Boyaa Interactive International Limited — Interim / Quarterly Report 2015

May 13, 2015

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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Boyaa Interactive International Limited 博雅互動國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0434)

FIRST QUARTERLY RESULTS ANNOUNCEMENT FOR THE THREE MONTHS ENDED 31 MARCH 2015

FINANCIAL HIGHLIGHTS
For the three months		Year-on-Year		For the year
**ended 31 **	March		Change*	ended 31
2015	2014		%	December 2014
RMB’000	RMB’000			RMB’000
(unaudited)	(unaudited)			(audited)
Revenue 243,956	221,627		10.1	945,319
- Web-based games 100,283	110,198		(9.0)	409,544
- Mobile games 143,673	111,429		28.9	535,775
Gross profit 131,305	133,237		(1.5)	567,852
Profit attributable to 57,593	62,237		(7.5)	280,065
owners of the
Company
Non-IFRS adjusted net 61,375	71,755		(14.5)	306,177
profit***

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REVENUE BY GAMES

REVENUE BY GAMES
Texas Hold’em Series Fight the Landlord Others	For the three months ended 31 March 2015 RMB’000 (unaudited) 2014 RMB’000 (unaudited) 167,280 184,634 55,078 27,180 21,598 9,813	Year-on-Year Change* % (9.4) 102.6 120.1
Total	243,956 221,627	10.1
**REVENUE BY LANGUAGE **	VERSIONS OF GAMES

For the three months ended 31 March 2015 RMB’000 (unaudited) 2014 RMB’000 (unaudited) Simplified Chinese 110,742 82,245 Other languages 133,214 139,382	Year-on-Year Change* % 34.7 (4.4)
Total 243,956 221,627	10.1
OPERATIONAL HIGHLIGHTS For the three months ended 31 March 2015 31 December 2014 31 March 2014 Paying Players (in thousands) 2,297 2,157 1,068 • Web-based games 156 160 181 • Mobile games 2,141 1,997 887 Daily Active Players (“DAUs”) (in thousands)* *6,003 5,828 5,252 • Web-based games 1,583 1,580 1,591 • Mobile games 4,420 4,248 3,661 Monthly Active Players (“MAUs”) (in thousands)* *29,207 27,909 24,461 • Web-based games 8,092 8,084 8,071 • Mobile games 21,115 19,825 16,390	Quarter-on- Quarter Change* Year-on-Year Change % % 115.1 6.5 (13.8) (2.5) 141.4 7.2 14.3 3.0 (0.5) 0.2 20.7 4.1 19.4 4.7 0.3 0.1 28.8 6.5

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For the three months ended Quarter-on-
31 March 31 December 31 March Year-on-Year Quarter
2015 2014 2014 Change [] Change []
% %
Average Revenue Per
Paying Player
(“ ARPPU ”) for Texas
Hold’em Series (in
RMB)
• Web-based games 409.5 407.6 409.1 0.1 0.5
• Mobile games 57.7 57.0 53.9 7.1 1.2
ARPPU for Fight the
Landlord (in RMB)
• Web-based games 48.4 48.3 47.3 2.3 0.2
• Mobile games 18.2 17.9 16.8 8.3 1.7
ARPPU for Other
Games (in RMB)
• Web-based games 9.3 10.8 11.7 (20.5) (13.9)
• Mobile games 8.8 7.2 8.2 7.3 22.2
Year-on-Year Change % represents a comparison between the current reporting period and
the corresponding period last year.
Quarter-on-Quarter Change % represents a comparison between the quarter ended 31
March 2015 and the immediately preceding quarter.
Non-IFRS adjusted net profit was derived from the unaudited profit for the period excluding
share-based compensation expenses.
The numbers of DAUs and MAUs shown above are calculated based on the number of active
players in the last calendar month of the relevant reporting period.
*----- End of picture text -----

The board of directors (the “ Board ”) of Boyaa Interactive International Limited (the “ Company ” or “ we ” or “ our ” or “ us ”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the “ Group ” or “ we ” or “ our ” or “ us ”) for the three months ended 31 March 2015 (the “ Reporting Period ”) (the “ First Quarterly Results ”). The First Quarterly Results have been reviewed by PricewaterhouseCoopers, the auditor of the Company, in accordance with International Standard on Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity” issued by the International Auditing and Assurance Standards Board, and by the audit committee of the Company (the “ Audit Committee ”). This announcement is made pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).

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BUSINESS OVERVIEW AND OUTLOOK

In the first quarter of 2015, despite the increasingly competitive market conditions in both the domestic and overseas markets, we achieved continuous growth in our financial results for the first quarter of the year by leveraging our strength in developing new card and board games and our competitiveness in operations, as well as our increased efforts in implementing our versatile and user-oriented operating strategy and in upgrading our games and enhancing customer services.

The growth in our active players base was mainly attributable from the growth in the mobile games markets, where the DAUs of our mobile games grew 20.7% from 3.7 million for the first quarter in 2014 to 4.4 million for the same period in 2015, and the MAUs of our mobile games grew 28.8% from 16.4 million for the first quarter in 2014 to 21.1 million for the same period in 2015. The number of our paying players in mobile games offering also increased significantly by 141.4% from 887 thousand for the first quarter in 2014 to 2,141 thousand for the same period in 2015, benefiting from the expansion of our mobile game player base and our flexible and diverse monetization strategies. The ARPPU of our two most important games, Texas Hold’em Series and Fight the Landlord, sustained steady growth in mobile games offering.

In the first quarter of 2015, we continued to increase our marketing and promotion efforts in both the domestic and overseas markets and remained focus on managing and developing relationships with our distribution channels. In terms of the domestic market, we achieved rapid growth in our total players through accelerating the expansion of channels and increasing player traffic. We also accelerated our investment in pre-installed games and TV games, and in particular, we have experienced rapid and continuous growth in the pre-installation of our mobile games and broadened our channels and layout in the TV game market. We continued to strengthen our cooperative relationships with the three major telecom operators in China and realized stable revenue growth through aligning our interests. In terms of the overseas market, we continued to deepen our strategic layout in target markets, commenced the important cooperation with Google, and at the same time, maintained and deepen the cooperation with large-scale social platforms such as Facebook and LINE to continuously broaden our player base.

In the first quarter of 2015, we acquired the entire equity interests of four companies, namely Shenzhen Coalaa Network Technology Co., Ltd. (深圳市卡拉網路科技有限 公司), Shenzhen Fengxunsheng Technology Co., Ltd. (深圳市豐訊盛科技有限公司), Shenzhen Guanhai Technology Co., Ltd. (深圳市觀海科技有限公司) and Function Technology Co., Ltd. (collectively referred to as “ Coalaa ”), through a series of agreements and at a total consideration of RMB5 million. Coalaa is an online card

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and board game developer and operator, with Texas Poker (Professional Version) and 9k Poker as its two most important games. Texas Poker (Professional Version) is offered as both a web-based game and a mobile game and in 12 language versions, including Arabian, Indonesian and Thai, and 9k Poker is offered as a mobile game and in Thai language only. We envisage that through such acquisition, we can further complement our game portfolio and we will be able to further expand our market share in overseas markets, and in particular, the Thai market.

In addition, we completed the investment in 30% equity interest in Shenzhen Easething Technology Co., Ltd. (深圳市易新科技有限公司, “ Easething ”) at a consideration of approximately RMB3 million during the Reporting Period. Easething is a company principally engaged in the research and development of intelligence hardware and artificial intelligence system and ancillary operations.

In terms of technology investment, as at the end of the first quarter of 2015, we had 787 servers hosted in 18 locations in different countries and regions. We also continued to refine our game development engine and technologies, thereby further optimized our technologies in areas such as 3D support technology and enhancing our game development efficiency and quality.

In the second quarter of 2015, we will continue to strengthen and expand our card and board games portfolio, with emphasis on promoting the development of local card and board games. We will further enhance our technologies and optimize the functions of our games in order to further improve player experience. In addition, we will expand the recognition and player base of our games by striving to hold influential tournaments and offline activities for our players. We will also continue to strengthen our research and development efforts on, and cooperation with respect to, emerging and cutting-edge technologies so as to achieve continuous technological innovation in our games.

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MANAGEMENT DISCUSSION AND ANALYSIS

Revenue

Our revenue for the three months ended 31 March 2015 amounted to approximately RMB244.0 million, representing year-on-year increase of 10.1% from approximately RMB221.6 million recorded for the same period of 2014. The year-on-year increase was primarily driven by the increase in paying players from 1,068 thousand in the three months ended 31 March 2014 to 2,297 thousand in the same period in 2015, mainly as a result of our effective monetization measures and the increase in our players, especially with respect to our mobile games. For the three months ended 31 March 2015, revenue generated from our mobile games and web-based games accounted for approximately 58.9% and 41.1% of our total revenue, respectively, as compared with 50.3% and 49.7%, respectively, for the three months ended 31 March 2014.

Cost of revenue

Our cost of revenue for the three months ended 31 March 2015 amounted to approximately RMB112.7 million, representing year-on-year increase of 27.5% from approximately RMB88.4 million recorded for the same period in 2014. The year-on-year increase was mainly due to the increase in commission fees paid to our payment collection channels attributable to the increase in the average rate of commission.

Gross profit and gross profit margin

As a result of the foregoing, our gross profit for the three months ended 31 March 2015 amounted to approximately RMB131.3 million, representing year-on-year decrease of 1.5% from approximately RMB133.2 million recorded for the same period in 2014.

Our gross profit margin were approximately 53.8% and 60.1%, respectively, for the three months ended 31 March 2015 and the same period in 2014.

Selling and marketing expenses

Our selling and marketing expenses for the three months ended 31 March 2015 amounted to approximately RMB47.9 million, representing year-on-year increase of 12.2% from approximately RMB42.7 million recorded for the same period in 2014. The year-on-year increase was mainly attributable to increased advertising and promotional activities to promote our games in our existing and target markets.

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Administrative expenses

Our administrative expenses for the three months ended 31 March 2015 amounted to approximately RMB29.6 million, representing year-on-year increase of 11.3% from approximately RMB26.6 million recorded for the same period in 2014. The year-on-year increase was mainly due to the increase in employee benefit expenses resulting from the increase in headcount, as well as the increase in rental expenses as a result of our office expansion.

Other income and gains - net

For the three months ended 31 March 2015, we recorded other income and gains — net of approximately RMB7.0 million, compared to approximately RMB7.8 million recorded for the same period in 2014. The other income and gains — net primarily consisted of return on short-term investments and gains on financial assets at fair value through profit or loss. The year-on-year decrease was primarily due to the decrease in return on short-term investments as compared to the same period of last year.

Finance income - net

Our net finance income for the three months ended 31 March 2015 was approximately RMB1.2 million, compared to approximately RMB2.8 million recorded for the same period of 2014. The year-on-year change was primarily due to the increase in discounting effects of non-current loans to employees.

Share of profit of associates

We held investments in five associates, namely Shenzhen Fanhou Technology Co., Ltd., RaySns Technology Co., Ltd. (“ RaySns ”), Shenzhen HuifuWorld Network Technology Co., Ltd. , Shenzhen Gangyun Technology Co., Ltd. and Easething as at 31 March 2015 (31 December 2014: five), all of which were online games or Internet technology companies. We recorded a share of profit of associates of approximately RMB3.1 million for the three months ended 31 March 2015, compared to a share of profit of associates of approximately RMB0.3 million recorded for the same period in 2014.

On 23 March 2015, our subsidiary, Shenzhen Dong Fang Bo Ya Technology Co., Ltd. (“ Boyaa Shenzhen ”) and other shareholders of RaySns (as vendors) entered into a share purchase agreement with Dalian Kemian Wood Industry Co., Ltd. (大連科冕木 業股份有限公司, “ Kemian ”) (as purchaser), pursuant to which Boyaa Shenzhen and other shareholders of RaySns agreed to dispose of 100% equity interests in RaySns

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to Kemian in return for consideration shares in Kemian. The completion of the proposed disposal is subject to certain conditions. As at the date of this announcement, the disposal has not been completed. For details, please refer to the announcement of the Company dated 23 March 2015.

Income tax expense

Our income tax expense for the three months ended 31 March 2015 was approximately RMB8.2 million, representing a decrease of 34.6% from approximately RMB12.6 million recorded for the three months ended 31 March 2014. The effective tax rate were 12.6% and 16.8%, respectively, for the three months ended 31 March 2015, and the same period in 2014. The decrease in effective tax rate for the three months ended 31 March 2015 compared to the corresponding period in 2014 is primarily due to the decrease in the share-based compensation expense which was a non-tax deductible item and the low effective tax rate of Coalaa newly acquired during the Reporting Period.

Profit for the Reporting Period

As a result of the foregoing, our profit for the three months ended 31 March 2015 amounted to approximately RMB56.9 million, with our profit attributable to owners of the Company for the fist quarter of 2015 amounted to approximately RMB57.6 million, representing year-on-year decrease of 8.6% and 7.5%, respectively, from the profit and the profit attributable to owners of the Company of approximately RMB62.2 million recorded for the same period in 2014.

Non-IFRS Measure — Adjusted net profit

To supplement our consolidated financial statements which are presented in accordance with International Financial Reporting Standards (“ IFRS ”), we also use unaudited non-IFRS adjusted net profit as an additional financial measure to evaluate our financial performance by eliminating the impact of items that we do not consider indicative of the performance of our business. The term of adjusted net profit is not defined under IFRS. Other companies in the industry the Group operates in may calculate such non-IFRS item differently from the Group. The use of adjusted net profit has material limitations as an analytical tool, as adjusted net profit does not include all items that impact our net profit for the Reporting Period and should not be considered in isolation or as a substitute for analysis of the Group’s results as reported under IFRS.

Our unaudited non-IFRS adjusted net profit for the three months ended 31 March 2015 of approximately RMB61.4 million was derived from our unaudited profit of the same period excluding share-based compensation expenses of approximately

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RMB1.8 million, RMB0.7 million and RMB2.1 million included in cost of revenue, selling and marketing expenses and administrative expenses, respectively, as compared to our unaudited non-IFRS adjusted net profit for the three months ended 31 March 2014 of approximately RMB71.8 million derived from our unaudited profit for the three months ended 31 March 2014 excluding share-based compensation expenses of approximately RMB3.8 million, RMB1.4 million and RMB4.3 million included in cost of revenue, selling and marketing expenses and administrative expenses, respectively.

Cash and cash equivalents

As at 31 March 2015, we had cash and cash equivalents of approximately RMB1,322.3 million (31 December 2014: approximately RMB1,029.3 million), which primarily consisted of cash at bank and in hand and short-term bank deposits. Out of the RMB1,322.3 million, approximately RMB1,222.6 million is denominated in Renminbi and approximately RMB99.7 million is denominated in other currencies (primarily US dollars). We currently do not hedge transactions undertaken in foreign currencies. Due to our persistent efforts in managing our exposure to foreign currencies through constant monitoring to limit as much as possible the amount of foreign currencies held by us, fluctuations in currency exchange rates do not have any material adverse impact on our financial results.

Up to 31 March 2015, a total amount of RMB145.4 million from the net proceeds from our initial public offering had been utilized for expanding our marketing and promotion activities and for equity investments. The unutilized net proceeds has been deposited into short-term demand deposits in a bank account maintained by the Group as well as used in short-term investments in certain wealth management products which are principal protected and with guaranteed return.

Short-term investments

As at 31 March 2015, we had short-term investments of approximately RMB100.0 million (31 December 2014: RMB370.0 million). The short-term investment represents investment in certain money market instruments in the form of principal and return-guaranteed products denominated in Renminbi offered by a commercial bank in China and has a term of one year. The short-term investment has matured before the end of April 2015 and no new money market instruments have been purchased by the Group during the Reporting Period. The effective interest rate for these short-term investments for the three months ended 31 March 2015 was 6.0% (for the three months ended 31 March 2014: 6.0%), and the returns on such short-term investments amounted to approximately RMB3.8 million for the three months ended 31 March 2015 (for the three months ended 31 March 2014: RMB4.4 million).

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The short-term investments were made for treasury management purpose and were made in line with our treasury and investment policies, after taking into account, among others, the level of risk, return on investment, liquidity and the term to maturity. Generally, the Company has in the past selected wealth management products that are principal guaranteed and which thereby had relatively low associated risk. Prior to making an investment, the Company had also ensured that there remains sufficient working capital for the Company’s business needs even after the investments in wealth management products. The Company decided and as agreed with the financial institutions offering the short-term investments, the underlying investment portfolio of all the short-term investments were represented by inter-bank loan market instruments and exchange traded fixed-income financial instruments, such as inter-bank loans, government bonds, central bank bills and similar products, which were highly liquid with a relatively short term of maturity, and which were considered to akin to placing deposits with banks whilst enabling the Group to earn an attractive rate of return.

Borrowings

During the three months ended 31 March 2015, we did not have any short-term bank borrowings and we had no outstanding, utilized or unutilized banking facilities.

Capital expenditures

For the three months ended 31 March 2015, our capital expenditure amounted to approximately RMB13.3 million (for the three months ended 31 March 2014: approximately RMB1.9 million), mainly including payment for investments of RMB9.0 million, which was funded by using the net proceeds from our initial public offering; and purchasing of additional furniture and equipment, motor vehicles, leasehold improvements and computer software of RMB4.3 million (for the three months ended 31 March 2014: approximately RMB1.9 million), which was funded by using our cash flows generated from our operations.

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FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2015

Note ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in associates Available-for-sale financial assets Deferred income tax assets Financial assets at fair value through profit or loss Prepayments and other receivables Current assets Trade receivables 3 Prepayments and other receivables Short-term investments 4 Cash and cash equivalents Total assets	31 March 31 2015 RMB’000 (Unaudited) 17,781 24,001 27,952 63,405 2,938 33,590 39,691 209,358 129,088 42,966 100,000 1,322,262 1,594,316 1,803,674	December 2014 RMB’000 (Audited) 15,176 19,626 21,839 63,975 1,685 22,085 42,651 187,037 94,312 33,001 370,000 1,029,331 1,526,644 1,713,681

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CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 MARCH 2015

Note EQUITY AND LIABILITIES Equity Share capital Share premium Shares held for RSU Scheme Reserves Retained earnings Non-controlling interests Total equity Liabilities Non-current liabilities Deferred income tax liabilities Current liabilities Trade and other payables 6 Deferred revenue Current income tax liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	31 March 31 2015 RMB’000 (Unaudited) 247 633,491 (17) 141,661 760,489 1,535,871 8,398 1,544,269 14,393 126,488 30,968 87,556 245,012 259,405 1,803,674 1,349,304 1,558,662	December 2014 RMB’000 (Audited) 245 632,329 (19) 137,045 702,896 1,472,496 9,130 1,481,626 14,234 115,169 24,238 78,414 217,821 232,055 1,713,681 1,308,823 1,495,860

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED 31 MARCH 2015

			Three months ended	Three months ended	Three months ended	Three months ended	Three months ended	Three months ended	Three months ended
				**31 **	March
	Note			2015					2014
			RMB’000				RMB’000
		(Unaudited) (Unaudited)
Revenue	2		243,956				221,627
Cost of revenue	7		(112,651)				(88,390)
Gross profit			131,305				133,237
Selling and marketing expenses	7		(47,908)				(42,702)
Administrative expenses	7		(29,644)				(26,645)
Other income and gains - net	8			7,027				7,754
Operating profit			60,780					71,644
Finance income				4,994				6,033
Finance costs			(3,808)					(3,222)
Finance income - net				1,186					2,811
Share of profit of associates				3,113					341
Profit before income tax			65,079					74,796
Income tax expense	9		(8,218)				(12,559)
Profit for the period			56,861					62,237
Other comprehensive income
Items that may be reclassified to profit or loss:
- Changes in value of available-for-sale
financial assets, net of tax				(579)					—
- Currency translation differences				681				4,853
Other comprehensive income for the period,
net of tax				102				4,853
Total comprehensive income for the period			56,963					67,090
Profit attributable to:
- Owners of the Company			57,593					62,237
- Non-controlling interests				(732)					—
			56,861					62,237
Total comprehensive income attributable to:
- Owners of the Company			57,695					67,090
- Non-controlling interests				(732)					—
			56,963					67,090
Earnings per share
(expressed in RMB cents per share)
- Basic	10			8.20					9.87
- Diluted	10			7.87					8.48
Dividends	11			—					—

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED 31 MARCH 2015

Balance at 1 January 2015 Comprehensive income Profit for the period Other comprehensive income - change in value of available-for-sale financial assets, net of tax - currency translation differences Total comprehensive income for the period Employee share option scheme - value of employee services - proceeds from shares issued - vesting of shares under RSU scheme Total transactions with owners, recognized directly in equity Balance at 31 March 2015 Balance at 1 January 2014 Comprehensive income Profit for the period Other comprehensive loss - currency translation differences Total comprehensive income for the period Employee share option scheme - value of employee services Total transactions with owners, recognized directly in equity Balance at 31 March 2014	Share capital RMB’000 245 — — — — — 2 — 2 247 239 — — — — — 239	Share premium RMB’000 632,329 — — — — — 1,164 (2) 1,162 633,491 738,070 — — — — — 738,070	Shares held for RSU Scheme RMB’000 (19) — — — — — — 2 2 (17) (33) — — — — — (33)	Reserves Retained earnings RMB’000 RMB’000 (Unaudited) 137,045 702,896 — 57,593 (579) — 681 — 102 57,593 4,514 — — — — — 4,514 — 141,661 760,489 53,512 422,831 — 62,237 4,853 — 4,853 62,237 9,518 — 9,518 — 67,883 485,068	Total Non- controlling interests RMB’000 RMB’000 1,472,496 9,130 57,593 (732) (579) — 681 — 57,695 (732) 4,514 — 1,166 — — — 5,680 — 1,535,871 8,398 1,214,619 — 62,237 — 4,853 — 67,090 — 9,518 — 9,518 — 1,291,227 —	Total equity RMB’000 1,481,626 56,861 (579) 681
						56,963
						4,514 1,166 —
						5,680
						1,544,269
						1,214,619 62,237 4,853
						67,090
						9,518
						9,518
						1,291,227

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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED 31 MARCH 2015

	Three months ended	Three months ended
	31 March
	2015	2014
	RMB’000	RMB’000
	(Unaudited)	(Unaudited)
Cash flows from operating activities
Cash generated from operations	28,965	71,164
Income tax paid	(445)	(10,592)
Net cash generated from operating activities	28,520	60,572
Cash flows from investing activities
Purchase of property, plant and equipment	(4,048)	(1,105)
Purchase of intangible assets	(226)	(798)
Purchase of short-term investments	—	(490,000)
Purchase of financial assets at fair value through
profit or loss	(8,026)	—
Investment in an associate	(1,000)	—
Acquisition of subsidiaries, net of cash
acquired (Note 12)	19	—
Proceeds from disposals of short-term investments	270,000	53,000
Proceeds from disposals of financial assets at fair
value through profit or loss	—	1,587
Proceeds from disposal of property, plant and
equipment	1	—
Return on short-term investments received	1,894	5,812
Interest received	4,828	6,049
Net cash flows generated from/(used in) investing
activities	263,442	(425,455)
Cash flows from financing activities
Proceeds from issuance of ordinary shares	1,227	—
Net cash flows generated from financing activities	1,227	—
Net increase/(decrease) in cash and cash equivalents	293,189	(364,883)
Cash and cash equivalents at beginning of period	1,029,331	965,566
Exchange (losses)/gains on cash and cash equivalents	(258)	624
Cash and cash equivalents at end of the period	1,322,262	601,307

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1. General information, basis of preparation and significant accounting policies

Boyaa Interactive International Limited (the “Company”) was incorporated in the Cayman Islands. The address of its registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company’s shares have been listed on the Main Board of The Stock Exchange of Hong Kong Limited since 12 November 2013 (the “Listing”).

The Company is an investment holding company. The Company and its subsidiaries (together, the “Group”) are principally engaged in the development and operations of online card and board game business in the People’s Republic of China (the “PRC”), Hong Kong and other countries and regions.

The consolidated balance sheet as at 31 March 2015, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the three months then ended, and a summary of significant accounting policies and other explanatory notes (collectively defined as the “Interim Financial Information”) of the Group have been approved by the Board of Directors (the “Board”) on 13 May 2015.

This Interim Financial Information is presented in Renminbi (“RMB”), unless otherwise stated.

During the period, the Group acquired four subsidiaries from certain independent third parties. These subsidiaries are principally engaged in development and operations of online card and board game business. Details of the acquisition are given in Note 12.

The Interim Financial Information is prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting’ issued by the International Accounting Standards Board. This Interim Financial Information should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December 2014 as set out in the 2014 annual report of the Company dated 11 March 2015 (the “2014 Financial Statements”).

Except as described below, the accounting policies applied are consistent with those used in the 2014 Financial Statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss and available-for-sale financial assets, which were carried at fair value.

Taxes on income in the interim periods are accrued using the tax rates that would be applicable to expected total annual earnings.

There are no new standards, and amendments and interpretations to existing standards that are effective for the first time for this interim period that could be expected to have a material impact on the Group.

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The following new standards and amendments to standards have been issued and are relevant to the Group, but are not effective for the financial year beginning on 1 January 2015 and have not been early adopted:

		Effective for the
		financial year
		beginning on or
		after
IFRS 11 (Amendment)	“Accounting for acquisitions of	1 January 2016
	interests in joint operations”
IAS 16 and IAS 38	“Clarification of acceptable methods	1 January 2016
(Amendments)	of depreciation and amortization”
IFRS 10 and IAS 28	“Sale or contribution of assets between	1 January 2016
(Amendments)	an investor and its associate or joint
	venture”
IAS 27 (Amendment)	“Equity method in separate financial	1 January 2016
	statements”
Annual improvements 2014	“Annual improvements project”	1 July 2016
IFRS 15	“Revenue from contracts with	1 January 2017
	customers”
IFRS 9	“Financial instruments”	1 January 2018

The Group is in the process of assessing the impact of the above new standards and amendments to existing standards on the Group’s consolidated financial statements.

2. Revenue and segment information

Development and operations of online games - Web-based games - Mobile games	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 100,283 110,198 143,673 111,429 243,956 221,627	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 100,283 110,198 143,673 111,429 243,956 221,627
		221,627

— 17 —

The directors of the Company consider that the Group’s operations are operated and managed as a single segment; accordingly no segment information is presented.

The Group offers their games in various language versions in order to enable game players to play the games in different regions. A breakdown of revenue derived from different language versions of the Group’s games is as follows:

Simplified Chinese Other languages	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 110,742 82,245 133,214 139,382 243,956 221,627

The Group has a large number of game players, none of whom contributed 5% or more of the Group’s revenue for the three months ended 31 March 2015 and 2014.

The Group’s non-current assets other than deferred income tax assets, financial assets at fair value through profit or loss and available-for-sale financial assets were located as follows:

Mainland China Other locations	31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 102,365 97,128 7,060 2,164 109,425 99,292

— 18 —

3. Trade receivables

Trade receivables Less: impairment provision	31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 129,980 95,204 (892) (892) 129,088 94,312

Trade receivables were arising from the development and operation of online game business. The credit terms of trade receivables granted to the platforms and third party payment vendors are usually 30 to 120 days. Ageing analysis based on recognition date of the gross trade receivables at the respective balance sheet dates is as follows:

0-60 days 60-90 days 90-180 days Over 180 days Short-term investments Short-term investments	31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 84,138 67,306 20,366 14,832 17,364 10,705 8,112 2,361 129,980 95,204 31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 100,000 370,000

1. Short-term investments

Short-term investments represented an investment in certain wealth management product issued by a commercial bank in the PRC. This wealth management product is principal protected and with guaranteed return, it is denominated in RMB and has a term of 1 year. The effective interest rate for these investments for the three months ended 31 March 2015 was 6.0% (for the year ended 31 December 2014: 6.2%).

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5. Share-based payments

(a) Share options

On 7 January 2011, the Board of the Company approved the establishment of a share option scheme (the “Pre-IPO Share Option Scheme”) with the objective to recognize and reward the contribution of eligible directors and employees to the growth and development of the Group. The contractual life of all options under Pre-IPO Share Option Scheme is eight years from the grant date.

(i) Movements in the number of share options outstanding

	**Number **	of share
	options
	31 March	31 March
	2015	2014
	(Unaudited)	(Unaudited)
At beginning of the period	8,827,506	29,527,781
Exercised	(3,709,034)	—
Lapsed	(312,522)	(25,000)
At end of the period	4,805,950	29,502,781

Share options exercised during the period resulted in 3,709,034 shares being issued, with exercise proceeds of approximately RMB1,166,000. As at 31 March 2015, an amount of RMB45,000 was due from The Core Admin Boyaa Option Limited (31 December 2014: RMB106,000), being the nominee of the Group’s share option scheme. The related weighted average share price at the time of exercise was HKD5.51 per share.

(ii) Outstanding share options

Details of the exercise prices and the respective numbers of share options which remained outstanding as at 31 March 2015 and 31 December 2014 are as follows:

		Number of share options	Number of share options
		31 March	31 December
Expiry Date	Price	2015	2014
		(Unaudited)	(Audited)
31 January 2019	USD0.05	2,326,963	6,307,675
1 March 2020	USD0.10	194,280	197,500
30 June 2020	USD0.15	172,031	209,655
31 October 2020	USD0.15	2,112,676	2,112,676
		4,805,950	8,827,506

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(b) RSUs

Pursuant to a resolution passed by the Board of the Company in 2013, the Company set up a RSU Scheme with the objective to incentivize directors, senior management and employees for their contribution to the Group, to attract, motivate and retain skilled and experienced personnel to strive for the future development and expansion of the Group by providing them with the opportunity to own equity interests in the Company.

RSUs held by a participant that are vested may be exercised (in whole or in part) by the participant serving an exercise notice in writing on The Core Trust Company Limited (the “RSU Trustee”) and copied to the Company.

The RSU Scheme will be valid and effective for a period of eight years, commencing from the date of the first grant of the RSUs.

Movements in the number of RSUs outstanding:

	**Number **	of RSUs
	2015	2014
	(Unaudited)	(Unaudited)
At 1 January	74,215,932	79,654,565
Granted	4,955,000	—
Lapsed	(866,308)	—
Vested and transferred	(5,139,750)	—
At 31 March	73,164,874	79,654,565
Vested but not transferred as at 31 March	46,719,396	—

On 12 March 2015, the Group granted 4,955,000 additional RSUs to its employees. The vesting period of the RSUs granted is 4 years and the vesting schedule is 25% after 12 months from the grant date, 25% after 24 months from the grant date, 12.5% after 30 months from the grant date, 12.5% after 36 months from the grant date, and 2.083% from each month of 37 to 48 months from the grant date. The fair value of each of the above newly granted RSU equals to the closing price of the Company’s ordinary shares on the grant date, which was HKD5.61 per share. The expiry date of the above newly granted RSUs is 11 March 2023.

— 21 —

6. Trade and other payables

Trade payables Other taxes payable Accrued expenses Guarantee deposit from a third party (Note (i)) Salary and staff welfare payables Payables for the remaining considerations for the acquisitions of an associate and subsidiaries Advance received from sales of prepaid game cards Returns on short-term investments received in advance Others	31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 1,162 670 45,166 45,189 39,232 31,274 19,783 19,887 7,457 9,769 7,000 — 2,994 2,718 443 2,500 3,251 3,162 126,488 115,169

• (i) It represented a guarantee deposit received from a third party for its tort liability to the Group according to the private settlement agreed by the Group and the third party. The guarantee deposit has been returned as at the date of the approval of the Interim Financial Information.

Trade payables were mainly arising from the leasing of servers. The credit terms of trade payables granted by the vendors are usually 30 to 90 days. The ageing analysis of trade payables based on recognition date is as follows:

0-30 days Over 90 days	31 March 31 December 2015 2014 RMB’000 RMB’000 (Unaudited) (Audited) 939 448 223 222 1,162 670

— 22 —

7. Expenses by nature

Expenses included in cost of revenue, selling and marketing expenses and administrative expenses are analyzed as follows:

Commission charges by platforms and third party payment vendors Advertising expenses Employee benefit expenses (excluding share-based compensation expenses) Share-based compensation expenses Servers rental expenses Other professional service fees Office rental expenses Travelling and entertainment expenses Depreciation of property, plant and equipment Auditor’s remuneration Amortization of intangible assets Business tax and related surcharges Other expenses

Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 94,671 69,340 39,436 34,556 32,925 28,764 4,514 9,518 5,996 3,524 2,501 2,348 2,427 1,273 1,845 1,117 1,623 1,083 1,000 1,000 674 84 213 2,205 2,378 2,925 190,203 157,737

Research and development expenses during the three months ended 31 March 2015 and 2014 were analyzed as below:

Employee benefit expenses Depreciation of property, plant and equipment Rental expenses	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 11,647 8,234 367 220 820 556 12,834 9,010

No development expenses were capitalized for the three months ended 31 March 2015 and 2014.

— 23 —

8. Other income and gains - net

Returns on short-term investments Realized/unrealized fair value gains on financial assets at fair value through profit or loss Government subsidies Foreign exchange (losses)/gains, net Others	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 3,754 4,428 3,479 1,587 1,000 1,543 (1,315) 216 109 (20) 7,027 7,754

9. Income tax expense

The income tax expense of the Group for the three months ended 31 March 2015 and 2014 is analyzed as follows:

Current tax Deferred tax	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 9,587 13,015 (1,369) (456) 8,218 12,559

(a) Cayman Islands income tax

The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of Cayman Islands and accordingly, is exempted from Cayman Islands income tax.

(b) Hong Kong profits tax

Hong Kong profits tax has been provided for as there was business operation that is subject to Hong Kong profits tax. It has been provided for at the rate of 16.5% on the estimated assessable profits for the three months ended 31 March 2015 and 2014.

(c) PRC Corporate Income Tax (“CIT”)

The income tax provision of the Group in respect of operations in the PRC has been calculated at the tax rate of 25% on the estimated assessable profits for the three months ended 31 March 2015 and 2014, based on the existing legislation, interpretations and practices in respect thereof.

— 24 —

According to relevant tax regulations, Shenzhen Dong Fang Bo Ya Technology Co., Ltd. (“Boyaa Shenzhen”) is exempt from CIT in 2009 for two years, followed by a 50% reduction in the applicable tax rates for the next three years, commencing either from the first year of commercial operations or from the first year of profitable operation after offsetting tax losses generated in prior years. Boyaa Shenzhen qualified as a “High and New Technology Enterprise” (“HNTE”) under the Corporate Income Tax Law in 2012 and as a result, Boyaa Shenzhen enjoys a preferential tax rate of 15% from 1 January 2012 to 31 December 2014. Based on management’s self-assessment, it is highly probable that Boyaa Shenzhen will successfully renew the HNTE qualification for the next 3 years ending 31 December 2017 in 2015. Therefore, the expected income tax rate for Boyaa Shenzhen was 15% for the three months ended 31 March 2015 (2014: 15%).

Boyaa On-line Game Development (Shenzhen) Co., Ltd. (“Boyaa PRC”) qualified as a HNTE under the Corporate Income Tax Law in 2013 and as a result, Boyaa PRC enjoys a preferential tax rate of 15% from 1 January 2013 to 31 December 2015. Therefore, the actual income tax rate for Boyaa PRC was 15% for the three months ended 31 March 2015 (2014: 15%).

According to a policy promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, enterprises engaged in research and development activities are entitled to claim 150% of the research and development expenses so incurred in a period as tax deductible expenses in determining its tax assessable profits for that period (“Super Deduction”).

(d) PRC withholding tax (“WHT”)

According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after 1 January 2008 are generally subject to a 10% WHT. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant withholding tax rate will be reduced from 10% to 5%.

As at 31 March 2015, the retained earnings of the Group’s PRC subsidiaries not yet remitted to holding companies incorporated outside of the PRC, for which no deferred income tax liability had been provided, were approximately RMB531,863,000. Such earnings are expected to be retained by the PRC subsidiaries for reinvestment purposes and would not be remitted to a foreign investor in the foreseeable future based on management’s estimation of overseas funding requirements.

— 25 —

The tax on the Group’s profit before tax differ from the theoretical amount that would arise using the weighted average tax rate applicable to profits of consolidated entities in the respective jurisdictions as follows:

Profit before income tax Add: Share of profit of associates, net of tax Tax calculated at a tax rate of 25% Tax effects of: - Tax holiday on assessable profits of subsidiaries - Different tax rates available to different subsidiaries of the Group - Expenses not deductible for tax purposes - Super Deduction Income tax expense	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 65,079 74,796 (3,113) (341) 61,966 74,455 15,492 18,614 (214) (2,562) (7,407) (4,591) 802 1,444 (455) (346) 8,218 12,559

10. Earnings per share

(a) Basic

Basic earnings per ordinary share is calculated by dividing the profit of the Group attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares held for the RSU Scheme which are treated as treasury shares.

Profit attributable to owners of the Company Weighted average number of ordinary shares in issue (thousand shares) Basic earnings per share (expressed in RMB cents per share)	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 57,593 62,237 702,505 630,822 8.20 9.87

— 26 —

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

For the three months ended 31 March 2015 and 2014, the Company had two categories of dilutive potential ordinary shares, share options and RSUs. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to the outstanding share options and RSUs. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options and RSUs.

Profit used to determine diluted earnings per share Weighted average number of ordinary shares in issue (thousand shares) Adjustment for RSUs (thousand shares) Adjustment for share options (thousand shares) Weighted average number of ordinary shares for calculating diluted earnings per share (thousand shares) Diluted earnings per share (expressed in RMB cents per share)	Three months ended 31 March 2015 2014 RMB’000 RMB’000 (Unaudited) (Unaudited) 57,593 62,237 702,505 630,822 23,617 75,223 5,314 28,302 731,436 734,347 7.87 8.48

11. Dividends

The Board did not propose any interim dividend for the three months ended 31 March 2015 (for the three months ended 31 March 2014: nil).

A final dividend in respect of the year ended 31 December 2014 of RMB0.059 per share (equivalent to HKD0.075 per share), amounting to a total dividend of approximately RMB45,015,000, was proposed pursuant to a resolution passed by the Board on 11 March 2015 and subject to the approval of the shareholders at the annual general meeting to be held on 14 May 2015. This Interim Financial Information does not reflect this dividend payable.

— 27 —

12. Business combination

Pursuant to the agreement entered between the Group and certain independent third parties, the Group acquired 100% equity interests in Function Technology Co., Ltd and Shenzhen Guanhai Technology Co., Ltd. (深圳市觀海科技有限公司) on 5 January 2015, 100% equity interest in Shenzhen Fengxunsheng Technology Co., Ltd. (深圳市豐訊盛科技有限公司) on 15 January 2015, and 100% equity interest in Shenzhen Coalaa Network Technology Co., Ltd. (深圳市卡拉 網絡科技有限公司) on 3 March 2015 at a total consideration of RMB5,000,000. These four acquired companies are mainly engaged in development and operations of online card and board game business.

The following table summarizes the consideration, the fair value of assets acquired, and liabilities assumed at the acquisition dates.

Consideration	On acquisition dates
	RMB’000
Consideration payable	5,000
Recognized amounts of identifiable assets acquired and
liabilities assumed	On acquisition dates
	RMB’000
Cash and cash equivalents	19
Trade receivables	143
Prepayments and other receivables	116
Property, plant and equipment	181
Trademarks and technical know-how (included in intangible assets)	4,823
Trade and other payables	(7)
Deferred tax liabilities	(275)
Total identifiable net assets	5,000

The revenue included in the consolidated statement of comprehensive income since acquisition dates contributed by the four acquired companies was RMB18,889,000. The four acquired companies also recorded profit of RMB12,055,000 during the same period.

Had the four companies been consolidated from 1 January 2015, the consolidated statement of comprehensive income would show pro-forma revenue of RMB244,924,000 and profit of RMB53,088,000.

— 28 —

RECONCILIATION FROM UNAUDITED NET PROFIT TO UNAUDITED NON-IFRS ADJUSTED NET PROFIT

FOR THE THREE MONTHS ENDED 31 MARCH 2015

Revenue Cost of revenue Gross profit Selling and marketing expenses Administrative expenses Other income and gains — net Operating profit Finance income — net Share of profit of associates Profit before income tax Income tax expense Profit for the period Non-IFRS Adjustment Share-based compensation expense included in cost of revenue Share-based compensation expense included in selling and marketing expenses Share-based compensation expense included in administrative expenses Non-IFRS adjusted net profit

For the three months ended 31 March 2015 2014 Year-on-Year RMB’ 000 RMB’ 000 Change (unaudited) (unaudited) % 243,956 221,627 10.1 (112,651) (88,390) 27.5 131,305 133,237 (1.5) (47,908) (42,702) 12.2 (29,644) (26,645) 11.3 7,027 7,754 (9.4) 60,780 71,644 (15.2) 1,186 2,811 (57.8) 3,113 341 812.9 65,079 74,796 (13.0) (8,218) (12,559) (34.6) 56,861 62,237 (8.6) 1,786 3,766 (52.6) 678 1,430 (52.6) 2,050 4,322 (52.6) 61,375* 71,755 (14.5)

• Year-on-Year Change % represents a comparison between the current reporting period and the corresponding period last year.

— 29 —

The Board wishes to remind investors that the above financial information is based on the Group’s unaudited management accounts. Investors are cautioned not to unduly rely on such information and are advised to exercise caution when dealing in the securities of the Company.

By order of the Board of Boyaa Interactive International Limited ZHANG Wei

Chairman and Executive Director

Hong Kong, 13 May 2015

As the date of this announcement, the executive directors are Mr. ZHANG Wei, Mr. DAI Zhikang and Mr. GAO Junfeng; the non-executive director is Mr. ZHOU Kui; the independent non-executive directors are Mr. CHEUNG Ngai Lam, Mr. CHOI Hon Keung Simon and Mr. GAO Shaofei.

— 30 —