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公司公告

三七互娱:2018年半年度报告摘要(英文版)2018-08-27  

						Wuhu Shunrong Sanqi Interactive Entertainment Network

                 Technology Co., Ltd.


        Summary of 2018 Semi-Annual Report




                          1
Contents


I. Definitions ........................................................................................................................................ 3
II. Basic Information of the Company ................................................................................................. 3
III. Discussion and Analysis on Business Operation ........................................................................... 6
IV. Financial Statements .................................................................................................................... 15




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I. Definitions

                      Term                                                               Definition

CSRC                                                      China Securities Regulatory Commission

SZSE                                                      Shenzhen Stock Exchange

Company/the Company/Listed Company/Sanqi                  Wuhu Shunrong Auto Parts Co., Ltd./Wuhu Shunrong Sanqi Interactive
Interactive Entertainment                                 Entertainment Network Technology Co., Ltd.

Shanghai Sanqi Interactive Entertainment                  Sanqi Interactive Entertainment (Shanghai) Technology Co., Ltd.

Company Law                                               The Company Law of the People’s Republic of China

Securities Law                                            The Securities Law of the People’s Republic of China

                                                          Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd. / Articles
Articles of Association                                   of Association of Wuhu Shunrong Sanqi Interactive Entertainment
                                                          Network Technology Co., Ltd.

Auditor                                                   GP Certified Public Accountants (Special General Partnership)

Yuan or 10,000 Yuan                                       RMB yuan or RMB 10,000 yuan

Reporting Period/this Reporting Period                    From January 1, 2018 to June 30, 2018

End of Reporting Period/End of this Reporting
                                                          June 30, 2018
Period

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

                                                          A game that is downloaded over mobile network and runs on a mobile
Mobile game
                                                          phone or other mobile terminals.

RPG                                                       Role-playing games

ARPG                                                      Action role-playing game

SLG                                                       Strategy games

                                                          Net income attributable to shareholders of the listed company excluding
                                                          performance compensation income/expenses and related goodwill
                                                          impairment generated by business acquisitions, after tax income/loss
Adjusted net income/ (loss)
                                                          from disposal of equity investments and share-based compensation.
                                                          The Company uses this non-GAAP measure as supplemental measure to
                                                          review and assess its operating performance.


II. Basic Information of the Company

1. Company Profile


Stock Name                               Sanqi Interactive Entertainment                Stock Code       002555

                                                                  3
Place of Listing                         Shenzhen Stock Exchange

Original Stock Name (if any)

Contact Details                          Secretary to the Board of Directors                Representative of Securities Affairs

Name                                     Ye Wei

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

Tel.                                     0553-7653737

Email                                    ir@37.com

Note: in case of any change to the stock name of the Company from the beginning of the reporting period to the disclosure date of the
semi-annual report, the original stock name before the change shall also be disclosed.


2. Key Accounting Data and Financial Indicators

Does the Company need to retroactively adjust or restate accounting data of previous years?
□Yes □No

                                                                              Same Period of the Prior Year-On-Year
                                             Current Reporting Period
                                                                              Year                           Increase/Decrease

Operating income (RMB)                                    3,302,496,146.77               3,079,428,904.50                          7.24%

Net income attributable to shareholders of
                                                           801,378,948.23                 850,550,518.37                           -5.78%
the listed company (RMB)

Net income attributable to shareholders of
the listed company after deduction of                      761,182,531.85                 758,747,435.56                           0.32%
non-recurring profit and loss (RMB)

Net cash flow from operating activities
                                                           977,236,017.96                1,096,847,309.63                        -10.91%
(RMB)

Basic earnings per share (RMB/share)                                   0.37                           0.41                         -9.76%

Diluted earnings per share (RMB/share)                                 0.37                           0.41                         -9.76%

Weighted average yield of net assets                              12.58%                          17.18%                           -4.60%

                                             End     of     the    Current                                   Year-on-Year
                                                                              End of the Prior Year
                                             Reporting Period                                                Increase/Decrease

Total assets (RMB)                                        8,782,997,697.02               9,160,137,685.38                          -4.12%

Net assets attributable to shareholders of
                                                          5,961,804,254.78               7,016,770,210.85                        -15.03%
the listed company (RMB)

The Company considers and uses one non-GAAP measure, adjusted net income/ (loss), as supplemental measure to review and
assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation
or as a substitute for the financial information prepared and presented in accordance with China Accounting Standards. The
Company's adjusted net income is RMB 783,200,320.97 for the reporting period, which is defined as net income attributable to
shareholders of the listed company of RMB 801,378,948.23 excluding after tax income/loss from disposal of equity investments of
                                                                   4
RMB 18,178,627.26 (There is no performance compensation income/expenses or related goodwill impairment generated by business
acquisitions,    and share-based compensation during this reporting period). The adjusted net income for the same period last year is
RMB 769,335,085.67. The adjusted net income for the reporting period increased by 1.80% compared to last year.


3. Number of Shareholders and Their Shareholding Details

Note: Names of top 10 shareholders, numbers of their shares, and their rankings disclosed in the semi-annual report shall be based on
the register of shareholders made available by the clearing company. In addition, shares held by China Securities Finance
Corporation Limited in the Company, shares transferred to Central Huijin Investment Ltd., and shares held by various public
offerings of funds and trader assets management programs will not be consolidated.
Unit: share

                                                                           Total number of preferred
Total     number       of      common
                                                                           shareholders    whose    voting
shareholders at the end of the 55,499                                                                             0
                                                                           rights were resumed at the end
reporting period
                                                                           of the reporting period (if any)

Shareholding Status of Top 10 Shareholders

                                                                                                                  Pledge or Seizure
Name     of     the Capacity        of Shareholding    Number     of Number of shares held with
                                                                                                                  Status      of
shareholder        shareholder        ratio            shares          selling restrictions                                        Quantity
                                                                                                                  shares

                   Domestic
Li Weiwei                                     19.00%     403,658,052                           302,743,539 Pledge                     92,260,000
                   natural person

                   Domestic
Zeng Kaitian                                  17.38%     369,304,174                            36,930,418 Pledge                     57,900,000
                   natural person

                   Domestic
Wu Xushun                                      8.00%     170,037,782                                          0
                   natural person

                   Domestic
Wu Weihong                                     7.92%     168,204,662                           126,153,496 Pledge                     21,720,000
                   natural person

                   Domestic
Wu Weidong                                     7.04%     149,638,084                           125,653,563 Pledge                     27,800,000
                   natural person

                   Domestic
Hu Yuhang                                      3.00%      63,830,436                             9,590,040 Pledge                     10,310,000
                   natural person

CUAM –
Ningbo Bank –
Zhuhai Rongxi
                   Other                       2.78%      59,031,876                            59,031,876
Equity
Investment
Partnership (LP)

No. 2 asset
management
                   Other                       2.10%      44,604,486                            44,604,486
plan of CUAM
Fund – Ningbo

                                                                       5
Bank – CUAM
– Shunrong
Sanqi private
placement plan

Private equity
investment fund
phase 1 of
private
placement of
Shanghai
PanXin
                    Other                      1.56%      33,057,850                       33,057,850
Investment
Management
co., Ltd. –
Shanghai Pan
Feng
Investment
Center (L.P.)

Ningbo Xinda
Fengsheng           Domestic
Investment          non-state-owne             1.53%      32,467,532                       32,467,532 Pledge       32,467,500
Partnership         d legal person
(L.P.)

                                       1. Among the top 10 shareholders of the company, Wu Xushun and Wu Weihong are father and
Description        of    association daughter and Wu Xushun and Wu Weidong are father and son. Wu Xushun, Wu Weihong, and
relationship or acting in concert Wu Weidong are persons acting in concert. 2. The company was unaware of other association
of the said shareholders               relationship among other top 10 shareholders or existence of persons acting in concert as
                                       provided in the Administrative Measures for Takeover of Listed Companies.

Description        of   shareholders
involved in securities margin Not applicable
trading (if any)


4. Dividend payout proposal approved by the Board

The Board has considered and approved the following dividend payout proposal for common shareholders for the reporting period:
based on the Company’s total shares of 2,124,870,253, a cash dividend of RMB1.00 (tax inclusive) per 10 shares should be
distributed to all the common shareholders, with no share dividend converted from capital reserves.


III. Discussion and Analysis on Business Operation

1. Brief Introduction of Business Operation in the Reporting Period

The company is mainly engaged in cultural and creative business activities and the manufacturing and sales of plastic fuel tanks for

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automobiles. Within its cultural and creative business it includes the R&D, publishing and operation of mobile and browser games.
Furthermore it has recently seen a large expansion into film, television, animation and comics, music, and VR.
The company steadily pushed forward its IP-centered, “platformization and globalization” development strategy for its cultural and
creative business in this reporting period, ranking the 23rd among China’s Top 100 internet companies in term of comprehensive
strength and 1st among A-share listed game companies.
In the reporting period, the company achieved an operating revenue of RMB 3.302 billion, up by 7.2% year on year; pre-tax profit
was RMB 919 million, down by 9.6% year on year; net income attributable to shareholders of the listed company was RMB 801
million, down by 5.8% year on year; and net income attributable to shareholders of the listed company after deduction of
non-recurring gains and losses was RMB 761 million, up by 0.32% year on year.
The variation in the net income attributable to shareholders of the company mainly resulted from the company’s disposal of its equity
in Shanghai Zheyuan Co., Ltd. and Shanghai Aurora Network Technology Co., Ltd. During the same period of the prior year,
shareholders net income on investment was recognized to be RMB 167 million, while there is no significant equity disposal from
January to June in 2018.
The variation in net income attributable to shareholders of the company after deduction of non-recurring gains and losses mainly
resulted from continuous growth of the mobile game business.


2. Brief Introduction of the Industry and Operation Environment

1)   Changes in the economic situation of the industry and their impact on the Company
According to China’s Game Industry Report of January to June 2018 jointly published by Game Publishing Working Committee of
China Audio-Video and Digital Publishing Association and GNC, the actual sales revenue of China’s game market amounted to RMB
105 billion from January to June 2018, up by 5.2% year on year. The number of players during this period in China was 530 million,
up by 4.0% year-on-year; the actual sales revenue of China’s mobile game market reached RMB 63.41 billion, 12.9% higher than the
same period of the prior year. Mobile games remained the main driving force for the growth of the overall games market.
In the reporting period, the gross billing of domestic mobile game business of the company amounted to RMB 3.34 billion, up by
55.3% year on year; mobile game business revenue saw a year-on-year increase of 39.1%, faster than industry averages. Based on the
actual sales revenue of the mobile game market as disclosed in the China’s Game Industry Report of January to June 2018, which
equates to RMB 63.41 billion, the mobile game business of the company occupied a market share of 5.3% in terms of gross billing.
As of the date of this report, the company expects the gross billing of its domestic mobile game business to be from RMB 2.2 billion
to RMB 2.7 billion in the third quarter, 36.2% to 67.2% higher than the prior quarter, owning a larger market share. The company
intends to enhance its portfolio of high-quality product lines by increasing R&D investment and strengthening cooperation with
developers, and to cooperate more closely with other channels and platforms. This is intended to further seize opportunities of growth
and to expand both scale and market share in the industry. With regards to browser games, the company intends to maximize its core
advantages in browser game operations and to further improve user experiences, retain existing users, and achieve steady operating
revenue.


2)   Changes in policy environment of the industry and their impact on the Company
The General Office of CPC Central Committee and the General Office of the State Council printed and distributed the Outline of the
National Plan for Cultural Development and Reform during the Period of the Thirteenth Five-Year Plan in May 2017, which sets
forth the requirements for “optimizing the structure and layout of the culture industry and accelerating development of emerging
industries including online audiovisual programs, mobile multimedia services, digital publishing, animation, comics and games,
creative designs, and 3D movies and Image Maximum movies”, and supports development of the game industry.
During the reporting period, the company actively reacted to any requirement changes in the industry and increased its input into

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high-quality games with innovative gameplay. In the meantime, it protected its intellectual property rights and ensured business
operation is in compliance with laws and regulations.




3. Products of the Company and Principal Operation Modes

The Company is mainly engaged in cultural and creative business activities and the manufacturing and sales of plastic fuel tanks for
automobiles. Within its cultural and creative business it includes the R&D, publishing and operation of mobile and browser games.
Furthermore it has recently seen a large expansion into film, television, animation and comics, music, and VR.
The company operates mobile games and browser games mainly through independent operations and joint operations with third
parties.
In terms of independent operations, the company obtains the right to game operations through independent R&D or license
agreements. It publishes and operates the games through its own or third parties’ channels. The company takes full charge of game
operations, promotions and maintenance. Furthermore it uniformly manages the launching and promotion of the games, customer
services, top-up and payment collection, feedback collating from users and games, and constantly updates and upgrades the products
together with developers.
In joint operations with third parties, the company cooperates with one or more game company to jointly operate a game. Third-party
game companies are responsible for the operations, promotion, top-up service, and recharge system of their own channels, while the
company and the developer jointly provide technical support.
There was no significant change in the main business, major products and operation modes, or main performance drivers of the
Company in the reporting period.




4. Core Competitiveness of the Company

The Company has been steadily pushing forward its IP-centered, “platformization and globalization” development strategy for its
cultural and creative business and established the following core competitiveness:


1. Strong Team
After years of operation in the cultural and creative industry, the company has built a core team of R&D elites, experienced publishers, and outstandin
staff with leadership skills through an effective support system, implementing incentive mechanisms, creating inspiring environments, and holding
recreational events. Its core team is solid with the prospective strategy layout ability, creative and vital skills, and executive power. Enterprising and
perseverant, it will help the company to make constant outstanding achievements in the industry.


2. Expertise in publishing
The company continued to play a vital role in the domestic mobile game publishing market in the reporting period. The Q1 2018
Quarterly Data Release and Research Report of China’s Interactive Entertainment Industry of iResearch showed that, the company
ranked third among listed game enterprises in China’s mobile game market, following Tencent and Netease, in the first quarter of
2018; it continued to take a leading position in domestic browser game field; and it also maintained an advantageous position in
overseas markets, including Hong Kong, Macao, Taiwan, Southeast Asia, Europe, and America. The company has accumulated rich
experience in mobile and browser game publishing, which assured an edge over competitors.
With respect to products, the company, due to an excellent performance and in-depth cooperation with a number of outstanding
developers and companies by means of investment and shareholding, has accumulated an abundance of resources. The company
applies a strict and quality assurance procedure to select and source high-quality products. The aim for long term operational
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developments and are, constantly adjusting and optimizing products, to attract users with better content and ultimately achieving
higher gross billing and revenue.
In terms of users, the company focusess on traffic operation and has accumulated profound experience in promotion and publishing
channels. It understands users of different channels, hence it can constantly and precisely introduce higher-quality games to target
players. On the one hand, the company was able to anticipate the needs of users by reading data and carried out customized treatment
for different users while cutting the customer acquisition cost; on the other hand, the company accumulated an abundance of
experience in exploring overseas markets, which provides a head start for further expansion in the future.
With respect to service, the company is dedicated to providing players with a detail-centered and comprehensive supporting service.
The company operates a flawless player account system, customer service system, and runs an experienced customer service team,
which, in combination with an abundant supply of products, offers players a wide option of games and one-stop service. Through
this,, the company, guided by the “platform building” strategy, is capable of further improving gaming experiences, activities, and
retention rates thus, increasing its revenue and advertising efficiency.
The Company was awarded “2017 Top 10 Globalized Brands” and “2017 Top 10 Enterprises Making Prominent Contributions to the
Game Industry” with its publishing strength over diversified competition at "China’s Game Awards" sponsored by xinhuanet.com
under the guidance of the Office of Central Leading Group for Cyberspace Affairs and the Ministry of Public Security of the
People’s Republic of China in the reporting period.


3. High-quality game R&D ability
    The company has independently developed and continues to do so a series of core technologies, such as advanced game engines
and frameworks, which, provide support for an all round excellent performance for popular online games. The company guarantees
to constantly launch high-quality games. Through proven core technologies and experience, the company can reduce costs and time
for R&D without compromising product quality, and to timely launch competitive games to get a head start in the market. The big
data analysis system independently developed by the company is capable of collecting, integrating, and analyzing a mass user
consumption and behavior database. For product improvement, the system examines user preference, behavior patterns, consumption
habits, etc., and provides critical insights for future product designs and general improvements. This allows the company to optimize
procedures of product development. The company has also adopted a market-orientation approach which is focused on sustainable
development with the help of its in-depth understanding of players’ demands in game operation business. The company balances the
commercial and entertainment properties of a product and is able to launch independently-developed, highly-successful, and long life
cycled products that are positively received by the market. As of the date of this report, the Company is developing two browser
games, Xue Meng Rong Yao (血盟荣耀) and MU X (奇迹X(暂定名)), and ten mobile games, namely Swords of Archangels (大天
使之剑(客户端版)), Soul Land H5(斗罗大陆H5), Mobile Game S, Mobile Game X of Mir(手游项目X(传奇类)), Tu Long
Po Xiao(屠龙破晓), Chao Neng Meng Qiu(超能萌球(暂定名)), Mobile Game T, Mobile Game E, Mobile Game F and H-Game.
Based on its competitive advantages, the company is expected to launch long-cycled popular games that are comparable to Yong
Heng Ji Yuan (永恒纪元), Chuan Qi Ba Ye (传奇霸业), and Swords of Archangels (大天使之剑).


4. Coordination of upstream and downstream business
The business structure of the company, which integrates R&D and operation, helps fully utilize resources and develop popular
products. In research and development of new products, inspiration comes from previous successful experiences. It utilizes its strong
R&D strength, with constant product improvement, adjustment and optimization based on market demands, and further increases the
success rate.
The company closely cooperates with a number of excellent content providers and front-line game developers in the form of equity
investment and strategic cooperation. The upstream business is able to constantly provide materials for the R&D business with
respect to IP and original contents while meeting the diversified demands of the publishing products.
Pragmatism and excellent performance enable the company to successfully establish close cooperation with numerous media and

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publishing channels and enhance its bargaining power before channel providers. In this way, the company is able to get access to
more high-quality channel resources at the same cost.




5. Discussion and Analysis on Business Operation

                                                                        January   -     June     January   -    June   Year-on-year
      Key performance indicators
                                                                        2018                     2017                  variation
      Operating income (RMB 100,000,000)                                               33.02                   30.79                  7.2%
      Pre-tax profit (RMB 100,000,000)                                                  9.19                   10.17                 -9.6%
      Net income attributable to shareholders of the company                            8.01                    8.51                 -5.8%
      (RMB 100,000,000)
      Adjusted net income ((RMB 100,000,000)                                            7.83                    7.69                  1.8%
      Net cash flow from operating activities ((RMB 100,000,000)                        9.77                   10.97                -10.9%
      Basic earnings per share (RMB/share)                                              0.37                    0.41                 -9.8%
      Weighted average yield of net assets                                        12.71%                   17.18%                   -4.47%


The Company, steadily pushed forward its IP-centered, “platformization and globalization” development strategy for its cultural and
creative business in this reporting period and maintained its leading position in domestic market in terms of comprehensive strength;
the auto parts business however saw a slight decrease.
The company achieved operating revenue of RMB 3.302 billion, 7.2% higher year on year in the reporting period. The growth of the
mobile game publishing and R&D business was the main driving force for growth of overall income in the current period.
The pre-tax profit and net income attributable to shareholders of the Company amounted to RMB 919 million and RMB 801 million,
down by 9.6% and 5.8% year on year, respectively. The relative profit declined somewhat because of incomes from disposal of large
equity investment in the same period of the prior year but none in the current period.
The company adopted one non-GAAP measure, adjusted net income/(loss), as a supplementary indicator to measure its actual
operation performance. The ajusted net income of the company was RMB 783 million in the current period, increasing by 1.8%
year-on-year. The profit increase was mainly driven by the continuous growth of the mobile game business.


(I)     Cultural and creative business
1.      Mobile game business


      Indicators                                               January - June 2017             January - June 2018     Year-on-year
                                                                                                                       variation
      Revenue from mobile games (RMB 100,000,000)                                 15.43                        21.46                39.1%

         ARPG                                                                     11.08                        15.49                39.8%
             Eastern magic games                                                         -                      1.28               100.0%
             Western magic games                                                         -                      4.38               100.0%
             Fantasy games                                                        10.90                         6.58                -39.6%
             Mystery games                                                               -                      0.50               100.0%
             Exploration games                                                           -                      1.73               100.0%
             Immortality games                                                        0.01                      0.96               9500.0%
             Other subjects                                                           0.17                      0.06                -64.7%

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      MOBA games                                                                   0.49                     0.59                20.4%
      RPG                                                                          1.29                     3.66               183.7%
      Card games                                                                       -                    0.12               100.0%
      SLG                                                                          1.33                     1.04               -21.8%
      Others                                                                       1.24                     0.56               -54.8%


Both the revenue from mobile game business and input in R&D grew, and the mobile game business continued to take a leading
position in domestic market and a number of overseas markets. In the reporting period, the operating revenue from the mobile game
business and its gross profit reached RMB 2.146 billion and RMB 1.665 billion, 39.1% and 38.8% higher year on year, respectively.
The Company mainly implemented the strategy of “ARPG + diversified categories” in mobile game R&D and publishing in 2018. A
total of 25 mobile games of different categories are launched in the first half of 2018, further enriching the experience of the
company in publishing different games. Revenue from ARPG mobile games increased by 39.8% and that from RPG mobile games
183.7% in the reporting period, marking a successful step.


(1) Mobile game publishing
Domestic market: the company continued to play a vital role in domestic mobile game publishing market. According to Q1 2018
Quarterly Data Release and Research Report of China’s Interactive Entertainment Industry of iResearch, the Company ranked third
among listed game companies in China’s mobile game market in the first quarter of 2018, following Tencent and Netease. the
Company, based on its capability of operating different games, adjusted its publishing strategy from simple “ARPG + SLG” to
“diversification” in the reporting period. In the meantime, relying on its in-depth understanding of user demands, the company joined
hands with developers to push forward product adjustment and optimization and launched attractive and high-quality games to the
market through constant improvements. The company sought product operation and development in the long run. It continued to
invest in long-cycled popular games such as Eternal Crusade and Swords of Archangels H5, which contribute a great deal to the
gross billing and profit of the company. As of the date of this report, the company had obtained the exclusive right to operate a
number of mobile games, including Bing Ren Da Zhan (兵人大战), Sword and Rebirth (剑与轮回), Jing Ling Qi Yue (精灵契约),
SNK All Star (working title) (SNK全明星(暂定名)), Ling Jian Xian Shi (灵剑仙师), and rich reserves of independently-developed
games such as Soul Land H5 (斗罗大陆H5). By the date of this report, the new ARPG games, including Tu Long Po Xiao(屠龙破
晓), released in July, has achieved significant results, and is expected to drive the growth of the company in the latter half of the year.
As of July 2018, the company’s monthly gross billing of mobile games in domestic market has exceeded RMB 700 million, and it
tends to grow further.
Overseas markets: the company continued its advantages in overseas markets and further executed its global strategies. In the
reporting period, the company constantly updated and iterated its flagship product, Yong Heng Ji Yuan(永恒纪元), which made
contributions to the profit in Hong Kong, Macao, Taiwan, Southeast Asia, Europe, America, and Korea. At the end of the reporting
period, the game was published in Japan, helping the company to explore the Japanese market. In the reporting period, Swords of
Archangels H5(大天使之剑H5) rose to the top of bestselling games in merely two months after its launching in Taiwan. Clans of
Intrigue(楚留香), an MMORPG launched on 5 July, achieved remarkable results in the Taiwan market. It ranked first among
best-selling games in terms of downloads only three days after launching. As of the date of this report, popular and upcoming games
operated by the company included the fighting card game KOF: Destiny(拳皇命运), love card game Half-the-World Journey(半
世界之旅), 2-D game Dengeki Bunko: Crossing Void(电击文库:零境交错), 2-D game Dream Link(梦境链接), RPG game
Era of Chaos, Code M-RPG, SLG game Three Kingdoms(墨三国), MOBA game Stonecraft(石器争霸), SLG game Lords of
Conquest, SLG game Primal Wars: Dino Age and, Kingdom and Beauty(江山美人). Upcoming games are expected to be launched
in overseas markets in the latter half of the year, assisting in overseas expansion.
In the reporting period, the company was awarded “2017 Top 10 Globalized Brands” at “China Game Awards”, and was selected to
“2017 World Top 52 APP Publishers” by App Annie, a world-renowned data organization.

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(2) Mobile games research and development
The Company continued to increase its investment in R&D of its mobile games business. In research and development of mobile
game products, the company is constantly active in design and innovation. It is dedicated to improving the product engine,
performance and art quality, so as to meet the increasing demand of users for high-quality game experience.
The company updated and iterated several long-cycled popular games that had been launched in the reporting period. For example, it
attempted to recall the memories of veteran players and make the game more appealing through better images and sound effects in
Chuan Qi Ba Ye (传奇霸业); it met the needs of players for “log-in and play” by integrating data from PC clients and mobile clients
in Swords of Archangels H5 (大天使之剑H5); in Yong Heng Ji Yuan (永恒纪元), the company, adapted to the market environment
by featuring precise traffic purchasing, improved player experience by innovative gameplay, in-game, enhanced its economic system
and updated vivid graphics. In addition, the company launched five independently-developed games in the reporting period,
including Fighter of the Destiny (择天记) and Swords of Archangels H5(大天使之剑H5) (for Hong Kong, Macao, and Taiwan).
The company began to set foot on research and development of casual games and turn-based games in the reporting period. In the
future, the target 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
genres, gameplay and to actively expand its product lines.
As of the end of the reporting period, the company was developing ten mobile games, namely Swords of Archangels (大天使之剑
(客户端版)), Soul Land H5(斗罗大陆H5), Mobile Game S, Mobile Game X of Mir(手游项目X(传奇类)), Tu Long Po Xiao
(屠龙破晓), Chao Neng Meng Qiu(超能萌球(暂定名)), Mobile Game T, Mobile Game E, Mobile Game F and H-Game.


2.   Browser game business
More than 20,000 new servers were opened in the first half of 2018 in the domestic market, topping the ranking list of operation
platforms in term of server opening (source of data from 9k9k). It continued to play a leading role in the industry in terms of market
share.
In the reporting period, the operating revenue from the browser game business reached RMB 910 million, a slight drop year on year,
which was mainly due to users’ shift to mobile clients and reduction in browser game products. User adhesiveness and platform
influences were enhanced by improving the user’s game experience, while strengthening cooperation with domestic top browser
game developers by investment and business cooperation. In the first half of 2018, the launch of The Rise of Taichi(太极崛起) and
other excellent games further stabilized the operating revenue. The open beta test of the browser game Demon Seals(镇魔曲网页版)
will be launched in the latter half of 2018 commenced in early July. The continuation of research and development of browser games
will further allow adaptation to changing market needs. The open beta test of the independently-developed Xue Meng Rong Yao (血
盟荣耀) was released in early July. MU X, which is under development, and The Legendary Swordsman(笑傲江湖), the game to be
operated by the company as an agent, are expected to be launched in the next half of the year.


3.   Other cultural and creative business
The company maintains its existing investments in films and television, music, animation, and VR. According to the future
investment plan, there will be a key focus centering a strategy on quality content, investing in other fast-growing cultural and
entertainment fields, utilizing operations, expanding into more fields, investing in companies in content realization and strategic
coordination. In addition to film and television, animation, music, and VR, further investment will be in education, sports, social
media, and preschool education, in order to build a brand that provides quality contents to users of all ages. By the date of the report
business has been extended to tens of millions of young users through following investment: YHKT Entertainment, an original
animation company; Junengwan, the first real comic platform in China; Wake, the first online yoga platform in China and domestic
popular idol bands. In addition, there are plans to enlarge its user group to infants through business involvement in preschool
education, so as to cover users of all ages. Through strategic coordination with invested companies and expansion in the future,

                                                                  12
high-quality content and services can be provided to users of all age brackets and become a cultural and creative brand that
accompanies the growth of the young generation of China.


4.     IP strategy
Combining its strength in game businesses and continuation of exploiting high-quality IP for development of competitive games, the
the company acquired the IP rights of Astro Boy, Seal OL, and added the IP cooperative project Soul Land in the reporting period. IPs
that were in the stage of development in the reporting period included MU (browser game MU X and mobile game Swords of
Archangels), and Soul Land (mobile game Soul Land H5). In addition to direct purchasing high-quality IPs, the Company and
Century Huatong entered into an agreement in the reporting period, according to which, the parties would strategically cooperate in
game R&D and operation and IP-adapted resources. The Company will continue to build its cultural and creative strategy system,
satisfy the diversified demands for users for entertainment, and exploit the value extension space of IP in film and television, game,
animation and comic, music, and VR in depth on the basis of its excellent IP strategy.


(II)   Automobile parts business
There was a decline in revenue and profit of the automobile parts business of the Company in the reporting period.




6. Revenue and Cost Analysis

Unit: RMB

                                                                               Year-on-year          Year-on-year        Year-on-year
                     Operating
                                        Operating cost      Gross profit       variation        of variation        of variation of gross
                     revenue
                                                                               operating revenue operating cost          profit

Industries

Online        game
                     3,071,123,194.02     716,040,586.48              76.68%               10.58%               -5.92%             4.09%
industry

Automobile parts
                       231,372,952.75     170,233,013.97              26.42%               -23.42%             -21.86%             -1.47%
industry

Products

Browser games          910,103,611.46     234,874,537.56              74.19%               -24.95%             -43.83%             8.67%

Mobile games         2,145,744,221.56     481,166,048.93              77.58%               39.10%              40.29%              -0.19%

Others                  15,275,361.00                0.00            100.00%               -30.62%              0.00%              0.00%

Automobile parts       231,372,952.75     170,233,013.97              26.42%               -23.42%             -21.86%             -1.47%

Regions

Domestic             2,828,407,922.34     783,422,516.41              72.30%                8.64%              -10.54%             5.94%

Overseas               474,088,224.43     102,851,084.04              78.31%                -0.41%              -0.42%             0.00%



Cost composition of main business
Unit: RMB

Cost composition       Current Reporting Period                      Same Period of the Prior Year                  Year-on-year

                                                                    13
                                                 Proportion   in    the                           Proportion   in    the variation
                         Amount                                           Amount
                                                 operating cost                                   operating cost

Game commission              633,845,493.29                   71.52%          680,490,259.80                   69.51%                2.01%

Cost of servers               43,827,578.58                       4.95%        37,705,465.73                       3.85%             1.09%

Amortization        of
                              22,131,700.53                       2.50%        42,039,126.54                       4.29%             -1.80%
royalty

Production cost                    503,238.47                     0.06%             765,752.79                     0.08%             -0.02%

Other costs                   15,732,575.61                       1.78%             114,933.11                     0.01%             1.76%

Direct materials             134,734,499.98                   15.20%          180,478,949.01                   18.44%                -3.23%

Direct labor cost                 8,281,182.96                    0.93%            8,535,911.02                    0.87%             0.06%

Manufacturing
                              27,217,331.03                       3.07%        28,838,008.32                       2.95%             0.13%
expenses

Total                        886,273,600.45                   100.00%         978,968,406.32                   100.00%               0.00%




7. Risks of the Company and Countermeasures

1. Market competition risks and countermeasures
The online game industry has developed a fierce industrial competition in products and market channels. With the development of
entertainment and internet industries, online game users have increasingly higher standards for game products. A more intense
market competition will put pressure on the developments for products and market channels.
In response, harnessing experience and accumulation in research and development of successful products and abundant IP resources
will be needed to move forward. Strategic cooperation with upstream producers will be implemented by means of investment and
shareholding, so as to constantly produce more mobile and browser games and retain users with competitive games. In market
channels, the company will maximize the first-mover advantages in overseas game markets, accelerate expansion of overseas
businesses and increase the contributions of overseas markets to the operating revenue so as to constantly improve core competitive
power in overseas markets.


2. Operation 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 game industry encounters a significant technological revolution, but game enterprises fail to catch up, 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 research and development is needed and there will be a continuation and extension of
development in upstream layouts by means of investment, shareholding, and merger and acquisition. Furthermore, the examination of
operations data in depth, constantly updating and understanding the change in target users’ preference, and timely adjusting its
operation strategy and research and development direction will be implemented so as 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. A series of internal control systems to define and classify security accidents and
respond in time to possible data security problems have also been implemented. Information security audits take place once every six
                                                                 14
months for systematic control of information security risks. In terms of privacy protection,the new Privacy Policy was established
and 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 will make sure it runs the business
in compliance with applicable laws and regulations throughout the world, to safeguard users personal information. A response
procedure to inform users of any possible security cost and what necessary actions need to be taken is also in place to ensure users
can manage their own personal information.


3. Risks of core employee turnover and countermeasures
As this is an online game enterprise without many fixed assets, a stable and high-quality game developer team is an important and
necessary guarantee to maintain its technological edge. If the company fails to effectively maintain and constantly perfect the
incentive mechanism for core employees under the change of environment, the employees' enthusiasm and creativity will be affected,
even resulting in resignation of core employees. If the company fails to recruit and retain technological and operation talents required,
its business operation, development, profitability will suffer.
In response, much attention has been given to cultivation and acquisition of professional talents. It creatively builds a platform-based
talent management mechanism, according to which excellent game producers are rewarded with high project bonus, while they are
given discretion of research and creation. Agreements are entered with core employees, creating a favorable working environment,
and developing a healthy corporate culture for employee loyalty. Further more, the company puts emphasis on employee training and
enhancing their sense of belonging, especially for core employees and executives. In this way, they can feel that they are owners of
the company and be more loyal to the company.


IV. Financial Statements

Numbers in the financial statements shall be denominated in Renminbi.


1. Consolidated balance sheet

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

Item                                       Closing balance                                 Opening balance

Current assets:

       Monetary capital                                                 1,538,659,591.57                              1,580,910,931.98

       Notes receivable                                                   46,200,000.00                                  55,340,000.00

       Accounts receivables                                              942,845,341.12                                 884,909,012.77

       Advance payments                                                  295,733,066.09                                 283,516,789.29

       Interest receivable                                                      5,095.89                                     582,592.17

       Dividends receivable                                                 1,194,183.75

       Other receivables                                                 322,191,024.83                                 388,111,919.85

       Inventory                                                          71,471,268.40                                 101,828,085.31

       Assets held for sale                                              337,765,050.83                                  75,066,714.34

       Other current assets                                              192,520,546.20                                 592,189,323.99
                                                                   15
Total current assets                            3,748,585,168.68   3,962,455,369.70

Non-current assets:

     Available-for-sale financial assets         651,972,479.13     882,481,586.86

     Long-term equity investment                 397,333,972.65     376,972,832.08

     Fixed assets                                288,015,211.62     292,395,887.17

     Construction in progress                     72,389,566.29      50,672,878.42

     Intangible assets                            42,485,019.45      44,898,112.29

     Development expenditure                        5,719,543.20       4,070,272.43

     Goodwill                                   2,540,312,996.76   2,540,312,996.76

     Long-term deferred expenses                  73,666,966.77      79,803,089.59

     Deferred income tax assets                   13,492,897.73      11,810,692.92

     Other non-current assets                    949,023,874.74     914,263,967.16

Total non-current assets                        5,034,412,528.34   5,197,682,315.68

Total assets                                    8,782,997,697.02   9,160,137,685.38

Current liabilities:

     Short-term loans                            649,000,000.00     372,054,500.00

     Accounts payable                            828,053,099.62     741,792,973.33

     Payments received in advance                 79,760,060.61      84,886,734.84

     Payroll payable                              87,340,794.43     113,480,021.50

     Taxes payable                                41,152,839.18      58,281,315.47

     Interest payable                                538,984.56         390,533.38

     Dividends payable                           212,487,025.30

     Other payable                               396,389,893.71      61,572,020.26

     Non-current liabilities due within
                                                  28,849,024.11      28,117,893.57
one year

     Other current liabilities                    60,837,165.93      57,738,251.19

Total current liabilities                       2,384,408,887.45   1,518,314,243.54

Non-current liabilities:

     Long-term loans                             296,165,631.48     310,775,272.06

     Bonds payable                                27,257,539.12      27,163,239.26

     Deferred income                                9,276,581.42     17,226,474.44

Total non-current liabilities                    332,699,752.02     355,164,985.76

Total liabilities                               2,717,108,639.47   1,873,479,229.30

Owner’s equity:


                                           16
       Share capital                                                2,124,870,253.00                            2,148,110,844.00

       Other equity instruments                                         1,947,846.62                                1,947,846.62

       Capital reserves                                              363,981,730.68                             1,972,639,580.66

       Other comprehensive incomes                                    -37,047,030.32                              -25,087,592.30

       Surplus reserves                                                99,561,946.09                               99,561,946.09

       Undistributed profit                                         3,408,489,508.71                            2,819,597,585.78

Total owner’s equity attributable to the
                                                                    5,961,804,254.78                            7,016,770,210.85
parent company

       Minority interests                                            104,084,802.77                               269,888,245.23

Total owner's equity                                                6,065,889,057.55                            7,286,658,456.08

Total liabilities and owner's equity                                8,782,997,697.02                            9,160,137,685.38


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


2. Balance sheet of the parent company

Unit: RMB

Item                                         Closing balance                           Opening balance

Current assets:

       Monetary capital                                                71,772,220.68                                5,437,518.91

       Dividends receivable                                          200,000,000.00

       Other receivables                                             786,037,356.83                             1,655,547,345.04

       Assets held for sale                                            69,996,897.11                               69,996,897.11

       Other current assets                                             2,799,462.88                              403,527,827.28

Total current assets                                                1,130,605,937.50                            2,134,509,588.34

Non-current assets:

       Available-for-sale financial assets                             60,000,000.00                               60,000,000.00

       Long-term equity investment                                  7,153,123,823.31                            5,754,424,925.15

       Deferred income tax assets                                       2,707,172.67                                3,334,186.37

       Other non-current assets                                        50,000,000.00                               50,000,000.00

Total non-current assets                                            7,265,830,995.98                            5,867,759,111.52

Total assets                                                        8,396,436,933.48                            8,002,268,699.86

Current liabilities:

       Short-term loans                                              649,000,000.00                               369,000,000.00

       Payroll payable                                                   283,731.30                                   539,632.89

       Taxes payable                                                                                               17,271,522.21

                                                               17
       Interest payable                                                             538,984.56                                      390,533.38

       Dividends payable                                                     212,487,025.30

       Other payable                                                         909,771,145.77                                      565,086,466.06

       Other current liabilities                                                  1,266,932.04                                      936,428.02

Total current liabilities                                                   1,773,347,818.97                                     953,224,582.56

Non-current liabilities:

Total non-current liabilities

Total liabilities                                                           1,773,347,818.97                                     953,224,582.56

Owner’s equity:

       Share capital                                                        2,124,870,253.00                                 2,148,110,844.00

       Capital reserves                                                     4,023,809,854.19                                 4,401,934,248.25

       Surplus reserves                                                       99,561,946.09                                       99,561,946.09

       Undistributed profit                                                  374,847,061.23                                      399,437,078.96

Total owner's equity                                                        6,623,089,114.51                                 7,049,044,117.30

Total liabilities and owner's equity                                        8,396,436,933.48                                 8,002,268,699.86


3. Consolidated income statement

Unit: RMB

Item                                             Accruals in the current period                   Accruals in the prior period

I. Total operating revenue                                                  3,302,496,146.77                                 3,079,428,904.50

       Including: operating revenue                                         3,302,496,146.77                                 3,079,428,904.50

II. Total operating costs                                                   2,447,475,704.34                                 2,305,547,913.50

       Including: operating costs                                             886,273,600.84                                     978,968,406.32

               Taxes and surcharges                                            15,844,704.11                                      11,835,813.83

               Sales expense                                                1,143,478,494.94                                     894,395,258.33

               Overheads                                                      385,778,790.51                                     406,200,167.32

               Financial expenses                                              13,958,433.93                                      14,277,887.24

               Asset impairment loss                                              2,141,680.01                                      -129,619.54

       Add: gains from changes in fair
value (represented in “-” for loss)

                       Investment       income
                                                                               23,747,705.64                                     209,368,987.93
(represented in "-" for loss)

             Including: investment income
from associated enterprise and joint                                              -4,090,378.50                                   -6,778,392.90
venture

                                                                       18
                   Gains from asset disposal
                                                              4,411.96       -625,274.29
(represented in “-” for loss)

                Other incomes                            42,885,206.03     33,482,273.74

III. Operating profit (represented in "-"
                                                        921,657,766.06   1,016,106,978.38
for loss)

        Add: Non-operating revenue                        1,076,547.10        589,454.30

        Less: Non-operating expenditures                  3,487,862.12        125,417.98

IV. Pre-tax profit (represented in "-" for
                                                        919,246,451.04   1,016,571,014.70
total loss)

        Less: Income tax expense                         36,437,882.35     64,889,299.38

V. Net income (represented in “-” for net
                                                        882,808,568.69    951,681,715.32
loss)

          (I) Net income of continued
operations (represented in “-” for net                882,808,568.69    951,681,715.32
loss)

        Net income attributable to owners of
                                                        801,378,948.23    850,550,518.37
the parent company

        Minority interest income                         81,429,620.46    101,131,196.95

VI. Other net comprehensive incomes
                                                        -12,085,783.31     -26,957,663.51
after tax

     Other comprehensive incomes after tax
attributable to owners of the parent                    -11,959,438.02     -27,310,344.67
company

        (II) Other comprehensive incomes
that can be reclassified as profit or loss in           -11,959,438.02     -27,310,344.67
the future

                  2. Profit and loss on changes
in      fair     value   of   available-for-sale        -16,780,009.82     -28,155,236.82
financial assets

                   5. Converted difference in
                                                          4,820,571.80        844,892.15
foreign currency statements

                  6. Others

     Other comprehensive incomes after tax
                                                           -126,345.29        352,681.16
attributable to minority shareholders

VII. Total comprehensive incomes                        870,722,785.38    924,724,051.81

               Total   comprehensive    income
attributable to owners of the parent                    789,419,510.21    823,240,173.70
company


                                                   19
          Total    comprehensive        incomes
                                                                                 81,303,275.17                                   101,483,878.11
attributable to minority shareholders

VIIII. Earnings per share:

       (1) Basic earnings per share                                                        0.37                                            0.41

       (2) Diluted earnings per share                                                      0.37                                            0.41

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


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


4. Income statement of the parent company

Unit: RMB

Item                                            Accruals in the current period                    Accruals in the prior period

I. Operating revenue                                                                       0.00                                     751,646.53

       Less: Operating cost                                                                0.00                                       31,646.53

              Taxes and surcharges                                               1,024,725.00                                       392,705.30

              Sales expense                                                                0.00

              Overheads                                                          6,601,859.21                                      9,362,828.12

              Financial expenses                                                 5,213,002.36                                      9,914,533.98

              Asset impairment loss                                              -2,508,054.79                                    -2,504,511.65

       Add: gains from changes in fair
                                                                                           0.00
value (represented in “-” for loss)

         Investment income (represented
                                                                              198,698,898.16                                     109,600,158.10
in "-" for loss)

              Including: investment income
from associated enterprise and joint                                             -1,301,101.84                                      -943,153.97
venture

               Gains from asset disposal
                                                                                           0.00
(represented in “-” for loss)

              Other incomes                                                           50,943.38

II. Business profit (“-” for loss )                                         188,418,309.76                                      93,154,602.35

       Add: Non-operating revenue                                                          0.00

       Less: Non-operating expenditures                                                5,483.09

III. Pre-tax profit (represented in “-” for
                                                                              188,412,826.67                                      93,154,602.35
total loss)

       Less: Income tax expense                                                    515,819.10                                     18,085,464.76


                                                                        20
IV. Net income (represented in “-” for
                                                                              187,897,007.57                                     75,069,137.59
net loss)

         (I) Net income of continued
operations (represented in “-” for net                                      187,897,007.57                                     75,069,137.59
loss)

VI. Total comprehensive incomes                                               187,897,007.57                                     75,069,137.59

VII. Earnings per share:

        (1) Basic earnings per share

        (2) Diluted earnings per share


5. Consolidated cash flow statement

Unit: RMB

Item                                            Accruals in the current period                   Accruals in the prior period

I. Cash flows from operating activities:

        Cash received from the sales of
                                                                             3,438,837,552.44                               3,406,760,557.65
goods or rendering services

        Cash received from tax refunds                                           26,890,901.13                                   21,837,951.79

        Other cash received relating to
                                                                                 23,960,147.51                                   25,950,170.88
operating activities

Sub-total of cash inflow from operating
                                                                             3,489,688,601.08                               3,454,548,680.32
activities

        Cash paid for goods acquired and
                                                                              764,126,180.75                                1,048,871,934.37
services received

        Cash paid to and on behalf of
                                                                              389,536,519.50                                    273,488,370.49
employees

        Taxes paid                                                            148,413,335.07                                    137,575,252.88

          Other cash paid relating to
                                                                             1,210,376,547.80                                   897,765,812.95
operating activities

Sub-total      of    cash   outflow      from
                                                                             2,512,452,583.12                               2,357,701,370.69
operating activities

Net cash flows from operating activities                                      977,236,017.96                                1,096,847,309.63

II. Cash flows from investing activities

        Cash received from withdrawal of
                                                                              118,636,674.46                                    195,000,000.00
investment

         Cash received from return on
                                                                                 31,431,186.39                                   12,689,873.46
investment

        Net cash received from disposal of                                        2,174,729.81                                    1,890,880.34

                                                                        21
fixed assets, intangible assets and other
long-term assets

       Other cash received relating to
                                                     1,126,557,800.00    974,417,865.14
investing activities

Sub-total of cash inflow from investing
                                                     1,278,800,390.66   1,183,998,618.94
activities

       Cash paid for purchase of fixed
assets, intangible assets and other                   131,912,260.35     575,626,006.32
long-term assets

       Cash paid for investment                        92,335,901.04     221,908,800.00

       Net cash paid for acquisition of
                                                                          -33,452,562.16
subsidiaries and other business entities

         Other cash paid relating to
                                                     1,126,557,800.00   1,100,000,000.00
investing activities

Sub-total      of     cash    outflow   from
                                                     1,350,805,961.39   1,864,082,244.16
investing activities

Net cash flows from investing activities               -72,005,570.73   -680,083,625.22

III.    Cash        flows    from   financing
activities:

        Cash received from absorbing
                                                       19,789,457.72     426,940,196.27
investment

        Including: cash received from
subsidiary investment from minority                    19,789,457.72         522,147.52
shareholders

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

       Cash received from issuing bond

       Other cash received relating to
financing activities

Sub-total of cash inflow from financing
                                                      668,789,457.72     986,940,196.27
activities

       Cash paid for repayment of debts               385,933,010.04     300,000,000.00

        Cash paid for distribution of
                                                      109,256,651.46     347,375,745.62
dividends or profits or interest payment

       Including: dividend and profit paid
                                                       90,000,000.00     128,000,000.00
to minority shareholders by subsidiaries

         Other cash paid relating to
                                                     1,120,317,235.07
financing activities

Sub-total      of     cash    outflow   from         1,615,506,896.57    647,375,745.62


                                                22
financing activities

Net cash flows from financing activities                                 -946,717,438.85                                     339,564,450.65

IV. Effect of changes in foreign
exchange rate on cash and cash                                                 -764,348.79                                     -4,625,651.40
equivalents

V. Net increase in cash and cash
                                                                             -42,251,340.41                                  751,702,483.66
equivalents

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

VI. Closing balance of cash and cash
                                                                         1,538,659,591.57                                1,570,915,489.78
equivalents


6. Cash flow statement of the parent company

Unit: RMB

Item                                        Accruals in the current period                    Accruals in the prior period

I. Cash flows from operating activities:

       Cash received from the sales of
                                                                                                                                 831,026.44
goods or rendering services

       Cash received from tax refunds                                            50,943.38

       Other cash received relating to
                                                                         1,717,002,285.35                                    494,120,800.82
operating activities

Sub-total of cash inflow from operating
                                                                         1,717,053,228.73                                    494,951,827.26
activities

       Cash paid for goods acquired and
                                                                                                                                  31,646.53
services received

       Cash paid to and on behalf of
                                                                              1,238,172.66                                      1,763,780.21
employees

       Taxes paid                                                            18,667,911.67                                           717.40

         Other cash paid relating to
                                                                          835,785,281.58                                     740,983,034.61
operating activities

Sub-total     of    cash   outflow   from
                                                                          855,691,365.91                                     742,779,178.75
operating activities

Net cash flows from operating activities                                  861,361,862.82                                     -247,827,351.49

II. Cash flows from investing activities

       Cash received from withdrawal of
                                                                             50,000,000.00                                    84,456,687.93
investment

        Cash received from return on                                          6,000,000.00                                   110,543,312.07


                                                                    23
investment

Sub-total of cash inflow from investing
                                                            56,000,000.00    195,000,000.00
activities

       Cash paid for investment                          1,120,000,000.00              0.00

Sub-total      of     cash    outflow   from
                                                         1,120,000,000.00
investing activities

Net cash flows from investing activities                 -1,064,000,000.00   195,000,000.00

III.    Cash        flows    from   financing
activities:

        Cash received from absorbing
                                                                             428,962,496.88
investment

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

       Cash received from issuing bond

       Other cash received relating to
                                                                91,195.70
financing activities

Sub-total of cash inflow from financing
                                                           649,091,195.70    988,962,496.88
activities

       Cash paid for repayment of debts                    369,000,000.00    300,000,000.00

        Cash paid for distribution of
                                                            10,627,267.52    218,729,086.30
dividends or profits or interest payment

         Other cash paid relating to
                                                               491,089.23
financing activities

Sub-total      of     cash    outflow   from
                                                           380,118,356.75    518,729,086.30
financing activities

Net cash flows from financing activities                   268,972,838.95    470,233,410.58

IV. Effect of changes in foreign
exchange rate on cash and cash
equivalents

V. Net increase in cash and cash
                                                            66,334,701.77    417,406,059.09
equivalents

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

VI. Closing balance of cash and cash
                                                            71,772,220.68    432,766,933.50
equivalents


7. Consolidated statement of changes in owner's equity

Current amount
Unit: RMB
                                                    24
                          Current period

                          Owner’s equity attributable to parent company

                                    Other           equity
                                                                                       Other                       Provisio                    Minorit Total
Item                                instruments                           Less:                                                  Undistri
                          Share                                Capital                 compre Special Surplus ns           for                 y           owner's
                                    Prefer Perpet                         treasury                                               buted
                          capital                   Other reserves                     hensive reserves reserves general                       interests equity
                                    red     ual                           stocks                                                 profit
                                                    s                                  incomes                     risks
                                    Share bond

                          2,148,                    1,947, 1,972,6                                                                2,819,5                  7,286,6
I. Closing balance                                                                     -25,087,          99,561,                               269,888
                          110,84                        846.6 39,580.                                                             97,585.                  58,456.
of the prior year                                                                       592.30           946.09                                ,245.23
                            4.00                           2        66                                                                    78                    08

        Add: Change
in         accounting
policy


Correction of prior
errors

              Business
combination under
common control

             Others

II.           Opening 2,148,                        1,947, 1,972,6                                                                2,819,5                  7,286,6
                                                                                       -25,087,          99,561,                               269,888
balance of current 110,84                               846.6 39,580.                                                             97,585.                  58,456.
                                                                                        592.30           946.09                                ,245.23
year                        4.00                           2        66                                                                    78                    08

III. Increase and
decrease of current -23,24                                     -1,608,6                                                                        -165,80 -1,220,7
                                                                                       -11,959,                                  588,891
year     (represented 0,591.                                   57,849.                                                                         3,442.4 69,398.
                                                                                        438.02                                    ,922.93
in        “-”     for       00                                    98                                                                                6         53
decrease)

(I)               Total
                                                                                       -11,959,                                  801,378 81,303, 870,722
comprehensive
                                                                                        438.02                                    ,948.23 275.17 ,785.38
incomes

(II) Capital input -23,24                                      -1,608,6                                                                        -157,10 -1,789,0
and      reduced      by 0,591.                                57,849.                                                                         6,717.6 05,158.
owners                        00                                    98                                                                                3         61

1. Common shares -23,24                                        -375,62                                                                                     -391,57
                                                                                                                                               7,286,9
input                 by 0,591.                                1,894.0                                                                                     5,527.3
                                                                                                                                                   57.72
shareholders                  00                                     6                                                                                            4

2. Capital input by
owners of other
equity instruments

                                                                                  25
3.      Amount      of
share-based
payment recorded
in owner's equity

                          -1,233,0                  -164,39 -1,397,4
4. Others                 35,955.                   3,675.3 29,631.
                               92                         5        27

                                          -212,48              -302,48
(III)            Profit                             -90,000,
                                          7,025.3              7,025.3
distribution                                         000.00
                                               0                    0

1.      Appropriation
of surplus reserves

2.      Appropriation
of provisions for
general risks

3. Distribution to                        -212,48              -302,48
                                                    -90,000,
owners              (or                   7,025.3              7,025.3
                                                     000.00
shareholder)                                   0                    0

4. Others

(IV)           Internal
carryover           of
owner's equity

1. Transfers from
capital reserves to
paid-in capital (or
stock capital)

2. Transfers from
surplus reserves to
paid-in capital (or
stock capital)

3. Surplus reserves
used      to     offset
losses

4. Others

(V)            Special
reserves

1. Withdrawal in
current period

2. Use in current
period

                                     26
(VI) Others

IV.               Closing 2,124,                   1,947,                                                          3,408,4             6,065,8
                                                            363,981                -37,047,   99,561,                        104,084
balance of current 870,25                          846.6                                                           89,508.             89,057.
                                                            ,730.68                 030.32    946.09                         ,802.77
period                        3.00                     2                                                               71                  55

Prior amount
Unit: RMB

                            Prior period

                            Owner’s equity attributable to parent company

                                     Other         equity                                                                    Minorit
                                                                                   Other                Provisio              Total
Item                                 instruments                      Less:                                 Undistri y
                            Share                       Capital           compre Special Surplus ns for                       owner's
                                                                 treasury                                   buted    interest
                                    Prefer Perpet                                                                             equity
                            capital               Other reserves          hensive reserves reserves general
                                    red    ual                   stocks                                     profit   s
                                                  s                       incomes                   risks
                                    Share bond

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

       Add: Change
in         accounting
policy


Correction of prior
errors

              Business
combination under
common control

             Others

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

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

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

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


                                                                              27
owners                     0        37                                            75

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

2. Capital input by
owners of other
equity instruments

3.      Amount      of
share-based                     85,836,                             15,147, 100,984
payment recorded                485.00                              615.00 ,100.00
in owner's equity

                                -195,69                                       -239,94
                                                                    -44,251
4. Others                       0,955.8                                       2,342.4
                                                                    ,386.62
                                     7                                             9

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

1.      Appropriation                          6,072,9   -6,072,9
of surplus reserves                             98.83      98.83

2.      Appropriation
of provisions for
general risks

3. Distribution to                                       -208,47 -128,00 -336,47
owners             (or                                   9,478.8 0,000.0 9,478.8
shareholder)                                                   0         0         0

4. Others

(IV)           Internal
carryover           of
owner's equity

1. Transfers from
capital reserves to
paid-in capital (or
stock capital)

2. Transfers from
surplus reserves to
paid-in capital (or
stock capital)

3. Surplus reserves
used      to     offset
losses


                                          28
4. Others

(V)           Special
reserves

1. Withdrawal in
current period

2. Use in current
period

(VI) Others

IV.          Closing 2,148,                     1,947, 1,972,6                                                       2,819,5                7,286,6
                                                                                -25,087,           99,561,                       269,888
balance of current 110,84                        846.6 39,580.                                                       97,585.                58,456.
                                                                                 592.30              946.09                      ,245.23
period                     4.00                        2        66                                                          78                     08


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

Current amount
Unit: RMB

                         Current period

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

I. Closing balance 2,148,11                                      4,401,934                                       99,561,94 399,437 7,049,044
of the prior year        0,844.00                                    ,248.25                                          6.09 ,078.96          ,117.30

       Add: Change
in         accounting
policy


Correction of prior
errors

            Others

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

III. Increase and
decrease of current -23,240,                                     -378,124,                                                   -24,590, -425,955,
year     (represented      591.00                                    394.06                                                      017.73      002.79
in “-” for decrease)

(I)              Total
                                                                                                                             187,897 187,897,0
comprehensive
                                                                                                                              ,007.57         07.57
incomes

                                                                           29
(II) Capital input
                          -23,240,   -378,124,             -401,364,
and      reduced    by
                           591.00      394.06                985.06
owners

1. Common shares
                          -23,240,   -378,124,             -401,364,
input               by
                           591.00      394.06                985.06
shareholders

2. Capital input by
owners of other
equity instruments

3.      Amount      of
share-based
payment recorded
in owner's equity

4. Others

                                                 -212,48
(III)            Profit                                    -212,487,
                                                 7,025.3
distribution                                                 025.30
                                                      0

1. Appropriation of
surplus reserves

2. Distribution to                               -212,48
                                                           -212,487,
owners             (or                           7,025.3
                                                             025.30
shareholders)                                         0

3. Others

(IV)           Internal
carryover           of
owner's equity

1. Transfers from
capital reserves to
paid-in capital (or
stock capital)

2. Transfers from
surplus reserves to
paid-in capital (or
stock capital)

3. Surplus reserves
used      to     offset
losses

4. Others

(V)            Special
reserves

                                           30
1. Withdrawal in
current period

2. Use in current
period

(VI) Others

IV.          Closing
                          2,124,87                               4,023,809                                      99,561,94 374,847 6,623,089
balance of current
                          0,253.00                                 ,854.19                                           6.09 ,061.23           ,114.51
period

Prior amount
Unit: RMB

                          Prior period

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

I. Closing balance 2,084,79                                      3,253,924                                      93,488,94 553,259 5,985,468
of the prior year         4,788.00                                 ,796.01                                           7.26 ,568.27           ,099.54

        Add: Change
in        accounting
policy


Correction of prior
errors

            Others

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

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

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

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

1. Common shares 63,316,0                                        1,148,009                                                                1,211,325
input                by      56.00                                 ,452.24                                                                  ,508.24


                                                                           31
shareholders

2. Capital input by
owners of other
equity instruments

3.      Amount      of
share-based
payment recorded
in owner's equity

4. Others

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

1. Appropriation of            6,072,998 -6,072,9
surplus reserves                     .83    98.83

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

3. Others

(IV)          Internal
carryover           of
owner's equity

1. Transfers from
capital reserves to
paid-in capital (or
stock capital)

2. Transfers from
surplus reserves to
paid-in capital (or
stock capital)

3. Surplus reserves
used     to      offset
losses

4. Others

(V)            Special
reserves

1. Withdrawal in
current period

2. Use in current
period



                          32
(VI) Others

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




                                      33