due to mergers and acquisitions (RMB 446,156,583.73) and related goodwill impairment (RMB 959,833,685.66), and after-tax income of accidental equity investment disposal (RMB 21,019,393.81). In addition, no equity incentive fee occurred during the reporting period. In 2017, the non-GAAP adjusted net profit attributable to common shareholders of the Company on the same basis was RMB 1,408,706,561.26. In this year, the non-GAAP adjusted net profit attributable to common shareholders of the Company increased by 6.56% on a year-on-year basis.

VII. Data differences due to different accounting standards in China and the rest of the world

1. Differences regarding to net profits and net assets between financial statements disclosed according to international standards and Chinese standards

□Applicable √Not Applicable

During the reporting period, there is no difference regarding to net profits and net assets between financial statements disclosed according to international standards and Chinese standards.

2. Differences regarding to net profits and net assets between financial statements disclosed according to standards of other countries and Chinese standards

□Applicable √Not Applicable

During the reporting period, there is no difference regarding to net profits and net assets between financial statements disclosed according to standards of other countries and Chinese standards

VIII. Quarterly Key financial indicators

Unit: RMB

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	Q1	Q2	Q3	Q4
Operating income	1,661,159,158.79	1,641,336,987.98	2,232,318,268.92	2,097,865,252.78
Net profits attributable to the listed
	410,093,180.04	391,285,768.19	416,969,559.37	-209,845,149.80
company shareholders

Net profit attributable to listed
company shareholders after
	392,281,177.22	368,901,354.63	407,269,424.34	-693,542,818.19
deducting non-recurring profits and

losses
Net cash flows from operating
	562,120,649.09	415,115,368.87	411,326,826.18	565,870,776.70
activities

The net profit attributable to listed company shareholders in the fourth quarter was RMB -209,845,149.80, mainly due to the

Company’s provision of RMB 959,833,685.66 set aside for Shanghai Mokun’s goodwill impairment loss. The amount of the impairment loss significantly exceeded the performance compensation and operating profit;

In the fourth quarter, the net profit attributable to listed company shareholders after deducting non-recurring profits and losses was RMB -693,542,818.19, mainly because the Company recognized the compensation of RMB 453,859,535.09 arising from the failure of performance commitments by Shanghai Mokun as non-recurring gains and losses, and the corresponding goodwill impairment of RMB 959,833,685.66 as the recurring profits and losses.

Is there any significant difference between the above financial indicators or their sum and those in the Company’s disclosed quarterly reports and semi-annual reports?

□ Yes √ No

IX. Non-recurring profits and losses and their amount

√Applicable □Not Applicable

Unit: RMB

Item	Amount in 2018	Amount in 2017	Amount in 2016	Description
	56,085,328.82			Mainly profit and loss from the disposal of long-term equity investment and fixed assets.
Profits or losses on disposal of
non-marketable asset, including offset		200,975,719.36	7,667,198.02
amount accrued for impairment provision

Government subsidy included in current	38,851,289.40			Mainly government subsidy other than the refund of value-added tax.
profit or loss (except those closely related to
enterprise operation and received based on		29,695,208.76	68,413,211.24
consolidated national standard quota or
quantitative)
Funds occupation fees collected from	17,307,831.49			Mainly interest income from borrowings.
non-financial enterprises and included in		15,607,133.62
current profit or loss
Profit or loss of asset whose investment or	16,941,398.12	13,370,838.07	6,931,102.57	Mainly the income from

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management is entrusted to others				bank’s financial products.
Except effective hedging business relating to	-9,740,417.35			Mainly the investment income from disposal of available-for-sale financial assets.
normal operating business of the company,
profit or loss caused by change in the fair
value of held-for-trading financial asset and
		40,268,035.00	3,608,355.70
financial liabilities, and investment profit for

disposal of trading financial asset, trading
financial liabilities and available-for-sales
financial assets.
Other non-operating revenue and	2,945,610.96
		1,251,440.52	-8,461,639.08
expenditure except the foregoing items

	446,156,583.73			Mainly including performance compensation income (the Company’s impairment loss accrued against the goodwill of Shanghai Mokun Company is RMB 959,833,685.66 and included in recurring profit and loss) and performance compensation expenses.
Other items consistent with definition of
		296,624,143.44
non-recurring profit and loss


Less: Affected amount of income taxes	33,857,857.74	36,707,567.83	10,764,962.34
Affected amount of minority interest	1,095,547.63
		-11,246,235.69	8,000,541.40
income (after-tax)

Total	533,594,219.80	572,331,186.63	59,392,724.71	--

As to non-recurring profits and losses determined based on the definition provided in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, and the recurring profits and losses determined from non-recurring profits and losses listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, reasoning shall be provided □Applicable √Not Applicable

During the reporting period, the Company recognized no non-recurring profit and loss defined and listed in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss as recurring profit and loss.

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Section III Business Overview

I. Main business in the reporting period

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

Yes

Software and IT services

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.

During the reporting period, the Company focused on cultural and creative businesses based on the development, distribution

and operation of mobile games and browser games, and also development in cultural segments such as film and television, animation,

music, education, social contact, VR, etc. The Company’s comprehensive strength ranks 23rd among the top 100 Internet companies in China, and 1st among A-share game companies due to steady promotion of development strategy of “perfection, diversification, platformization and globalization” around IPs.

During the reporting period, the Company gained an operating income of RMB 7.633 billion, with a year-on-year increase of 23.33%; a total profit of RMB 1.219 billion, with a year-on-year decrease of 36.38%; a net profit attributable to the listed company shareholders of RMB 1.009 billion, with a year-on-year decrease of 37.77%; a non-GAAP net profit of RMB 1.501 billion, with a year-on-year increase of 6.56%.

The main reasons for changes in the net profit attributable to the listed company shareholders include:

1) During the reporting period, the performance compensation income and goodwill impairment loss were recognized due to the under-performance of Shanghai Mokun, a subsidiary of the Company, therefore the net profit attributable to the listed company shareholders was decreased by RMB 506 million;

2) In 2017, the Company disposed of the equities of Shanghai Zheyuan Culture & Media Co., Ltd., Shanghai Aurora Network Technology Co., Ltd. and other companies, and recognized the after-tax investment income of RMB 200 million. No significant equity disposal income existed in 2018;

3) In addition to the above-mentioned affects, the Company’s non-GAAP net profit also increased by 6.56%, and the main

reason for driving performance growth is the Company’s continued development in mobile games.

Changes in industry-related economic situation and their impacts on the Company

1) According to the China Game Industry Report of 2018 jointly released by China Game Publishing Committee (GPC) and Gamma Data (CNG), the actual sales revenue of the Chinese game market reached RMB 214.44 billion in 2018 with a year-on-year increase of 5.3%, and the number of Chinese game users reached 626 million in 2018 with an year-on-year increase of 7.3%. The growth rate of Chinese game users exceeded that of 2014-2017. The actual sales revenue of mobile games was RMB 133.96 billion with a year-on-year increase of 15.4%, and increased to 62.5% of total sales revenue of the Chinese game market on a year-on-year basis; and the number of Chinese mobile game users was 605 million, with a year-on-year increase of 9.2% higher than that of 2017. The mobile game market remains the main driver of overall growth in the game market.

During the reporting period, the Company’s transaction amount of domestic mobile game business totaled RMB 8.683 billion, with a year-on-year increase of 85% higher than the average industry level. During the reporting period, the market share of the Company’s domestic mobile game business was 6.48%.

2) On the one hand, the growth rate of the game industry is declining and the competition among participants in the game industry is

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becoming increasingly fierce. On the other hand, the spiritual and cultural products available for selection are increasingly enriched, and game users require more high-quality spiritual and cultural products, and the competition between different cultural consumer segments is also developing. Providing high-quality products and valuable user services is an effective way to increase competitiveness.

During the reporting period, the Company increased R&D investments, enhanced its output capability of high-quality games, and strengthened cooperation with R&D vendors to expand the reserve of high-quality games, as well as further promoted the user value through three-dimensional marketing methods and perfect operational services, thus further exploiting the mode of “integration of R&D and operation” to help the Company gain a greater competitive advantage.

2. Changes in industrial policy environment and their impacts on the Company

In May 2017, General Office of the CPC Central Committee and the General Office of the State Council issued the Outline of the National Plan for Cultural Development Reform in the 13th Five-Year Plan Period, which required “optimizing the layout of cultural industries and accelerating the development of emerging industries such as online audiovisual services, mobile multimedia, digital publishing, animation and games, creative design, 3D and giant screen movies”, and supporting the development of the game industry.

During the reporting period, the Company actively responded to relevant requirements of industrial development, increased investments in high-quality games and innovative gameplay settings, and vigorously protected intellectual property rights to ensure compliant operations.

In December 2018, the General Office of the State Council issued the Regulations on Further Supporting the Development of Cultural Enterprises, which explicitly increased the national supports for key enterprises and projects for national cultural exports and strengthened the construction of national cultural export bases.

Sanqi Interactive Entertainment actively responds to the national “Go Out policy” for cultural industries, and strives to promote Chinese cultural services to the rest of world. 37GAMES will further develop its first-mover advantage in overseas markets, and rely on its advanced game R&D and localized marketing capabilities to continuously expand the scale of overseas business and create more foreign currency earnings, thus escorting the exports of cultural industries and helping Chinese cultural and entertainment enterprises to enhance their cultural confidence.

3. Main businesses, main products and business models of the Company

During the reporting period, the Company’s main businesses include the development, distribution and operation of mobile games and browser games. The operating modes of the Company’s mobile games and browser games mainly include independent operation and third-party joint operation.

Under the independent operation mode, the Company obtains the operation rights of game products through independent R&D or agencies, and publishes and operates these products through its own or third-party channels. The Company is fully responsible for the operation, promotion and maintenance of the game; providing unified management services for online promotion, online customer service and top-up payment; and iteratively updating game products along with game developers based on the real-time feedback of users and games.

Under the third-party joint operation mode, the Company cooperates with one or more game operators to jointly operate games. The third-party game operators are responsible for operation and promotion of respective channels and management of recharge and charge system, while the Company provides technical support services along with game developers.

During the reporting period, the Company disposed of the manufacturing and sales business of automotive plastic fuel tanks.

Apart from that, there is no significant change to the Company’s main businesses, main products and business models, and major performance drivers.

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II. Material changes in major assets

1. Material changes in major assets



Major assets	Material changes

	The balance of equity assets at the end of the period increased by RMB 415 million compared to the opening
	balance, mainly due to the new investment into the equity of Sanqi Guangzheng (Guangzhou) Cultural
	Technology Investment Partnership (Limited Partnership), Shenzhen Zhonghui Television Culture
Equity assets	Communication Co., Ltd., Shanghai Fenghua Qiushi Culture Media Co., Ltd., New Cues (Beijing) Television
	Investment Co., Ltd. and other companies during the reporting period. Refer to Note 8 of the consolidated
	financial statements, available-for-sale financial assets and Section 9 Long-term Equity Investments for more
	details.
	The balance of fixed assets at the end of the period decreased by RMB 256 million compared to the opening
Fixed assets
	balance, mainly due to the disposal of Shunrong Auto Parts during the reporting period.

Construction in	The balance of construction in process at the end of the period decreased by RMB 51 million compared to the
progress	opening balance, mainly due to the disposal of Shunrong Auto Parts during the reporting period.
	At the end of the period, the balance of notes receivable and accounts receivable increased by RMB 358
Notes receivable and
	million compared to the opening balance, mainly due to the increase in operating income in the fourth quarter
accounts receivable
	of the current year compared with the same period of the previous year.

	At the end of the period, the balance of other current assets decreased by RMB 235 million compared to the
Other current assets
	opening balance, mainly due to the decrease in performance compensation receivables.

	At the end of the period, the balance of other receivables increased by RMB 404 million compared to the
Other receivables	opening balance, mainly due to the increase in the amount of equity receivable from the disposal of Shunrong
	Auto Parts during the reporting period.
	The balance of goodwill at the end of the period decreased by RMB 962 million compared to the opening
Goodwill	balance, mainly due to provision made by the Company for impairment on the goodwill formed by the merger
	resulting from Shanghai Mokun’s failure to reach the expected performance in 2018.
	The balance of other non-current assets at the end of the period decreased by RMB 113 million compared to
Other non-current	the opening balance, mainly due to the recognition of prepaid equity investments to Shenzhen Zhonghui
assets	Television Culture Communication Co., Ltd. as available-for-sale financial assets and decreases in
	engineering equipment prepayment arising from the disposal of Shunrong Auto Parts.

2. Main foreign assets

□Applicable √Not Applicable

III. Analysis of core competitiveness

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

Yes

Software and IT services

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The Company has steadily promoted the development strategy of “perfection, diversification, platformization and globalization” around IPs to form the following core competitiveness:

1. Industry-leading R&D strength

Since the launch of the first self-developed product in 2014, the Company has launched nearly 20 self-developed products, of which more than half of the products has a monthly transaction amount exceeding RMB 100 million. During the reporting period, a number of self-developed quality games, such asYong Heng Ji Yuan (永恒纪元) , Chuan Qi Ba Ye (传奇霸业), andSwords of Archangels (大天使之剑) , have achieved steady transaction amount in the markets at which these games have been launched for more than one year. The Company’s self-developed products are characterized by high output, high success rate and long period, indicating that the Company’s R&D strength is at the leading level in the industry.

The “Perfection” R&D strategy runs through the entire life cycle of the Company’s self-developed products: Before the launch of games, the Company carefully worked out details of product planning, art quality, music effects, etc.; after the launch of games, the Company continued to invest in product iteration, process optimization, user experience and other aspects to ensure the high transaction amount and long period of games.

The Company has always attached great importance to R&D investments. During the reporting period, the Company incurred an R&D expenditure of RMB 540 million, with a year-on-year increase of 22.94%. Through continuous R&D investments, the Company has accumulated a large number of core technologies: A series of high-performance and stable game engines and frameworks are independently developed by the Company to support the development of highly playable large-scale online games of high performance and quality, which provide an important guarantee for the Company to continuously launch high-quality games. As an important tool to enhance the product experience, the Company analyzes its game data through self-developed big data analysis system, and uses the analysis results to provide accurate numerical reference for design of new products and iterative optimization of previous products, thus improving the Company’s insights and capacity for process optimization in terms of product development. The Company’s product research and development has always been market-oriented. The Company adheres to the principle of sustainable development, constantly breaks through itself, and also maintains its advantages in the ARPG category while at the same time making initial attempts in new areas. The leisure sports game Chao Neng Qiuqiu (working title)（超能球球（暂定名））, the turn-based game Mobile Game AOD（手游项目AOD） and the simulation business game Code DG（代号DG）developed during the reporting period are expected to be launched in 2019. As of the end of the reporting period, the Company was carrying out market researches on other types of games such as SLG. In 2019, the Company will continue to make diversified innovation in product types, themes, art performance, gameplay settings, etc.

As of the issuance date of this report, the Company was developing a browser game of MU X (working title)(奇迹X（暂定名）), and mobile games such as Chuan Qi NB（传奇NB）, Code YZD（代号YZD）, Chuan Qi S（传奇S）, Code DG（代号DG）, Chao Neng Qiuqiu (working title)（超能球球（暂定名））, An Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典） and Mobile Game AOD（手游项目AOD）. With its accumulated experiences and continuous innovation, the Company is expected to continue to produce long-period quality games that surpass theYong Heng Ji Yuan (永恒纪元) , Chuan Qi Ba Ye (传奇霸业), and Swords of Archangels (大天使之剑) .

2. Excellent distribution strength

During the reporting period, the market share of the Company’s mobile game distribution business in China increased to 6.48%; the Company’s browser game business in China also continued to maintain its leading position; while maintaining market advantages in China’s Hong Kong, Macao, Taiwan and Southeast Asia, the Company has also made breakthroughs in the Japanese and South Korean markets. The Company actively adheres to the “perfection and diversification” business strategy and promotes its own business capacity to a new height through continuous innovation:

1) The promotion of “perfection” strategy is reflected in product supply before the launch of games and operation optimization after

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the launch.

In terms of product supply, the Company has accumulated abundant product resources, established a rigorous evaluation process and evaluation criteria for product introduction, and also utilized its own advantages in user data and numerical experiences to work out products along with game developers, thus ensuring a better quality of games before their launch.

In terms of operation optimization, the Company has strong capabilities for operation and optimization in numerical management, process optimization, event planning, etc. After the launch of games, the Company continues to improve the quality of games, attract users through better contents, extend the product life cycle, and accumulate higher income.

2) The “diversification” strategy has achieved good results in multiple business dimensions such as products, promotion and services. In terms of game products, the Company on the one hand brings a diversified layout to the product supply side through independent research and development, investment in capital and cooperation with many large R&D manufacturers such as Tencent, NetEase, Perfect World, Century Huatong Group, etc.; on the other hand, the Company has also made diversified attempts in product categories and product themes, and achieved good results. Since 2018, the Company has successively launched a series of game products with different categories and themes and excellent performances in the Chinese mobile game market, such as Gui Yu Mi Cheng, Tu Long Po Xiao, Dou Luo Da Lu H5, etc. The successful launch of these games indicates that the Company’s multi-theme and multi-category product matrix has begun to take shape and the Company has also accumulated preliminary success experiences on the way to diversified development.

In terms of promotion, the Company adopts a multi-dimensional approach of “three-dimensional marketing + precise delivery” to create a new idea for systemic flow management. In terms of three-dimensional marketing, the Company tries to meet the different cultural consumption needs of users from different perspectives by choosing spokespersons who match the product connotation, promoting games through high-quality micro-movie-style promotional materials, carrying out cross-border cooperation amongYong Heng Ji Yuan (永恒纪元) , Xian Ling Jue Xing（仙灵觉醒）, and finance, catering and FMCG industries, and implanting public welfare activities into game products. In terms of precise delivery, the Company analyzes big data such as “user portrait” and “user model” with the user resources accumulated over the years to accurately deliver advertisements to targeted user groups and improve the advertising effect.

In terms of services, the Company is committed to providing game users with comprehensive and detailed long-term services. Through an improved user account and service system, and an experienced service team, the Company uses abundant product supplies to provide users with comprehensive game products and one-stop services to continuously improve user satisfaction, activation and retention, and also to extend the product life cycle.

3. Advantage of “integration of R&D and operation” mode

The “integration of R&D and operation” mode of the Company is conducive to making full use of resources and creating quality products from a long-term perspective. On the one hand, the Company can ensure the stable supply of quality products to support the operation development through strong R&D strengths. At the same time, the R&D team can utilize the feedback of the operation department to optimize products and extend the product life cycle; on the other hand, in the early stages of product R&D, the operation team can provide advices and suggestions to the R&D team with years of experiences and keen market insights. Additionally, in the early stage of commercialization of products, the operation team can also support the R&D team to conduct a large number of product tests, and utilize the promotion and marketing strategies to guide the R&D team to adjust the iterative updates of product activities and improve the product success rate.

4. Team strengths

The Company has been deeply involved in the field of cultural and creative industries for many years. Its core management team consists of experienced employees who have strong and forward-looking capabilities for strategic layout, while the core team consists of highly skilled R&D personnel, creative operators, and highly efficient managers. The Company has always adhered to the marathon-style entrepreneurial spirit, and constantly caught up to surpass the industry leader.

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Section V Discussion and Analysis of Operation Status

I. Overview

Key performance indicators	2018	2017	Year-on-year change
Operating income (RMB 100 million)	76.33	61.89	23.33%
Total profit (RMB 100 million)	12.19	19.17	-36.38%
Net profits attributable to the listed company shareholders (RMB 100 million)	10.09	16.21	-37.77%
Non-GAAP net profit (RMB 100 million)	15.01	14.09	6.56%
Net cash flows from operating activities (RMB 100 million)	19.54	18.32	6.69%
Basic earning per share (yuan/share)	0.47	0.76	-38.16%
Weighted average rate of return on equity	16.59%	28.12%	-11.53%

During the reporting period, the Company has steadily promoted the development strategy of “perfection, diversification, platformization and globalization” around IPs, making its comprehensive strength in the forefront among Chinese competitors.

During the reporting period, the Company achieved an operating income of RMB 7.633 billion, with a year-on-year increase of 23.33%, and the growth of distribution and R&D for mobile games was the main driver of overall income growth during the period.

The Company achieved a total profit of RMB 1.219 billion, with a year-on-year decrease of 36.38%; and a net profit attributable to the listed company shareholders of RMB 1.009 billion, with a year-on-year decrease of 37.77%. The main reasons for the year-on-year decline in net profit attributable to the listed company shareholders are stated as below: 1) During the reporting period, the performance compensation income and goodwill impairment loss were recognized due to the under-performance of Shanghai Mokun, a subsidiary of the Company, therefore the net profit attributable to shareholders was decreased by RMB 506 million; 2) In 2017, the Company disposed of the equities of Shanghai Zheyuan Culture & Media Co., Ltd., Shanghai Aurora Network Technology Co., Ltd. and other companies, and recognized the after-tax investment income of RMB 200 million. No significant equity disposal income existed in 2018;

The Company uses non-GAAP net profit as a complementary indicator to measure actual operating results. The Company’s non-GAAP net profit for the period was RMB 1.501 billion, a year-on-year increase of 6.56%. The main driver for profit growth was mainly the Company’s continued growth in mobile games.

(I) Mobile game business

During the reporting period, the Company achieved an operating income of RMB 5,582 million and a gross profit of RMB 4,518 million from mobile games, a year-on-year increase of 69.99% and 79.89% respectively. The Company’s business revenue from and R&D investment into mobile games continue to increase, and the mobile game business maintains the leading position in domestic and overseas markets.

1. Release of mobile games

(1) Domestic market

The Company continued to play a vital role in domestic mobile game publishing market. During the reporting period, the market share of the Company’s mobile game business in China increased to 6.48%. During the reporting period, the Company operated more than 5 products with a monthly gross billing of more than RMB 100 million, with the highest exceeding RMB 930 million, the total number of new registered users exceeding 110 million, and the greatest number of monthly active users exceeding 20 million.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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During the reporting period, the Company, based on its capability of operating different games, adjusted its publishing strategy from simple “ARPG + SLG” to “diversification”. The Company applies diversification strategies at various levels such as products, promotion and services in a creative manner.During the reporting period, the Company formed a broad partnership with well-known internal and external firms such as Aurora Network, Tencent, NetEase, Perfect World, Century Huatong Group (CHT) and completed a diversified product layout. The product matrix includes ARPG, MMO, CARD, SLG and other types, covering a wide range of themes such as magic, western fantasy, eastern fantasy, adventure, fairy tales and nijigen. In 2018, more than 20 games of different types and themes were launched. As of the issuance date of this report, the Company had obtained the exclusive right to operate 9 mobile games, including Sword and Rebirth（剑与轮回）, Zhu Yu Di Xia Cheng（猪与地下城）, Xian Ling 2 (working title)（仙灵2（暂定名））, and rich reserves of independently-developed games such as Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, Code YZD(代号YZD), Chuan Qi S（传奇S）and Jing Ling Sheng Dian（精灵盛典）.

In the meantime, relying on its in-depth understanding of user demands, the Company created a new way of systemic traffic operation, and adopted a diversified mode of “multi-channel marketing + targeted advertising + long-term service” to provide users with comprehensive high-quality services for the whole process from their initial contact with the product to play the game and meet the deeper spiritual and cultural needs of users.

(2) Overseas market

During the reporting period, the Company further executed global strategies, and made breakthroughs in newly developed business areas such as Japan and Korea while maintaining competitiveness in advantageous areas such as China’s Hong Kong, Macao, Taiwan and Southeast Asia. As of the end of the reporting period, the Company maintained good relations with many local manufacturers in Hong Kong, Macao and Taiwan. 37GAMES, the Company’s overseas brand, covered more than 200 countries, and operated nearly 80 mobile games around the world.

During the reporting period, the Company made breakthroughs in having games published in Japan and South Korea:Yong Heng Ji Yuan (永恒纪元) , released in Japan in late June, achieved the highest monthly gross billing of over 10 million; the new game 운명: 무신의 후예 achieved a gross billing of over 10 million in Korea, ranked among Top 10 best-selling games.

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The Company also maintained its advantageous position in China’s Hong Kong, Macao, Taiwan and Southeast Asia: During the

reporting period, the self-developed product Swords of Archangels (大天使之剑) H5 was launched in China’s Hong Kong, Macao, Taiwan and Vietnam, and rose to the top of bestselling games in merely two months after its launching; Clans of Intrigue（楚留香）, an MMORPG launched in the reporting period, ranked first among best-selling games in terms of downloads only three days after launched in China’s Taiwan market, with the maximum daily installations exceeding 150,000,

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renewing the game downloading record on the day in Taiwan. Gui Yu Mi Cheng（鬼语迷城） launched at the end of the reporting period was ranked 2nd in terms of best-selling games and 1st in terms of downloads in the first month when it was released in China’s Taiwan.

During the reporting period, the Company constantly updated and iterated its flagship product,Yong Heng Ji Yuan (永恒纪元) , keeping a stable gross billing in China’s Hong Kong, Macao, Taiwan, Southeast Asia, Europe, America, Korea and other regional markets.

As of the issuance date of this report, the Company has reserved many global products, including Western Magic SLG game Code MH（代号MH）, SLG game Code ZSJ（代号ZSJ）to gain a position in the global SLG market; in addition, the following games were introduced to the Japanese market: card game SNK オールスター, female game Tian E Zuo（天鹅座）, nijigen game Mo

Wang Ji Hua（魔王计划） and others; the following games were introduced to the Korean market: nijigen game Den ge ki Bunko

Crossing Void (电击文库：零境交错), SLG game Zhen Long Ba Ye（真龙霸业）, ARPG game An Hei Hou Yi（暗黑后裔） and others; in addition, there are a wide variety of games, including Shi Hun: Long Yue Chuan Shuo (侍魂：胧月传说), Dou Luo Da Lu （斗罗大陆H5）, Xi Wang M (希望M), which will be brought to overseas market in 2019 to help the Company further explore overseas markets.

2. Research and development of mobile games

During the reporting period, the Company registered a year-on-year increase of 61.05% in the gross billing of mobile game R&D business, and the increased proportion of the income from self-developed products enhanced the Company’s profitability. The continuous investment into mobile game R&D is an important part of the Company’s “quality and diversified” business strategy. The increased R&D investment mainly focuses on improvement of product quality and exploration of new product categories.

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To improve product quality, the Company is committed to make better the product engines, and the artistic and sound quality of products to meet the user demand in experiencing high-quality games at technical level; it is dedicated to game innovation and process optimization to meet user demand in fun and smooth experience at the planning level. High-quality development and high-frequency iterations made new products attractive to users, and allowed most self-developed products to maintain high gross billing for a long time. Since 2018, more than 10 self-developed mobile games have been launched, among which Dou Luo Da Lu H5（斗罗大陆H5）and Yi Dao Chuan Shi（一刀传世） and other games achieved a monthly gross billing of over RMB 100 million. The Company updated and iterated several long-cycled popular games that have been launched. For the Swords of Archangels (大天使之剑) H5, the Company follows the long-term operation concept, and makes it an industry-standard H5 product through design and development of innovative gameplay to satisfy user demands. For Yong Heng Ji Yuan (永恒纪元) , the Company’s R&D team keeps updating and iterating the cross-server system in combination with the SLG game mode, to enhance the social interaction between players, continuously optimize the version content, and enhance the game experience of new and old players.

In the exploration of new product categories, the Company set foot on R&D of casual sports games, turn-based games and simulation and education games during the reporting period, and conducted preliminary research on the development of other categories such as SLG. As of the issuance date of this report, Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, a casual sports game developed by the Company, was under test and is expected to be launched in 2019. In the future, the goal of the Company is to become a first-rate game developer capable of providing players with various game products, focusing on high-quality content and utilizing its own advantages in anticipating user needs. It will apply core technologies to further explore new themes, gameplay and categories, and to actively expand its product lines.

As of the end of the reporting period, the Company was developing 12 mobile games, including Chuan Qi NB（传奇NB）, Code YZD（代号YZD）, Chuanqi S（传奇S）, Code DG（代号DG）, Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, An Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典） and Mobile Game AOD（手游项目AOD）.

(II) Browser games

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More than 36,000 new servers were opened in 2018 in the domestic market, topping the ranking list of operation platforms in term of server opening (source of data from 9k9k). During the reporting period, the operating from the browser game business reached RMB 1,646 million, a slight drop year on year, which was mainly due to users’ shift to mobile clients and reduction in browser game products. The Company improved user adhesiveness and stabilized the product life cycle through refined operation of major high-quality games, while strengthening cooperation with domestic top browser game developers through strategic investment and business cooperation. A series of excellent games were launched during the reporting period, including The Rise of Taichi（太极崛起）, the browser game Zhen Mo Qu（镇魔曲网页版）and Mie Shen（灭神）, which helps further stabilize the operating income. At the same time, the Company continued its efforts to develop browser games. MU X (working title)(奇迹X（暂定名）), which is under development, and The Legendary Swordsman (working title)（笑傲江湖（暂定名））, the game to be operated by the Company as an agent, are expected to be launched in 2019.

(III) Other cultural and creative businesses

During the reporting period, the Company invested into other

fast-growing cultural and creative segments, while maintaining the

high-speed growth of its core business, and deeply explored the opportunity to extend film and television, animation, music, literature, VR/AR, Internet health and other fields with a key focus centering a strategy on quality content, to create a brand that can provide quality content for all ages. In addition to maintaining the existing layout in film, animation, music and other fields, the Company made arrangements for new cultural and creative segments by investing in Internet sports (Wake Yoga), children's education (Miaocode, KaDa Story), youth cultural communication (Eomchat), talent agent (Original Plan) and IP incubation (Jinhai Shiyi), to provide high-quality content for all ages and segments.

Focusing on main game business and traffic operation advantages, combined with the previous layout of VR and AR, the Company will empower and coordinate strategically with the invested companies, and prepare for the upcoming 5G era, offering more high-quality content with new experience, create a one-stop cultural and entertainment ecosystem, and become the most trusted cultural brand of China’s younger generation.

(IV) IP strategy

It’s a long-term development goal of the Company to create quality content and establish a quality content brand. Based on this, the Company continues to explore high-quality IP for development of quality cultural products including games, relying on its own advantages. During the reporting period, the Company had three new IP reserves: Astro Boy（阿童木）, Seal Online（希望OL） and The Ancient Century（上古世纪）, and one IP cooperation project Dou Luo Da Lu H5（斗罗大陆H5）.As of the end of the reporting period, the IPs of the Company’s reserves covered different segments, including games, animation, literature, film and television. The cooperation projects Dou Luo Da Lu H5（斗罗大陆H5）, Yi Dao Chuan Shi（一刀传世） which was adapted from Chuan Qi（传奇）, and Seal Online had been launched as of the reporting date, all of which achieved a high gross billing. As of the issuance date of this report, the web project of Miracle MU MU X (working title)(奇迹X（暂定名）) and the mobile game Jing Ling Shen Dian (精灵盛典）was at the late development stage, and are expected to be launched by 2019. Relying on its excellent IP strategy, the Company will continue to build its cultural and creative strategy system, satisfy the diversified demands of users for entertainment, and exploit

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the value extension space of IP in film and television, game, animation and comic, music and VR in depth.

II. Analysis of main business

1. General

See “I. Overview” in “Discussion and Analysis of Operation Status” for related content.

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2. Income and cost

(1) Composition of operating income

Unit: RMB

	2018	2018	2017	2017
					Year-on-year increase/decrease
	Amount	Proportion of operating revenue	Amount	Proportion of operating revenue

Total operating income	7,632,679,668.47	100%	6,188,828,116.75	100%	23.33%
By industry
Online game industry	7,247,460,500.55	94.95%	5,628,616,443.76	90.95%	28.76%
Automobile parts industry	385,219,167.92	5.05%	560,211,672.99	9.05%	-31.24%
By products
Browser games	1,645,957,054.96	21.56%	2,298,860,026.39	37.15%	-28.40%
Mobile games	5,581,764,190.33	73.13%	3,283,622,990.10	53.06%	69.99%
Automobile parts	385,219,167.92	5.05%	560,211,672.99	9.05%	-31.24%
Others	19,739,255.26	0.26%	46,133,427.27	0.74%	-57.21%
By regions
Domestic	6,705,946,316.22	87.86%	5,269,286,525.60	85.14%	27.26%
Overseas	926,733,352.25	12.14%	919,541,591.15	14.86%	0.78%

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.

Unit: RMB

	2018	2018	2018	2018	2017	2017	2017	2017

	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4

Operating income	1,661,159,158.79	1,641,336,987.98	2,232,318,268.92	2,097,865,252.78	1,618,738,028.5	1 1,460,690,875.99	1,384,968,829.74	1,724,430,382.51

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Net profits attributable to
the listed company	410,093,180.04	391,285,768.19	416,969,559.37	-209,845,149.80	433,033,150.06	417,517,368.31	360,788,807.71	409,243,101.39
shareholders

Explain the reasons for seasonal (or periodic) characteristics of the Company’s business and fluctuation risks

The Company does not have seasonal or periodic characteristics in its business.

The net profit attributable to listed company shareholders in the fourth quarter was RMB -209,845,149.80, mainly due to the Company’s provision of RMB 959,833,685.66 set aside for Shanghai Mokun’s goodwill impairment loss. The amount of the impairment loss significantly exceeded the performance compensation and operating profit.

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(2) Industries, products or regions that account for over 10% of the Company’s operating income or operating profit

√Applicable □Not Applicable

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

Yes

Software and IT services

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.

Unit: RMB

				Year-to-year	Year-to-year
						Year-to-year
			Gross profit	increase/decrease	increase/decrease
	Operating income	Operating cost				increase/decrease
			margin	of the operating	of the operating
						of gross profit
				income	cost

Industry of clients
Online game
	7,247,460,500.55	1,525,929,424.69	78.95%	28.76%	-0.52%	6.20%
industry

Automobile parts
	385,219,167.92	285,491,515.41	25.89%	-31.24%	-31.10%	-0.15%
industry

By products
Browser games	1,645,957,054.96	462,583,409.98	71.90%	-28.40%	-39.29%	5.04%
Mobile games	5,581,764,190.33	1,063,346,014.71	80.95%	69.99%	37.76%	4.46%
Automobile parts	385,219,167.92	285,491,515.41	25.89%	-31.24%	-31.10%	-0.15%
Others	19,739,255.26	0.00	100.00%	-57.21%	0.00%	0.00%
By regions
Domestic	6,705,946,316.22	1,565,632,670.32	76.65%	27.26%	-10.31%	9.78%
Overseas	926,733,352.25	245,788,269.78	73.48%	0.78%	21.36%	-4.49%

For change of statistical caliber for main business data during the reporting period, the Company adjusted the main business data according to year-end statistical caliber

□Applicable √Not Applicable

(3) Whether the Company has goods sales revenue higher than service revenue

□ Yes √ No

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

□Applicable √Not Applicable

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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(5) Composition of operating cost

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.

Composition of main business cost

Unit: RMB

	Reporting period	Reporting period	Amount of previous year	Amount of previous year
					Year-on-year
Cost composition		Proportion in		Proportion in
	Amount		Amount		increase/decrease
		operating cost		operating cost

Shared revenue from
	1,404,939,973.86	77.56%	1,423,838,815.22	73.08%	-1.33%
games

Cost of servers	63,107,660.73	3.48%	54,854,972.77	2.82%	15.04%
Amortization of
	37,821,137.65	2.09%	54,778,687.09	2.81%	-30.96%
copyright money

Production cost	20,060,652.45	1.11%	371,026.02	0.02%	5,306.80%
Direct materials cost	220,361,708.66	12.17%	337,461,925.72	17.32%	-34.70%
Direct labor
	14,430,238.31	0.80%	17,028,724.64	0.87%	-15.26%
expenses

Manufacturing
	50,699,568.44	2.80%	59,863,088.30	3.07%	-15.31%
expenses

Total cost	1,811,420,940.10	100.00%	1,948,197,239.76	100.00%	-7.02%

Industry category Industry category

Unit: RMB

		2018	2018	2017	2017
						Year-on-year
Industry category	Item		Proportion in		Proportion in
		Amount		Amount		increase/decrease
			operating cost		operating cost

Online game	Shared revenue
		1,404,939,973.86	77.56%	1,423,838,815.22	73.08%	-1.33%
industry	from games

Online game
	Cost of servers	63,107,660.73	3.48%	54,854,972.77	2.82%	15.04%
industry

Online game	Amortization of
		37,821,137.65	2.09%	54,778,687.09	2.81%	-30.96%
industry	copyright money

Online game
	Production cost	20,060,652.45	1.11%	371,026.02	0.02%	5,306.80%
industry

Automobile parts	Direct materials
		220,361,708.66	12.17%	337,461,925.72	17.32%	-34.70%
industry	cost

Automobile parts	Direct labor	14,430,238.31	0.80%	17,028,724.64	0.87%	-15.26%

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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industry	expenses
Automobile parts	Manufacturing
		50,699,568.44	2.80%	59,863,088.30	3.07%	-15.31%
industry	expenses

Description None

(6) Whether the consolidation scope changes in the reporting period

√Yes □ No

See Note III. Consolidation scope change under Section V for details

(7) Significant changes or adjustments to businesses, products or services during the reporting period

√Applicable □Not Applicable

During the reporting period, the Company disposed of the manufacturing and sales business of automotive plastic fuel tanks. Apart from that, there is no significant change to the Company’s main businesses, main products and business models, and major performance drivers.

(8) Major sales customers and major suppliers

Major sales customers

Major sales customers
Total sales revenue of top 5 customers (RMB)	2,557,588,746.03
Proportion of total sales revenue of top 5 customers
	33.51%
against the total sales revenue

Proportion of related parties’ sales among the sales of top
	0.00%
5 customers against total annual sales

Profile of top 5 customers

S/N	Customer name	Sales (RMB)	Proportion to annual total sales revenue
1	No. 1	1,129,853,810.91	14.80%
2	No. 2	684,819,228.17	8.97%
3	No. 3	359,505,079.95	4.71%
4	No. 4	208,935,938.85	2.74%
5	No. 5	174,474,688.15	2.29%
Total	--	2,557,588,746.03	33.51%

Description of major customers’ other situation □Applicable √Not Applicable

Major suppliers of the Company

Major suppliers of the Company
Total purchase amount of top five suppliers (RMB)	565,682,491.87
Proportion of total purchase amount of top 5 suppliers	31.83%

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against the total purchase amount	against the total purchase amount
Proportion of related parties’ total purchase among the
purchase amount of top 5 suppliers against the total		0.00%
purchase amount
Profiles of top 5 suppliers
			Proportion in annual total purchase
S/N	Supplier Name	Purchasing amount (RMB)
			amount

1	No. 1	222,561,545.35	12.52%
2	No. 2	123,298,738.37	6.94%
3	No. 3	88,873,339.60	5.00%
4	No. 4	81,570,946.86	4.59%
5	No. 5	49,377,921.69	2.78%
Total	--	565,682,491.87	31.83%

Description of major customers’ other situation

□Applicable √Not Applicable

3. Expenses

Unit: RMB

			Year-on-year
	2018	2017	increase/decr	Explanation
			ease
	3,347,261,308.33	1,908,207,466.32		This was mainly due to a huge year-on-year increase in Internet traffic
				expenses of the Company’s mobile game business during the reporting
				period. The increase in mobile game business expenses was mainly due
				to the increase in the number of registered users. The number of new
				users in the reporting period exceeded 110 million. The main reasons
				were: (1) During the reporting period, games such as Gui Yu Mi Cheng,
				Swords of Archangels H5, Xian Ling Jue Xing, and Tu Long Po Xiao
Selling and
				were in the main promotion period; (2) Gui Yu Mi Cheng, Xian Ling Jue
distribution			75.41%
				Xing and other products of new themes attracted users from more
expenses
				market segments, which enlarged the Company’s customer acquisition

				scope, and promoted the new theme products. Products of new themes
				were effectively promoted. During the reporting period, games such as
				Gui Yu Mi Cheng, Swords of Archangels H5, Xian Ling Jue Xing, and
				Tu Long Po Xiao were in the main promotion period. In the same period
				last year, the main source of income,Yong Heng Ji Yuan (永恒纪元)
				and other games entered the peak period of gross billing.
Administrati	246,062,902.36	340,490,511.74		Mainly because the Company received equity incentive fee of RMB 101
			-27.73%
ve expense				million in the same period last year, but did not receive such fee in the

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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				current period.
Financial	17,097,099.24	28,555,783.27		Mainly due to the decrease in exchange losses during the reporting
			-40.13%
expense				period.

R&D	537,705,604.63	436,169,030.12		Mainly due to the increase in the number of R&D personnel in the game
			23.28%
expense				business and the increase in salary during the reporting period.

4. R&D investment

√Applicable □Not Applicable

Since 2018, more than 10 self-developed mobile games have been launched, among which Dou Luo Da Lu H5（斗罗大陆H5） and Yi Dao Chuan Shi（一刀传世） and other games achieved a monthly gross billing of over 100 million RMB. As of the issuance date of this report, the Company was developing a browser game of MU X (working title)(奇迹X（暂定名）), and mobile games such as Chuan Qi NB（传奇NB）, Code YZD（代号YZD）, Chuan Qi S（传奇S）, Code DG（代号DG）, Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, An Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典）and Mobile Game AOD（手游项目AOD）. Through continuous R&D investment, deep technical accumulation and continuous innovation, the Company is expected to continue to launch high-quality games to realize continuous revenue growth.

As of the end of the reporting period, the number of R&D staff decreased by 5.61% compared with that at the end of 2017, mainly due to the Company’s disposal of Shunrong Auto Parts in November 2018, resulting a fall in the number of R&D staff by 178 compared with that at the beginning of the current period.

R&D investment

	2018	2017	Change proportion (%)
Number of R&D staff	1,379	1,461	-5.61%
Proportion of R&D staff	60.94%	54.05%	6.89%
Amount of R&D investment
	539,841,128.36	439,094,559.01	22.94%
(RMB)

Proportion of R&D investment
	7.07%	7.09%	-0.02%
in operating income

Amount of capitalized R&D
	2,254,237.93	7,663,076.06	-70.58%
investment (RMB)

Percentage of capitalized R&D
	0.42%	1.75%	-1.33%
investment in R&D investment

The reason for the significant change in the proportion of total R&D investment in operating income compared with the previous

year

□Applicable √Not Applicable

Reasons and justification for the substantial change in the capitalization rate of R&D investment

□Applicable √Not Applicable

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.

Unit: RMB

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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		Basic information of relevant
Project name	Capitalized amount of R&D		Schedule
		projects

		Get a genuine license, use 3D
			At the late development stage,
		engine support, and ARPG
Browser game projects	6,205,796.16		and expected to be launched by
		browser games with MU client
			2019.
		games as the theme.

Basis for the above amount of capitalized R&D investment is as follows:

(1) Technically feasible in completing the use or sales of the intangible assets;

(2) Intention of the Company to complete the use or sales of the intangible assets for use and sale;

(3) There are markets for intangible assets, which can produce economic benefits for the Company;

(4) The Company has rich R&D experience and good business performance, gains the support of enough technique, finance and other resources to accomplish the development of intangible assets, and is able to use or sell the intangible assets;

(5) The expenditures in the development period of intangible assets can be measured reliably.

The above projects have undergone rigorous evaluation through market research, project initiating report and development plan, and the accounting treatment of capitalization of R&D expenditure has been properly reviewed, and the internal control of the Company’s R&D expenditure is sound.

5. Cash flow

Unit: RMB

Item	2018	2017	Year-on-year increase/decrease
Sub-total of cash inflows from operating	7,656,830,471.69	6,764,509,897.17
			13.19%
activities

Sub-total of cash outflows from operating	5,702,396,850.85	4,932,613,968.87
			15.61%
activities

Net cash flows from operating activities	1,954,433,620.84	1,831,895,928.30	6.69%
Sub-total of cash inflows from investing	4,242,654,828.03	2,567,482,176.55
			65.25%
activities

Sub-total of cash outflows from investing	4,297,762,675.44	3,935,420,406.47
			9.21%
activities

Net cash flows from investing activities	-55,107,847.41	-1,367,938,229.92	95.97%
Sub-total of cash inflows from financing	668,789,457.72	1,344,262,496.88
			-50.25%
activities

Sub-total of cash outflows from financing	2,638,059,560.80	1,034,016,584.46
			155.13%
activities

Net cash flows from financing activities	-1,969,270,103.08	310,245,912.42	-734.74%
Net increase of cash and cash equivalents	-65,170,587.19	761,697,925.86	-108.56%

Description of main factors influencing major year-on-year changes in relevant data √Applicable □Not Applicable

The sub-total of cash inflows from investing activities increased by 65.25% from the previous year, mainly due to the increase in

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the Company’s redemption of financial products during the reporting period.

The cash inflow of financing activities decreased by 50.25% from the previous year, mainly due to: 1) the Company’s issuance of shares to raise funds in the same period last year; 2) decrease in the Company’s bank loans during the reporting period.
The sub-total of cash inflows from investing activities increased by 155.13% from the previous year, mainly due to the Company’s payment for acquiring the minority shareholders’ equity of Jiangsu Aurora during the reporting period.

Reasons for the significant difference between the net cash flow from the Company’s operating activities and the net profit for the year during the reporting period

□Applicable √Not Applicable

III. Analysis of non-main business

√Applicable □Not Applicable

Unit: RMB

	Amount	Proportion of total profit	Cause	Is it consistently applied?
			Mainly due to investment
Investment income	80,543,972.30	6.61%	profits from the disposal of	No
			equity investment
			Mainly due to the asset
Asset impairment	1,049,355,112.25	86.06%	impairment losses of the	No
			goodwill of Shanghai Mokun.
			Mainly due to the income from
			performance compensation
Non-operating
	463,914,478.18	38.05%	recognized resulting from the	No
income
			under-performance of Shanghai

			Mokun
			Mainly refund of VAT upon	Refund of VAT upon collection
			collection and other	can be consistently applied, but
Other profits	97,647,310.60	8.01%
			government subsidies related to	other government subsidies

			daily operations.	cannot be consistently applied.

IV. Analysis of assets and liabilities

1. Significant changes in the composition of assets

Unit: RMB

	End of 2018	End of 2018	End of 2017	End of 2017
					Increase/d
		Proportion		Proportion
					ecrease of	Explanation
	Amount	of total	Amount	of total
					proportion
		assets		assets

Monetary fund	1,532,965,200.05	18.26%	1,580,910,931.98	17.26%	1.00%	No significant change.
Accounts	1,298,554,481.23	15.47%	884,909,012.77	9.66%	5.81%	Mainly due to the increase in operating income

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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receivable						in the fourth quarter of the current year
						compared with the same period of the previous
						year.
			101,828,085.31			Mainly due to the disposal of Shunrong Auto
Inventories				1.11%	-1.11%
						Parts during the reporting period.

	555,602,013.99		376,972,832.08			Mainly due to the new investment into the
						equity of Sanqi Guangzheng (Guangzhou)
						Cultural Technology Investment Partnership
Long-term equity
		6.62%		4.12%	2.50%	(Limited Partnership), Shanghai Fenghua
investments
						Qiushi Culture Media Co., Ltd., New Cues

						(Beijing) Television Investment Co., Ltd. and
						other companies during the reporting period.
	36,458,454.56		292,395,887.17			Mainly due to the disposal of Shunrong Auto
Fixed assets		0.43%		3.19%	-2.76%
						Parts during the reporting period.

Construction in			50,672,878.42
				0.55%	-0.55%	No significant change.
progress

Short-term loan	369,000,000.00	4.40%	372,054,500.00	4.06%	0.34%	No significant change.
Long-term loans	281,176,106.33	3.35%	310,775,272.06	3.39%	-0.04%	No significant change.
						Mainly due to the increase in the amount of
Other receivables	792,425,628.90	9.44%	388,694,512.02	4.24%	5.20%	equity receivable from the disposal of Shunrong
						Auto Parts during the reporting period.
Other current						Mainly due to the decrease in the performance
	356,865,377.91	4.25%	592,189,323.99	6.46%	-2.21%
assets						compensation receivables.

						Mainly due to provision made by the Company
						for impairment on the goodwill formed by the
Goodwill	1,578,567,397.76	18.80%	2,540,312,996.76	27.73%	-8.93%	merger resulting from Shanghai Mokun’s
						failure to reach the expected performance in
						2018.
						Mainly due to the increase in the cost of
Notes payable
						Internet traffic resulting from the year-on-year
and accounts	1,082,362,368.29	12.89%	741,792,973.33	8.10%	4.79%
						increase in Internet traffic expenses during the
payable
						reporting period.

2. Assets and liabilities measured by fair value

√Applicable □Not Applicable

Unit: RMB

		Profits and
			Change in fair	Impairment	Purchase
	Beginning	losses from				Sales amount in
Item			value included	accrued in	amount in		Ending balance
	balance	change of fair				current period
			in equity	current period	current period
		value in this

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Financial assets
3. Financial assets
	81,100,692.72	31,572,708.00	-52,732,066.85	35,582,900.00	16,845,591.30	78,678,642.57
available for sale

Subtotal of financial
	81,100,692.72	31,572,708.00	-52,732,066.85	35,582,900.00	16,845,591.30	78,678,642.57
assets

Total of the above	81,100,692.72	31,572,708.00	-52,732,066.85	35,582,900.00	16,845,591.30	78,678,642.57
Financial liabilities	0.00					0.00

Whether there is significant change to measurement attributes of main assets during the reporting period

□ Yes √ No

3. Restriction of main assets and rights as if the end of the reporting period

The prepaid purchase price of Company’s subsidiaries corresponding to the borrowing with the office building as the mortgage was RMB 799,637,688.54 in total.
In the bank account balance of the Company’s subsidiaries, RMB 12,925,183.70 was the restricted fund, and RMB 4,299,671.56 was the guarantee.

V. Analysis of Investment Situations

1. Overview

√Applicable □Not Applicable

Investment amount during the reporting
	Investment amount of previous year (yuan)	Change %
period (yuan)

1,914,383,167.80	2,401,535,373.99	-20.29%

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2. Major equity investment during the reporting period

√Applicable □Not Applicable

Unit: RMB

									Progress as	Antici		Involved
Name of		Way of					Investm				Current		Date of
			Investment	Sharehold	Capital			Product	of the	pated		in		Index of disclosure (if
invested	Main businesses	contributi				Partner	ent				investment		disclosure
			amount	ing ratio	sources			types	balance	reven		lawsuit		any)
company		on					period				profit and loss		(if any)
									sheet date	ue		or not?

														Announcement of Wuhu
	Technology development, technology
														Shunrong Sanqi
	transfer, technical consultation, technical
									Industrial					Interactive
	services in the field of network technology
									and					Entertainment Network
	and computer technology; computer system
Jiangsu							Long-te	R&D of	commercial				February	Technology Co., Ltd. on
	integration, network engineering, animation	Purchase	1,400,000,000.00	20.00%	Self-owned	None				0.00	157,665,891.95	No
Aurora							rm	games	changes				8th, 2018	Acquiring 20% equity of
	design, creative services; graphic design
									have been					Jiangsu Aurora Network
	and production; sales of computer
									registered					Technology Co., Ltd.
	hardware, software and auxiliary
														(Announcement No.:
	equipment.
														2018-008)

														Announcement on the
														Subsidiary’s Intention to
									Industrial					Invest in and Receive
								Investmen	and					Shares of Huai’an Sanqi
Huai’an	Equity investment, investment and asset						Long-te	t	commercial				December	Yijian
		Purchase	155,215,923.89	60.30%	Self-owned	None					238,480.95	No
Sanqi	management in the cultural media industry.						rm	managem	changes				4th, 2018	Pan-Entertainment Asset

								ent	have been					Management Center
									registered					(Limited Partnership)
														(Announcement No.:
														2018-090)
Beijing	Organizational culture and art exchange	Capital	25,000,000.00	2.50%	Self-owned	None	Long-te	Culture	Industrial			No

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Chenming	activities; film and television planning;	increase					rm	media	and
Media	economic information consultation;								commercial
Co., Ltd.	animation design; design, production,								changes
	agency and release of ads; conference								have been
	services; hosting exhibition and display								registered
	events; technology promotion.
	Technology consulting, technical services,
	technology development and technology
	transfer in network technology,
	communication technology, computer
	technology, information technology,
									Industrial
Shanghai	electronic technology, intelligent
									and
Zhangmen	technology and multimedia professional
		Capital					Long-te	R&D of	commercial
g Network	fields, communication engineering, network		10,000,000.00	10.00%	Self-owned	None				No
		increase					rm	games	changes
Technolog	engineering, computer system integration,
									have been
y Co., Ltd.	graphic design and production, art design,
									registered
	design and production of various ads, the

	use of self-owned media to release ads,
	business information consulting (except for
	brokerage), R&D and sales of electronic
	products.
	Production, reproduction, distribution,
									Industrial
Hebei	copyright transactions and agency
									and
Youying	transactions of TV dramas, TV variety
		Capital					Long-te	Culture	commercial
Culture	shows, TV feature shows, animated story,		26,800,000.00	7.00%	Self-owned	None				No
		increase					rm	media	changes
Spreading	columns and radio play (production of TV
									have been
Co., Ltd.	dramas requires separate licenses)
									registered
	(operating with licenses); design,

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	production and agent of domestic
	advertising business, release of domestic
	outdoor advertising, organization of cultural
	and artistic exchange activities (except for
	commercial performance); marketing
	planning; corporate image planning.
	Planning of cultural and artistic exchange
	activities, design, production, agent and
	release of various advertisements, etiquette
	services, exhibition and display services,
	animation design, network technology
	(acting as a technology intermediary is not
Shanghai	permitted); technology development,								Industrial
Touch	technology transfer, technology consulting								and
Culture	and technical services in the field of	Capital					Long-te	Culture	commercial
			15,000,000.00	10.00%	Self-owned	None				No
Communi	computer software and hardware	increase					rm	media	changes

cation Co.,	technology; investment management,								have been
Ltd.	literary creation, photography services								registered
	(other than developing and enlargement
	printing), computer system integration;
	sales of computers, software and auxiliary
	equipment (other than dedicated products
	for computer information system security)
	and electronic products.
Shanghai	Cultural and artistic exchanges and								Industrial
Original	planning, corporate image planning,	Capital					Long-te	Culture	and
			10,000,000.00	2.50%	Self-owned	None				No
Plan	animation design and production, etiquette	increase					rm	media	commercial

Culture &	services, exhibition and conference								changes

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Media Co.	services, design, production, agency and								have been
Ltd.	release of various ads, organization and								registered
	planning of public relations activities,
	performance broker; technological
	development, technology transfer, technical
	consulting and technical services in the field
	of computer and network technology;
	e-commerce (value-added
	telecommunications and financial services
	are not permitted); sales of daily necessities
	and cosmetics; production of radio and
	television programs.
	Technology R&D, technical consulting,
	technical services and transfer of
	technology results: computer software and
	hardware, network technology, education
	software; computer system integration, data
	processing technology services; education
Hangzhou									Industrial
	information consultation (other than
Honghua								Children’s	and
	services for studying abroad and agencies
Duoduo		Capital					Long-te	digital	commercial
	for studying abroad); copyright agency,		16,978,390.00	5.00%	Self-owned	None				No
Network		increase					rm	reading	changes
	conference and exhibition; sales of:
Technolog								platform	have been
	electronic products (other than electronic
y Co., Ltd.									registered
	publications), communication equipment,

	articles, toys and audio-visual products for
	children; design, production, agent and
	release of: domestic ads; value-added
	telecom services; wholesale and retail of
	publications; computer animation design,

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	electronic equipment leasing, art training,
	organization and planning of cultural and
	artistic exchange activities (other than
	performances and performance agencies);
	commercial Internet culture services;
	production of radio and television
	programs; import and export of goods
	Management of entrusted assets (it is not
	permitted to engage in trust, financial asset
	management, securities asset management,
	etc.); equity investment; investment
	consulting, business management
	consulting; corporate marketing planning;
	cultural event planning; planning of culture
	and art exchange activities themed at film
Shenzhen
	and television; organization and planning of								Industrial
Zhonghui
	public relations activities; planning of								and
Television
	conference affairs and activities; planning						Long-te	Culture	commercial
Culture		Others	50,000,000.00	3.85%	Self-owned	None				No
	of etiquette events; corporate image						rm	media	changes
Communi
	planning; investment in film and television								have been
cation Co.,
	projects; investment in cultural industry								registered
Ltd.
	projects; creation of literary scripts, music

	works, songs, folk art, calligraphy and seal
	cutting works; technological development,
	technology transfer, technical consultation
	and technical maintenance in film and
	television culture; multimedia design;
	animation design; graphic design;
	advertising business; radio play, TV drams,

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	cartoons (production must be declared
	separately), special topics, columns
	(excluding political news), production,
	reproduction and distribution of variety
	shows, film distribution.
	Technology development, technical
	consultation, technical services, technology								Industrial
Jiangsu
	transfer in the fields of network technology								and
Yezi
	and computer technology; design and	Capital					Long-te	R&D of	commercial
Network			15,000,000.00	20.00%	Self-owned	None				-1,098,251.51	No
	production of various ads; animation	increase					rm	games	changes
Technolog
	design; computer graphic design and								have been
y Co., Ltd.
	production; sales of computer software and								registered

	auxiliary equipment.
Sanqi
Guangzhe						Guangz							Announcement on the
ng						hou							Subsidiary’s Proposed
(Guangzh						Securiti							Foreign Investment and
ou)						es			Industrial				Participation in the
Cultural						Innovat		Investmen	and				Establishment of Sanqi
	Corporate financial consulting; investment
Technolog		Newly-es				ion	Long-te	t	commercial			December	Guangzheng
	consulting; investment of corporate’s own		45,000,000.00	45.00%	Self-owned						No
y		tablished				Invest	rm	managem	changes			4th, 2018	(Guangzhou) Cultural
	funds; project investment
Investmen						ment		ent	have been				Technology Investment

t						Manag			registered				Partnership (Limited
Partnershi						ement							Partnership)
p (Limited						Co.,							(Announcement No.:
Partnershi						Ltd.							2018-088)
p)
Chengdu	R&D and sales of computer hardware and	Capital	12,000,000.00	20.00%	Self-owned	None	Long-te	R&D of	Industrial	-388,213.60	No

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Popcorn	software and electronic products; network	increase					rm	games	and
Interactive	technology development; computer system								commercial
Entertain	integration; basic software services;								changes
ment	application software services; technology								have been
Technolog	import and export.								registered
y Co., Ltd.
	Production of broadcasting and television
	programs; cultural entertainment brokerage;
	performance brokerage; technical
	consulting services for electronic products
	and accessories; intelligent technology
	consulting and related services; computer
	hardware development; computer network
	system engineering services; computer
	technology transfer; development and
									Industrial
	construction of computer network platform;
Mango									and
	computer technology consultation;
Excellent							Long-te	Culture	commercial
	computer technology development and	Others	35,582,900.00	0.18%	Self-owned	None				No
Media							rm	media	changes
	technical services; information network
Co., Ltd.									have been
	communication audio-visual program
									registered
	business; sales of electronic products and

	accessories and intelligent products; R&D
	of electronic products and intelligent
	technologies; retail of household chemicals,
	daily necessities, cultural and sports goods,
	toys, hardware tools, household appliances,
	clothing, shoes and hats, furniture,
	communication equipment and jewelry;
	development and sales of tourism products,

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	tourism information consulting and related
	services; advertising design and outdoor
	advertising, and agent for television and
	newspaper advertising; event planning,
	exhibition and training; sales of
	pre-packaged food and liquor; retail of
	Chinese medicine, health food, medical
	equipment, audio-visual products, book and
	newspaper; information service of
	second-class value-added telecom business
	(excluding fixed-line telephone information
	service business and mobile network
	information service); part-time insurance
	agency; import and export of various
	commodities and technologies (other than
	those limited or prohibited by the country);
	fertilizer retail; sales of packaged seeds that
	are not repackaged; sales of tree and crop
	seeds.
Total	--	--	1,816,577,213.89	--	--	--	--	--	--	0.00	156,417,907.79	--	--	--

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3. Major non-equity investment during the reporting period

√Applicable □Not Applicable

Unit: RMB

									Accumulat
		Is it
			Industries	Investment					ed gains as	Reasons for failure
	Way of	fixed			Accumulated input						Date of
			relevant for	amount during		Capital	Project	Anticipated	of the end	to reach planned
Project name	contribut	assets			amount as of the end						disclosure (if	Index of disclosure (if any)
			investment	the reporting		sources	progress	revenue	of the	schedule or
	ion	investme			of reporting period						any)
			projects	period					reporting	expected revenue
		nt
									period

12F, 14F, 17F~23F
office premises,												Announcement on the
underground 3F and												Subsidiary’s Purchase of
						Own +
4F parking spaces of			Commercial real									Office Space and
	Others	Yes		40,940,000.00	836,804,793.02	mortgage		0.00	0.00	Not applicable	April 26th, 2017
Zhongrong Plaza,			estate									Supporting Parking Lot
						loans
No. 666, Huangpu												(Announcement No.:

Avenue, Tianhe												2017-034)
District, Guangzhou
Total	--	--	--	40,940,000.00	836,804,793.02	--	--	0.00	0.00	--	--	--

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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4. Financial assets that are measured by fair value

√Applicable □Not Applicable

Unit: RMB

		Profits and losses
			Change in fair
		from change of		Purchase amount during	Amount sold during the	Accumulated
Assets category	Initial investment cost		value included in				Ending amount	Capital sources
		fair value in this		the reporting period	reporting period	investment income
			equity
		period

Share	112,016,157.36	0.00	-21,159,358.85	35,582,900.00	12,178,155.94	-9,114,992.25	78,678,642.57	Self-owned
Total	112,016,157.36	0.00	-21,159,358.85	35,582,900.00	12,178,155.94	-9,114,992.25	78,678,642.57	--

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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5. Utilization of raised fund

√Applicable □Not Applicable

(1) Utilization of raised fund

√Applicable □Not Applicable

Unit: RMB 10,000

					Total
			Total				Proportion
					raised fund	Accumulat
			amount of	Total			of		Use and	Amount of
					with	ed total		Total
Year of		Total	used raised	amount of			accumulat		expenditur	raised fund
	Way of fund				changed	raised fund		amount of
fund		amount of	fund	raised fund			ed raised		e of	left unused
	raising				purpose	with		unused
raising		raised fund	during the	that has			fund with		unused	for over
					during the	changed		raised fund
			reporting	been used			changed		raised fund	two years
					reporting	purpose
			period				purpose
					period

	Non-public
2017		45,596.25	45,596.25	45,596.25	0	0	0.00%	0	--	0
	offerings

Total	--	45,596.25	45,596.25	45,596.25	0	0	0.00%	0	--	0
Description of overall utilization of raised fund
Upon verification of Reply on Verification of Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd.
Issuing Shares to, Purchasing Assets from, and Raising Supporting Funds from Wuhu Shunrong Sanqi Mutual Entertainment
Network Technology Co., Ltd. (Z.J.X.K. [2017] No. 579) from China Securities Regulatory Commission, Wuhu Shunrong Sanqi
Interactive Entertainment Network Technology Co., Ltd. issued, in the form of non-public offerings, 17,866,869 shares of common
stocks (“A-shares”) with par value of RMB 1 per share and issue price of 25.52 yuan/share to two specific investors: Shenzhen
State-owned Enterprise Structural Adjustment, Investment Attraction & M&A Equity Investment Fund Partnership (Limited
Partnership) and Shenzhen Yidun Media Investment Fund Partnership (Limited Partnership), and the total raised funds were RMB
455,962,496.88. After deducting the issuance expenses of RMB 31,313,316.06 (including tax), and considering the VAT input tax
of RMB 1,768,867.93, the net raised funds were RMB 426,418,048.75. As of June 30th, 2017, the supporting fund raised from the
above issuance was in place and verified by Pan-China Certified Public Accountants (Special Ordinary Partnership), which issued
the Capital Verification Report (T.J.Y. [2017] No. 3-64) on July 1st, 2017. The raised fund was mainly used for purchasing 68.43%
equity of Shanghai Mokun and 49.00% equity of Jiangsu Zhiming, with cash consideration of RMB 422,642,500.00 and relevant
intermediary fees of RMB 33,320,000.00 for this transaction.

(2) Change items of the raised fund

√Applicable □Not Applicable

Unit: RMB 10,000

	Whether	Total	Total	Investme	Accumul	Investme	Date on	Benefits	Whether	Significa
Committed investment
	the	committe	investme	nt	ated	nt	which the	realized	realize	nt change
project and investment
	project	d	nt after	amount	investme	schedule	project	during	the	to the
of extra raised fund
	has been	investme	adjustme	during	nt	at the	will reach	the	expected	project

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	changed	nt	nt (1)	the	amount at	closing	expected	reporting	benefits	feasibility
	(includin	amount		reporting	the	period (3)	use state	period
	g partial	for raised		period	closing	＝(2)/(1)
	change)	fund			period (2)
Committed investment project
Cash consideration for
purchasing 68.43%							May 31st,
	No	33,346.25	33,346.25	0	33,346.25	100.00%		-330.17	No	No
equity of Shanghai							2017

Mokun
Cash consideration for
purchasing 49.00%							May 31st,
	No	8,918	8,918	0	8,918	100.00%		3,155.69	Yes	No
equity of Jiangsu							2017

Zhiming
Fees for intermediary							June
agency related to the	No	3,332	3,332	0	3,332	100.00%	30th,	0	Yes	No
transaction							2017
Subtotal of committed
	--	45,596.25	45,596.25	0	45,596.25	--	--	2,825.52	--	--
investment projects

Investment of extra raised fund
None
Total	--	45,596.25	45,596.25	0	45,596.25	--	--	2,825.52	--	--
Description and reason
	During the reporting period, due to the restrictions on the publication number and the overall decline in
for failure to reach
	growth rate of the game industry, the R&D and launch schedule of Shanghai Mokun, a subsidiary of the
planned schedule or
	Company, was not up to expectations, resulting in its major games failing to be launched in 2018 and
expected revenue (by
	generate revenue and profits and Shanghai Mokun’s operating results lower than expected.
individual project)

Description of major
change to project	None
feasibility
Amount, purpose and	Not applicable
use schedule of extra
raised fund
Change of	Not applicable
implementation
location of raised fund

investment project
Adjustment of	Not applicable
implementation mode
of raised fund

investment project

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2018 Annual Report

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	Applicable
	Before the raised funds were in place, to ensure the smooth implementation of the Company’s restructuring, the Company made a preliminary investment in the use of raised funds by self-raised fund according to the actual situation, including the payment of the cash consideration of RMB 50 million for the transaction, and relevant intermediary agency of RMB 4,466,000, totaling RMB 54,466,000. After the raised funds were in place, the Proposal on Replacing the Funds That Have Been Put into Investment Projects with the Raised Funds was reviewed and approved at the 7thMeeting of the 4thBoard of Directors, and it was agreed to use RMB 54,466,000 of the raised funds to replace the pre-invested self-raised funds.
Initial input and
replacement of raised
fund investment project

Use idle raised fund as	Not applicable
temporary
supplementary working
capital
Amount of raised fund	Not applicable
balance and reasons for
project implementation
Use and expenditure of
	As of the end of the reporting period, the Company's raised funds have been used up, without any surplus.
unused raised fund

Other problems or
circumstances in the
	None
use and disclosure of

raised fund

(3) Change items of the raised fund

□Applicable √Not Applicable

No change items of the raised funds during the reporting period.

VI. Major asset and equity sales

1. Sales of major assets

□Applicable √Not Applicable

The Company did not sell major assets during the reporting period.

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2. Sales of major equity

√Applicable □Not Applicable

				Profits							Is it
				contributed		Percentage of					implemented
				by the equity		profits					as
				to the listed		contributed					scheduled?
			Transactio
				company		by sales of	Pricing	Is it an	Relationship	Are the equity	If not,
	Sold		n price		Impact of the selling on the							Date of
Counterparty		Sale date		from the		assets to the	principle of	associated	with the	involved fully	explain the		Index of disclosure
	equity		(10,000		Company							disclosure
				beginning of		listed	selling equity	transaction?	counterparty	transferred?	reasons and
			yuan)
				this year to		company of					the measures

				the sale date		total net					the
				(RMB		profits					Company
				10,000)							has taken.
					By divesting the auto component								Announcement of
					sector assets with low profitability								Wuhu Shunrong Sanqi
					that are not suitable for the								Interactive
							Refer to the
Wuhu					long-term strategy of listed				Companies				Entertainment
							appraisal
Ningzhong	Shunrong	Novemb			companies, the Company can use				under control				Network Technology
							value,				Implemented	September
Auto Parts	Auto	er 30th,	81,900	125.84	its resources to focus on	-0.94%		Yes	of the	Yes			Co., Ltd. on Selling
							determined				as schedule	21st, 2018
Technology	Parts	2018			developing cultural and creative				controlling				Auto Parts Assets and
							through
Co., Ltd.					industries, improve asset operation				shareholders				Associated
							consultation
					efficiency, and improve the asset								Transaction

					quality and profitability of listed								(Announcement No.:
					companies.								2018-075)

VII. Analysis of Main Holding and Joint-Stock Company

√Applicable □Not Applicable

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Main subsidiaries and joint-stock companies affecting more than 10% of the Company’s net profit

Unit: RMB

			Registered
Company name	Company type	Main businesses		Total assets	Net asset	Operating income	Operating profit	Net profit
			capital

Shanghai Sanqi
	Subsidiary	Online games	10,000,000.00	6,933,137,265.67	4,056,858,080.40	7,283,837,859.03	1,076,368,498.40	1,463,682,662.09
Interactive Entertainment

Acquisition and disposal of subsidiaries during this reporting period

√Applicable □Not Applicable

	Method for acquisition and disposal of
Company name		Influence on overall production, operation and performance
	subsidiaries during this reporting period

		This equity sale was a reasonable choice made by the Company based on its development strategy. By divesting
		the auto component sector assets with low profitability that are not suitable for the long-term strategy of listed
Shunrong Auto Parts	Sale
		companies, the Company can use its resources to focus on developing cultural and creative industries, improve

		asset operation efficiency, and improve the asset quality and profitability of listed companies.

Major holding and joint-stock companies

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VIII. The Structured Entity Controlled by the Company

□Applicable √Not Applicable

IX. Prospect on the future development of the Company

(I) Development strategy and business plan for 2019

After years of development, the Chinese game market has seen a drop in growth rate of the actual sales revenue, and a single-digit growth rate of game users for five consecutive years. As the Chinese game industry enters a mature stage, the growth drivers have changed from “demographic dividend” to “content dividend”. Against the backdrop, the Company remains committed to the development strategy of “quality, diversification, platform, and globalization”, and develops incrementally on basis of existing advantages, while exploring other fields to create space for future development.

1. Quality-development strategy

Quality content is an important guarantee for the survival and development of the Company. In 2019, the Company will take the following measures to increase the quality content reserve:

1) Enhance independent R&D strength: Increase R&D investment and the reserve of high-quality R&D talents, and enhance our own ability to produce high-quality products;

2) Strengthen cooperation with upstream high-quality content providers such as Tencent, NetEase, Perfect World and Century Huatong, and increase the reserve of high-quality content;

3) Further explore and support the development of high-quality R&D companies and R&D teams through investment in capital and strategic cooperation, and expand the supply of quality products;

4) Strengthen IP development: Continue to explore high-quality IPs, deeply understand the essence of IPs, select highly fit IPs

for product development to match the characteristics of target game users; continue to create original IPs, bring forth the new through

continuous iterative development of excellent original works, add rich content to enhance the awareness of product IPs, and thus increase the value of IPs.

2. Diversification strategy

The Company’s diversification strategy includes two aspects: diversification of products and diversification of traffic operation.

1) In terms of product diversification, the Company will intensify its attempt to new products, themes, gameplays and technologies in the process of R&D and operation, and enhance our ability to develop and operate diversified products in 2019;

2) In terms of diversified traffic operation, the Company will improve traffic conversion efficiency and increase profit margin by adopting a diversified mode of “three-dimensional marketing + precise delivery + long-term service” in 2019.

3. Platform strategy

The Company’s goal is to become a high-quality content platform, and create a brand providing a wide range of cultural consumer goods in games, movies, animation, music, literature, VR/AR, Internet health, Internet education for all ages. In 2019, the Company will further explore high-quality content targets, improve the layout of cultural and creative industry chain through investment in capital, and expand the coverage of products, especially the coverage of the young, to become a cultural and creative brand that accompanies the growth of the young generation of China.

4. Globalization strategy

In 2019, the company will keep advancing its globalization strategy.

On one hand, the Company will focus on developing high-potential markets such as the United States, Japan and South Korea

depending on localized product selection and marketing tools to achieve new growth. In terms of products, the Company will focus Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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on breakthroughs in operating SLG products in global market. As of the issuance date of this report, it has reserves of such SLG games as developed by excellent teams with successful experience, including Western Magic Code MH（代号MH）and Code ZSJ （代号ZSJ）, to gain a position in the global SLG market. In terms of regional development, it will focus on the development of the Japanese and Korean markets in 2019 based on the initial breakthrough in the Japanese and Korean markets in 2018. As of the issuance date of this report, it has a wealth of products targeting the two markets: card games SNK オールスター, female game Tian E Zuo（天鹅座）, nijigen game Mo Wang Ji Hua（魔王计划）and Dengeki Bunko: Crossing Void（电击文库：零境交错）, SLG game Zhen Long Ba Ye（真龙霸业）, ARPG game An Hei Hou Yi（暗黑后裔） and others.

On the other hand, the Company will introduce more diversified products into China’s Hong Kong, Macao and Taiwan, Southeast Asia and other advantageous areas to meet the diversified used demands to further enhance its dominant position.

(II) Possible risks

1. Market competition risks and countermeasures

The online game industry is facing increasingly fierce competition as it gradually matures. The development of various Internet-based cultural creative segments other than online games is further exacerbating external competition. At the same time, online game users are also maturing, and online game users have increasingly higher standards for game products. Intense market competition will challenge the Company’s development in terms of products and market channels.

In response, the Company will continue to increase R&D investment, R&D and innovation in product creativity, gameplay, theme, art and technology. It will maintain close cooperation with excellent developers to guarantee the supply of quality products, and continue to connect users with quality games. In terms of market channels, the Company will further bring into play the role of new ideas in traffic operation, deepen the business strategy of three-dimensional marketing, precision delivery and long-term services, and continuously enhance its core market competitiveness.

2. Business risks and countermeasures

The online game industry is characterized by fast product update, limited life cycle and fast change of user preference. Game enterprises need to increase their investment in technology development and closely keep in pace with trend of the industrial technologies. If the technology, products and other aspects of the game undergo major changes, but game enterprises fail to keep up with the development of industry technology, their products will fail to meet the market demands. At the same time, information security and user privacy protection arouse great public concerns. If the Company leaks users’ information due to negligence, there will be a significant damage on the user experience and brand image. Consequently, its operation performance will be impaired.

In response, increasing input in product R&D is needed to maintain continuous product innovation. The Company also needs to dig deeper into operational data, continuously update the understanding of changes in target users’ preferences, and timely adjust operational strategies and R&D directions, to meet the core demands of users.

A strict internal control system for information security management and user privacy protection has been set up to ensure the security of users’ information to the maximum extent. In terms of information security, the Company has developed a series of internal control systems to define and classify security incidents and to respond to possible data security problems. Information security audits take place once every six months for systematic control of information security risks. In terms of privacy protection, the Privacy Policy has been established, which provides in details the rules and standards for collection and use of users’ personal information and sets forth the reasonable and feasible security measures adopted for protection of users’ personal information. In this way the Company will make sure with greatest efforts that all users’ personal information are protected at the highest level. The Company ensures that it runs the business in compliance with applicable laws and regulations throughout the world, and protects the users’ right to manage personal information. A response procedure has been stipulated to inform users of any possible cost and necessary actions needed to be taken.

3. Risks of core personnel turnover and countermeasures

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2018 Annual Report

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A stable and high-quality talent team for game development, operation and management is an important guarantee for the Company to maintain its core competitive advantage. If the Company fails to effectively build a core talent team, give reasonable incentives and manages the core personnel, the employees’ enthusiasm and creativity will be affected, which will have an adverse impact on the Company’s core competitiveness.

In response, much attention has been attached to cultivation and acquisition of professional talents. The Company creatively builds a platform-based talent management mechanism, according to which excellent game producers are rewarded with high project bonus, and given discretion of research and creation. The Company maintains the stability of core technology and management personnel by signing agreements with core personnel, creating a favorable working environment and building a great corporate culture. Meanwhile, the Company helps employees to realize their potential through a well-trained employee training system, and rationally manages the team by using a clear rule of survival of the fittest to reinforce the team’s dynamics.

Section V Financial Report

I. Financial Statements

Unit in statements in financial notes: RMB

1. Consolidated balance sheet

Prepared by: Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd.

December 31st, 2018

Unit: RMB

Item	Ending balance	Beginning balance
Current assets:
Monetary fund	1,532,965,200.05	1,580,910,931.98
Transaction settlement funds
Loans to other banks
Financial assets measured at fair value
with changes included in current profits
and losses
Derivative financial assets
Notes receivable and accounts
	1,298,554,481.23	940,249,012.77
receivable

Wherein: Notes receivable		55,340,000.00
Accounts receivable	1,298,554,481.23	884,909,012.77
Prepayments	193,770,132.83	283,516,789.29
Premiums receivable
Reinsurance premiums receivable

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Reinsurance contract reserves

receivable

Other receivables	792,425,628.90	388,694,512.02
Wherein: Interest receivable	64,445.20	582,592.17
Dividends receivable
Redemptory monetary capital for sale
Inventories		101,828,085.31
Assets held-for-sale	7,536,816.46	75,066,714.34
Non-current assets due within one

year

Other current assets	356,865,377.91	592,189,323.99
Total current assets	4,182,117,637.38	3,962,455,369.70
Non-current assets:
Disbursement of advances and loans
Available-for-sale financial assets	1,119,291,025.55	882,481,586.86
Held-to-maturity investment
Long-term receivables
Long-term equity investments	555,602,013.99	376,972,832.08
Investment property
Fixed assets	36,458,454.56	292,395,887.17
Construction in progress		50,672,878.42
Productive biological assets
Oil and gas assets
Intangible assets	14,296,437.04	44,898,112.29
Development expenditure	6,205,796.16	4,070,272.43
Goodwill	1,578,567,397.76	2,540,312,996.76
Long-term deferred expenses	74,286,546.49	79,803,089.59
Deferred income tax assets	27,325,270.01	11,810,692.92
Other non-current assets	801,611,138.04	914,263,967.16
Total non-current assets	4,213,644,079.60	5,197,682,315.68
Total assets	8,395,761,716.98	9,160,137,685.38
Current liabilities:
Short-term loan	369,000,000.00	372,054,500.00
Loan from central bank
Receipt of deposits and deposits from

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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other banks
Loans from other banks
Financial liabilities measured at fair
value with changes included in current
profits and losses
Derivative financial liabilities
Notes payable and accounts payable	1,082,362,368.29	741,792,973.33
Account received in advance	94,628,742.59	84,886,734.84
Financial assets sold for repurchase
Service charges and commissions

payable

Payroll payable	121,978,401.18	113,480,021.50
Tax payable	89,275,803.43	58,281,315.47
Other payables	108,142,599.83	61,962,553.64
Wherein: Interests payable	52,841.84	390,533.38
Dividends payable
Reinsured accounts payable
Reserves for insurance contract
Receivings from securities trading for

customers

Receivings from vicariously sold

securities

Liabilities held for sale
Non-current liabilities due within one
	29,599,165.73	28,117,893.57
year

Other current liabilities	97,256,568.16	57,738,251.19
Total current liabilities	1,992,243,649.21	1,518,314,243.54
Non-current liabilities:
Long-term loans	281,176,106.33	310,775,272.06
Bonds payable		27,163,239.26
Wherein: Preferred shares
Perpetual capital securities
Long-term payables
Long-term remuneration payable
Estimated liabilities
Deferred income	3,903,715.32	17,226,474.44

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Deferred income tax liabilities	4,735,906.20
Other non-current liabilities
Total non-current liabilities	289,815,727.85	355,164,985.76
Total liabilities	2,282,059,377.06	1,873,479,229.30
Owners’ equity:
Share capital	2,124,870,253.00	2,148,110,844.00
Other equity instruments		1,947,846.62
Wherein: Preferred shares
Perpetual capital securities
Capital reserve	298,739,967.21	1,972,639,580.66
Less: Treasury stock
Other comprehensive income	46,376,346.58	-25,087,592.30
Special reserves
Surplus reserve	170,477,835.88	99,561,946.09
General risk provisions
Undistributed profit	3,332,211,003.19	2,819,597,585.78
Total equity attributable to parent company
	5,972,675,405.86	7,016,770,210.85
owners

Minority shareholders' equity	141,026,934.06	269,888,245.23
Total owners' equities	6,113,702,339.92	7,286,658,456.08
Total liabilities and owners’ equity	8,395,761,716.98	9,160,137,685.38

Legal representative: Li Weiwei Accounting supervisor: Ye Wei Legal representative of the accounting firm: Ye Wei

2. Balance sheet of parent company

Unit: RMB

Item	Ending balance	Beginning balance
Current assets:
Monetary fund	4,325,959.18	5,437,518.91
Financial assets measured at fair value
with changes included in current profits and
losses
Derivative financial assets
Notes receivable and accounts

receivable

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Wherein: Notes receivable
Accounts receivable
Prepayments	63,300.00
Other receivables	1,391,766,571.39	1,655,547,345.04
Wherein: Interest receivable
Dividends receivable	500,000,000.00
Inventories
Assets held-for-sale		69,996,897.11
Non-current assets due within one year
Other current assets	1,165,393.00	403,527,827.28
Total current assets	1,397,321,223.57	2,134,509,588.34
Non-current assets:
Available-for-sale financial assets	179,996,897.11	60,000,000.00
Held-to-maturity investment
Long-term receivables
Long-term equity investments	6,402,393,690.49	5,754,424,925.15
Investment property
Fixed assets
Construction in progress
Productive biological assets
Oil and gas assets
Intangible assets
Development expenditure
Goodwill
Long-term deferred expenses
Deferred income tax assets	8,090.43	3,334,186.37
Other non-current assets		50,000,000.00
Total non-current assets	6,582,398,678.03	5,867,759,111.52
Total assets	7,979,719,901.60	8,002,268,699.86
Current liabilities:
Short-term loan	369,000,000.00	369,000,000.00
Financial liabilities measured at fair
value with changes included in current
profits and losses
Derivative financial liabilities

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Notes payable and accounts payable	36,357,038.26
Account received in advance
Payroll payable	484,767.87	539,632.89
Tax payable	1,745,935.68	17,271,522.21
Other payables	711,616,794.64	565,476,999.44
Wherein: Interests payable	52,841.84	390,533.38
Dividends payable
Liabilities held for sale
Non-current liabilities due within one

year

Other current liabilities		936,428.02
Total current liabilities	1,119,204,536.45	953,224,582.56
Non-current liabilities:
Long-term loans
Bonds payable
Wherein: Preferred shares
Perpetual capital securities
Long-term payables
Long-term remuneration payable
Estimated liabilities
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities	1,119,204,536.45	953,224,582.56
Owners’ equity:
Share capital	2,124,870,253.00	2,148,110,844.00
Other equity instruments
Wherein: Preferred shares
Perpetual capital securities
Capital reserve	3,952,461,239.82	4,401,934,248.25
Less: Treasury stock
Other comprehensive income
Special reserves

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Surplus reserve	170,477,835.88	99,561,946.09
Undistributed profit	612,706,036.45	399,437,078.96
Total owner’s equity	6,860,515,365.15	7,049,044,117.30
Total liabilities and owners’ equity	7,979,719,901.60	8,002,268,699.86

3. Consolidated profit statement

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
I. Total operating income	7,632,679,668.47	6,188,828,116.75
Wherein: Operating incomes	7,632,679,668.47	6,188,828,116.75
Interest incomes
Earned insurance premium
Incomes from service

charges and commissions

II. Total operating cost	7,041,943,419.64	5,039,424,012.89
Wherein: Operating costs	1,811,420,940.10	1,948,197,239.76
Interest payment
Service charges and

commission expenses

Refunded premium
Net amount of

compensation payout

Net amount of reserves for

reinsurance contract

Policy dividend payment
Reinsured expenses
Taxes and additional
	33,040,452.73	26,508,097.89
charges

Selling and distribution
	3,347,261,308.33	1,908,207,466.32
expenses

Administrative expense	246,062,902.36	340,490,511.74
R&D expense	537,705,604.63	436,169,030.12
Financial expense	17,097,099.24	28,555,783.27
Wherein: Interest fee	44,631,901.22	32,858,899.90
Interest income	27,632,671.32	24,363,295.31

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Assets impairment losses	1,049,355,112.25	351,295,883.79
Add: Other profits	97,647,310.60	111,259,077.18
Investment profit (“-”
	80,543,972.30	256,030,245.92
indicates the loss)

Wherein: Investment income
	7,617,107.86	-11,139,329.07
of joint-venture and partnership

Income from changes in fair

value (“-” indicates the loss)

Exchange income (“-”

indicates the loss)

Assets disposal income (“-”
	1,289,755.10	1,055,284.09
indicates the loss)

III. Operation profit (“-” indicates the
	770,217,286.83	1,517,748,711.05
loss)

Add: Non-operating income	463,914,478.18	403,057,922.86
Less: Non-operating expense	14,812,283.49	4,187,038.90
IV. Total profit (“-” indicates the total
	1,219,319,481.52	1,916,619,595.01
loss)

Less: Income taxes	67,889,647.39	80,119,872.98
V. Net profit (“-” indicates the loss)	1,151,429,834.13	1,836,499,722.03
(I) Net profit of going concern (“-”
	1,150,171,412.45	1,826,090,011.93
indicates net loss)

(II) Net profit of discontinuing
	1,258,421.68	10,409,710.10
operation (“-” indicates net loss)

Net profits attributable to parent
	1,008,503,357.80	1,620,582,427.47
company owners

Gain and loss of minority
	142,926,476.33	215,917,294.56
shareholders

VI. After-tax net of other
	71,463,938.88	-19,783,336.38
comprehensive incomes

After-tax net of other comprehensive
incomes owned by the owner of the	71,463,938.88	-20,469,057.23
parent company
(I) Other comprehensive incomes
that cannot be classified into profit and
loss
1. Re-measurement of

changes in defined benefit plan

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2. Other comprehensive
incomes that cannot be reclassified into

profits and losses under the equity

method
(II) Other comprehensive incomes
that would be classified into profit and	71,463,938.88	-20,469,057.23
loss
1. Other comprehensive
incomes that can be reclassified into

profits and losses under the equity

method
2. Loss and profit of
change in fair value of	52,307,268.18	-21,799,686.38
available-for-sale financial assets
3. Loss and profit of
available-for-sale financial assets of
held-to-maturity investments
4. Effective part of hedge

profit and loss of cash flow

5. Translation difference in
	19,156,670.70	1,330,629.15
the foreign currency financial statement

6. Others
Other comprehensive income net of
		685,720.85
tax attributed to minority stockholders

VII. Total comprehensive income	1,222,893,773.01	1,816,716,385.65
Total comprehensive income
	1,079,967,296.68	1,600,113,370.24
attributable to parent company owners

Total comprehensive income
	142,926,476.33	216,603,015.41
attributable to minority shareholders

VIII. Earnings per share:
(I) Basic earning per share	0.47	0.76
(II) Diluted earning per share	0.47	0.76

For combination of enterprises under the same control in this period, the net profit realized by the merged party before combination was: 0.00 yuan, net profit realized by the merged party in last times: RMB 0.00.

Legal representative: Li Weiwei Accounting supervisor: Ye Wei Legal representative of the accounting firm: Ye Wei

4. Profit statement of parent company

Unit: RMB

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Item	Amount incurred in the current period	Amount incurred in the previous period
I. Operating income	0.00	751,646.53
Less: Operating cost	0.00	31,646.53
Taxes and additional charges	1,439,813.45	1,349,357.00
Selling and distribution

expenses

Administrative expense	48,933,572.35	17,159,274.42
R&D expense
Financial expense	16,087,126.85	4,144,539.06
Wherein: Interest fee	23,907,281.20	19,681,094.85
Interest income	8,065,073.02	15,735,776.78
Assets impairment losses	-13,304,383.76	10,753,616.43
Add: Other profits	191,216.36	156,969.20
Investment profit (“-”
	766,968,765.34	-294,252,732.59
indicates the loss)

Wherein: Investment income
	-2,136,170.23	-1,555,025.80
of joint-venture and partnership

Income from changes in fair

value (“-” indicates the loss)

Assets disposal income (“-”

indicates the loss)

II. Operating profit ("-" indicates the
	714,003,852.81	-326,782,550.30
loss)

Add: Non-operating income		401,364,984.06
Less: Non-operating expense	805,483.09
III. Total profit (“-” indicates the total
	713,198,369.72	74,582,433.76
loss)

Less: Income taxes	4,039,471.84	13,852,445.44
IV. Net profit (“-” indicates the loss)	709,158,897.88	60,729,988.32
(I) Net profit of going concern (“-”
	709,158,897.88	60,729,988.32
indicates net loss)

(II) Net profit of discontinuing

operation (“-” indicates net loss)

V. Net of tax of other comprehensive

incomes

(I) Other comprehensive incomes

that cannot be classified into profit and

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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loss
1. Re-measurement of

changes in defined benefit plan

2. Other comprehensive
incomes that cannot be reclassified into

profits and losses under the equity

method
(II) Other comprehensive incomes
that would be classified into profit and
loss
1. Other comprehensive
incomes that can be reclassified into

profits and losses under the equity

method
2. Loss and profit of
change in fair value of
available-for-sale financial assets
3. Loss and profit of
available-for-sale financial assets of
held-to-maturity investments
4. Effective part of hedge

profit and loss of cash flow

5. Translation difference in

the foreign currency financial statement

6. Others
VI. Total comprehensive income	709,158,897.88	60,729,988.32
VII. Earnings per share:
(I) Basic earning per share
(II) Diluted earning per share

5. Consolidated cash flow statement

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
I. Cash flows from operating activities:
Cash received from sales of goods
	7,517,301,512.57	6,627,148,304.92
or rendering of services

Net increase of deposits from

customers and other banks

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Net increase of loans from central

bank

Net increase of loans from other

financial institutions

Cash received from receiving
insurance premium of original
insurance contract
Net cash received from reinsurance

business

Net increase of policy holder

deposits and investment funds

Disposal of financial assets
measured at fair value with changes
included in profits and losses
Cash received from interests, fees

and commissions

Net increase of loans from other

banks

Net capital increase of repurchase

business

Refunds of taxes and levies	58,796,021.20	81,575,068.42
Cash received from other operating
	80,732,937.92	55,786,523.83
activities

Sub-total of cash inflows from
	7,656,830,471.69	6,764,509,897.17
operating activities

Cash paid for purchasing goods
	1,592,652,631.45	1,918,243,942.60
and services

Net increase of customer's loans

and advances

Net increase of deposits in central

bank and other banks

Cash paid for indemnity of original

insurance contract

Cash paid for interests, service

charges and commissions

Cash paid for policy dividends
Cash paid to and on behalf of
	716,621,799.73	597,184,300.24
employees

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Payments of taxes and levies	258,651,093.19	363,818,448.62
Other cash paid relating to
	3,134,471,326.48	2,053,367,277.41
operating activities

Sub-total of cash outflows from
	5,702,396,850.85	4,932,613,968.87
operating activities

Net cash flows from operating activities	1,954,433,620.84	1,831,895,928.30
II. Cash flows from investing activities:
Cash received from withdrawal of
	421,971,645.20	304,550,800.00
investments

Cash received from returns on
	66,495,799.11	25,999,566.33
investments

Net cash received from disposal of
fixed assets, intangible assets and other	13,201,717.90	8,909,245.08
long-term assets
Net cash received from disposal of
	160,122,465.82
subsidiaries and other business units

Other cash received relating to
	3,580,863,200.00	2,228,022,565.14
investing activities

Sub-total of cash inflows from investing
	4,242,654,828.03	2,567,482,176.55
activities

Cash paid to procure fixed assets,
intangible assets and other long-term	324,484,119.63	1,018,821,190.70
assets
Cash paid to acquire investments	227,024,902.40	344,220,277.93
Net increase of pledge loans
Net cash received from payment of
	155,074,986.19	450,009,937.84
subsidiaries and other business entities

Cash payments relating to other
	3,591,178,667.22	2,122,369,000.00
investment activities

Sub-total of cash outflows from
	4,297,762,675.44	3,935,420,406.47
investing activities

Net cash flows from investing activities	-55,107,847.41	-1,367,938,229.92
III. Cash flows from financing

activities:

Cash received from capital
	19,789,457.72	433,862,496.88
contribution

Wherein: Cash from the
	19,789,457.72	4,900,000.00
investment of minority shareholders of

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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the subsidiaries
Cash received from borrowings	649,000,000.00	910,400,000.00
Cash received from issuance of

debentures

Other cash received relating to

financing activities

Sub-total of cash inflows from
	668,789,457.72	1,344,262,496.88
financing activities

Cash repayments of amounts
	680,172,393.57	572,506,834.37
borrowed

Cash payments for interest
expenses and distribution of dividends	557,419,932.16	368,016,434.03
or profits
Wherein: Dividends and profits
paid by subsidiaries to minority	90,000,000.00	128,000,000.00
shareholders
Other cash payments relating to
	1,400,467,235.07	93,493,316.06
financing activities

Sub-total of cash outflows from
	2,638,059,560.80	1,034,016,584.46
financing activities

Net cash flows from financing activities	-1,969,270,103.08	310,245,912.42
IV. Influence of exchange rate change
	4,773,742.46	-12,505,684.94
on cash and cash equivalents

V. Net increase of cash and cash
	-65,170,587.19	761,697,925.86
equivalents

Add: Opening balance of cash and
	1,580,910,931.98	819,213,006.12
cash equivalents

VI. Balance of cash and cash
	1,515,740,344.79	1,580,910,931.98
equivalents at the end of period

6. Cash flow statement of parent company

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
I. Cash flows from operating activities:
Cash received from sales of goods
		831,026.44
or rendering of services

Refunds of taxes and levies

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Cash received from other operating
	2,839,071,058.58	1,173,262,433.61
activities

Sub-total of cash inflows from
	2,839,071,058.58	1,174,093,460.05
operating activities

Cash paid for purchasing goods
		31,646.53
and services

Cash paid to and on behalf of
	2,906,501.07	3,096,452.80
employees

Payments of taxes and levies	17,678,775.88	1,484,543.09
Other cash paid relating to
	1,695,271,506.47	1,204,811,508.30
operating activities

Sub-total of cash outflows from
	1,715,856,783.42	1,209,424,150.72
operating activities

Net cash flows from operating activities	1,123,214,275.16	-35,330,690.67
II. Cash flows from investing activities:
Cash received from withdrawal of
	497,690,000.00	195,000,000.00
investments

Cash received from returns on
	224,996,712.32	1,582,261.90
investments

Net cash received from disposal of
fixed assets, intangible assets and other
long-term assets
Net cash received from disposal of

subsidiaries and other business units

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

Sub-total of cash inflows from investing
	722,686,712.32	202,582,261.90
activities

Cash paid to procure fixed assets,
intangible assets and other long-term
assets
Cash paid to acquire investments	1,400,000,000.00
Net cash received from payment of
		372,642,500.00
subsidiaries and other business entities

Cash payments relating to other

investment activities

Sub-total of cash outflows from
	1,400,000,000.00	372,642,500.00
investing activities

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Net cash flows from investing activities	-677,313,287.68	-170,060,238.10
III. Cash flows from financing

activities:

Cash received from capital
		428,962,496.88
contribution

Cash received from borrowings	649,000,000.00	560,000,000.00
Cash received from issuance of

debentures

Other cash received relating to

financing activities

Sub-total of cash inflows from
	649,000,000.00	988,962,496.88
financing activities

Cash repayments of amounts
	649,000,000.00	561,000,000.00
borrowed

Cash payments for interest
expenses and distribution of dividends	446,695,312.14	228,181,607.55
or profits
Other cash payments relating to
	317,235.07	4,313,316.06
financing activities

Sub-total of cash outflows from
	1,096,012,547.21	793,494,923.61
financing activities

Net cash flows from financing activities	-447,012,547.21	195,467,573.27
IV. Influence of exchange rate change

on cash and cash equivalents

V. Net increase of cash and cash
	-1,111,559.73	-9,923,355.50
equivalents

Add: Opening balance of cash and
	5,437,518.91	15,360,874.41
cash equivalents

VI. Balance of cash and cash
	4,325,959.18	5,437,518.91
equivalents at the end of period

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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7. Consolidated statement of changes in owners' equity

Amount of current period

Unit: RMB

		Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period	Current period
		Total owners' equity attributable to the parent company
		Other equity instruments
			Perpet									Minority
Item						Less:	Other						Total owner’s
		Pf	ual					Special		General risk	Undistributed	shareholders'
	Share capital	reer red	capita	Others	Capital reserve	Treasur	comprehensive	reserves	Surplus reserve	provisions	profit	equity	equity
			l			y stock	income
		shares
			securi

			ties
I. Balance at the
end of previous	2,148,110,844.00			1,947,846.62	1,972,639,580.66		-25,087,592.30		99,561,946.09		2,819,597,585.78	269,888,245.23	7,286,658,456.08
year
Add: Changes
to accounting
policies
Fund for
corrections of

errors of previous

period
Business
combination under
the same control

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Others
II. Beginning
	2,148,110,844.00	1,947,846.62	1,972,639,580.66	-25,087,592.30	99,561,946.09	2,819,597,585.78	269,888,245.23	7,286,658,456.08
balance at this year

III.
Increased/decrease
d amount this year	-23,240,591.00	-1,947,846.62	-1,673,899,613.45	71,463,938.88	70,915,889.79	512,613,417.41	-128,861,311.17	-1,172,956,116.16
(“-” indicates
decrease)
(I) Total
comprehensive				71,463,938.88		1,008,503,357.80	142,926,476.33	1,222,893,773.01
income
(II) Owner
investment and	-23,240,591.00	-1,947,846.62	-1,669,411,237.39				-181,787,787.50	-1,876,387,462.51
decreased capital
1. Ordinary share
	-23,240,591.00		-446,970,507.71				7,286,957.72	-462,924,140.99
invested by Owners

2. Capital invested
by other equity
instrument holders
3. Amounts of
share-based
payments
recognized in
owners' equity
4. Others		-1,947,846.62	-1,222,440,729.68				-189,074,745.22	-1,413,463,321.52
(III) Profit					70,915,889.79	-495,889,940.39	-90,000,000.00	-514,974,050.60

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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distribution
1. Appropriation to
	70,915,889.79	-70,915,889.79
surplus reserves

2. Appropriation of
general risk
reserves
3. Distribution to
owners (or		-424,974,050.60	-90,000,000.00	-514,974,050.60
shareholders)
4. Others
(IV) Internal
transfer of owners'
equity
1. Capital (or share
capital) from
capital reserves
2. Capital (or share
capital) from
surplus reserves
3. Surplus reserves
for making up
losses
4. Set the income
from the carrying

forward and

retaining of benefit

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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plan change
amount
5. Others
(V) Special

reserves

1. Withdrawn
amount of this
period
2. Using amount

this period

(VI) Others		-4,488,376.06					-4,488,376.06
IV. Closing balance							6,113,702,339.92
of this accounting	2,124,870,253.00	298,739,967.21	46,376,346.58	170,477,835.88	3,332,211,003.19	141,026,934.06
period

Amount of previous period

Unit: RMB

			Previous period	Previous period	Previous period	Previous period	Previous period
			Total owners' equity attributable to the parent company
	Other equity		instruments
											Minority
		Perpet			Less:	Other			General			Total owner’s
							Special	Surplus		Undistributed	shareholders'
Share capital	Preferre	ual		Capital reserve	Treasur	comprehensive			risk			equity
		capital	Others				reserves	reserve		profit	equity
	d shares				y stock	income			provisions
		securit

		ies
2,084,794,788.00			1,947,846.62	934,484,599.29		-4,618,535.07		93,488,947.26		1,413,567,635.94	205,489,001.44	4,729,154,283.48

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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of previous year
Add: Changes
to accounting
policies
Fund for
corrections of errors
of previous period
Business
combination under
the same control
Others
II. Beginning
	2,084,794,788.00	1,947,846.62	934,484,599.29	-4,618,535.07	93,488,947.26	1,413,567,635.94	205,489,001.44	4,729,154,283.48
balance at this year

III.
Increased/decreased
amount this year	63,316,056.00		1,038,154,981.37	-20,469,057.23	6,072,998.83	1,406,029,949.84	64,399,243.79	2,557,504,172.60
(“-” indicates
decrease)
(I) Total
comprehensive				-20,469,057.23		1,620,582,427.47	216,603,015.41	1,816,716,385.65
income
(II) Owner
investment and	63,316,056.00		1,038,154,981.37				-24,203,771.62	1,077,267,265.75
decreased capital
1. Ordinary share
	63,316,056.00		1,148,009,452.24				4,900,000.00	1,216,225,508.24
invested by Owners

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2. Capital invested
by other equity
instrument holders
3. Amounts of
share-based
payments	85,836,485.00			15,147,615.00	100,984,100.00
recognized in
owners' equity
4. Others	-195,690,955.87			-44,251,386.62	-239,942,342.49
(III) Profit
		6,072,998.83	-214,552,477.63	-128,000,000.00	-336,479,478.80
distribution

1. Appropriation to
		6,072,998.83	-6,072,998.83
surplus reserves

2. Appropriation of

general risk reserves

3. Distribution to
owners (or			-208,479,478.80	-128,000,000.00	-336,479,478.80
shareholders)
4. Others
(IV) Internal transfer

of owners' equity

1. Capital (or share
capital) from capital
reserves
2. Capital (or share

capital) from surplus

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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reserves
3. Surplus reserves

for making up losses

4. Set the income
from the carrying
forward and
retaining of benefit
plan change amount
5. Others
(V) Special reserves
1. Withdrawn
amount of this
period
2. Using amount this

period

(VI) Others
IV. Closing balance
of this accounting	2,148,110,844.00	1,947,846.62	1,972,639,580.66	-25,087,592.30	99,561,946.09	2,819,597,585.78	269,888,245.23	7,286,658,456.08
period

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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8. Statement of changes in owner's equity of parent company

Amount of current period

Unit: RMB

					Current period	Current period
		Other equity instruments					Other
						Less:
Item			Perpetual				comprehen	Special		Undistributed	Total owner’s
	Share capital	Preferred			Capital reserve	Treasury			Surplus reserve
			capital	Others			sive	reserves		profit	equity
		shares				stock
			securities				income

I. Balance at the end of
	2,148,110,844.00				4,401,934,248.25				99,561,946.09	399,437,078.96	7,049,044,117.30
previous year

Add: Changes to

accounting policies

Fund for
corrections of errors of
previous period
Others
II. Beginning balance at this
	2,148,110,844.00				4,401,934,248.25				99,561,946.09	399,437,078.96	7,049,044,117.30
year

III. Increased/decreased
amount this year (“-”	-23,240,591.00				-449,473,008.43				70,915,889.79	213,268,957.49	-188,528,752.15
indicates decrease)
(I) Total comprehensive
										709,158,897.88	709,158,897.88
income

(II) Owner investment and	-23,240,591.00				-449,473,008.43						-472,713,599.43

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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decreased capital
1. Ordinary share invested
	-23,240,591.00	-449,473,008.43			-472,713,599.43
by Owners

2. Capital invested by other

equity instrument holders

3. Amounts of share-based
payments recognized in
owners' equity
4. Others
(III) Profit distribution			70,915,889.79	-495,889,940.39	-424,974,050.60
1. Appropriation to surplus
			70,915,889.79	-70,915,889.79
reserves

2. Distribution to owners (or
				-424,974,050.60	-424,974,050.60
shareholder)

3. Others
(IV) Internal transfer of

owners' equity

1. Capital (or share capital)

from capital reserves

2. Capital (or share capital)

from surplus reserves

3. Surplus reserves for

making up losses

4. Set the income from the

carrying forward and

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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retaining of benefit plan
change amount
5. Others
(V) Special reserves
1. Withdrawn amount of this

period

2. Using amount this period
(VI) Others
IV. Closing balance of this					6,860,515,365.15
	2,124,870,253.00	3,952,461,239.82	170,477,835.88	612,706,036.45
accounting period

Amount of previous period

Unit: RMB

					Previous period	Previous period	Previous period
		Other equity instruments
						Less:	Other
Item			Perpetual					Special			Total owner’s equity
	Share capital	Preferred			Capital reserve	Treasury	comprehensive		Surplus reserve	Undistributed profit
			capital	Others				reserves
		shares				stock	income
			securities

I. Balance at the end of
	2,084,794,788.00				3,253,924,796.01				93,488,947.26	553,259,568.27	5,985,468,099.54
previous year

Add: Changes to

accounting policies

Fund for
corrections of errors of
previous period
Others

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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II. Beginning balance at this
	2,084,794,788.00	3,253,924,796.01	93,488,947.26	553,259,568.27	5,985,468,099.54
year

III. Increased/decreased
amount this year (“-”	63,316,056.00	1,148,009,452.24	6,072,998.83	-153,822,489.31	1,063,576,017.76
indicates decrease)
(I) Total comprehensive
				60,729,988.32	60,729,988.32
income

(II) Owner investment and
	63,316,056.00	1,148,009,452.24			1,211,325,508.24
decreased capital

1. Ordinary share invested
	63,316,056.00	1,148,009,452.24			1,211,325,508.24
by Owners

2. Capital invested by other

equity instrument holders

3. Amounts of share-based
payments recognized in
owners' equity
4. Others
(III) Profit distribution			6,072,998.83	-214,552,477.63	-208,479,478.80
1. Appropriation to surplus
			6,072,998.83	-6,072,998.83
reserves

2. Distribution to owners (or
				-208,479,478.80	-208,479,478.80
shareholder)

3. Others
(IV) Internal transfer of

owners' equity

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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1. Capital (or share capital)

from capital reserves

2. Capital (or share capital)

from surplus reserves

3. Surplus reserves for

making up losses

4. Set the income from the
carrying forward and

retaining of benefit plan

change amount
5. Others
(V) Special reserves
1. Withdrawn amount of

this period

2. Using amount this period
(VI) Others
IV. Closing balance of this
	2,148,110,844.00	4,401,934,248.25	99,561,946.09	399,437,078.96	7,049,044,117.30
accounting period

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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II. Item notes to consolidated financial statement

1. Monetary funds

Unit: RMB

Item	Ending balance	Beginning balance
Cash on hand	29,585.32	59,238.53
Bank deposit	1,526,769,012.67	1,573,326,143.60
Other monetary funds	6,166,602.06	7,525,549.85
Total	1,532,965,200.05	1,580,910,931.98
Wherein: Total amount deposited in the
	382,759,855.68	309,430,937.71
foreign countries

Other notes

Other monetary funds are the balances of third party payment platforms and portfolio accounts for the Company and its subsidiaries.

2. Notes receivable and accounts receivable

Unit: RMB

Item	Ending balance	Beginning balance
Notes receivable		55,340,000.00
Accounts receivable	1,298,554,481.23	884,909,012.77
Total	1,298,554,481.23	940,249,012.77

(1) Notes receivable

1) Type of bills receivable is listed

Unit: RMB

Item	Ending balance	Beginning balance
Bank acceptance		55,340,000.00
Total		55,340,000.00

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2018 Annual Report

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(2) Accounts receivable

1) Disclosure of accounts receivable types

Unit: RMB

	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance
	Book balance		Provision for bad debts			Book balance		Provision for bad debts
Type
		Proportio		Accrual	Book value				Accrual	Book value
	Amount		Amount			Amount	Proportion	Amount
		n		proportion					proportion

Accounts receivable with
provision for bad debts
withdrawn based on the	1,367,120,440.35	100.00%	68,565,959.12	5.02%	1,298,554,481.23	932,039,535.47	99.73%	47,130,522.70	5.06%	884,909,012.77
credit risk feature
portfolio
Receivables of individual
account with insignificant
						2,493,589.80	0.27%	2,493,589.80	100.00%
amount but accrued for

provision of bad debts
Total	1,367,120,440.35	100.00%	68,565,959.12	5.02%	1,298,554,481.23	934,533,125.27	100.00%	49,624,112.50	5.31%	884,909,012.77

Receivables of individual account with significant amount and accrued provision for bad account at the end of this period:

□Applicable √Not Applicable

Accounts receivable with bad debts provisions accrued by aging analysis method in the portfolio:

√Applicable □Not Applicable

Unit: RMB

		Ending balance

Aging	Accounts receivable	Provision for bad debts	Accrual proportion

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Items within 1 year
Subtotal within 1 year	1,365,178,454.75	68,258,899.39	5.00%
1 - 2 year (s)	1,415,470.24	141,547.02	10.00%
2 - 3 years	488,724.86	146,617.46	30.00%
3 - 4 years	37,790.50	18,895.25	50.00%
4 - 5 years			80.00%
Over 5 years			100.00%
Total	1,367,120,440.35	68,565,959.12	5.02%

Description of basis for this portfolio determination:

Receivables of same aging share similar characteristics of credit risk

Receivables with bad debts provisions accrued by balance percentage method in the portfolio:

□Applicable √Not Applicable

Account receivables with bad debts provisions accrued by other methods in the portfolio:

None

The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services. The Company does not have any account receivable with age of more than 3 years and high single amount.

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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2) Reserve of the bad debts that are accrued, withdrew and taken back in current period

The provision for bad debt accrued in this current period is RMB 24,946,245.78 and the provision for bad debts returned back or taken back in this current period is RMB 0.00.

Including important provision for bad debt returned back or taken back in this current period:

Unit: RMB

Organization name	Amount returned back or taken back	Change the way of return
3) Accounts receivables actually written off	in this period	Unit: RM
Item		Verification amount
Receivable software operating income		2,499,329.10

Unit: RMB

Including important notes for cancellation of receivables after verification:

Unit: RMB

				Verification	Generated from
	Nature of account
Organization name		Verification amount	Verification reason	procedures	related party
	receivables
				performed	transactions or not

Note for cancellation of account receivables after verification:

In the current period, the write-off of the provision for bad debts is RMB 2,499,329.10, and the amount arising from the reduction of bad debt provision due to disposal of subsidiaries is RMB 3,505,070.06.

4) Top five arrears balance of accounts receivable by the end of the period

Unit: RMB

			Unit: RMB
Organization name	Book balance	Percentage in accounts receivable (%)	Provision for bad debts
No. 1	645,500,526.41	47.22%	32,275,026.32
No. 2	56,721,344.85	4.15%	2,836,067.24
No. 3	54,887,510.53	4.01%	2,744,375.53
No. 4	49,540,943.92	3.62%	2,477,047.20
No. 5	38,602,959.32	2.82%	1,930,147.97
Subtotal	845,253,285.03	61.82%	42,262,664.26

3. Prepayments

(1) Prepayments listed by aging

Unit: RMB

	Closing balance	Closing balance	Beginning balance	Beginning balance
Aging
	Amount	Proportion	Amount	Proportion

Within 1 year	146,868,718.41	75.80%	198,328,892.96	69.95%

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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1 - 2 year(s)	39,028,966.61	20.14%	56,723,653.42	20.01%
2 - 3 years	4,642,733.10	2.40%	28,413,652.41	10.02%
Over 3 years	3,229,714.71	1.66%	50,590.50	0.02%
Total	193,770,132.83	--	283,516,789.29	--

The explanation for the reasons of failure in in-time settlement for significant amount of advance payment with aging of more than 1 year:

Unit: RMB

		Unit: RMB
Unit	Amount of prepayment with age of more than 1 year	Unsettlement reasons
WEBZEN INC.	20,670,730.34	The game has not been launched
Total	20,670,730.34	/

(2) Top five ending balances of prepayments classified by prepayment objects:

Unit: RMB

		Unit: RMB
Organization name	Book balance	Proportion in remaining pre-paid amount
No. 1	20,670,730.34	10.67%
No. 2	18,725,822.60	9.66%
No. 3	18,000,000.00	9.29%
No. 4	12,353,760.00	6.38%
No. 5	10,427,258.32	5.38%
Subtotal	80,177,571.26	41.38%

Other notes: None

4. Other receivables

Unit: RMB

Item	Ending balance	Beginning balance
Interest receivable	64,445.20	582,592.17
Other receivables	792,361,183.70	388,111,919.85
Total	792,425,628.90	388,694,512.02

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(1) Interest receivable

1) Classification of interests payable

Unit: RMB

Item	Ending balance	Beginning balance
Fixed-term deposits	64,445.20	582,592.17
Total	64,445.20	582,592.17

(2) Other receivables

1) Classification of other receivables

Unit: RMB

	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance
	Book balance		Provision for bad debts			Book balance		Provision for bad debts
Type
		Proportio		Accrual	Book value					Book value
	Amount		Amount			Amount	Proportion	Amount	Accrual proportion
		n		proportion

Other accounts
receivable withdrawn
provision for bad debts	819,655,662.79	99.98%	27,294,479.09	3.33%	792,361,183.70	411,171,304.86	100.00%	23,059,385.01	5.61%	388,111,919.85
based on credit risk
feature combination
Other receivables of
individual account with
insignificant amount	200,000.00	0.02%	200,000.00	100.00%
and accrued for
provision of bad

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2018 Annual Report

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account
Total	819,855,662.79	100.00%	27,494,479.09	3.35%	792,361,183.70	411,171,304.86	100.00%	23,059,385.01	5.61%	388,111,919.85

Other receivables of individual account with significant amount and with bad debt provision accrued at the end of current period:

□Applicable √Not Applicable

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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Other receivable with provisions of bad debts accrued by aging analysis method in the portfolio:

√Applicable □Not Applicable

Unit: RMB

	Ending balance	Ending balance	Ending balance
Aging
	Other receivables	Provision for bad debts	Accrual proportion

Items within 1 year
Subtotal within 1 year	334,249,175.30	16,712,458.76	5.00%
1 - 2 year (s)	80,725,203.02	8,070,461.36	10.00%
2 - 3 years	1,122,916.40	336,874.92	30.00%
3 - 4 years	147,368.07	73,684.05	50.00%
4 - 5 years			80.00%
Over 5 years	2,101,000.00	2,101,000.00	100.00%
Total	418,345,662.79	27,294,479.09	6.52%

Description of basis for this portfolio determination:

Receivables of same aging share similar characteristics of credit risk

Other receivables with bad debts provisions accrued by balance percentage method in the portfolio:

□Applicable √Not Applicable

Other receivables with provisions of bad debts accrued by other methods in the portfolio:

√Applicable □Not Applicable

Other accounts receivable (by unit)			Ending balance	Ending balance
	Other receivables	Provision for bad debts	Accrual proportion	Reason for not accruing
Wuhu Ningzhong Auto Parts Technology Co., Ltd.	RMB 401,310,000.00	-	-	For single tests of controlling shareholders’ funds, the present value of estimated future cash flows is equal to the book value.
Total	RMB 401,310,000.00	-	-	/

2) Reserve of the bad debts that are accrued, withdrew and taken back in current period

The provision for bad debt accrued in this current period is RMB 5,538,704.08 and the provision for bad debts returned back or taken back in this current period is RMB 0.00.

Including important provision for bad debt transferred back or recovered in this period:

Unit: RMB

Organization name Amount carried forward or recovered Change the way of return

3) Accounts receivables actually written off in this period

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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Unit: RMB

Item Verification amount

Important notes for cancellation of other receivables after verification:

Unit: RMB

				Verification	Generated from
	Nature of other
Organization name		Verification amount	Verification reason	procedures	related party
	receivables
				performed	transactions or not

Note for cancellation of other receivables after verification:

In the current period, the disposal of subsidiaries reduced the amount of bad debt provision by RMB 1,103,610.00.

4) Classification of other receivables based on the fund nature

Unit: RMB

Fund nature	Ending book value	Opening book balance
Security, deposit and imprest	69,863,183.59	45,432,385.25
Related parties borrowing		267,459,561.64
Receivable sharing and royalty	33,563,609.65	33,849,014.57
Equity-related receivables	448,486,888.88	57,768,000.00
Performance compensation receivables	260,868,040.88
Others	7,073,939.79	6,662,343.40
Total	819,855,662.79	411,171,304.86

5) Other accounts receivable in top five based on year-end balance collected from arrears party

Unit: RMB

				Proportion in total	Ending balance of
Organization name	Fund nature	Ending balance	Aging	ending balance of	provision for bad
				other receivables	debts
Wuhu Ningzhong Auto Parts	Equity disposal
		401,310,000.00	Within 1 year	48.95%
Technology Co., Ltd.	receivables

Original shareholders of Shanghai
Mokun Digital Technology Co.,
	Performance
Ltd. (Zhangshu Wangzhong
	compensation	260,868,040.88	Within 1 year	31.82%	13,043,402.04
Investment Management Center
	receivables
(Limited Partnership), Yang

Dongmai, Chen Wei)
Jiangyin Zhongnan Heavy	Equity disposal
		42,768,000.00	1 - 2 year(s)	5.22%	4,276,800.00
Industries Co., Ltd	receivables

Tibet is also complex Advertising	Cash deposit and		Within 1 year, 1 - 2
		24,450,000.00		2.98%	1,347,500.00
Co., Ltd.	pledge		years

	Cash deposit and
Hefei Intermediate People’s Court		20,000,000.00	Within 1 year	2.44%	1,000,000.00
	pledge

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2018 Annual Report

Total -- 749,396,040.88 -- 91.41% 19,667,702.04

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5. Inventories

Does the Company need to comply with the disclosure requirements for real estate industry?

(1) Classifications of inventories

Unit: RMB

		Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance
Item		Devaluation			Devaluation
	Book balance		Book value	Book balance		Book value
		provision			provision

Raw material				54,932,578.33		54,932,578.33
Products in
				3,074,467.07		3,074,467.07
process

Commodity
		0.00		45,497,455.50	1,676,415.59	43,821,039.91
stocks

Total		0.00		103,504,500.90	1,676,415.59	101,828,085.31

Does the Company need to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 4 - Listed Companies Engaged in Seed Industry and Planting Business?

Does the Company need to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 11 - Listed Companies Engaged in Jewelry Related Business?

(2) Inventory valuation allowance

Unit: RMB

		Increased amount of current period	Increased amount of current period	Decreased amount of current period	Decreased amount of current period
	Beginning
Item				Write-back or		Ending balance
	balance	Withdrawing	Others		Others
				write-off

Commodity
	1,676,415.59	4,004,132.44			5,680,548.03	0.00
stocks

Total	1,676,415.59	4,004,132.44	0.00	0.00	5,680,548.03	0.00

In the current period, the disposal of subsidiaries reduced the amount of inventory valuation allowance by RMB 5,680,548.03.

(3) Description for amount of borrowing costs capitalization in the final balance of the inventory

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None

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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(4) Finished but not calculated assets that is formed by construction contract at the end of the period.

Unit: RMB

Item Amount

Other notes: None

6. Assets held-for-sale

Unit: RMB

	Carrying value at the end		Estimated disposal
Item		Fair value		Estimated disposal date
	of the period		expense

Available-for-sale
	7,536,816.46	7,536,816.46	0.00	December 31st, 2019
financial assets

Total	7,536,816.46	7,536,816.46	0.00	--

Other notes:

The above assets are expected to be disposed of within the next 12 months.

7. Other current assets

Unit: RMB

Item	Ending balance	Beginning balance
Financing products of bank	116,000,000.00	110,000,000.00
Retained VAT and VAT to be certified	115,335,389.59	76,813,938.41
Prepaid income tax	6,410,819.68	4,010,401.52
Performance compensation receivables	119,119,168.64	401,364,984.06
Total	356,865,377.91	592,189,323.99

Other notes:

Performance compensation receivables are arising from the acquisition of 68.43% equities from Shanghai Mokun Digital Technology Co., Ltd. in 2017 and the signing of profit compensation agreement with Yang Dongmai, Chen Wei and Zhangshu Wangzhong Investment Management Center (Limited Partnership) (original shareholders of Shanghai Mokun). According to the calculation methods stipulated in the profit compensation agreement; Shanghai Mokun Digital Technology Co., Ltd.’s audited net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses in 2016, 2017 and 2018; and the impairment amount of goodwill and the calculation method of impairment compensation at the end of 2018, it is calculated that three original shareholders of Shanghai Mokun Digital Technology Co., Ltd. in 2018 should compensate the Company at a price of RMB 453,859,535.09, of which: cash compensation is RMB 260,868,040.88 and included in other receivables; and stock compensation is RMB 192,991,494.21 and calculated at the issue price of RMB 17.27/share. In addition, 12,618,556 shares shall be offered to the Company as compensation, and their fair value shall be calculated to be RMB 119,119,168.64 based on the market price on December 31st, 2018.

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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8. Available-for-sale financial assets

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

Unit: RMB

	Ending balance	Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance
Item		Impairment			Impairment
	Book balance		Book value	Book balance		Book value
		provision			provision

Equity instrument
	1,131,091,025.55	11,800,000.00	1,119,291,025.55	894,281,586.86	11,800,000.00	882,481,586.86
available for sale:

Fair value
	71,141,826.11		71,141,826.11	57,541,101.92		57,541,101.92
measurements

Measured at cost	1,059,949,199.44	11,800,000.00	1,048,149,199.44	836,740,484.94	11,800,000.00	824,940,484.94
Total	1,131,091,025.55	11,800,000.00	1,119,291,025.55	894,281,586.86	11,800,000.00	882,481,586.86

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

Unit: RMB

Classification of
	Equity instrument	Available-for-sale
available-for-sale financial			Total
	available for sale	liability instrument
assets

Costs of equity
instruments/amortized costs of	57,810,972.60		57,810,972.60
debt instruments
Fair value	71,141,826.11		71,141,826.11
Change amount of fair value
accumulatively included in	13,330,853.51		13,330,853.51
other comprehensive incomes

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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(3) Available-for-sale financial assets measured by cost at the end of term

Unit: RMB

	Book balance	Book balance	Book balance	Book balance	Impairment provision	Impairment provision	Impairment provision
						Increase in			Shareholding ratio in	Cash bonus of current
Invested company		Increase in	Decrease in		Beginning		Decrease in
	Beginning balance			Ending balance		current		Ending balance	invested companies	period
		current period	current period		balance		current period
						period

Shenzhen Mokylin
	60,000,000.00			60,000,000.00					1.95%
Technology Co., Ltd.

Tianjin Purple
Dragon Singular
Point Interactive	25,264,211.00		2,148,421.10	23,115,789.90					1.72%
Entertainment Co.,
Ltd.
Hangzhou Southern
		69,996,897.11		69,996,897.11					10.00%
Pictures Co., Ltd.

Shenzhen Zhonghui
Television Culture
		50,000,000.00		50,000,000.00					3.85%
Communication Co.,

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

Beijing Jizhi Xunyou
	6,000,000.00			6,000,000.00	6,000,000.00			6,000,000.00	10.00%
Technology Co., Ltd.

Shenzhen QiFun
	50,000,000.00			50,000,000.00					6.22%
Network Corp. Ltd.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Gortune Investment
		1,000,000.00	1,000,000.00			0.20%
Co., Ltd

Guangzhou
Joyegame Software	4,000,000.00		4,000,000.00	4,000,000.00	4,000,000.00	15.00%
Co., Ltd.
Suzhou Youge
Hulian Venture
Investment Center	5,000,000.00		5,000,000.00			2.98%
(Limited
Partnership)
Chengdu 91ACT
Technology		52,731,000.00	52,731,000.00			17.01%	2,440,350.00
Company
Guangzhou Xiaoyi
Network Technology	200,000.00		200,000.00	200,000.00	200,000.00	10.00%
Co., Ltd.
Xiamen Intensive
Joint Technology	8,000,000.00		8,000,000.00			10.00%
Co., Ltd.
Beijing Chinese Anci
Equity Investment
Fund Management	50,000,000.00		50,000,000.00			16.67%
Center (Limited
Partnership)
Hunan Tianlei
Network Technology	1,500,000.00		1,500,000.00	1,500,000.00	1,500,000.00	10.00%
Co., Ltd.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2018 Annual Report

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Shanghai Mango
Creative Equity
	240,000,000.00		66,418,508.59	173,581,491.41	7.78%	4,956,454.96
Investment Fund

(L.P.)
Beijing Colorful
Game Technology	5,000,000.00			5,000,000.00	8.54%
Co., Ltd.
Jiangsu Mingtong
Information	50,000,000.00			50,000,000.00	5.00%
Technology Co., Ltd.
Zhongsheng
Chunqiu Film and
	9,000,000.00			9,000,000.00	5.00%
TV Culture (Beijing)

Co., Ltd.
Shanghai Mango
Interactive
	42,000,000.00		42,000,000.00
Entertainment

Technology Co., Ltd.
Wafa Games Limited		875.06		875.06	10.00%
SNK Corporation		1,036.35		1,036.35	1.42%
Miaocode Education
BVI Holding		6,863,200.00		6,863,200.00	3.00%
Limited
Archiact Interactive
	20,587,940.96	1,036,481.90		21,624,422.86	7.86%
Ltd.

Tianjin Digital Color	80,000,000.00			80,000,000.00	1.51%

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2018 Annual Report

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Interactive
Technology Co., Ltd.
Tianshe (Shanghai)
Culture & Media	10,000,000.00			10,000,000.00	18.30%
Co., Ltd.
Shanghai Quwei
Network Technology	7,000,000.00			7,000,000.00	4.75%
Co., Ltd.
Antic gameworld
	38,332.98		38,332.98		5.00%
co.,ltd

X.D. Network Co.,
	100,050,000.00			100,050,000.00	2.38%	1,194,183.75
Ltd.

Najia Technology
	40,000,000.00			40,000,000.00	7.20%
(Shenzhen) Co., Ltd.

Shenzhen Zen-game
	18,000,000.00			18,000,000.00	2.78%	2,166,684.00
Technology Co., Ltd.

Haojiahuo Media
Fund I Partners
	5,000,000.00		1,100,000.00	3,900,000.00	20.00%
(Limited

Partnership)
Beijing Chenming
		25,000,000.00		25,000,000.00	2.50%
Media Co., Ltd.

Beijing Longri
		2,999,193.00		2,999,193.00	10.00%
Technology Co., Ltd.

Xiamen Huoyou
		5,000,000.00		5,000,000.00	7.00%
Information

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2018 Annual Report

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Technology Co., Ltd.
Shanghai
Zhangmeng Network	10,000,000.00	10,000,000.00	10.00%
Technology Co., Ltd.
Hebei Youying
Culture Spreading	26,800,000.00	26,800,000.00	7.00%
Co., Ltd.
Shanghai Touch
Culture
	15,000,000.00	15,000,000.00	10.00%
Communication Co.,

Ltd.
Wake Of Light
Network Technology	9,900,000.00	9,900,000.00	7.00%
Co., Ltd.
Shanghai Original
Plan Culture &	10,000,000.00	10,000,000.00	2.50%
Media Co. Ltd.
Beijing Jinhai Shiyi
Culture Media Co.,	7,500,000.00	7,500,000.00	15.00%
Ltd.
Hangzhou Honghua
Duoduo Network	16,978,390.00	16,978,390.00	5.00%
Technology Co., Ltd.
Beijing Blueberry
Time Technology	2,623,200.00	2,623,200.00	10.02%
Co., Ltd.

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Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

2018 Annual Report

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Beijing Yuge
		2,000,000.00		2,000,000.00			10.00%
Technology Co., Ltd.

YHKT
Entertainment Co.,		14,400,000.00		14,400,000.00			8.10%
Ltd.
Guangzhou Xuyang
Network Technology		1,000,000.00		1,000,000.00			10.00%
Co., Ltd.
Changzhou Pengyou
Interactive
Entertainment		1,500,000.00		1,500,000.00			15.00%
Network Technology
Co., Ltd.
Wuji Entertainment
Games Co., Ltd.		2,583,703.75		2,583,703.75			14.16%
(Korea)
			111,705,262.6 7	1,059,949,199.4
Total	836,740,484.94	334,913,977.17			11,800,000.00	11,800,000.00	--	10,757,672.71
				4

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

Unit: RMB

Classification of available-for-sale financial assets	Equity instrument available for	Available-for-sale liability
			Total
	sale	instrument

Balance of opening impairment accrued	11,800,000.00		11,800,000.00
Accruing of current period	52,732,066.85		52,732,066.85

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2018 Annual Report

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Wherein: Transfer in from other comprehensive income	52,732,066.85			52,732,066.85
Decrease in current period	52,732,066.85			52,732,066.85
Balance of closing impairment accrued	11,800,000.00			11,800,000.00

9. Long-term equity investment

Unit: RMB

				Increase or decrease in this period	Increase or decrease in this period	Increase or decrease in this period	Increase or decrease in this period
											Closing
		Addition		Profit and loss on	Other		Profit or cash
	Beginning					Other		Withdrawn impairment provision			balance of
Invested company		al	Negative	investments	comprehensive		dividend			Ending balance
	balance					equity			Others		depreciation
		investme	investment	confirmed with	income		declared to be
						change					reserves
		nts		equity method	adjustment		distributed

I. Joint ventures
II. Associates
Yangzhou Fuhai Sanqi
Internet Cultural
	50,000,000.00	5,000.00		-1,868,895.65						48,136,104.35
Investment Center

(Limited Partnership)
Chengdu Epietheus
	0.00									0.00	2,205,871.87
Technology Co., Ltd.

Shenzhen Yiwan
Network Technology	5,530,326.40			-986,852.06						4,543,474.34
Co., Ltd.
Penta Game Co., Ltd.	530,972.63			91,040.99					-622,013.62	0.00
Shanghai Tingting
	0.00									0.00	6,718,402.50
Network Technology

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Co., Ltd.
Shanghai Aoting
Network Technology	0.00				0.00	2,978,876.18
Co., Ltd.
Shanghai Moe Palace
Network Technology	2,462,825.73		-2,462,825.73		0.00	2,462,825.73
Co., Ltd.
Beijing Zhuayou
Interactive Network	0.00				0.00	4,874,914.55
Technology Co., Ltd.
YHKT Entertainment
	5,830,002.99			-5,830,002.99	0.00
Co., Ltd.

Longzhang Network
Technology	5,722,316.69	-530,438.17			5,191,878.52
(Shanghai) Co., Ltd.
Shenzhen Zhanlong
Interactive
	7,313,570.51	-732,632.93			6,580,937.58
Entertainment

Technology Co., Ltd.
Huai’an Sanqi Yijian
Pan-Entertainment
Asset Management	101,677,840.80	8,407,544.53		-110,085,385.33	0.00
Center (Limited
Partnership)
Xiamen Yiqi
Investment	2,125,258.74	-462,336.57			1,662,922.17
Management Co., Ltd.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Mango (Xiamen)
Creative Incubation
Equity Investment	38,646,762.21		516,747.41			39,163,509.62
Fund Partnership
(Limited Partnership)
Chengdu 91ACT
	23,501,260.32		-57,515.85		-23,443,744.47	0.00
Technology Company

Chengdu Mofei
	10,962,498.78		4,814,920.27			15,777,419.05
Technology Co., Ltd.

Chengdu Modu
	10,969,974.47		-1,264,717.03			9,705,257.44
Technology Co., Ltd.

Chengdu Pengwan
	57,102,073.65		922,526.36	-2,234,228.00		55,790,372.01
Technology Co., Ltd.

Shanghai Fuhai Sanqi
Investment	3,000,419.01		-13,417.91			2,987,001.10
Management Co., Ltd.
Shanghai Jueli Culture
	29,729,869.92		-2,136,170.23			27,593,699.69
Media Co., Ltd.

Jiangsu Yezi Network		15,000,0
			-1,098,251.51			13,901,748.49
Technology Co., Ltd.		00.00

Beijing Xize
Interactive		6,000,00
			-488,215.07			5,511,784.93
Entertainment		0.00

Technology Co., Ltd.
Sanqi Guangzheng		45,000,0
						45,000,000.00
(Guangzhou) Cultural		00.00

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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100

2018 Annual Report

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Technology
Investment Partnership
(Limited Partnership)
Chengdu Popcorn
Interactive		12,000,0
				-388,213.60						11,611,786.40
Entertainment		00.00

Technology Co., Ltd.
Shanghai Yuhouyi
Network Technology	21,866,859.23			-1,632,900.41						20,233,958.82
Co., Ltd.
Shaoxing Shangyu
		4,900,00
Zhangyu Network				-253,649.26						4,646,350.74
		0.00
Technology Co., Ltd.

Khorgos Tuolu
		3,600,00
Lingyin Culture										3,600,000.00
		0.00
Technology Co., Ltd.

Shanghai Fenghua
Qiushi Culture Media				3,414,788.87					129,263,558.53	132,678,347.40
Co., Ltd.
New Cues (Beijing)
Television Investment				1,363,745.68					99,921,715.66	101,285,461.34
Co., Ltd.
Longzhang Animation

(Shanghai) Co., Ltd.

		86,505,0
Subtotal	376,972,832.08		0.00	7,617,107.86	0.00	0.00	-2,234,228.00	-2,462,825.73	89,204,127.78	555,602,013.99	19,240,890.83
		00.00

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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101

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	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report	2018 Annual Report
		86,505,0
Total	376,972,832.08		0.00	7,617,107.86	0.00	0.00	-2,234,228.00	-2,462,825.73	89,204,127.78	555,602,013.99	19,240,890.83
		00.00

Other notes

(1) Other changes in the current period include: The disposal of Wuji Entertainment Games Co., Ltd. (a subsidiary of the Company) caused its shareholding company - Penta Game Co., Ltd. to reduce the other amount of RMB 622,013.62; as the joint venture of Tibet Taifu Culture Media Co., Ltd., a subsidiary of the Company, YHKT Entertainment Co., Ltd. and Chengdu 91ACT Technology Company decreased their shareholding ratio this year, and the other amount was reduced by RMB 5,830,002.99 and RMB 23,443,744.47, respectively with long-term equity investment as available-for-sale financial assets; the Company acquired the remaining equity of Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership) and included it in its consolidated statements, resulting in the reduction of other amounts of RMB 110,085,385.33; in addition, Shanghai Fenghua Qiushi Culture Media Co., Ltd. and New Cues (Beijing) Television Investment Co., Ltd., the original joint stock company of Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership), were included in the Company’s long-term equity investment, adding to other amounts by RMB 129,263,558.53 and RMB 99,921,715.66.

(2) As of the end of the reporting period, Longzhang Animation (Shanghai) Co., Ltd. has not recognized an excess loss of RMB 7,906,627.53.

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10. Fixed Assets

Unit: RMB

Item	Ending balance	Beginning balance
Fixed assets	36,458,454.56	292,395,887.17
Total	36,458,454.56	292,395,887.17

(1) Status of fixed assets

Unit: RMB

	Houses and	Machinery and		Electric and office
Item			Motor vehicles		Total
	buildings	equipment		equipment

I. Original carrying

value:

1. Balance at the
beginning of this	164,616,484.07	321,150,698.63	18,039,511.37	120,026,021.36	623,832,715.43
period
2. Increase of this
	29,728,748.00	35,686,559.35	181,780.37	20,925,975.65	86,523,063.37
period

(1) Purchasing	27,876,250.00	2,319,334.98	181,780.37	20,925,975.65	51,303,341.00
(2)
Construction in
	1,852,498.00	33,367,224.37			35,219,722.37
progress

transferred-in
(3) Increase by
business
combination

3. Decrease of this
	194,345,232.07	356,837,257.98	11,796,962.89	23,971,485.65	586,950,938.59
period

(1) Disposal or
	122,256.76	13,259,910.76		6,747,003.55	20,129,171.07
discard as useless

(2) Disposal of
subsidiaries or	194,222,975.31	343,577,347.22	11,796,962.89	17,224,482.10	566,821,767.52
liquidation
4. Ending balance			6,424,328.85	116,980,511.36	123,404,840.21
II. Accumulated

depreciation

1. Balance at the	39,642,480.79	177,572,760.75	9,547,888.32	87,385,476.20	314,148,606.06

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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beginning of this
period
2. Increase of this
	5,098,435.17	23,736,930.77	2,433,786.65	16,050,267.65	47,319,420.24
period

(1) Accruing	5,098,435.17	23,736,930.77	2,433,786.65	16,050,267.65	47,319,420.24

3. Decrease of this
	44,740,915.96	201,309,691.52	8,847,579.27	19,623,453.90	274,521,640.65
period

(1) Disposal or
	24,841.74	872,458.22		5,063,458.30	5,960,758.26
discard as useless

(2) Disposal of
subsidiaries or	44,716,074.22	200,437,233.30	8,847,579.27	14,559,995.60	268,560,882.39
liquidation
4. Ending balance			3,134,095.70	83,812,289.95	86,946,385.65
III. Provision for

impairment of assets

1. Balance at the
beginning of this		17,288,222.20			17,288,222.20
period
2. Increase of this

period

(1) Accruing

3. Decrease of this
		17,288,222.20			17,288,222.20
period

(1) Disposal or
		701,638.09			701,638.09
discard as useless

(2) Disposal of
subsidiaries or		16,586,584.11			16,586,584.11
liquidation
4. Ending balance
IV. Book value
1. Ending book
			3,290,233.15	33,168,221.41	36,458,454.56
value

2. Book value at
the beginning of	124,974,003.28	126,289,715.68	8,491,623.05	32,640,545.16	292,395,887.17
period

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11. Construction in progress

Unit: RMB

Item	Ending balance	Beginning balance
Construction in progress		50,672,878.42
Total		50,672,878.42

(1) Status of construction under progress

Unit: RMB

		Ending balance		Beginning balance	Beginning balance	Beginning balance
Item		Impairment			Impairment
	Book balance		Book value	Book balance		Book value
		provision			provision

Phase II
equipment				51,102,382.68	429,504.26	50,672,878.42
engineering
Total				51,102,382.68	429,504.26	50,672,878.42

(2) Change of significant construction during the period

Unit: RMB

							Proportio
							n of			Wherein:
									Accumul		Capitali
							accumula			Amount
				Amount of		Endi			ated		zation
			Increased		Amount of		tive	Project		of
Project	Budg	Beginning		transfer-in		ng			amount		rate of	Capital
			amount of		other decreases		engineeri	progres		capitalize
name	et	balance		fixed assets at		balan			of		interest	sources
			current period		of this period		ng	s		d interest
				current period		ce			capitalize		for this
							investme			in current
									d interest		period
							nt in			period

							budget
Phase II
equipment		51,102,382.68	159,573,327.28	35,219,722.37	175,455,987.59
engineering
Total		51,102,382.68	159,573,327.28	35,219,722.37	175,455,987.59		--	--				--

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12. Intangible assets

(1) Status of intangible assets

Unit: RMB

				Cost of
			Non-patent
Item	Land use rights	Patent right		publication	Domain name	Game copyright	Trademark	Office software	Total
			technology
				number

I. Original carrying value
1. Balance at the
	26,840,827.98	433,225.73		354,930.00	12,778,182.04	102,289,169.43	1,093,770.09	13,789,477.71	157,579,582.98
beginning of this period

2. Increase of this
	0.00	46,757.09		0.00	0.00	0.00	10,923.36	2,188,309.03	2,245,989.48
period

(1) Purchasing		46,757.09						2,188,309.03	2,235,066.12
(2) Internal R&D
(3) Increase by

business combination

(4) Exchange rate
	0.00			0.00	0.00	0.00	10,923.36		10,923.36
variation

3. Decrease of this period	26,840,827.98	479,982.82				8,849,452.49	238,929.14	3,617,392.10	40,026,584.53
(1) Disposal						8,849,452.49			8,849,452.49
(2) Disposal of
	26,840,827.98	479,982.82					238,929.14	3,617,392.10	31,177,132.04
subsidiaries or liquidation

4. Ending balance				354,930.00	12,778,182.04	93,439,716.94	865,764.31	12,360,394.64	119,798,987.93
II. Accumulated amortization	0.00	0.00		0.00	0.00	0.00	0.00	0.00	0.00

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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1. Balance at the
	5,039,376.59	88,303.26	354,930.00	2,395,909.31	65,733,536.40	421,636.24	7,422,677.44	81,456,369.24
beginning of this period

2. Increase of this
	494,536.68	34,752.89	0.00	638,909.16	3,480,714.04	26,424.53	3,293,272.55	7,968,609.85
period

(1) Accruing	494,536.68	34,752.89	0.00	638,909.16	3,480,714.04	17,073.10	3,293,272.55	7,959,258.42
(2) Exchange rate
	0.00	0.00	0.00	0.00	0.00	9,351.43	0.00	9,351.43
variation

3. Decrease of this
	5,533,913.27	123,056.15			6,357,983.58	74,362.67	2,680,855.64	14,770,171.31
period

(1) Disposal		103,771.15			6,357,983.58			6,461,754.73
(2) Disposal of
	5,533,913.27	19,285.00				74,362.67	2,680,855.64	8,308,416.58
subsidiaries or liquidation

4. Ending balance			354,930.00	3,034,818.47	62,856,266.86	373,698.10	8,035,094.35	74,654,807.78
III. Provision for impairment
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
of assets

1. Balance at the
					30,440,779.99		784,321.46	31,225,101.45
beginning of this period

2. Increase of this

period

(1) Accruing

3. Decrease of this
							377,358.34	377,358.34
period

(1) Disposal

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4. Ending balance					30,440,779.99		406,963.12	30,847,743.11
IV. Book value	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1. Ending book value				9,743,363.57	142,670.09	492,066.21	3,918,337.17	14,296,437.04
2. Book value at the
	21,801,451.39	344,922.47		10,382,272.73	6,114,853.04	672,133.85	5,582,478.81	44,898,112.29
beginning of period

The ratio of intangible assets formed through the internal research and development of the Company at the end of the period to the balance of intangible assets is 16.48%.

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13. Development expenditure

Unit: RMB

	Beginning				Ending
Item		Increased amount of current period	Decreased amount of current period
	balance				balance

Item I	3,951,558.23	2,254,237.93			6,205,796.16
Item II	118,714.20			118,714.20
Total	4,070,272.43	2,254,237.93		118,714.20	6,205,796.16

Other notes

14. Goodwill

(1) Carrying value of goodwill

Unit: RMB

Name of the		Increase in current period	Increase in current period	Decrease in current period	Decrease in current period	Ending balance
invested company	Beginning	Formed through
and the matter
	balance	business	Others	Disposal	Others
which forms
goodwill		combination

Shanghai Sanqi
Interactive	1,578,065,048.53					1,578,065,048.53
Entertainment
Wuji
Entertainment	1,911,913.34			1,911,913.34
Games Co., Ltd.
Chengdu
Shengge Times
Network	263,737.88					263,737.88
Technology Co.,
Ltd.
Shanghai Mokun	1,259,793,585.93					1,259,793,585.93
Total	2,840,034,285.68					2,838,122,372.34

(2) Goodwill impairment

Unit: RMB

Name of the		Increase in current period	Increase in current period	Decrease in current period	Decrease in current period
invested company	Beginning
and the matter	balance	Withdrawing	Others	Disposal	Others
which forms

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goodwill
Chengdu
Shengge Times
Network	263,737.88		263,737.88
Technology Co.,
Ltd.
Shanghai Mokun	299,457,551.04	959,833,685.66	1,259,291,236.70
Total	299,721,288.92	959,833,685.66	1,259,554,974.58

Information about the asset group or portfolio in which the goodwill is recognized

Name of asset group	Composition	Carrying amount (Unit: RMB)	Determination method	Whether it is consistent with the asset group recognized at the date of acquisition and the time of goodwill impairment test in previous years
Shanghai Sanqi Interactive Entertainment	All assets and liabilities of Shanghai Sanqi Interactive Entertainment	3,527,707,463.90	Shanghai Sanqi Interactive Entertainment can bring independent cash flows and is therefore identified as a portfolio	Yes
Shanghai Mokun	All assets and liabilities of Shanghai Mokun	106,085,800.19	Shanghai Mokun can bring independent cash flows and is therefore identified as a portfolio	Yes

Explain the process of goodwill impairment test, key parameters (such as the growth rate in forecast period, growth rate in steady period, profit rate, discount rate, forecast period, etc. for estimation of the present value of future cash flows), and the recognition method of goodwill impairment loss:

At the end of 2018, the book value of the goodwill formed by the merger of above-mentioned companies was apportioned to relevant asset groups with a reasonable method as of the date of acquisition, and the relevant asset groups containing goodwill were also tested for impairment. The recoverable amount of the goodwill formed by the merger is calculated by the Company based on the present value of estimated future cash flows, and the above key data are determined based on historical experiences and forecasts on market development.

Shanghai Mokun: The current value of the expected future cash flow of the asset group refers to the evaluation basis, evaluation process and evaluation results in the Evaluation Report (L.X.(Z.)P.B.Z. [2019] No. A0043) issued by Guangdong Union Trust Evaluation Co., Ltd. In 2018, due to the restrictions on the publication number and the overall decline in growth rate of the game industry, the launch schedule of Shanghai Mokun’s developed games was not up to expectations, resulting in its major games failing to be launched in 2018 and generate revenue and profits and Shanghai Mokun’s operating results lower than expected. In 2018, the future cash flow was estimated based on the financial budget and perpetual cash flow of the asset group approved by the management for five years. The annualized growth rate of operating income in the next five years will range from 15.91% to 7%. The perpetual cash flow after the next five years will be determined by the level of the final year at the detailed forecast period, combined with the industry development trend. The discount rate for calculating the present value is 14.11%, which is the pre-tax discount rate that reflects the specific risks of the relevant asset group. Compared with the present value of the asset group including goodwill, a provision for impairment of goodwill of RMB 959,833,685.66 shall be set aside this year.

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Shanghai Sanqi Interactive Entertainment: The management prepares the cash flow forecast for the next five years based on the most recent financial budget, and estimates the cash flow for the perpetual period. It is expected that the annual growth rate of operating income will be 20%-0% in the next 5 years. The perpetual cash flow after the next five years will remain stable, and the discount rate for calculating the present value will be 13.74%. Compared with the present value of the asset group including goodwill, the goodwill of Shanghai Sanqi Interactive Entertainment is not impaired.

Impact of goodwill impairment test

In 2018, due to the restrictions on the publication number and the overall decline in growth rate of the game industry, the R&D and launch schedule of Shanghai Mokun, a subsidiary of the Company, was not up to expectations, resulting in its major games failing to be launched in 2018 and generate revenue and profits and Shanghai Mokun’s operating results lower than expected. In 2018, the committed net profit was RMB 168.00 million and Shanghai Mokun’s net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses in 2018 was RMB -4.8249 million. According to the relevant provisions of Accounting Standards for Business Enterprises and the Company’s accounting policies, the Company conducted an impairment test on the goodwill formed by the acquisition of equities from Shanghai Mokun, and the difference of the total amount of goodwill at the end of the year and the fair value of net identifiable assets minus the assessed value of all equities was deemed as the amount of goodwill impairment that should be accrued at the end of 2018.

Other notes

None

15. Long-term deferred expenses

Unit: RMB

			Amortization
		Increased amount of
Item	Beginning balance		amount of the	Other decreases	Ending balance
		current period
			current period

Cost of copyright
	74,821,106.66	55,766,989.82	59,910,845.76	502,309.77	70,174,940.95
agency

Trade mark
	99,838.19		96,894.93		2,943.26
registration fee

Cost of building
	4,882,144.74	1,601,805.24	2,375,287.70		4,108,662.28
decoration

Total	79,803,089.59	57,368,795.06	62,383,028.39	502,309.77	74,286,546.49

Other notes None

16. Deferred income tax assets and deferred income tax liabilities

(1) Non-offset deferred income tax assets

Unit: RMB

Item Ending balance Beginning balance

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	Deductible temporary	Deferred income tax	Deductible temporary
				Deferred income tax assets
	differences	assets	differences

Provision for assets
	130,272,445.92	22,476,347.10	36,779,247.42	7,231,974.30
impairment

Deductible losses	23,377,176.05	3,718,400.30	3,304,795.02	826,198.75
Changes in fair value of
available-for-sale financial			23,559,590.80	2,091,835.89
assets (impairment losses)
Accrued performance
	7,536,817.40	1,130,522.61	3,756,740.62	338,106.66
compensation receivables

Governmental subsidies
recognized into deferred			8,817,182.16	1,322,577.32
income
Total	161,186,439.37	27,325,270.01	76,217,556.02	11,810,692.92

(2) Details of unrecognized deferred income tax assets

Unit: RMB

Item	Ending balance	Beginning balance
Deductible temporary differences	80,408,693.08	114,160,721.60
Deductible losses	122,954,217.39	186,240,044.70
Total	203,362,910.47	300,400,766.30

(3) Deductible losses of unrecognized deferred income tax assets will be expired at the end of following years

Unit: RMB

Year	Ending amount	Initial amount	Remarks
2019		5,191,066.43
2020	2,058,386.09	29,786,482.41
2021	18,045,171.61	53,635,799.65
2022	85,382,375.75	97,626,696.21
After 2022	17,468,283.94
Total	122,954,217.39	186,240,044.70	--

Other notes:

None

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17. Other non-current assets

Unit: RMB

Item	Ending balance	Beginning balance
Prepayment for engineering equipment		68,399,174.14
Prepayment for equity investment		50,000,000.00
Prepayment for house purchase	801,611,138.04	795,864,793.02
Total	801,611,138.04	914,263,967.16

Other notes:

None

18. Short-term Loans

(1) Classification of short-term loans

Unit: RMB

Item	Ending balance	Beginning balance
Guaranteed loans	369,000,000.00	372,054,500.00
Total	369,000,000.00	372,054,500.00

Description of classification of other short-term borrowings:

The Company classifies short-term borrowings by borrowing conditions.

19. Notes payable and accounts payable

Unit: RMB

Item	Ending balance	Beginning balance
Accounts payable	1,082,362,368.29	741,792,973.33
Total	1,082,362,368.29	741,792,973.33

(1) List of accounts payable

Unit: RMB

Item	Ending balance	Beginning balance
Payables on materials		78,742,772.74
Payable shared profits of games	508,051,919.40	406,735,668.55
Payable internet traffic costs	560,422,006.00	219,833,849.91
Other payable costs	13,888,442.89	36,480,682.13
Total	1,082,362,368.29	741,792,973.33

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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(2) Significant accounts payable with age of more than one year

Unit: RMB

Item	Ending balance	Reasons for outstanding or non-carryover
Shengji Information Technology
	6,866,723.87	In the process of reconciliation
(Shanghai) Co., Ltd.

Total	6,866,723.87	--

Other notes:

None

20. Account received in advance

(1) List of account received in advance

Unit: RMB

Item	Ending balance	Beginning balance
Advances on sales		2,085,495.91
Recharge received in advance	94,547,117.27	81,795,279.69
Shared profits received in advance		1,005,959.24
Others	81,625.32
Total	94,628,742.59	84,886,734.84

21. Staff salaries payable

(1) List of staff salaries payable

Unit: RMB

			Decrease in current
Item	Beginning balance	Increase in current period		Ending balance
			period

I. Short-term
	112,808,985.92	701,173,947.60	692,849,384.25	121,133,549.27
remuneration

II. Post-employment
benefit-defined	596,785.58	39,018,138.69	38,940,125.19	674,799.08
contribution plans
III. Dismiss welfares	74,250.00	1,171,439.98	1,075,637.15	170,052.83
Total	113,480,021.50	741,363,526.27	732,865,146.59	121,978,401.18

(2) List of short-term remuneration

Unit: RMB

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			Decrease in current
Item	Beginning balance	Increase in current period		Ending balance
			period

1. Salaries, bonus,
	108,121,922.68	620,043,409.78	607,671,407.42	120,493,925.04
allowances and subsidies

2. Staff welfare expenses		36,155,187.78	36,155,187.78
3. Social insurance
	342,764.93	21,444,703.98	21,407,991.85	379,477.06
premiums

Wherein: Medical
	299,439.24	18,304,959.00	18,271,766.75	332,631.49
insurance premiums

Industrial
injuries insurance	6,233.18	574,387.94	575,034.84	5,586.28
premium
Maternity
	28,595.97	1,972,851.71	1,967,583.68	33,864.00
insurance premiums

Critical
	8,496.54	592,505.33	593,606.58	7,395.29
illness insurance

4. Housing provident
	223,868.00	18,764,192.84	18,738,999.84	249,061.00
fund

5. Union expenses and
employee educational	4,120,430.31	4,766,453.22	8,875,797.36	11,086.17
expenditure
Total	112,808,985.92	701,173,947.60	692,849,384.25	121,133,549.27

(3) List of defined contribution plans

Unit: RMB

			Decrease in current
Item	Beginning balance	Increase in current period		Ending balance
			period

1. Basic endowment
	582,242.35	37,633,046.65	37,561,162.84	654,126.16
insurance

2. Unemployment
	14,543.23	1,385,092.04	1,378,962.35	20,672.92
insurance premiums

Total	596,785.58	39,018,138.69	38,940,125.19	674,799.08

Other notes: None

22. Taxes payable

Unit: RMB

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Item	Ending balance	Beginning balance
VAT	33,574,036.91	22,778,212.15
Enterprise income tax	51,032,839.33	31,249,164.08
Individual income tax	971,561.88	1,078,087.62
Urban maintenance and construction tax	1,366,222.30	929,920.78
Education surtax	590,668.51	497,953.99
Local education surcharge	392,703.75	331,969.34
Housing property tax		454,278.16
Land use tax		253,945.28
Water conservancy funds	397,874.74	182,693.41
Stamp tax	591,306.68	485,653.80
River management fees		39,257.62
Embankment protection fee	179.23	179.24
Outbound income tax	358,410.10
Total	89,275,803.43	58,281,315.47

Other notes: None

23. Other payables

Unit: RMB

Item	Ending balance	Beginning balance
Interests payable	52,841.84	390,533.38
Other payables	108,089,757.99	61,572,020.26
Total	108,142,599.83	61,962,553.64

(1) Interest payable

Unit: RMB

Item	Ending balance	Beginning balance
Interest payable for short-term loan	52,841.84	390,533.38
Total	52,841.84	390,533.38
Significant interest overdue but unpaid:		Unit: RM
Borrower	Default penalty	Overdue reason

Unit: RMB

Other notes:

None

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(2) Other payables

1) Other accounts payable listed by the nature of accounts

Unit: RMB

Item	Ending balance	Beginning balance
Deposit and guarantee deposit	8,360,000.00	7,650,158.00
Payable temporary receipts		2,000,000.00
Freight and storage charges		9,825,807.62
Investment funds payable	8,500,000.00	35,448,685.81
Equity funds	86,936,207.21
Others	4,293,550.78	6,647,368.83
Total	108,089,757.99	61,572,020.26

24. Non-current liability due within one year

Unit: RMB

Item	Ending balance	Beginning balance
Long-term loans due within 1 year	29,599,165.73	28,117,893.57
Total	29,599,165.73	28,117,893.57

Other notes:

Non-current liabilities due within one year are the mortgage loans due within one year for house purchase by legal persons that are used by the subsidiaries of the Company for the purchase of office space.

25. Other current liabilities

Unit: RMB

Item	Ending balance	Beginning balance
Temporarily estimated output tax	89,719,750.76	53,981,510.57
Payable performance compensation	7,536,817.40	3,756,740.62
Total	97,256,568.16	57,738,251.19

Movements in short-term bonds payable:

Unit: RMB

								Amortizat
						Issuance	Withdraw		Repayme
								ion of
Name of	Nominal	Issuing	Bond	Issuing	Beginnin	in the	ing		nts in the	Ending
								premium
bonds	value	date	period	amount	g balance	current	interest at		current	balance
								or
						period	par		period
								discount

Other notes:

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Payable performance compensation is the performance compensation arising from canceling 357,483 shares of Jiangyin Zhongnan Heavy Industries Co., Ltd due to Shanghai Aurora Networks Technology Co., Ltd. transferred in 2017 failing to satisfy its performance commitment in 2018.

26. Long-term loans

(1) Classification of long-term loans

	Unit: RMB Ending balance Beginning balance 281,176,106.33 310,775,272.06 281,176,106.33 310,775,272.06	Unit: RMB Ending balance Beginning balance 281,176,106.33 310,775,272.06 281,176,106.33 310,775,272.06
Item	Ending balance	Beginning balance
Mortgage, guaranteed loan	281,176,106.33	310,775,272.06
Total	281,176,106.33	310,775,272.06

Description of classification of other long-term borrowings:

Long-term borrowings are the mortgage loans for house purchase by legal persons that are used by the subsidiaries of the Company for the purchase of office space. The Company assumes joint and several liabilities for these borrowings. Other instructions, including interest rate range:

The applicable interest rate is 105% of the benchmark interest rate for 5-year RMB loans from financial institutions.

27. Bonds payable

(1) Bonds payable

Unit: RMB

Item	Ending balance	Beginning balance
Convertible corporate bonds		27,163,239.26
Total		27,163,239.26

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(2) Increase and decrease of bonds payable (excluding other financial instruments like preferred shares and perpetual capital securities that were classified into financial liabilities)

Unit: RMB

						Issuance in the	Withdrawing	Amortization of	Repayments in the	Decrease in
Name of bonds	Nominal value	Issuing date	Bond period	Issuing amount	Beginning balance						Ending balance
						current period	interest at par	premium or discount	current period	current period

private
		December	December 1st,
convertible	23,028,000.00			20,237,720.27	23,288,349.08		1,151,400.00	718,643.84		25,158,392.92	0.00
		2nd, 2016	2021
bonds 1st

private
		December	December 1st,
convertible	3,831,571.35			3,367,303.68	3,874,890.18		191,578.57	119,573.36		4,186,042.11	0.00
		2nd, 2016	2021
bonds 2nd

Total	--	--	--	23,605,023.95	27,163,239.26		1,342,978.57	838,217.20		29,344,435.03

(3) Description of the conversion conditions and time of convertible corporate bonds

The issuer of convertible corporate bonds at the beginning of the period is Wuji Entertainment Games Co., Ltd. (Korea), a holding subsidiary of the Company, and the holder of convertible corporate bonds can request conversion during the period from the date of one year from the date of issuance to one month before the expiration date. The decrease of convertible corporate bonds in this period is due to the disposal for control loss by Wuji Entertainment Games Co., Ltd. (Korea).

28. Deferred income

Unit: RMB

Item	Beginning balance	Increase in current period	Decrease in current period	Ending balance	Cause
					Governmental subsidy related to
Government subsidies	8,817,182.17	681,000.00	9,498,182.17
					assets

Deferred income from royalty income	8,409,292.27	1,931,196.96	6,436,773.91	3,903,715.32	Royalty income

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Total 17,226,474.44 2,612,196.96 15,934,956.08 3,903,715.32 --

Items revolving governmental subsidies:

Unit: RMB

			Amount of
		Amounts of new		Amount of other	Amount of cost
			non-operating
Items of liabilities	Beginning balance	subsidies in		income in current	offset in the current	Other movements	Ending balance	Related to assets/income
			income in
		current period		period.	period
			current period

Project subsidies of Automotive Fuel
	650,000.08			119,166.67		-530,833.41		Related to assets
System R&D Center

Subsidy for the purchase of single
	152,896.27			25,163.35		-127,732.92		Related to assets
equipment by SMEs

Provincial “6+1” subsidies for
building independent innovation	699,833.33			90,566.67		-609,266.66		Related to assets
capacity in Anhui Province
Special funds for development of
provincial enterprises of Nanling
	383,333.35			45,833.33		-337,500.02		Related to assets
Country Commission of Economy and

Information Technology
Provincial innovation enterprise R&D
	215,062.50			25,437.50		-189,625.00		Related to assets
equipment subsidy

2015 provincial special fund to build
	219,687.50			25,437.50		-194,250.00		Related to assets
an innovative province

Subsidies for R&D and purchase of
	666,400.00			71,866.67		-594,533.33		Related to assets
instruments and equipment

2016 provincial special fund to build
	666,400.00			71,866.67		-594,533.33		Related to assets
an innovative province

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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2017 Construction fund supports for
building manufacturing strong
provinces, and equipment subsidies
	3,363,000.00		313,500.00	-3,049,500.00	Related to assets
for technological transformation

projects to improve industrial
foundation
Reward and subsidy for industrial
technology reform of Country
	1,668,677.50		154,247.50	-1,514,430.00	Related to assets
Commission of Economy and

Information Technology
2017 provincial special fund to build
an innovative province of Nanling
County Commission of Economy and	131,891.64		12,191.65	-119,699.99	Related to income
Information Technology (technology
division)
Special funds for development of
county-level foreign trade enterprises		681,000.00		-681,000.00	Related to assets
in 2017
Total	8,817,182.17	681,000.00	955,277.51	-8,542,904.66

Other notes:

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29. Share capital

Unit: RMB

			Changes (+/-) in this time	Changes (+/-) in this time	Changes (+/-) in this time	Changes (+/-) in this time
				Shares
	Beginning balance						Ending balance
				converted from
		Stock issue	Dividend stock		Others	Subtotal
				accumulated

				reserves
Total number of	2,148,110,844.00						2,124,870,253.00
					-23,240,591.00	-23,240,591.00
shares

Other notes:

According to the resolution of the Company’s 2017 annual general meeting of shareholders, as Shanghai Mokun failed to fulfill its 2017 annual performance commitment, Yang Dongmai and other performance compensation obligors should compensate for a total of 23,240,591 shares. The Company will repurchase and cancel these shares according to relevant agreements, resulting in changes to

the Company’s registered capital and equity: The Company’s registered capital decreased from RMB 2,148,110,844 to RMB 2,124,870,253, and the Company’s equity decreased from 2,148,110,844 shares to 2,124,870,253 shares.

30. Other equity instruments

(1) Statement of changes in financial instruments such as outstanding preferred shares and perpetual capital securities issued at the end of the period

Unit: RMB

Outstanding	Beginning balance	Beginning balance	Increase in current period	Increase in current period	Decrease in current period	Decrease in current period	Ending balance	Ending balance
financial
	Quantity	Book value	Quantity	Book value	Quantity	Book value	Quantity	Book value
instruments

Equity component
value of convertible	1	1,947,846.62			1	1,947,846.62
corporate bonds
Total	1	1,947,846.62			1	1,947,846.62

The changes in other equity instruments in the current period, the reasons for the changes, and the basis for relevant accounting treatment:

The decrease in this period is the reduction of equity component value of convertible corporate bonds due to disposal of Wuji Entertainment Games Co., Ltd. (a subsidiary of the Company).

Other notes:

None

31. Capital reserves

Unit: RMB

Item Beginning balance Increase in current period Decrease in current Ending balance

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			period
Capital Premium (share
	1,965,229,405.38	35,892,959.50	1,705,304,196.89	295,818,167.99
premium)

Other capital reserves	7,410,175.28		4,488,376.06	2,921,799.22
Total	1,972,639,580.66	35,892,959.50	1,709,792,572.95	298,739,967.21

Other notes, involving changes in the current period and change reasons:

(1) The increase in capital premium in this year included the increase of capital reserve of RMB 18,745,498.96 due to the exercise of conversion rights by the shareholders of preferred shares of Wuji Entertainment Games Co., Ltd. (a subsidiary of the Company); increase of capital reserve of RMB 14,644,959.82 due to Shanghai Sanqi Interactive Entertainment (a subsidiary wholly owned by

the Company) transferring its subsidiaries - Guangzhou Huoshanhu Company and Anhui Sanqi to Guangzhou Sanqi (a holding subsidiary of the Company); increase of capital reserve of RMB 2,502,500.72 in Shanghai Mokun, a subsidiary of the Company, due to the increase in capital of minority shareholders.

The decrease in capital premium in this year included the 20% equities of Jiangsu Aurora acquired by the Company offsetting the capital reserve - equity premium by RMB 1,248,120,566.34; the acquisition of 15% equities of Guangzhou Huoshanhu by Guangzhou Sanqi (a subsidiary of the Company) offsets capital reserve-share premium by RMB 7,710,622.12; Shanghai Mokun, a subsidiary of the Company, failed to achieve its performance commitments, so it repurchased shares to offset the capital reserve by RMB 449,473,008.43.

(2) The decrease in other capital reserve in this period was due to the fact that as the joint venture of Tibet Taifu Culture Media Co., Ltd., a subsidiary of the Company, YHKT Entertainment Co., Ltd. decreased its shareholding ratio this year with long-term equity investment as available-for-sale financial assets and caused other capital reserve to decline by RMB 4,488,376.06.

32. Other comprehensive income

Unit: RMB

		Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the current period
					Aibbl	Attribu
			Less: The amount
						table to ii
			calculated in other
Item	Beginning	Accrual before	comprehensive	Less: Income	ttrutae to parent	mnort y	Ending balance
	balance	income tax in	income in earlier
				taxes	company after	shareh
		this period	period and carried
					tax	olders
			over to profit and loss
						after
			in current period.
						tax

II. Other comprehensive incomes that would be classified into profit and loss					71,463,938.88
	-25,087,592.30	52,311,844.22	-23,888,000.86	4,735,906.20			46,376,346.58

Variable Loss and Profit of fair value of salable financial assets					52,307,268.18
	-25,470,466.38	31,572,708.00	-25,470,466.38	4,735,906.20			26,836,801.80

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Translation difference in the foreign currency financial statement					19,156,670.70
	382,874.08	20,739,136.22	1,582,465.52			19,539,544.78

Other total comprehensive income	-25,087,592.30				71,463,938.88	46,376,346.58
		52,311,844.22	-23,888,000.86	4,735,906.20

Other notes, involving conversion of the effective component of the cash flow hedging profit and loss to the initially recognized amount of the hedged items:

None

33. Surplus reserves

Unit: RMB

			Decrease in current
Item	Beginning balance	Increase in current period		Ending balance
			period

Statutory surplus
	99,561,946.0	9 70,915,889.79		170,477,835.88
reserves

Total	99,561,946.0	9 70,915,889.79		170,477,835.88

Surplus reserve notes, involving changes in the current period and change reasons:

The company shall reserve 10% of the net profit of the parent company as the provision for legal surplus.

34. Undistributed profits

Unit: RMB

Item	Current period	Previous period
Adjustment of undistributed profits of previous year	2,819,597,585.78	1,413,567,635.94
Undistributed profits at the beginning of the period	2,819,597,585.78
		1,413,567,635.94
after adjustment

Add: Net profit owned by parent company owners in
	1,008,503,357.80	1,620,582,427.47
this year

Less: Appropriation to legal surplus reserves	70,915,889.79	6,072,998.83
Dividends payable on common stock	424,974,050.60	208,479,478.80
Undistributed profits at the end of the period	3,332,211,003.19	2,819,597,585.78

Details of undistributed profits at the beginning of adjustment period:

1) Due to retroactive adjustment of Enterprise Accounting Standard and its relevant new provisions, the affected undistributed profit at the beginning of the period is RMB 0.00.

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

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

4) Due to changes of consolidation scope caused by the same control, the affected undistributed profit at the beginning of the period is RMB 0.00.

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5) Due to all the other adjustments, the affected undistributed profit at the beginning of the period is RMB 0.00.

35. Operating income and operating costs

Unit: RMB

	Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the previous period	Amount incurred in the previous period
Item
	Income	Cost	Income	Cost

Main business	7,632,679,668.47	1,811,420,940.10	6,188,729,008.57	1,948,067,595.79
Other businesses			99,108.18	129,643.97
Total	7,632,679,668.47	1,811,420,940.10	6,188,828,116.75	1,948,197,239.76

36. Taxes and additional charges

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Urban maintenance and construction tax	10,486,240.49	7,941,837.63
Education surtax	4,693,077.15	3,518,238.96
Housing property tax	1,248,953.90	1,145,438.72
Land use tax	2,563,885.00	3,207,777.30
Vehicle and vessel use tax	22,325.20	20,389.47
Stamp tax	8,003,772.08	6,703,094.58
Local education surcharge	3,269,512.10	2,345,492.62
Water conservancy funds	2,752,686.81	1,404,336.13
Construction fund for cultural undertakings		104,319.98
River management fees		7,404.96
Others		109,767.54
Total	33,040,452.73	26,508,097.89

Other notes: None

37. Sales expense

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Salary and welfare	125,454,065.25	94,862,624.16
Depreciation cost	2,201,939.07	2,452,462.02
Office expense	1,171,092.14	2,294,285.34

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Internet traffic fee	3,188,625,479.94	1,767,614,006.47
Traveling expense	1,462,185.31	2,725,380.16
Transportation and storage fees	18,091,042.19	27,201,590.38
Entertainment expenses	4,025,796.16	4,151,221.02
Others	6,229,708.27	6,905,896.77
Total	3,347,261,308.33	1,908,207,466.32

Other notes: None

38. Management expense

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Salary and welfare	138,154,150.37	122,730,667.18
Office expense	25,604,123.72	34,206,282.94
Traveling and conference fees	12,780,600.56	12,278,341.07
Fees of depreciation and amortization	11,959,200.23	13,818,326.98
Business entertainment expense	12,180,998.39	13,901,648.09
Rentals	23,245,925.37	20,591,183.94
Agency and consulting fees	19,134,146.42	15,404,989.50
Share payment		100,984,100.00
Others	3,003,757.30	6,574,972.04
Total	246,062,902.36	340,490,511.74

Other notes: None

39. R&D expense

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Salary and welfare	439,113,908.11	344,422,361.03
Operation and maintenance fees	42,414,470.88	36,523,870.96
Fees of depreciation and amortization	13,015,245.63	18,421,390.26
Design cost	17,566,420.48	16,667,400.08
Traveling and transportation expenses	5,135,780.17	3,677,004.63
Office expense	7,584,107.07	6,566,727.06

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Rent and office utilities	5,107,935.40	2,220,064.44
Others	7,767,736.89	7,670,211.66
Total	537,705,604.63	436,169,030.12

Other notes: None

40. Financial expenses

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Interest payment	44,631,901.22	32,858,899.90
Service charges and others paid to
	645,223.32	606,729.28
financial authorities

Less: Interest incomes	27,632,671.32	24,363,295.31
Exchange gains and losses	-547,353.98	19,453,449.40
Total	17,097,099.24	28,555,783.27

Other notes: None

41. Asset impairment losses

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
I. Losses on bad debts	30,322,401.56	19,082,968.12
II. Inventory devaluation losses	4,004,132.44	66,962.78
III. Available-for-sale financial asset impairment losses	52,732,066.85	3,000,000.00
V. Long-term equity investment impairment losses	2,462,825.74	11,593,317.05
VII. Fixed asset impairment losses		17,288,222.20
IX. Construction in progress impairment losses		429,504.26
XII. Intangible asset impairment losses		377,358.34
XIII. Goodwill impairment losses	959,833,685.66	299,457,551.04
Total	1,049,355,112.25	351,295,883.79

Other notes: None

42. Other profits

Unit: RMB

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Sources of other incomes Government subsidies Total	Amount incurred in the current period	Amount incurred in the previous period
	97,647,310.60	111,259,077.18
	97,647,310.60	111,259,077.18

43. Investment income

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Long-term equity investment income measured by equity
	7,617,107.86	-11,139,329.07
method

Investment profits by the disposal of long-term equity
	6,403,021.73	218,512,763.55
investment

Investment profit by marketable financial assets during
	10,930,309.95	10,503,501.81
the holding period

Investment profit by the disposal of marketable financial
	-9,740,417.35	20,264,211.00
assets

Original equity treated as investment income from
	48,392,551.99	1,411,495.72
disposal

Bank yields from financial products	16,941,398.12	13,370,838.07
Others		3,106,764.84
Total	80,543,972.30	256,030,245.92

Other notes: None

44. Income from disposal of assets

Unit: RMB

Source of income from asset disposal	Amount incurred in the current period	Amount incurred in the previous period
Gains (losses) from disposal of fixed assets	1,289,755.10	1,055,284.09
Total	1,289,755.10	1,055,284.09

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45. Non-operating income

Unit: RMB

									Unit: RMB	Unit: RMB	Unit: RMB	Unit: RMB
	Item		Amount incurred in the current period			Amount incurred in the previous period			Amount recognized into current non-recurring profits and losses
	Government subsidies						11,200.00
	Tort compensation		8,891,208.00				1,528,930.43			8,891,208.00
	Performance compensation
			453,859,535.09				401,364,984.06			453,859,535.09
	receivables

	Others		1,163,735.09				152,808.37			1,163,735.09
	Total		463,914,478.18				403,057,922.86
	Government subsidy recognized in current losses and gains:
							Do subsidies
								Whether it is a			Amount incurred
							affect the profit			Amount incurred		Related to
Subsidy items		Entity		Reason	Nature and type			special subsidy			in the previous
							and loss of the			in this period		assets/income
								or not?			period
							year?

					Subsidies received from the government to encourage
VAT immediate levy		Tax bureaus in Shanghai,
				Subsidies	and support specific industries and segments		No	No		58,796,021.20	81,575,068.42	Related to income
and refund		Guangzhou, Huai’an, etc.
					(according to national policies and regulations)

Return of handling		Tax bureaus in Guangzhou,			Subsidies received from the government for the
charges of individual		Huai’an, Shanghai, Nanling		Subsidies	protection of certain utility services or socially		No	No		1,463,852.75	1,135,760.56	Related to income
income tax		County (Anhui), etc.			necessary product supply or price control functions
		Social insurance fund
					Subsidies received from the government for the
Subsidy for post		management centers in
				Subsidies	protection of certain utility services or socially		No	No		690,765.77	665,044.69	Related to income
stability		Guangzhou, Huai’an, Wuhu,
					necessary product supply or price control functions
		Shenzhen, etc.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	Huai’an Software Park		Subsidies received for compliance with local support
Subsidies for Huai’an
	Management Development	Subsidies	policies for investment promotion by local	No	No	4,556,098.16	10,516,637.23	Related to income
Software Park
	Co., Ltd.		governments

Subsidies for Internet
	Huai’an Hongze District		Subsidies received for compliance with local support
Industry Base in
	Internet Industry Base	Subsidies	policies for investment promotion by local	No	No	1,011,370.36		Related to income
Hongze District,
	Management Co., Ltd.		governments
Huai’an City

Subsidies from	Huai’an Economic and
Huai’an Overseas	Technological Development		Subsidies received for compliance with local support
Students Pioneer Park	Zone Overseas Students	Subsidies	policies for investment promotion by local	No	No	3,007,996.25	3,540,171.40	Related to income
Management	Pioneer Park Management		governments
Committee	Office
	Tax Bureau of Shanghai		Subsidies received for compliance with local support
Tax rebate from
	Jiading District and Pudong	Subsidies	policies for investment promotion by local	No	No	1,298,632.80		Related to income
Shanghai government
	New Area		governments

	Finance and Taxation
			Subsidies received for compliance with local support
	Service Center in Wuhu
Industrial subsidies		Subsidies	policies for investment promotion by local	No	No	2,167,000.00	4,935,700.00	Related to income
	Machinery Industry
			governments
	Development Zone

	Management Committee of
			Subsidies received for compliance with local support
	Anhui Xinwu Economic &
Industrial subsidies		Subsidies	policies for investment promotion by local	No	No	961,399.64		Related to income
	Technological Development
			governments
	Zone

	Treasury Payment Center of		Subsidies received for compliance with local support
Industrial subsidies	Wuhu Jiujiang District	Subsidies	policies for investment promotion by local	No	No	12,856,498.14		Related to income
	Finance Bureau		governments
Industrial subsidies	Wuhu Advertising Industry	Subsidies	Subsidies received for compliance with local support	No	No	62.00	268,618.87	Related to income

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	Park Asset Management		policies for investment promotion by local
	Co., Ltd.		governments
Provincial Financial
Research Funds for
	Department of Science and
Research and			Subsidies for research and development, technology
	Technology of Guangdong	Subsidies		No	No	1,777,800.00		Related to income
Development of			renewal and renovation
	Province
Enterprises in

Guangdong Province
Subsidies to
	Guangzhou Science,
Guangzhou			Subsidies for research and development, technology
	Technology and Innovation	Subsidies		No	No	853,900.00	100,000.00	Related to income
enterprises’ R&D			renewal and renovation
	Commission
investment

Special fund for
	The Bureau of Science,
subsidies to
	Technology, Industry &		Subsidies for research and development, technology
Guangzhou		Subsidies		No	No	0.00	100,000.00	Related to income
	Informatization of Tianhe		renewal and renovation
enterprises’ R&D
	District, Guangzhou
investment

Special subsidy of
Tianhe District to
	The Bureau of Science,
support development
	Technology, Industry &		Subsidies for research and development, technology
of software		Subsidies		No	No	500,000.00		Related to income
	Informatization of Tianhe		renewal and renovation
development and
	District, Guangzhou
enterprise R&D

investment
Special subsidy of
	Office of Talent Affairs,
Tianhe District to			Subsidies for research and development, technology
	Tianhe District Committee	Subsidies		No	No	200,000.00		Related to income
support innovation			renewal and renovation
	of Guangzhou
and entrepreneurship

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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of high-level talents
Special fund of
	The Bureau of Science,
Tianhe District for			Subsidies received for compliance with local support
	Technology, Industry &
subsidies to Thero		Subsidies	policies for investment promotion by local	No	No	500,000.00	500,000.00	Related to income
	Informatization of Tianhe
brand building			governments
	District, Guangzhou
service

Funding support of
	Guangzhou Municipal		Subsidies received for compliance with local support
Tianhe District for
	Development and Reform	Subsidies	policies for investment promotion by local	No	No	200,000.00		Related to income
cultural and creative
	Commission		governments
industry

Provincial financial	Jiangsu Department of
			Subsidies for research and development, technology
reward for enterprise	Finance, Department of	Reward		No	No	2,000,000.00		Related to income
			renewal and renovation
R&D expenses	Science and Technology

Supporting subsidy
			Subsidies received for compliance with local support
from the Finance	Finance Bureau of Jiading
		Subsidies	policies for investment promotion by local	No	No	0.00	1,339,770.00	Related to income
Bureau of Jiading	District, Shanghai
			governments
District, Shanghai

	Nanling Economic
Reward for “Four			Subsidies received for compliance with local support
	Development Zone
Standards”		Reward	policies for investment promotion by local	No	No	110,000.00	120,000.00	Related to income
	Construction Investment
enterprises			governments
	Co., Ltd.

Reward for “Four			Subsidies received for compliance with local support
	Statistics Bureau of Wuhu
Standards”		Reward	policies for investment promotion by local	No	No	3,000.00	2,000.00	Related to income
	County
enterprises			governments

Reward for scientific
	Science & Technology		Subsidies for research and development, technology
and technical		Reward		No	No	52,000.00	50,000.00	Related to income
	Bureau of Wuhu County		renewal and renovation
innovation of Science

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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& Technology Bureau
Reward and subsidy
	Wuhu Municipal		Subsidies received for compliance with local support
to province with
	Commission of Economy	Reward	policies for investment promotion by local	No	No	0.00	500,000.00	Related to income
strong manufacturing
	and Information Technology		governments
power

Return of handling			Subsidies received for compliance with local support
charges of VAT and	Huai’an Tax Service	Reward	policies for investment promotion by local	No	No	71,081.94	25,238.00	Related to income
enterprise income tax			governments
Incentive fund for	Huai’an Municipal Science		Subsidies for research and development, technology
		Reward		No	No	100,000.00		Related to income
high-tech enterprises	and Technology Bureau		renewal and renovation

	Science and Technology
District-level
	Division of Huai’an
supporting incentive			Subsidies for research and development, technology
	Economic and	Reward		No	No	100,000.00		Related to income
fund for high-tech			renewal and renovation
	Technological Development
enterprises
	Zone

Incentive fund for
cultivation of	Jiangsu Department of		Subsidies for research and development, technology
		Reward		No	No	55,555.00		Related to income
provincial new	Finance		renewal and renovation

high-tech enterprises
Special fund of			Subsidies received for compliance with local support
	Department of Commerce of
commercial		Reward	policies for investment promotion by local	No	No	110,100.00		Related to income
	Jiangsu Province
development			governments

Rebates of VAT			Subsidies received for compliance with local support
levied by South	Sam Sung Tax Office	Subsidies	policies for investment promotion by local	No	No	9,633.64		Related to income
Korea			governments
Supporting subsidy of	Internal Revenue Services		Subsidies received for compliance with local support
		Subsidies		No	No	0.00	1,348,511.17	Related to income
Guro, Seoul, South	and Government of Guro,		policies for investment promotion by local

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Korea	Seoul, South Korea		governments
2017 supporting fund
for animation of	Shanghai Municipal
			Subsidies received for compliance with local support
Shanghai Municipal	Administration of Culture
		Subsidies	policies for investment promotion by local	No	No	0.00	235,849.06	Related to income
Administration of	and Tourism, Radio and
			governments
Culture and Tourism,	Television

Radio and Television
	People’s Government of		Subsidies received for compliance with local support
Tax return of Jiading
	Jiading District of Shanghai	Subsidies	policies for investment promotion by local	No	No	0.00	518,800.00	Related to income
District Government
	Municipality		governments

2016 city-level
	Management Committee of		Subsidies received for compliance with local support
directing fund for
	Huai’an Software Park of	Reward	policies for investment promotion by local	No	No	0.00	400,000.00	Related to income
cultural industry
	Jiangsu Province		governments
development

	Economic Development
	Bureau of Huai’an
Incentive fund for			Subsidies for research and development, technology
	Economic and	Reward		No	No	0.00	400,000.00	Related to income
offshore outsourcing			renewal and renovation
	Technological Development

	Zone
Subsidies for			Subsidies received for compliance with local support
	Leading Group Office for
Huaishang Talent		Subsidies	policies for investment promotion by local	No	No	0.00	150,000.00	Related to income
	Talent Affairs of Huai’an
Project			governments

Special incentive of
Tianhe District			Subsidies received for compliance with local support
	Finance Bureau of Tianhe
Business and Finance		Reward	policies for investment promotion by local	No	No	0.00	122,100.00	Related to income
	District
Bureau for			governments

introduction of key

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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enterprises
Support for fashion
creative animation of
Culture, Radio, Film,			Subsidies received for compliance with local support
	Guangzhou Municipal
Television & Public		Subsidies	policies for investment promotion by local	No	No	0.00	400,000.00	Related to income
	Bureau of Finance
Press Bureau of			governments

Guangzhou
Municipality
Special subsidies for
	The Bureau of Science,
rents of key industrial			Subsidies received for compliance with local support
	Technology, Industry &
enterprises granted by		Subsidies	policies for investment promotion by local	No	No	0.00	90,100.00	Related to income
	Informatization of Tianhe
the Finance Bureau			governments
	District, Guangzhou
of Tianhe District

Supporting fund of
the Finance Bureau	Human Resources and
of the Khorgas	Social Security Bureau of
Economic	the Khorgas Economic		Subsidies received for compliance with local support
Development Zone	Development Zone	Subsidies	policies for investment promotion by local	No	No	0.00	118,857.00	Related to income
Management	Management Committee of		governments
Committee of	Xinjiang Uygur
Xinjiang Uygur	Autonomous Region
Autonomous Region
Copyright grant of			Subsidies received from the government to encourage
	Copyright Association of
Shanghai Copyright		Subsidies	and support specific industries and segments	No	No	0.00	3,500.00	Related to income
	Shanghai
Association			(according to national policies and regulations)

2016 Excellent	Huai’an Municipal Bureau
			Subsidies for research and development, technology
Copyright of Chuan	of Culture, Radio, Film and	Reward		No	No	0.00	3,000.00	Related to income
			renewal and renovation
Qi Ba Ye (传奇霸业)	Television Press and

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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of Huai’an	Publication (Copyright)
2016 policy fund for
promotion of
provincial foreign			Subsidies received for compliance with local support
	Commerce Bureau of
trade transferred by		Subsidies	policies for investment promotion by local	No	No	0.00	64,500.00	Related to income
	Nanling County
the Commerce			governments

Bureau of Nanling
County
Subsidies for blue
collar apartment rents
	Nanling Economic
granted by Nanling			Subsidies received for compliance with local support
	Development Zone
Economic		Subsidies	policies for investment promotion by local	No	No	0.00	27,648.00	Related to income
	Construction Investment
Development Zone			governments
	Co., Ltd.
Construction

Investment Co., Ltd.
	Jishan Town Government of		Subsidies received for compliance with local support
Return of land use tax	Nanling County, Anhui	Subsidies	policies for investment promotion by local	No	No	1,857,265.44	1,411,521.00	Related to income
	Province		governments
Project subsidies of
	Anhui Department of		Subsidies for research and development, technology
Automotive Fuel		Subsidies		No	No	119,166.67	130,000.00	Related to assets
	Finance		renewal and renovation
System R&D Center

Subsidy for the	Wuhu Municipal
			Subsidies for research and development, technology
purchase of single	Commission of Economy	Subsidies		No	No	25,163.35	27,450.92	Related to assets
			renewal and renovation
equipment by SMEs	and Information Technology

Provincial “6+1”	Nanling County
			Subsidies for research and development, technology
subsidies for building	Commission of Economy	Subsidies		No	No	90,566.67	98,800.00	Related to assets
			renewal and renovation
independent	and Information Technology

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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innovation capacity
Special funds for
development of
provincial enterprises
	Nanling County
of Nanling Country			Subsidies for research and development, technology
	Commission of Economy	Subsidies		No	No	45,833.33	50,000.00	Related to assets
Commission of			renewal and renovation
	and Information Technology
Economy and

Information
Technology
Provincial innovation
	Wuhu Municipal Science		Subsidies for research and development, technology
enterprise R&D		Subsidies		No	No	25,437.50	27,750.00	Related to assets
	and Technology Bureau		renewal and renovation
equipment subsidy

2015 provincial
	Nanling County
special fund to build			Subsidies for research and development, technology
	Commission of Economy	Subsidies		No	No	25,437.50	27,750.00	Related to assets
an innovative			renewal and renovation
	and Information Technology
province

Subsidies for R&D
	Nanling County
and purchase of			Subsidies for research and development, technology
	Commission of Economy	Subsidies		No	No	71,866.67	78,400.00	Related to assets
instruments and			renewal and renovation
	and Information Technology
equipment

2016 provincial
special fund to build	Wuhu Municipal Science		Subsidies for research and development, technology
		Subsidies		No	No	71,866.67	78,400.00	Related to assets
an innovative	and Technology Bureau		renewal and renovation

province
Subsidies for	Nanling County
			Subsidies for research and development, technology
technologically	Commission of Economy	Subsidies		No	No	313,500.00	57,000.00	Related to assets
			renewal and renovation
transformed	and Information Technology

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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equipment to make
the foundation of
industry development
more solid for
provinces with strong
manufacturing power
	Nanling County
Reward and subsidy			Subsidies for research and development, technology
	Commission of Economy	Subsidies		No	No	154,247.50	14,022.50	Related to assets
for technology reform			renewal and renovation
	and Information Technology

2017 provincial
	Nanling County
special fund to build			Subsidies for research and development, technology
	Commission of Economy	Subsidies		No	No	12,191.65	1,108.36	Related to assets
an innovative			renewal and renovation
	and Information Technology
province

Reward for scientific	Nanling County
			Subsidies for research and development, technology
and technical	Commission of Economy	Reward		No	No	200,000.00		Related to income
			renewal and renovation
innovation	and Information Technology

	Nanling County
Reward for invention			Subsidies for research and development, technology
	Commission of Economy	Reward		No	No	86,000.00		Related to income
patent			renewal and renovation
	and Information Technology

2017 provincial			Subsidies received for compliance with local support
	Commerce Bureau of
supporting fund of		Subsidies	policies for investment promotion by local	No	No	96,000.00		Related to income
	Nanling County
foreign trade policy			governments

Reward and subsidy
for specialized,	Nanling County
			Subsidies for research and development, technology
sophisticated, special	Commission of Economy	Subsidies		No	No	1,000,000.00		Related to income
			renewal and renovation
and new SMEs and	and Information Technology

provincial industry

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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design center which
are identified in the
province
Subsidy of the Wuhu
Joint Conference
Office for Air
	Wuhu Municipal		Subsidies received from the government for the
Pollution Prevention
	Environmental Protection	Subsidies	protection of certain utility services or socially	No	No	0.00	11,200.00	Related to income
and Control on the
	Bureau		necessary product supply or price control functions
elimination of

heavy-polluting
vehicles

Other notes:

None

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46. Non-operating expenses

Unit: RMB

	Amount incurred in the	Amount incurred in the previous	Amount recognized into current
Item
	current period	period	non-recurring profits and losses

External donation	3,454,249.54	134,259.40	3,454,249.54
Losses on the damage and retirement of
	1,107,986.48		1,107,986.48
non-current assets

Payable performance compensation	7,702,951.36	3,756,740.62	7,702,951.36
Fine and fine for delaying payment	32,392.81	219,253.60	32,392.81
Others	2,514,703.30	76,785.28	2,514,703.30
Total	14,812,283.49	4,187,038.90

Other notes: None

47. Income taxes

(1) Income tax sheet

Unit: RMB

	Amount incurred in the current
Item		Amount incurred in the previous period
	period

Income taxes of current period	88,775,602.71	83,470,564.82
Deferred income tax	-20,885,955.32	-3,350,691.84
Total	67,889,647.39	80,119,872.98

(2) Accounting profit and income tax expenses adjustment process

Unit: RMB

Item	Amount incurred in the current period
Total profit	1,219,319,481.52
Income tax expenses calculated at legal/applicable tax rate	304,829,870.39
Impact of various tax rates applicable to subsidiaries	-325,192,357.62
Adjustment of impact on the income tax in the previous period	3,411,685.40
Impact of non-taxable income	-10,974,398.80
Impact of the non-deductible costs, expenses and losses	152,848,212.09

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Impact of deductible losses of unrecognized deferred income tax assets in the previous period
	-17,450,098.57

Impact of deductible temporary differences or deductible loss of unrecognized deferred income tax assets of this period
	7,148,912.28

Impact of weighted R&D cost deduction	-46,224,603.40
Others	-507,574.39
Income taxes	67,889,647.39

Other notes

48. Other comprehensive income

For details, please refer to Note 32 - Other comprehensive income.

49. Items of cash flow statements

(1) Cash received from other operating activities

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Operational incomings and outgoings
	7,170,260.47	3,000,000.00
received

Government subsidies received	38,577,011.89	29,104,526.97
Interest income received	10,849,579.35	8,756,161.69
Deposits and guarantees received	12,431,744.54	6,814,202.79
Other amounts received	11,704,341.67	8,111,632.38
Total	80,732,937.92	55,786,523.83

Description of other received cash relevant to operating activities: None

(2) Cash paid relating to other operating activities

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Out-of-pocket expenses	3,091,233,883.86	2,029,450,687.59
Payment of guarantee and reserve	36,152,700.88	19,562,859.61
Service charge	645,223.32	606,729.28
Non-operating expense	5,635,594.16	430,298.28
Other payables	803,924.26	3,316,702.65

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Total 3,134,471,326.48 2,053,367,277.41

2,053,367,277.41

Description of other cash paid relating to operating activities:

None

(3) Other cash received relating to investment activities

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Government subsidies related to assets
		5,235,700.00
received

Financial products	3,580,863,200.00	2,212,369,000.00
Earnest money for repurchase of equities		6,000,000.00
Return of copyright money		4,417,865.14
Total	3,580,863,200.00	2,228,022,565.14

Description of other cash received relating to investing activities:

None

(4) Other cash payments relating to investing activities

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Financial products	3,586,863,200.00	2,122,369,000.00
Payment of performance compensation	15,795.67
Guarantee for government freezing	4,299,671.55
Total	3,591,178,667.22	2,122,369,000.00

Description of other cash payments relating to investing activities:

None

(5) Other cash payments relating to financing activities

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Issuing costs of raised fund		4,313,316.06
Cash payment for acquisition of minority
	1,400,150,000.00	89,180,000.00
stocks of subsidiary

Repurchase of treasury stocks	317,235.07
Total	1,400,467,235.07	93,493,316.06

Description of cash payments relating to financing activities:

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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None

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50. Supplementary data of cash flow statement

(1) Supplementary data of cash flow statement

Unit: RMB

Supplementary data	Amount of current period	Amount of previous period
1. Net profits transferred to cash flow of
	--	--
operation activities:

Net profit	1,151,429,834.13	1,836,499,722.03
Add: Provision for assets impairment	1,049,355,112.25	351,295,883.79
Depreciations of fixed assets, oil and gas
	47,319,420.24	54,913,911.20
assets, and productive biological assets

Amortization of intangible assets	7,959,258.42	19,083,068.70
Amortization of long-term deferred expenses	62,383,028.39	86,013,536.69
Losses on disposal of fixed assets, intangible
assets and other long-term assets (“-”	-1,289,755.10	-1,055,284.09
indicates the profit)
Losses at discard of fixed assets (“-”
	1,107,986.48
indicates the profit)

Financial expense (“-” indicates the profit)	22,428,003.26	45,364,584.84
Losses on investments (“-” indicates the
	-80,543,972.30	-256,030,245.92
profit)

Decrease of deferred income tax assets (“-”
	-23,600,218.04	-3,350,691.84
indicates increase)

Decrease of inventories (“-” indicates
	24,488,168.49	-30,413,122.55
increase)

Decrease of operational receivable items (“-”
	-482,254,618.57	-244,342,642.44
indicates increase)

Increase of operational payable items (“-”
	621,807,956.92	270,541,351.33
indicates decrease)

Others	-446,156,583.73	-296,624,143.44
Net cash flows from operating activities	1,954,433,620.84	1,831,895,928.30
2. Major investments and financing activities
	--	--
not related to cash expenditure and income:

3. Changes of cash and cash equivalent:	--	--
Ending cash balance	1,515,740,344.79	1,580,910,931.98

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Less: Cash balance at the beginning of the
	1,580,910,931.98	819,213,006.12
period

Net increase of cash and cash equivalents	-65,170,587.19	761,697,925.86

(2) Net cash paid for acquisition of subsidiaries in the current period

Unit: RMB

	Amount
Cash or cash equivalent paid in the current period for the business
	155,215,923.89
combination in the current period

Wherein:	--
Huai’an Sanqi	155,215,923.89
Less: Cash and cash equivalent held by subsidiary on purchase date	140,937.70
Wherein:	--
Huai’an Sanqi	140,937.70
Wherein:	--
Net cash paid for acquisition of the subsidiary	155,074,986.19

Other notes: None

(3) Net cash received for the disposal of subsidiaries in the current period

Unit: RMB

	Amount
Cash or cash equivalent received in current period for the disposal
	420,169,978.90
of subsidiaries in the current period

Wherein:	--
Shunrong Auto Parts	417,690,000.00
Wuji Entertainment Games Co., Ltd.	2,479,978.90
Less: Cash and cash equivalent held by subsidiary at the date of
	260,047,513.08
losing control

Wherein:	--
Shunrong Auto Parts	232,034,091.47
Wuji Entertainment Games Co., Ltd.	28,013,421.61
Wherein:	--
Net cash received for the disposal of subsidiaries	160,122,465.82

Other notes:

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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(4) Constitution of cash and cash equivalent

Unit: RMB

Item	Ending balance	Beginning balance
I. Cash	1,515,740,344.79	1,580,910,931.98
Wherein: Cash on hand	29,585.32	59,238.53
Bank deposit available for payment
	1,509,544,157.41	1,573,326,143.60
at any time

Other monetary fund available for
	6,166,602.06	7,525,549.85
payment at any time

III. Balance of cash and cash equivalents at	1,515,740,344.79	1,580,910,931.98
the end of period

Other notes:

The ending balance of cash and cash equivalents in 2018 annual cash flow statement was RMB 1,515,740,344.79. The ending balance of monetary funds on the balance sheet as of December 31st, 2018 was RMB 1,532,965,200.05. The difference of RMB 17,224,855.25 was the guarantee and frozen fund not meeting the cash and cash equivalent standard.

51. Assets with limited ownership or right of use

Unit: RMB

Item	Carrying value at the end of the period	Reason for restriction
		RMB 12,925,183.70 was the frozen fund
Monetary fund	17,224,855.26	in bank account, and RMB 4,299,671.56
		was the guarantee
		Borrowing of the Company’s subsidiaries
Other non-current assets	799,637,688.54	with the office building corresponding to
		the prepaid purchase price as the mortgage
Total	816,862,543.80	--

Other notes:

None

52. Foreign currency monetary items

(1) Monetary items in foreign currency

Unit: RMB

	Balance of foreign currency at		Balance in RMB at the end of
Item		Exchange rate
	the end of period		period

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Monetary fund	--	--
Wherein: USD	58,717,072.67	6.8632	402,987,013.15
EUR	79,895.03	7.8741	629,101.46
HKD	2,248,414.35	0.8764	1,970,510.34
KRW	425,522,955.00	0.0061	2,595,690.03
NT	7,799,117.00	0.2244	1,750,121.85
JPY	1,131,161.00	0.0625	70,697.56
THB	1,856,586.38	0.2128	395,081.58
Accounts receivable	--	--
Wherein: USD	15,479,578.51	6.8632	106,239,443.23
EUR	16,672.53	7.8741	131,281.17
HKD	38,880,089.32	0.8764	34,074,510.28
PHP	18,676,829.00	0.1311	2,448,532.28
RM	5,419,450.42	1.6609	9,001,165.20
THB	64,283,102.33	0.2128	13,679,444.18
TRY	206,472.59	1.2978	267,960.13
IDR (Indonesian
	6,246,489,120.87	0.0005	3,123,244.56
Rupiah)

VND	32,192,102,114.71	0.0003	9,657,630.63
KRW	783,163,539.00	0.0061	4,777,297.59
AUD	826,855.17	4.8310	3,994,537.33
JPY	408,755,016.97	0.0625	25,547,188.56
GBP	414.65	8.7485	3,627.57
BRL	2,511.74	1.7680	4,440.76
PLN	437.93	1.8345	803.38
CAD	6.25	5.0300	31.44
SGD	375,691.38	5.0376	1,892,582.90
INR	9,315.00	0.0988	920.32
SEK	72.80	0.7680	55.91
RUB	9,532.32	0.0981	935.12
Other receivables
Wherein: USD	640,000.00	6.8632	4,392,448.00
NT	68,500.00	0.2244	15,371.40
Accounts payable

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Wherein: NT	116,384,895.97	0.2244	26,116,770.66
USD	20,061,742.56	6.8632	137,687,751.54
EUR	7,984.30	7.8741	62,869.18
THB	28,007.57	0.2128	5,960.01
VND	4,676,607,625.40	0.0003	1,402,982.29
HKD	29,385.09	0.8764	25,753.09
JPY	1,061,811.00	0.0625	66,363.19

Other notes:

(2) Notes to overseas operational entities, including disclosures of overseas principal places of business, functional currencies and the basis of choosing the currency of important overseas operational entities, as well as the reasons for the change in functional currencies (if any).

√Applicable □Not Applicable

The Company’s wholly-owned subsidiary Vogue Entertainment International and its six subsidiaries, G-MEI Network, Wisdom Entertainment International, Wisdom Game International, Top Increase, 37 Games Company, 37 Games Entertainment Limited (hereinafter referred to as “Vogue Entertainment International”) and Easy Gaming, Inc. are mainly engaged in overseas business. Taking USD as the bookkeeping base currency can better reflect the actual situation of Vogue Entertainment International and Easy Gaming, Inc. The Company carefully considers and combines existing financial settlement conditions and future. To more accurately reflect the information of Vogue Entertainment International and Easy Gaming, Inc., the bookkeeping currency was changed from RMB to USD from January 1st, 2018. This bookkeeping currency change is accounted for using the future applicable method.

53. Government subsidies

(1) Basic information on government subsidies

Unit: RMB

			Amount included in current
Type	Amount	Presented item
			profits and losses

Governmental subsidy related to assets
	681,000.00	Deferred income

Government Subsidy Related to Income
	96,692,033.09	Other profits	96,692,033.09

(2) Return of government subsidies

□Applicable √Not Applicable

Other notes:

None

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III. Consolidation scope change

1. Business combinations not under the same control

(1) Business combination not under common control in current period

Unit: RMB

							Revenue of	Net profit of
							Acquiree	Acquiree
				Stock		Confirmation
Name of	Time point of	Equity control	Share		Purchasing		from	from
				controlling		basis on
acquiree	stock control	cost	ratio		date		purchase date	purchase date
				mode		purchase day
							to the end of	to the end of

							term	term
Huai’an Sanqi					November 30th, 2018	2018.11.30 actual handover date		4,769,618.99
	November			Cash
		155,215,923.89	60.30%
	30th, 2018			purchase

Other notes:

Pursuant to the Priority Limited Partnership Share Transfer Agreement signed between the Company and China Resources SZITIC Trust Co., Ltd. in November 2018, the follow-up supplementary agreement, and the purchase agreement signed with Guangdong Yijian Investment Co., Ltd, the Company acquired 60.30% equity of Huai’an Sanqi in cash. For the transaction price of the assets to

be purchased, refer to the book value of the identifiable net assets at the purchasing date as stipulated in the Priority Limited Partnership Share Transfer Agreement and the follow-up supplementary agreement, and the transaction price was RMB 155,215,923.89.

The Company originally held 39.70% equity of Huai’an Sanqi, and became a wholly-owned subsidiary of the Company after acquisition of 60.30% in cash.

(2) Merger cost and goodwill

Unit: RMB

Combination cost	Huai’an Sanqi
- Cash	155,215,923.89
- Fair value on the acquisition date of the equities held before the
	98,626,954.68
acquisition date

Total merger cost	253,842,878.57
Less: Proportion of fair value of identifiable net assets acquired	253,842,878.57
Amount of goodwill/ merger cost which is less than the definable
	0.00
net assets fair proportion

Recognition method for fair value on the combined costs and description of contingent consideration and its change:

For the transaction price of the assets to be purchased, refer to the book value of the identifiable net assets at the purchasing date as stipulated in the Priority Limited Partnership Share Transfer Agreement and the follow-up supplementary agreement, and it was determined by the parties to this restructuring transaction to be RMB 155,215,923.89.

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The main reasons for the large goodwill:

Not applicable Other notes: None

(3) Identifiable assets and liabilities of acquiree on the acquisition date

Unit: RMB

	Huai’an Sanqi	Huai’an Sanqi
	Fair value on purchase day	Book value on purchase day
Monetary fund	140,937.70	140,937.70
Receivables	25,875,923.89	25,875,923.89
Long-term equity investments	229,185,274.20	229,185,274.20
Accounts payable	1,359,257.22	1,359,257.22
Net asset	253,842,878.57	253,842,878.57
Net asset acquired	253,842,878.57	253,842,878.57

Recognition method for identifiable assets and fair value: Determined by book value. Contingent liabilities of the acquiree assumed in business combination:

None

Other notes: None

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2. Disposal of subsidiaries

Whether there are cases where the control over investment in subsidiary is lost in single disposal

□ Yes √ No

Unit: RMB

						Difference of
						enjoyed net						Amount of other
						asset share of						comprehensive
											Recognition methods
						the subsidiary	Proportion of	Carrying value		Profits or losses		income, related to
		Ratio of		Time					Fair value of		and main assumption
	Disposal		Disposal		Determination basis	between	remaining	of remaining		attributing to		equity investment
		disposal		point of					remaining equity		for fair value of
Name of subsidiary	price of		method		of time point of	consolidated	equity on the	equity on the		remaining equity		of original
		equity		losing					on the date of		remaining equity on
	equity		of equity		losing control	financial	date of losing	date of losing		re-measured by		subsidiary, carried
		(%)		control					losing control		the date of losing
						statements	control	control		fair values		forward to the
											control
						corresponding to						profit and loss on

						disposal price						investments
						and investment
				Novemb	The equity transfer
Shunrong Auto	819,000,		Right
		100.00%		er 30th,	procedure was	6,470,484.05					-
Parts	000.00		offering
				2018	completed

				Decemb	The equity transfer
Wuji Entertainment	6,935,70		Right								Equity transaction
		40.74%		er 31st,	procedure was	-1,117,205.48	14.16%	1,533,960.59	2,583,703.75	1,049,743.16
Games Co., Ltd.	0.00		offering								price
				2018	completed

Other notes:

None

Whether there are cases where investment in subsidiary is disposed step by step through multiple transactions and the control is lost in the current period

□ Yes √ No

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3. Merger scope change for other reasons

Notes to changes in scope of combination due to other reasons (e.g., establishment of new subsidiaries, liquidation of subsidiaries, etc.) and their related circumstances:

Company name	Cause of changes	Establishment/Change date
Anhui Wanhu	Newly-established	March 1st, 2018
Zhuhai Miaohu	Newly-established	April 26th, 2018
Zhuhai Shangjie	Newly-established	April 26th, 2018
Khorgas Mopeng	Newly-established	May 29th, 2018
Ningbo Langkun	Newly-established	July 26th, 2018
Shanghai Jiakun	Newly-established	July 17th, 2018
Guangzhou Sanqi Culture & Entertainment	Newly-established	August 9th, 2018
Anhui Zhusheng	Newly-established	October 11th, 2018
37Games.Japan Co., Ltd.	Newly-established	December 17th, 2018
Guangzhou Jisheng	Write-off	March 23rd, 2018
Guangzhou Jishi	Write-off	May 24th, 2018

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IV. Rights and interests in other parties

1. Rights and interests in subsidiary

(1) Organization of enterprise group

	Principal place of			Shareholding ratio	Shareholding ratio
Name of subsidiary		Registered address	Business nature			Acquisition method
	business			Directly	Indirectly

Level 1 subsidiary
Shanghai Sanqi Interactive
	Guangzhou	Shanghai	Software	100.00%		Business combination not under common control
Entertainment

Tibet Xintai	Tibet	Tibet	Investment	100.00%		Establishment
Guangzhou Sanqi Culture &
	Guangzhou	Guangzhou	Software	100.00%		Establishment
Entertainment

Level 2 subsidiary
Shanghai Yingtong	Guangzhou	Shanghai	Software		100.00%	Business combination not under common control
Anhui Vogue Entertainment	Guangzhou	Wuhu	Software		100.00%	Business combination not under common control
Guangzhou Sanqi	Guangzhou	Guangzhou	Software		80.00%	Business combination not under common control
	British Virgin
Vogue Entertainment International		British Virgin Islands	Software		100.00%	Business combination not under common control
	Islands

Jiangsu Aurora	Guangzhou	Huai’an	Software	20.00%	80.00%	Business combination not under common control
Guangzhou Xingzhong	Guangzhou	Guangzhou	Software		100.00%	Business combination not under common control
Shanghai Guanhang	Guangzhou	Shanghai	Software		100.00%	Business combination not under common control
Anhui Jiashang	Guangzhou	Wuhu	Software		100.00%	Business combination not under common control
Easy Gaming, Inc.	United States	United States	Software		100.00%	Business combination not under common control

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Khorgas Sanqi	Xinjiang	Xinjiang	Investment	100.00%	Establishment
Level 3 subsidiary
Shanghai Zhiren	Guangzhou	Shanghai	Software	100.00%	Business combination not under common control
Zhuhai Shangjie	Zhuhai	Zhuhai	Software	100.00%	Establishment
G-MEI Network	Taiwan	British Virgin Islands	Software	100.00%	Business combination not under common control
	British Virgin
Top Increase		British Virgin Islands	Software	100.00%	Business combination not under common control
	Islands

Shanghai Mobile Game	Guangzhou	Shanghai	Software	80.00%	Business combination not under common control
Chengdu Shengge Times Network
	Chengdu	Chengdu	Software	80.00%	Business combination not under common control
Technology Co., Ltd.

Beijing Shangheng	Guangzhou	Beijing	Software	80.00%	Business combination not under common control
Jiangsu Jiaqu	Guangzhou	Huai’an	Software	80.00%	Business combination not under common control
Guangzhou Huoshanhu	Guangzhou	Guangzhou	Software	80.00%	Establishment
Anhui Sanqi	Guangzhou	Wuhu	Software	80.00%	Establishment
Anhui Wanhu	Guangzhou	Wuhu	Software	80.00%	Establishment
Zhuhai Miaohu	Zhuhai	Zhuhai	Software	80.00%	Establishment
Guangzhou Sanqi Interactive
	Guangzhou	Guangzhou	Software	100.00%	Establishment
Entertainment

Anhui Aurora	Guangzhou	Wuhu	Software	100.00%	Establishment
Guangzhou Jisheng	Guangzhou	Guangzhou	Software	100.00%	Establishment
Anhui Xuhong	Guangzhou	Wuhu	Advertising	100.00%	Establishment
Anhui Guanyu	Guangzhou	Wuhu	Advertising	100.00%	Business combination not under common control
Anhui Zhusheng	Guangzhou	Wuhu	Software	100.00%	Establishment

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Level 4 subsidiary
Tibet Taifu	Tibet	Tibet	Software		100.00%	Business combination not under common control
			Software and
Khorgas Xinghui	Xinjiang	Xinjiang	Information		100.00%	Establishment
			Technology Service
Jiangsu Zhiming	Guangzhou	Huai’an	Software	49.00%	51.00%	Business combination not under common control
37Games Entertainment Co., Ltd.	Hong Kong	Hong Kong	Software		100.00%	Business combination not under common control
	British Virgin
Wisdom Game International		British Virgin Islands	Software		100.00%	Business combination not under common control
	Islands

Wisdom Entertainment International	Hong Kong	Hong Kong	Software		100.00%	Business combination not under common control
37 Games Company	South Korea	South Korea	Software		100.00%	Business combination not under common control
			Software and
Khorgos Xinrui	Xinjiang	Xinjiang	Information		80.00%	Establishment
			Technology Service
Level 5 subsidiary
Tibet Yaotong	Guangzhou	Tibet	Software		100.00%	Establishment
Tibet Shengge	Guangzhou	Tibet	Software		100.00%	Establishment
Shanghai Mokun	Shanghai	Shanghai	Software		100.00%	Combination not under the same control
			Business services
Huai’an Sanqi	Huai’an	Huai’an			100.00%	Business combination not under common control
			industry

			Software and
Khorgas Qianyu	Xinjiang	Xinjiang	Information		100.00%	Establishment
			Technology Service
37Games.Japan Co., Ltd.	Japan	Japan	Software		100.00%	Establishment

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Level 6 subsidiary
Shanghai Langkun	Shanghai	Shanghai	Software	76.50%	Business combination not under common control
Shanghai Miji	Shanghai	Shanghai	Software	100.00%	Business combination not under common control
Shanghai Kunkun	Shanghai	Shanghai	Software	100.00%	Business combination not under common control
Shanghai Aojue	Shanghai	Shanghai	Software	100.00%	Business combination not under common control
Khorgas Mopeng	Xinjiang	Xinjiang	Software	100.00%	Establishment
Level 7 subsidiary
Khorgas Jiaji	Xinjiang	Xinjiang	Software	76.50%	Business combination not under common control
Shanghai Jiakun	Shanghai	Shanghai	Software	76.50%	Establishment
Ningbo Langkun	Xinjiang	Xinjiang	Software	76.50%	Establishment

The shareholding ratio in the subsidiary is different from the percentage of the voting rights:

Not applicable

Basis for a company to control the invested organization with half or less than half of voting rights and a company not to control the invested organization with more than half of voting rights: Not applicable

For important structured entities that are included in the scope of consolidation, the basis for control:

Not applicable

Basis for determining whether the company is an agent or a client:

Not applicable

Other notes:

None

(2) Key no-wholly owned subsidiaries

Unit: RMB

Name of subsidiary Shareholding ratio of Profit and loss belonging to minority Dividend declared to be distributed to minority Balance of minority equity at the end of period

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	minority shareholders	shareholder of the current period	shareholder of the current period
Guangzhou Sanqi	20.00%	133,337,736.30	90,000,000.00	147,368,592.82

Notes to shareholding ratio of minority shareholders of subsidiaries which is different from the percentage of the voting rights:

Not applicable

Other notes:

None

(3) Main financial information of key non-wholly owned subsidiaries

Unit: RMB

Name		Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance
of
		Non-current					Non-current				Non-current assets				Current		Non-current
subsidi	Current assets		Total assets		Current liabilities				Total liabilities	Current assets			Total assets					Total liabilities
		assets					liabilities								liabilities		liabilities
ary


Guang
zhou	2,156,907,783.27	127,801,334.17	2,284,709,117.44		1,516,725,501.90		31,140,651.44		1,547,866,153.34	1,043,430,956.42	115,896,348.84		1,159,327,305.26		531,531,578.14		34,416,645.44	565,948,223.58
Sanqi

Name of subsidiary			Amount incurred in the current period								Amount incurred in the previous period
								Cash flows from						Total consolidated		Cash flows from operating
		Operating incomes		Net profit		Total consolidated income				Operating income		Net profit
								operating activities						income		activities

Guangzhou Sanqi		3,593,993,326.91		666,688,681.51		666,688,681.51		1,464,777,160.65		2,098,517,906.50		470,530,214.76		470,530,214.76		863,880,248.47

Other notes:

None

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2. Change of owner’s equity share in subsidiaries and the business of subsidiaries still under control

(1) Notes on change of owner’s equity share in subsidiaries

Name of subsidiary	Change time	Shareholding ratio before change	Shareholding ratio after change
Jiangsu Aurora	February 2018	80.00%	100.00%
Guangzhou Huoshanhu	June 2018	85.00%	80.00%
Anhui Sanqi	June 2018	100.00%	80.00%

(2) Effect of the transaction on minority interests and attributable to owners' equity of the parent company

Unit: RMB

	Jiangsu Aurora	Anhui Sanqi	Guangzhou Huoshanhu
- Cash	1,400,000,000.00		150,000.00
Total of purchase cost/ disposal
	1,400,000,000.00		150,000.00
consideration

Less: Subsidiaries’ share of net
assets calculated based on share	151,879,433.66	-5,028,053.57	-1,756,284.13
of equity received/disposed.
Balance	1,248,120,566.34	5,028,053.57	1,906,284.13
Wherein: Capital reserves
	1,248,120,566.34	5,028,053.57	1,906,284.13
adjustment

Other notes

(1) In the current year, the Company acquired 20% equity of Jiangsu Aurora from Hu Yuhang by paying cash of RMB 1.4 billion, and completed the procedures for industrial and commercial change on February 7th, 2018. According to the Evaluation Report on the Shareholders’ Equity Assets of Jiangsu Aurora Network Technology Co., Ltd. Involved in the Equities Acquisition by Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. (L.X.(Z.)P.B.Z. [2017] No. A0553) issued by Guangdong Union Trust Evaluation Co., Ltd., the assessed value of Jiangsu Aurora’s total shareholders’ equity was RMB 7,004,652,200, and the consideration price agreed by the parties to the transaction was RMV 1.4 billion.

(2) In June 2018, the Company acquired 15% of Guangzhou Huoshanhu’s equity from Wang Ziqiang by paying cash of RMB 150,000.00, and completed the procedures for industrial and commercial changes on July 18th, 2018.

In June 2018, the Company transferred 100% equity of Guangzhou Huoshanhu and Anhui Sanqi to Guangzhou Sanqi Network Technology Co., Ltd., one of its holding subsidiaries. After the transfer, the Company indirectly held 80% equity of Guangzhou Huoshanhu Information Technology Co., Ltd. and Anhui Sanqi Network Technology Co., Ltd. Guangzhou Huoshanhu Information Technology Co., Ltd. completed the procedures for industrial and commercial changes on July 18th, 2018, and Anhui Sanqi Network Technology Co., Ltd. completed the procedures for industrial and commercial changes on August 3rd, 2018.

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3. Equity in jointly operated arrangements or joint ventures

(1) Key joint ventures or associates

				Shareholding ratio	Shareholding ratio	Accounting treatment
Names of joint ventures or associated	Principal place	Registered	Business			methods of joint
enterprises	of business	address	nature	Directly	Indirectly	ventures or associated
						enterprises
Yangzhou Fuhai Sanqi Internet Cultural
	Yangzhou	Yangzhou	Investment		25.46%	Equity method
Investment Center (Limited Partnership)

Mango (Xiamen) Creative Incubation Equity
Investment Fund Partnership (Limited	Xiamen	Xiamen	Investment		31.75%	Equity method
Partnership)
Shanghai Fenghua Qiushi Culture Media Co.,
	Shanghai	Shanghai	Investment		20.00%	Equity method
Ltd.

New Cues (Beijing) Television Investment
	Beijing	Beijing	Investment		20.00%	Equity method
Co., Ltd.

The shareholding ratio in the joint ventures or associates is different from the percentage of the voting rights:

Not applicable

Evidence of voting right below 20% but significant, or voting right over 20% but not significant:

Not applicable

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(2) Main financial information on key associated enterprises

Unit: RMB

	Ending balance/Amount incurred in the current period	Ending balance/Amount incurred in the current period	Ending balance/Amount incurred in the current period	Ending balance/Amount incurred in the current period	Opening balance/Amount incurred in previous period	Opening balance/Amount incurred in previous period	Opening balance/Amount incurred in previous period
						Huai’an Sanqi
		Mango (Xiamen) Creative			Yangzhou Fuhai
	Yangzhou Fuhai Sanqi		Shanghai	New Cues		Yijian	Mango (Xiamen) Creative
		Incubation Equity			Sanqi Internet
	Internet Cultural		Fenghua Qiushi	(Beijing) Television		Pan-Entertainment	Incubation Equity Investment
		Investment Fund			Cultural Investment
	Investment Center		Culture Media	Investment Co.,		Asset Management	Fund Partnership (Limited
		Partnership (Limited			Center (Limited
	(Limited Partnership)		Co., Ltd.	Ltd.		Center (Limited	Partnership)
		Partnership)			Partnership)
						Partnership)

Current assets	59,887,123.89	96,865,384.60	88,732,285.69	174,005,448.14	72,887,128.32	2,530,160.27	116,887,443.92
Non-current assets	139,000,000.00	26,500,000.00	41,926,172.74	17,240,844.95	37,750,000.00	233,574,085.99	9,300,000.00
Total assets	198,887,123.89	123,365,384.60	130,658,458.43	191,246,293.09	110,637,128.32	236,104,246.26	126,187,443.92
Current liabilities			35,247,574.35	142,418,605.58			4,465,358.22
Total liabilities			35,247,574.35	142,418,605.58			4,465,358.22
Total shareholders’ equity attributed
	198,887,123.89	123,365,384.60	95,410,884.08	48,827,687.51	110,637,128.32	236,104,246.26	121,722,085.70
to parent company

Share of net assets calculated at
	48,136,104.35	39,163,509.62	19,082,176.82	9,765,537.50	50,000,000.00	101,677,840.80	38,646,762.21
shareholding ratio

- Goodwill			113,596,170.58	91,519,923.84
Book value of equity investment on
	48,136,104.35	39,163,509.62	132,678,347.40	101,285,461.34	50,000,000.00	101,677,840.80	38,646,762.21
associates

Operating income			22,850,573.32	9,309,366.03
Net profit	-7,680,004.43	1,628,080.84	17,073,944.37	5,994,031.50	137,128.32	11,067,234.25	-4,262,166.26
Total consolidated income	-7,680,004.43	1,628,080.84	17,073,944.37	5,994,031.50	137,128.32	11,067,234.25	-4,262,166.26

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Dividend from associated
enterprises received in the current							8,769,681.68
year

Other notes

None

(3) Financial information summary on less important joint ventures and associated enterprises

Unit: RMB

	Ending balance/Amount incurred in the current period	Opening balance/Amount incurred in previous period
Joint ventures:	--	--
Totals of the following items calculated as per respective
	--	--
shareholding proportion

Affiliated enterprises:	--	--
Total investment book value	229,338,591.28	186,648,229.07
Totals of the following items calculated as per respective
	--	--
shareholding proportion

- Net profit	4,099,680.58	-10,183,932.08
- Total consolidated income	4,099,680.58	-10,183,932.08

Other notes

Except for Yangzhou Fuhai Sanqi Internet Cultural Investment Center (Limited Partnership), Mango (Xiamen) Creative Incubation Equity Investment Fund Partnership (Limited Partnership), Shanghai Fenghua Qiushi Culture Media Co., Ltd. and New Cues (Beijing) Television Investment Co., Ltd., other associates are of slight importance.

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(4) Excess deficit in joint ventures or associated enterprises

	Unit: RMB Accumulated unconfirmed losses recognized in the previous period Unconfirmed loss of the current period (or shared net profits of the current period) Accumulated unconfirmed loss at the end of the period -5,201,916.08 -2,704,711.45 -7,906,627.53	Unit: RMB Accumulated unconfirmed losses recognized in the previous period Unconfirmed loss of the current period (or shared net profits of the current period) Accumulated unconfirmed loss at the end of the period -5,201,916.08 -2,704,711.45 -7,906,627.53	Unit: RMB Accumulated unconfirmed losses recognized in the previous period Unconfirmed loss of the current period (or shared net profits of the current period) Accumulated unconfirmed loss at the end of the period -5,201,916.08 -2,704,711.45 -7,906,627.53
	Accumulated unconfirmed	Unconfirmed loss of the current
Names of joint ventures or			Accumulated unconfirmed loss
	losses recognized in the	period (or shared net profits of
associated enterprises			at the end of the period
	previous period	the current period)

Longzhang Animation
	-5,201,916.08	-2,704,711.45	-7,906,627.53
(Shanghai) Co., Ltd.

Other notes

None

V. Risk associated with financial instruments

The target of risk management by the Group is to balance risk and profit, and minimize the negative influence of risk on the Company's operation performance, and maximize the profit of shareholder and other equity investors. Base on this risk management target, the fundamental strategy of the Company's risk management is to identify and analyze various risks in the Company, establish appropriate risk tolerance baseline, manage risks, and to supervise all risks promptly and reliably so as to control risk in limited scope.

The various risks related to financial instruments Company faces in its daily activities mainly include credit risk, liquidity risk and market risk. The policy that has been examined and authorized by the management to manage the risks is summarized as follows. (I) Risks of credit Credit risk refers to the possibility of financial loss borne by one party caused by the failure to performance obligation by another party of the financial instrument.

The Company's credit risk is mainly derived from bank deposits and receivables. To control the above-mentioned relevant risks, the Company adopts the following measures.

Bank deposit The Company deposits bank deposits in financial institutions with higher credit ratings, so its credit risk is lower. 2. Receivables

The Company regularly conducts credit evaluations for customers who use credit-based transactions. Based on the results of the credit evaluation, the Company chooses to conduct transactions with recognized customers of good credit, and monitors the balance of its receivables to avoid significant risks of bad debts. As the Company's risk points of accounts receivable are distributed among multiple partners and customers, as of December 31st, 2018, 61.82% of the Company’s accounts receivable (December 31st, 2017: 51.36%) was from the top five balance customers. The company does not have significant credit concentration risks. (II) Liquidity risk Liquidity risk refers to the risk of a shortage of funds when the Company is required to settle its obligations in the form of cash or other financial assets. The liquidity risk may result from the inability to sell financial assets at fair value as soon as possible; or from the inability of the other party to repay their contractual debts; or from debts that are due in advance; or from the inability to generate expected cash flows.

The Company’s current financial assets can meet working capital needs and capital expenditures, so it does not assume significant liquidity risks.

(III) Market risk

Market risk refers to the possibility of fluctuation in the fair value of financial instruments or future cash flow caused by market price change. Market risk includes interest rate risk and foreign exchange risk.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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1. Interest rate risk

Interest rate risk refers to the possibility of fluctuation in the fair value of financial instruments/future cash flow caused by market interest rate change. The Company does not have the risk of changes in market interest rates.

2. Foreign currency risk

Exchange rate risk refers to the possibility of fluctuation of the fair value of financial instruments or future cash flows due to changes in foreign exchange rates. The exchange rate risk of the company mainly related to monetary assets and debts of foreign currency. The main business place of the Company is in Mainland China and the main activities is calculated in RMB. Therefore, the market risk of foreign exchange changes tolerated by the Company is not significant.

The ending foreign currency monetary assets and liabilities of the Company can be found in the description of foreign currency monetary items under Item Notes to Consolidated Financial Statement in the notes to the financial statements.

VI. Disclosure of fair value

1. Ending fair value of assets and liabilities measured at fair value

Unit: RMB

	Ending	Ending	fair value
Item	Level I measurement of	Level II measurement of	Level III measurement of
				Total
	fair value	fair value	fair value

I. Continuous fair value
	--	--	--	--
measurements

(II) Available-for-sale
	71,141,826.11			71,141,826.11
financial assets

(2) Equity instrument
	71,141,826.11			71,141,826.11
investment

II. Non-continuous
	--	--	--	--
measurement of fair value

(I) Assets held-for-sale	7,536,816.46			7,536,816.46

2. Determining basis for the market price of continuous and non-continuous first-level fair value-measured project

The fair value of available-for-sale financial assets and hold-for-sale is determined based on the open market value.

VII. Related parties and related transaction

1. Information of the Company's parent company

					Percentage of the
				Shareholding ratio of
Name of parent					Company's vote
	Registered address	Business nature	Registered capital	the parent company
company					rights held by the
				against the Company
					parent company

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Description of the information of the Company's parent company

Final controllers of the Company are Wu Xushun, Wu Weihong and Wu Weidong.

Other notes:

Actual controller of the Company

Name of affiliated parties	Percent of stocks of the Company (%)	The percent of voting share of the Company (%)
Wu Xushun	7.89	7.89
Wu Weihong	6.99	6.99
Wu Weidong	6.16	6.16

Wu Xushun is in father-daughter relation with Wu Weihong, and father-son relation with Wu Weidong. The above three shareholders held a total of 21.04% of the Company's shares.

2. Information of the Company's subsidiaries

Details of the subsidiaries of the company are shown in Note IX: Rights and Interests in Other Bodies.

3. Affiliates and joint ventures of the Company

For the important joint ventures or affiliated enterprises of the Company, please refer to Notes IX: Rights and Interests in Other Entities.

Details on other joint ventures or associated enterprises with balance from related party transactions with the Company this period or earlier are as follows:

Names of joint ventures or associated enterprises	Relation with the Company
Shenzhen Yiwan Network Technology Co., Ltd.	An associated enterprise of the Company
Chengdu Pengwan Technology Co., Ltd.	An associated enterprise of the Company
Shanghai Tingting Network Technology Co., Ltd.	An associated enterprise of the Company
Chengdu Mofei Technology Co., Ltd.	An associated enterprise of the Company
Longzhang Animation (Shanghai) Co., Ltd.	An associated enterprise of the Company
Chengdu Modu Technology Co., Ltd.	An associated enterprise of the Company
Shenzhen Zhanlong Interactive Entertainment Technology Co., Ltd.	An associated enterprise of the Company
Longzhang Network Technology (Shanghai) Co., Ltd.	An associated enterprise of the Company
Shaoxing Shangyu Zhangyu Network Technology Co., Ltd.	An associated enterprise of the Company
Shanghai Yuhouyi Network Technology Co., Ltd.	An associated enterprise of the Company
Shanghai Fuhai Sanqi Investment Management Co., Ltd.	An associated enterprise of the Company
Chengdu Popcorn Interactive Entertainment Technology Co., Ltd.	An associated enterprise of the Company
Jiangsu Yezi Network Technology Co., Ltd.	An associated enterprise of the Company
Shanghai Aoting Network Technology Co., Ltd.	An associated enterprise of the Company
Shanghai Aurora Network Technology Co., Ltd.	An associate of the Company before March 31st, 2017
Shanghai Mokun	An associate of the Company before May 31st, 2017, and a subsidiary of

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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the Company after May 31st, 2017. An associate of the Company before November 30th, 2018, and a Huai’an Sanqi subsidiary of the Company after November 30th, 2018.

Other notes

The Company disposed of the joint venture Shanghai Aurora Network Technology Co., Ltd. on March 31st, 2017, and disclosed amount of the related party transaction with it in the previous period from January to March 2017.
The Company completed the overall acquisition of Shanghai Mokun on May 31st, 2017, and disclosed amount of the related party transaction with it in the previous period from January to May 2017.

4. Other affiliated parties

Names of other related parties	Relationship between other affiliated parties and the Company
	A related person for the past 12 months ended January 31st, 2018, (Vice
Shenzhen Mokylin Technology Co., Ltd.	Chairman and General Manager of the Company and a director of this
	company)
	A related person (Deputy General Manager of the Company and a director
Beijing Colorful Game Technology Co., Ltd.
	of this company)

	A related person (a director and Deputy General Manager of the
Shenzhen QiFun Network Corp. Ltd.
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
Guangzhou Joyegame Software Co., Ltd.
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
Chengdu 91ACT Technology Company
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
Xiamen Huoyou Information Technology Co., Ltd.
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
Shanghai Zhangmeng Network Technology Co., Ltd.
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
Shanghai Mango Interactive Entertainment Technology Co., Ltd.
	Company, and a director of this company)

	A related person (a director and Deputy General Manager of the
YHKT Entertainment Co., Ltd.
	Company, and a director of this company)

	A company under of the controlling shareholders before November 13th,
Wuhu Ningzhong Auto Parts Technology Co., Ltd.
	2018

	Natural person who holds more than 5% of the shares of a listed company,
Li Weiwei
	Vice Chairman and General Manager

Zeng Kaitian	Natural person who holds more than 5% of the shares of a listed company

Other notes

Vice Chairman and General Manager of the Company, and a director of Shenzhen Mokylin Technology Co., Ltd. before January 31st, 2017, that is, a related person of this company for the past 12 months ended January 31st, 2018. During the reporting period, the related party transaction with it disclosed was the amount incurred in January 2018.

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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5. Status of associated transaction

(1) Associated transaction regarding trade of goods and labor services

Profile on purchasing products and obtaining labor services

Unit: RMB

		Amount incurred in	Approved transaction	Whether it exceeds the	Amount incurred in the previous
Related party	Details of transaction between related parties
		the current period	amount	transaction amount	period

Shenzhen Yiwan Network	Shared revenue from games, copyright money
		194,977.48	400,000.00	No	212,164.40
Technology Co., Ltd.	purchasing and commissioned R&D fees

Chengdu Pengwan	Shared revenue from games and commissioned R&D
		6,482,280.85	40,127,600.00	No	26,751,740.93
Technology Co., Ltd.	fees

Shanghai Aurora Network	Shared revenue from games, copyright money
				No	11,932,597.82
Technology Co., Ltd.	purchasing

Shanghai Tingting Network	Shared revenue from games and commissioned R&D
		300,592.09	300,400.00	Yes	7,495,417.36
Technology Co., Ltd.	fees

Shenzhen Mokylin	Shared revenue from games and commissioned R&D
		155,553.92	500,000.00	No	5,490,077.96
Technology Co., Ltd.	fees

	Shared revenue from games, copyright money
Shanghai Mokun				No	1,051,125.60
	purchasing

Chengdu Mofei	Shared revenue from games, copyright money
		36,644,866.42	38,500,000.00	No	157,157.40
Technology Co., Ltd.	purchasing

Beijing Colorful Game
	Shared revenue from games	674,552.81	5,715,000.00	No	952,493.00
Technology Co., Ltd.

Shenzhen QiFun Network	Shared revenue from games, copyright money
		45,803.04	10,000,000.00	No	121,757.67
Corp. Ltd.	purchasing

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Guangzhou Joyegame	Shared revenue from games and commissioned R&D
				No	8,279.46
Software Co., Ltd.	fees

Chengdu 91ACT
	Shared revenue from games		10,000,000.00	No	255,657.80
Technology Company

Longzhang Animation	Shared revenue from games, copyright money
		6,202,792.26	49,700,000.00	No	514,216.26
(Shanghai) Co., Ltd.	purchasing

Xiamen Huoyou
Information Technology	Shared revenue from games	432,497.68	500,000.00	No
Co., Ltd.
Shanghai Zhangmeng
Network Technology Co.,	Shared revenue from games	433,686.77		Yes
Ltd.
Chengdu Modu	Shared revenue from games and commissioned R&D
		1,794,731.88	6,000,000.00	No
Technology Co., Ltd.	fees

Shenzhen Zhanlong
Interactive Entertainment	Shared revenue from games	2,707,232.67	2,000,000.00	Yes
Technology Co., Ltd.
Longzhang Network
Technology (Shanghai)	Commissioned R&D expense	546,721.82		Yes
Co., Ltd.
Shanghai Mango
	Shared revenue from games and fees for new product
Interactive Entertainment		895,684.27	6,342,800.00	No	4,228,519.65
	design
Technology Co., Ltd.

Shaoxing Shangyu
Zhangyu Network	Shared revenue from games	76,623.87	112,000,000.00	No
Technology Co., Ltd.

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Shanghai Aoting Network
	Shared revenue from games	No	38,453.71
Technology Co., Ltd.

Profile on selling products/providing labor services

Unit: RMB

			Amount incurred in the previous
Related party	Details of transaction between related parties	Amount incurred in the current period
			period

Shanghai Yuhouyi Network Technology Co., Ltd.	Software operating income	18,624,476.80	5,545,397.18
Shanghai Mango Interactive Entertainment Technology
	Software operating income	20,037.16	840,274.48
Co., Ltd.

Shenzhen Mokylin Technology Co., Ltd.	Income from evaluation service, technical service fees		473,057.78
Beijing Colorful Game Technology Co., Ltd.	Software operating income	5,557.51	12,466.87
Shanghai Fuhai Sanqi Investment Management Co., Ltd.	Service consultation income	1,870,000.00

Note to related party transactions for the purchase and sale of goods, provision and acceptance of labor services

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(2) Affiliated-party guarantee

The company acts as the guarantor

Unit: RMB

				Has the guarantee been
The guaranteed	Amount of guarantee	Starting date of guarantee	Ending date of guarantee
				fulfilled?

The company acts as the guaranteed

Unit: RMB

				Has the guarantee been
Guarantor	Amount of guarantee	Starting date of guarantee	Ending date of guarantee
				fulfilled?

Li Weiwei, Zeng Kaitian	210,000,000.00	May 23rd, 2017	May 22nd, 2018	Yes
Li Weiwei, Zeng Kaitian	90,000,000.00	May 24th, 2017	May 22nd, 2018	Yes
Li Weiwei, Zeng Kaitian	69,000,000.00	June 9th, 2017	June 8th, 2018	Yes
Li Weiwei, Zeng Kaitian	80,000,000.00	January 30th, 2018	November 16th, 2018	Yes
Li Weiwei, Zeng Kaitian	200,000,000.00	February 28th, 2018	November 16th, 2018	Yes
Li Weiwei, Zeng Kaitian	210,000,000.00	June 22nd, 2018	June 21st, 2019	No
Li Weiwei, Zeng Kaitian	159,000,000.00	June 25th, 2018	June 21st, 2019	No

Status of associated guarantee

(3) Asset transfer and debt restructuring of affiliated party

Unit: RMB

	Details of transaction between	Amount incurred in the current	Amount incurred in the
Related party
	related parties	period	previous period

Wuhu Ningzhong Auto Parts
	Disposal of equity	819,000,000.00
Technology Co., Ltd.

(4) Remuneration for key management personnel

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Remuneration for key management
	17,574,216.02	14,575,079.96
personnel

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6. Accounts receivable and payable by related parties

(1) Receivables

Unit: RMB

		Ending balance	Ending balance	Beginning balance	Beginning balance
Project name	Related party
		Book balance	Provision for bad debts	Book balance	Provision for bad debts

Accounts receivable	Shanghai Yuhouyi Network Technology Co., Ltd.	2,091,604.00	104,580.20	5,473,326.88	273,666.34
	Shanghai Mango Interactive Entertainment
Accounts receivable				141,403.60	7,070.18
	Technology Co., Ltd.

Accounts receivable	Beijing Colorful Game Technology Co., Ltd.	370.22	18.51	13,214.88	660.74
Prepayment	Chengdu Modu Technology Co., Ltd.			1,000,000.00
Prepayment	Chengdu Mofei Technology Co., Ltd.	2,000,000.00		842,842.60
Prepayment	Longzhang Animation (Shanghai) Co., Ltd.			14,485,783.74
	Longzhang Network Technology (Shanghai) Co.,
Prepayment		2,061,081.07		1,982,010.00
	Ltd.

Prepayment	Shenzhen QiFun Network Corp. Ltd.	2,264,856.00		1,978,994.10
Prepayment	Chengdu 91ACT Technology Company			1,450,617.07
	Chengdu Popcorn Interactive Entertainment
Prepayment		1,000,000.00
	Technology Co., Ltd.

	Shenzhen Zhanlong Interactive Entertainment
Prepayment		650,147.37
	Technology Co., Ltd.

Prepayment	Jiangsu Yezi Network Technology Co., Ltd.	3,000,000.00
Prepayment	Shenzhen Yiwan Network Technology Co., Ltd.	2,193,140.33		1,757,963.61

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Other receivables Wuhu Ningzhong Auto Parts Technology Co., Ltd. 401,310,000.00

(2) Payables

Unit: RMB

Project name	Related party	Ending book value	Opening book balance
Accounts payable	Chengdu Mofei Technology Co., Ltd.	11,483,657.92
Accounts payable	Chengdu Modu Technology Co., Ltd.	1,794,731.88
Accounts payable	Chengdu Popcorn Interactive Entertainment Technology Co., Ltd.	175,699.90
Accounts payable	Shanghai Zhangmeng Network Technology Co., Ltd.	1,941,996.00
Accounts payable	Chengdu Pengwan Technology Co., Ltd.	311,961.83	11,622,401.24
Accounts payable	Guangzhou Joyegame Software Co., Ltd.		3,951.38
Accounts payable	Shenzhen Mokylin Technology Co., Ltd.		14,717,281.13
Accounts payable	Shaoxing Shangyu Zhangyu Network Technology Co., Ltd.	33,370.33
Accounts payable	Shanghai Mango Interactive Entertainment Technology Co., Ltd.	490,418.65	346,198.97
Accounts payable	Beijing Colorful Game Technology Co., Ltd.	1,512,769.27	1,138,598.90
Accounts payable	Shanghai Aoting Network Technology Co., Ltd.	7,360.48	7,360.48
Accounts payable	Shanghai Tingting Network Technology Co., Ltd.	299,979.17	727,664.83
Accounts payable	Shenzhen Yiwan Network Technology Co., Ltd.	339,622.58
Other payables	Chengdu Modu Technology Co., Ltd.		6,000,000.00
Other payables	Chengdu Mofei Technology Co., Ltd.		6,000,000.00
Other payables	Huai’an Sanqi		19,032,685.81
Other payables	YHKT Entertainment Co., Ltd.		2,000,000.00

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Other payables Xiamen Huoyou Information Technology Co., Ltd. 5,000,000.00

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VIII. Share-based payment

1. Overview of share payment

□Applicable √Not Applicable

IX. Commitment and contingencies

1. Material commitments

The existence of material commitments at the balance sheet date

As of December 31st, 2018, the Company had no major commitments needed to be disclosed for normal production and business activities.

2. Contingencies

(1) The existence of material contingencies at the balance sheet date

As of December 31st, 2018, the Company had no major contingencies needed to be disclosed for normal production and business activities.

(2) The fact that the Company has no significant contingencies required to be disclosed should also be explained

The Company does not have material commitments or contingencies that need to be disclosed.

3. Others

X. Events after the Balance Sheet Date

1. Profit distribution

	Unit: RMB 423,246,120.00 423,246,120.00
Proposed distributed profits or dividends	423,246,120.00
Profits or dividends that are approved to be issued after deliberation	423,246,120.00

2. Description of events after the balance sheet date

The Company held the 23rd meeting of the 4th Board of Directors on January 3rd, 2019 and the first Extraordinary General Meeting of 2019 on January 21st, 2019, at which the Plan for Repurchasing Shares of the Company by Centralized Competitive Bidding was reviewed and approved. The Company held the 24th meeting of the 4th Board of Directors on January 21st, 2019, at which the Proposal on Amending and Supplementing the “Plan for Repurchasing Shares of the Company by Centralized Competitive Bidding” was reviewed and approved. The Company intends to use its own funds or self-raised funds to concentrate buy back shares of the Company by centralized competitive bidding. The repurchase amount is not less than RMB 300 million (included) and not

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more than RMB 600 million (included), with the repurchase price not exceeding 15.00 yuan / share (included). The specific repurchase quantity is based on the number of shares actually repurchased at the end of the repurchase period. On April 11th, 2019, the Company repurchased shares through a stock repurchase special securities account for the first time by centralized competitive bidding. A total of 8,639,653 shares were repurchased, accounting for 0.41% of the Company’s current total share capital, with highest price of 13.73 yuan / share and the lowest price of 13.13 yuan / share. The total amount paid was RMB 116,113,041.13 (excluding transaction costs). This repurchase was in line with the requirements of the Company’s repurchase program.

On February 28th, 2019, the Company’s wholly-owned subsidiary Tibet Taifu Culture Media Co., Ltd. (hereinafter referred to as “Tibet Taifu”) and Beijing Zhaoxi Guangnian Information Technology Co., Ltd. (hereinafter referred to as “Zhaoxi Guangnian Company”) signed the Equity Transfer Agreement of Shanghai Mokun Digital Technology Co., Ltd., under which it sold 100% equity of Shanghai Mokun Digital Technology Co., Ltd. held by Tibet Taifu to Zhaoxi Guangnian Company at a price of RMB 110 million. The procedures for the industrial and commercial change have been completed for this transaction.

On March 13th, 2019, the Company received a notice from Wu Xushun, one of the controlling shareholders and actual controllers of the Company. Wu Xushun subscribed offline the shares of Yinhua MSCI China A-Share Index Exchange-Traded Open-Ended Securities Investment Fund (hereinafter referred to as “Yinhua MSCI China ETF), and directly purchased Yinhua MSCI China ETF shares with 21,200,000 shares, to subscribe for the fund share corresponding to the value of 21,200,000 shares. After the completion of the share swap, Wu Xushun’s shareholding ratio decreased to 5.12%, so the total shareholding ratio of Wu Xushun, the original largest shareholder, and his persons acting in concert Wu Weihong and Wu Weidong (hereinafter referred to as “Wu Family”) fell to 18.27%, resulting in a change in the Company’s largest shareholder from Wu Family to Li Weiwei.

On April 8th, 2019, the Company held the 3rd Extraordinary General Meeting of 2019, at which the Proposal on Advancing the General Election of Non-independent Directors for the Fifth Board of Directors and the Proposal on Advancing the General Election of Independent Directors for the Fifth Board of Directors were reviewed and approved. The Company officially completed the general election of the Board of Directors, and the Fifth Board of Directors was formed. Li Weiwei, Yang Jun and Chen Xialin, who were recommended by Li Weiwei for non-independent directors, were elected. Candidates Ni Ning, Zhu Ning, Yin Bin and Chen Jianlin for independent directors were elected. Seven members of the Company’s Fifth Board of Directors were recommended by Li Weiwei. Based on the above facts, the voting rights held by Li Weiwei have had a material influence on the resolution of the Company’s 3rd Extraordinary General Meeting of 2019, and played a decisive role in electing more than half of the members of the Company’s Board of Directors through this meeting, effectively controlling the majority of the new board of directors, that is owning the controlling right of a listed company as specified in provisions of the Listing Rules. After the reelection, Li Weiwei became the controlling shareholder and actual controller of the Company.

The Company held the 26[th] Meeting of the 4[th] Board of Directors on March 18th, 2019, at which the Proposal on Changing the Name of the Company was reviewed and approved. The Company plans to change its Chinese name from “芜湖顺荣三七互娱网络科技股份有限公司” to “芜湖三七互娱网络科技集团股份有限公司”. (The final company name is subject to the approval of the Administration for Industry and Commerce).

XI. Other Important Events

1. Discontinued operation

Unit: RMB

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						Discontinued operating profit
Item	Income	Fees	Total profit	Income taxes	Net profit	attributable to the owner of
						parent company
Shunrong
	385,219,167.92	386,251,651.91	443,643.42	-814,778.26	1,258,421.68	1,258,421.68
Auto Parts

Other notes

The expenses are the operating costs, taxes and surcharges and current operating expenses for the January to November of the year.

2. Segment information

(1) Basis for determining reportable divisions and accounting policies

The Company determines the reporting segment based on internal organizational structure, management requirement and internal reporting system, and determines the reporting segment based on the industry segment. The performance of the auto parts business and the online game business were assessed separately. Each segment uses assets and liabilities separately.

(2) Financial information of reportable divisions

Unit: RMB

	Automotive Parts	Online Games Business
Item			Offset among segments	Total
	Business Division	Division

Operating income	385,219,167.92	7,247,460,500.55		7,632,679,668.47
Operating cost	285,491,515.41	1,487,131,978.05		1,772,623,493.46
Total assets		8,435,308,789.48		8,435,308,789.48
Total liabilities		2,282,059,377.06		2,282,059,377.06

3. Other significant transactions and events having influence on the investors' decisions

The Proposal on the Company’s Phase II ESOP Plan (Draft) and Its Summary, the Proposal on the Management Rules of the Company's Phase II ESOP, and the Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the Company's Phase II ESOP were reviewed and approved at the Company’s 16[th] meeting of the 4[th] Board of Directors held on July 2nd, 2018 and the 2[nd] Extraordinary General Meeting of 2018 held on July 18th, 2018. On September 5th, 2018, the Company’s Phase II ESOP has been transferred to the unlimited tradable shares of the Company held by the Company’s actual controllers Wu Weihong and Wu Weidong through the block trading method, totaling 26,310,527 shares, accounting for 1.24% of the Company's total share capital. The total transaction amount is RMB 249,999,996.58 (including transaction costs), with the average transaction price being 9.50 yuan/share.

As of September 5th, 2018, the Company has completed the purchase of shares in the Phase II Employee Stock Ownership Plan within 6 months after reviewed and approved at the Company's General meeting of Shareholders. The shares purchased in this shareholding plan are locked in accordance with the regulations, and the lock-up period will be from September 6th, 2018 to September 5th, 2019.

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XII. Notes to Main Items of Financial Statements of Parent Company

1. Other receivables

Unit: RMB

Item	Ending balance	Beginning balance
Dividends receivable	500,000,000.00
Other receivables	891,766,571.39	1,655,547,345.04
Total	1,391,766,571.39	1,655,547,345.04

(1) Dividend receivable

1) Dividends receivable

Unit: RMB

Item (or invested organization)	Ending balance	Beginning balance
Shanghai Sanqi Interactive Entertainment	500,000,000.00
Total	500,000,000.00

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(2) Other receivables

1) Classification of other receivables

Unit: RMB

	Ending balance	Ending balance	Ending balance	Ending balance	Ending balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance	Beginning balance
	Book balance		Provision for bad debts			Book balance		Provision for bad debts
Type
				Accrual	Book value					Book value
	Amount	Proportion	Amount			Amount	Proportion	Amount	Accrual proportion
				proportion

Other accounts receivable
withdrawn provision for bad
	891,798,933.09	100.00%	32,361.70	0.00%	891,766,571.39	1,668,884,090.50	100.00%	13,336,745.46	0.80%	1,655,547,345.04
debts based on credit risk

feature combination
Total	891,798,933.09	100.00%	32,361.70	0.00%	891,766,571.39	1,668,884,090.50	100.00%	13,336,745.46	0.80%	1,655,547,345.04

Other receivables of individual account with significant amount and with bad debt provision accrued at the end of current period:

□Applicable √Not Applicable

Other receivable with provisions of bad debts accrued by aging analysis method in the portfolio:

√Applicable □Not Applicable

Unit: RMB

	Ending balance	Ending balance	Ending balance
Aging
	Other receivables	Provision for bad debts	Accrual proportion

Items within 1 year
Subtotal within 1 year	317,234.07	15,861.70	5.00%
1 - 2 year (s)	40,000.00	4,000.00	10.00%
2 - 3 years			30.00%
Over 3 years	25,000.00	12,500.00	50.00%

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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	2018 Annual Report	2018 Annual Report	2018 Annual Report
3 - 4 years	25,000.00	12,500.00	50.00%
Total	382,234.07	32,361.70

Description of basis for this portfolio determination:

Other receivables of same aging share similar characteristics of credit risk

Other receivables with bad debts provisions accrued by balance percentage method in the portfolio:

□Applicable √Not Applicable

Other receivables with provisions of bad debts accrued by other methods in the portfolio:

√Applicable □Not Applicable

The related accounts (including the controlling shareholder) within the scope of the consolidation have a lower credit risk, and the provision for bad debts of other receivables in the portfolio is 0%. The ending balance of other receivables in this portfolio is RMB 891,416,699.02, and the ending balance of bad debt provision is RMB 0.00.

2) Reserve of the bad debts that are accrued, withdrew and taken back in current period

The provision for bad debt accrued in this current period is RMB 0.00 and the provision for bad debts returned back or taken back in this current period is RMB 13,304,383.76. Including important provision for bad debt transferred back or recovered in this period:

Unit: RMB

Organization name Amount carried forward or recovered Change the way of return

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3) Classification of other receivables based on the fund nature

Unit: RMB

Fund nature	Ending book value	Opening book balance
Deposits and guarantees	65,000.00	65,000.00
Amount of affiliated parties	490,106,699.02	1,402,274,181.21
Related parties borrowing		266,543,561.64
Equity disposal receivables	401,310,000.00
Others	317,234.07	1,347.65
Total	891,798,933.09	1,668,884,090.50

4) Other accounts receivable in top five based on year-end balance collected from arrears party

Unit: RMB

				Proportion in total	Ending balance of
Organization name	Fund nature	Ending balance	Aging	ending balance of	provision for bad
				other receivables	debts
Wuhu Ningzhong
	Equity disposal
Auto Parts		401,310,000.00	Within 1 year	45.00%
	receivables
Technology Co., Ltd.

	Amount of affiliated
Anhui Xuhong		300,000,000.00	Within 1 year	33.64%
	parties

Shanghai Sanqi
	Amount of affiliated
Interactive		170,000,000.00	Within 1 year	19.06%
	parties
Entertainment

	Amount of affiliated
Tibet Xintai		20,100,000.00	Within 1 year	2.25%
	parties

Zhangshu Wangzhong
Investment
	Others	166,745.03	Within 1 year	0.02%	8,337.25
Management Center

(Limited Partnership)
Total	--	891,576,745.03	--	99.97%	8,337.25

2. Long-term equity investment

Unit: RMB

	Ending balance	Ending balance		Beginning balance	Beginning balance	Beginning balance
Item		Impairment			Impairment
	Book balance		Book value	Book balance		Book value
		provision			provision

Investment to
	6,374,799,990.80		6,374,799,990.80	5,724,695,055.23		5,724,695,055.23
subsidiaries

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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Investment into associated enterprises and joint ventures
	27,593,699.69	27,593,699.69	29,729,869.92	29,729,869.92

Total	6,402,393,690.49	6,402,393,690.49	5,754,424,925.15	5,754,424,925.15

(1) Investment to subsidiaries

Unit: RMB

					Estimated accrued
						Ending balance of
	Beginning	Increase in	Decrease in		impairment
Invested company				Ending balance		depreciation
	balance	current period	current period		provision of
						reserves
					current period

Shanghai Sanqi
Interactive	4,720,000,000.00			4,720,000,000.00
Entertainment
Shunrong Auto
	749,895,064.43		749,895,064.43
Parts

Jiangsu Zhiming	254,799,990.80			254,799,990.80
Jiangsu Aurora		1,400,000,000.00		1,400,000,000.00
Total	5,724,695,055.23	1,400,000,000.00	749,895,064.43	6,374,799,990.80

(2) Investment into associates and joint ventures

Unit: RMB

		Increase or decrease in this	Increase or decrease in this	Increase or decrease in this	Increase or decrease in this	Increase or decrease in this	period
		Addi tiona l inves tmen ts			Other		Profit or
											Ending
Investment	Beginning		Negative	Profit and loss	comprehe	Other	cash dividend declared to be distributed	Withdrawn		Ending	balance of
				on investments	nsive
company	balance		investmen			equity		impairmen	Others	balance	depreciation
				confirmed with	income
			t			change		t provision			reserves
				equity method	adjustme

					nt
I. Joint ventures
II. Associates
Shanghai Jueli
Culture Media	29,729,869.92			-2,136,170.23						27,593,699.69
Co., Ltd.
Subtotal	29,729,869.92			-2,136,170.23						27,593,699.69
Total	29,729,869.92			-2,136,170.23						27,593,699.69

Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.

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3. Operating incomes and operating costs

Unit: RMB

	Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the previous period	Amount incurred in the previous period
Item
	Income	Cost	Income	Cost

Main business			751,646.53	31,646.53
Total			751,646.53	31,646.53

Other notes:

None

4. Investment income

Unit: RMB

Item	Amount incurred in the current period	Amount incurred in the previous period
Long-term equity investment income
	700,000,000.00
measured by cost method

Long-term equity investment income
	-2,136,170.23	-1,555,025.80
measured by equity method

Investment profits by the disposal of
	69,104,935.57	-295,279,968.69
long-term equity investment

Investment profit by marketable financial
		1,582,261.90
assets during the holding period

Investment profit by the disposal of
		1,000,000.00
marketable financial assets

Total	766,968,765.34	-294,252,732.59

XIII. Supplementary data

1. Incidental profit or loss statement in current period

√Applicable □Not Applicable

Unit: RMB

Item	Amount	Description
		Mainly profit and loss from the
Losses and profits on disposal of non-current assets	56,085,328.82	disposal of long-term equity
		investment and fixed assets.
Government subsidy included in current profit or loss (except those closely		Mainly government subsidy other
related to enterprise operation and received based on consolidated national	38,851,289.40	than the refund of value-added
standard quota or quantitative)		tax.

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Funds occupation fees collected from non-financial enterprises and included in current profit or loss		Mainly interest income from
	17,307,831.49
		borrowings.

		Mainly the income from bank’s
Profit or loss of asset whose investment or management is entrusted to others	16,941,398.12
		financial products.

Except effective hedging business relating to normal operating business of the company, profit or loss caused by change in the fair value of
		Mainly the investment income
held-for-trading financial asset and financial liabilities, and investment profit	-9,740,417.35	from disposal of available-for-sale
for disposal of trading financial asset, trading financial liabilities and available-for-sales financial assets.		financial assets.

Other non-operating revenue and expenditure except the foregoing items	2,945,610.96
		Mainly including performance
		compensation income (the
		Company’s impairment loss
		accrued against the goodwill of
Other items consistent with definition of non-recurring profit and loss	446,156,583.73	Shanghai Mokun Company is
		RMB 959,833,685.66 and
		included in recurring profit and
		loss) and performance
		compensation expenses.
Less: Affected amount of income taxes	33,857,857.74
Affected amount of minority interest income	1,095,547.63
Total	533,594,219.80	--

2. Return on equity and earnings per share

		e Earnings per share Basic earning per share (yuan/share) Diluted earning per share (yuan/share)	e Earnings per share Basic earning per share (yuan/share) Diluted earning per share (yuan/share)
	Weighted average rat
Profits during reporting period			Diluted earning per share
	of return on equity
			(yuan/share)

Net profits attributable to the company common		0.47	0.47
	16.59%
shareholders

Net profits attributable to the company common
shareholders after deducting non-recurring profits and	7.81%	0.22	0.22
losses

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3. Data differences due to different accounting standards in China and the rest of the world

(1) Differences regarding net profits and net assets between financial statements disclosed by international standards and Chinese standards

□Applicable √Not Applicable

(2) Differences regarding to net profits and net assets between financial statements disclosed by overseas standards and Chinese standards

□Applicable √Not Applicable

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AI assistant

37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. — Annual Report 2018

54581_rns_2019-04-25_a35eeeaf-91ed-44a5-a7e7-7fbe238f237e.PDF

2018 Annual Report

Section I Contents and Interpretation

Table of Contents

Definitions

Section II Company Profile and Key Financial Indicators

I. Company profile

II. Contact person and contact information

III. Information disclosure and designated place

IV. Changes in Registration Information

V. Other relevant information

VI. Main accounting data and financial index

VII. Data differences due to different accounting standards in China and the rest of the world

1. Differences regarding to net profits and net assets between financial statements disclosed according to international standards and Chinese standards

□Applicable √Not Applicable

2. Differences regarding to net profits and net assets between financial statements disclosed according to standards of other countries and Chinese standards

□Applicable √Not Applicable

VIII. Quarterly Key financial indicators

IX. Non-recurring profits and losses and their amount

Section III Business Overview

I. Main business in the reporting period

2. Changes in industrial policy environment and their impacts on the Company

3. Main businesses, main products and business models of the Company

II. Material changes in major assets

1. Material changes in major assets

2. Main foreign assets

III. Analysis of core competitiveness

1. Industry-leading R&D strength

2. Excellent distribution strength

the launch.

3. Advantage of “integration of R&D and operation” mode

4. Team strengths

Section V Discussion and Analysis of Operation Status

I. Overview

(I) Mobile game business

1. Release of mobile games

(1) Domestic market

(2) Overseas market

2. Research and development of mobile games

(II) Browser games

(III) Other cultural and creative businesses

(IV) IP strategy

II. Analysis of main business

1. General

2. Income and cost

(1) Composition of operating income

(2) Industries, products or regions that account for over 10% of the Company’s operating income or operating profit

√Applicable □Not Applicable

Yes

Software and IT services

(3) Whether the Company has goods sales revenue higher than service revenue

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

(5) Composition of operating cost

(6) Whether the consolidation scope changes in the reporting period

√Yes □ No

(7) Significant changes or adjustments to businesses, products or services during the reporting period

√Applicable □Not Applicable

(8) Major sales customers and major suppliers

Major sales customers

3. Expenses

4. R&D investment

√Applicable □Not Applicable

□Applicable √Not Applicable

□Applicable √Not Applicable

5. Cash flow

III. Analysis of non-main business

IV. Analysis of assets and liabilities

1. Significant changes in the composition of assets

2. Assets and liabilities measured by fair value

3. Restriction of main assets and rights as if the end of the reporting period

V. Analysis of Investment Situations

1. Overview

2. Major equity investment during the reporting period

3. Major non-equity investment during the reporting period

4. Financial assets that are measured by fair value

5. Utilization of raised fund

(1) Utilization of raised fund

(2) Change items of the raised fund

37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. Annual Report 2018