2018 Annual Report
Wuhu Shunrong Sanqi Interactive Entertainment Network
Technology Co., Ltd.
2018 Annual Report
April, 2019
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Section I Contents and Interpretation
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Table of Contents
Section I Contents and Interpretation ......................................................................................................................................................2
Section II Company Profile and Key Financial Indicators ......................................................................................................................7
Section III Business Overview ..............................................................................................................................................................13
Section V Discussion and Analysis of Operation Status ........................................................................................................................18
Section V Financial Report ....................................................................................................................................................................52
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Definitions
Term means Definition
CSRC means China Securities Regulatory Commission
SZSE means Shenzhen Stock Exchange
The Company/Company/Listed Wuhu Shunrong Auto Parts Co., Ltd./Wuhu Shunrong Sanqi Interactive
means
Company/Sanqi Interactive Entertainment Entertainment Network Technology Co., Ltd.
Shanghai Sanqi Interactive Entertainment means Sanqi Interactive Entertainment (Shanghai) Technology Co., Ltd.
Company Law means Company Law of the People's Republic of China
Securities Law means Securities Law of the People's Republic of China
Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd./Articles of
Articles of Association means Association of Wuhu Shunrong Sanqi Interactive Entertainment Network
Technology Co., Ltd.
Audit Institution means GP Certified Public Accountants Co., Ltd. (Special General Partnership)
RMB/RMB 10,000 means Chinese yuan/10,000 Chinese yuan
Reporting Period means January 1st, 2018 to December 31st, 2018
End of Reporting Period means December 31st, 2018
Clientless or browser kernel-based micro-client games that are based on
web development technologies and utilize standard protocols as basic
Browser games means
transmission modes. Game users can play browser games directly through
an Internet browser
Games that are downloaded via mobile network and run on mobile phones
Mobile games means
or other mobile terminals.
RPG means Role playing game
ARPG means Action role playing game
SLG means Simulation game
Net profit attributable to ordinary shareholders of the Company, net of
performance compensation due to mergers and acquisitions and related
Non-GAAP net profit means
goodwill impairment, after-tax income of accidental equity investment
disposal, and equity incentive fees
Domestic means Mainland China
Overseas means Outside of mainland China
Shanghai Mokun means Shanghai Mokun Digital Technology Co., Ltd.
Jiangsu Zhiming means Jiangsu Zhiming Network Technology Co., Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Shunrong Investment Company means Wuhu Shunrong Investment Co., Ltd.
Shunrong Yonghong Company means Shanghai Shunrong Yonghong Technology Development Co., Ltd.
Guangzhou Senyun Co., Ltd. means Guangzhou Senyun Auto Parts Co., Ltd.
Shunrong Auto Parts means Wuhu Shunrong Auto Parts Co., Ltd.
Yanling Investment Co., Ltd. means Shanghai Yanling Investment Management Co., Ltd.
Tibet Xintai means Tibet Xintai Culture Media Co., Ltd.
Anhui Vogue Entertainment means Anhui Vogue Entertainment Network Technology Co., Ltd.
Vogue Entertainment International means Vogue Entertainment International Limited
G-MEI Network means G-MEI Network Technology Co., Ltd.
Guangzhou Sanqi means Guangzhou Sanqi Network Technology Co., Ltd.
Guangzhou Xingzhong means Guangzhou Xingzhong Information Technology Co., Ltd.
Anhui Xuhong means Anhui Xuhong Information Technology Co., Ltd.
Wuji Entertainment Games Co., Ltd. means Wuji Entertainment Games Co., Ltd.
Anhui Sanqi means Anhui Sanqi Network Technology Co., Ltd.
Jiangsu Aurora means Jiangsu Aurora Network Technology Co., Ltd.
Shanghai Yingtong means Shanghai Yingtong Network Technology Co., Ltd.
Wisdom Entertainment International means Wisdom Entertainment Online International Limited
Wisdom Game International means Wisdom Game Online International Limited
Shanghai Guanhang means Shanghai Guanhang Network Technology Co., Ltd.
Anhui Jiashang means Anhui Jiashang Network Technology Co., Ltd.
Chengdu Shengge Times Network Technology
means Chengdu Shengge Times Network Technology Co., Ltd.
Co., Ltd.
Beijing Shangheng means Beijing Shangheng Jiatian Network Technology Co., Ltd.
Jiangsu Jiaqu means Jiangsu Jiaqu Network Technology Co., Ltd.
Shanghai Zhiren means Shanghai Zhiren Culture Media Co., Ltd.
Tibet Taifu means Tibet Taifu Culture Media Co., Ltd.
37Games Entertainment Co., Ltd. means 37 Games Entertainment Limited
Shanghai Mobile Game means Shanghai Shouyou Tianxia Digital Technology Co., Ltd.
Anhui Guanyu means Anhui Guanyu Culture Media Co., Ltd.
Tibet Yaotong means Tibet Yaotong Network Technology Co., Ltd.
Tibet Shengge means Tibet Shengge Network Technology Co., Ltd.
Guangzhou Sanqi Interactive Entertainment means Sanqi Interactive Entertainment (Guangzhou) Technology Co., Ltd.
Guangzhou Huoshanhu means Guangzhou Huoshanhu Information Technology Co., Ltd.
Guangzhou Jisheng means Guangzhou Jisheng Network Technology Co., Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Guangzhou Jishi means Guangzhou Jishi Network Technology Co., Ltd.
Khorgas Qianyu means Khorgos Entertainment Network Technology Co., Ltd.
Khorgas Xinghui means Khorgos Xinghui Network Technology Co., Ltd.
Khorgos Xinrui means Khorgos Xinrui Network Technology Co., Ltd.
Top Increase means Top Increase Global Limited
Khorgas Sanqi means Khorgos Sanqi Entertainment Venture Capital Co., Ltd.
Anhui Aurora means Anhui Sanqi Aurora Network Technology Co., Ltd.
Shanghai Langkun means Shanghai Langkun Digital Technology Co., Ltd.
Shanghai Kunkun means Shanghai Kunkun Digital Technology Co., Ltd.
Shanghai Miji means Shanghai Miji Digital Technology Co., Ltd.
Shanghai Aojue means Shanghai Aojue Digital Technology Co., Ltd.
Khorgas Jiaji means Khorgos Jiaji Digital Technology Co., Ltd.
Khorgas Mopeng means Khorgos Mopeng Digital Technology Co., Ltd.
Guangzhou Jisheng means Guangzhou Jisheng Network Technology Co., Ltd.
Anhui Wanhu means Anhui Wanhu Information Technology Co., Ltd.
Zhuhai Miaohu means Zhuhai Miaohu Network Technology Co., Ltd.
Zhuhai Shangjie means Zhuhai Shangjie Network Technology Co., Ltd.
Ningbo Langkun means Ningbo Langkun Digital Technology Co., Ltd.
Shanghai Jiakun means Shanghai Jiakun Digital Technology Co., Ltd.
Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center
Huai’an Sanqi means
(Limited Partnership)
Anhui Zhusheng means Anhui Zhusheng Network Technology Co., Ltd.
Guangzhou Sanqi Culture & Entertainment means Sanqi Entertainment Network Technology (Guangzhou) Co., Ltd.
Chengdu Pengwan Technology Co., Ltd. means Chengdu Pengwan Technology Co., Ltd. and its subsidiaries
Shenzhen Mokylin Technology Co., Ltd. means Shenzhen Mokylin Technology Co., Ltd. and its subsidiaries
Zhangshu Wangzhong Investment Management Center (Limited
Wangzhong Investment means
Partnership)
The proportion of transaction amount from the Company’s domestic
Market share of the Company’s domestic mobile game business during the reporting period to actual sales revenue
means
mobile game business of mobile game market indicated in the China Game Industry Report of
2018
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Section II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation Sanqi Interactive Entertainment Stock code 002555
Place of Listing Shenzhen Stock Exchange
Company name in Chinese 芜湖顺荣三七互娱网络科技股份有限公司
Company short name in
三七互娱
Chinese
Company name in English (if WUHU SHUNRONG SANQI INTERACTIVE ENTERTAINMENT NETWORK
any) TECHNOLOGY CO., LTD.
Legal representative Li Weiwei
Registered address Nanling County Economic Development Zone, Wuhu City, Anhui Province
Post code of registered
243000
address
11/F, Tower A1, Wanjiang Fortune Plaza, No. 88, Ruixiang Road, Jiujiang District, Wuhu City,
Business address
Anhui Province
Zip Code of business address 241000
Website www.37.com
Email ir@37.com
Note: The Company held the 3rd Extraordinary General Meeting of Shareholders on April 8th, 2019, during which the Proposal on
Changing the Name of the Company was reviewed and approved. It is proposed to change its Chinese name to “芜湖三七互娱网络
科 技 集 团 股 份 有 限 公 司 ” and its English name to “WUHU SANQI INTERACTIVE ENTERTAINMENT NETWORK
TECHNOLOGY GROUP CO., LTD.”. The Company is currently completing relevant procedures for industrial and commercial
registration of changes.
II. Contact person and contact information
Secretary of the Board of Directors Securities Affairs Representative
Name Ye Wei Wang Sijie
11/F, Tower A1, Wanjiang Fortune Plaza, 11/F, Tower A1, Wanjiang Fortune Plaza,
Contact address No. 88, Ruixiang Road, Jiujiang District, No. 88, Ruixiang Road, Jiujiang District,
Wuhu City, Anhui Province Wuhu City, Anhui Province
Tel. 0553-7653737 0553-7653737
Facsimile 0553-7653737 0553-7653737
Email ir@37.com ir@37.com
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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III. Information disclosure and designated place
Name of newspaper designated by the Company for China Securities Journal, Securities Times, Shanghai Securities News,
information disclosure Securities Daily
Website designated by CSRC for publication of
http://www.cninfo.com.cn
annual reports
11/F, Tower A1, Wanjiang Fortune Plaza, No. 88, Ruixiang Road, Jiujiang
Designated place of annual reports
District, Wuhu City, Anhui Province
IV. Changes in Registration Information
Organization code 71392778-9
1. On March 2nd, 2011, the Company issued its IPO on SME Board of Shenzhen Stock
Exchange. The Company is mainly engaged in manufacturing and selling plastic fuel
tanks of automobiles. 2. On May 27th, 2014, the material asset restructuring of the
Company involving shares issuance, assets purchase with cash, supporting fund
raising, and related-party transactions was conditionally approved by the 22nd Session
in 2014 of the Merger, Acquisition and Reorganization Examination Committee of
Listed Companies of the CSRC. On December 2nd, 2014, the Company received from
CSRC the Reply Regarding Wuhu Shunrong Auto Parts Co., Ltd. Issuing Shares to Li
Weiwei and Others, Purchasing Assets, and Raising Supporting Funds. Through
purchase of 60% shares of Shanghai Sanqi Interactive Entertainment, the Company
developed its single main business of manufacturing automotive plastic fuel tanks into
dual main businesses of advanced manufacturing and modern cultural creativity. 3. On
Changes to main business after IPO (if December 18th, 2015, the Company received the Reply Regarding Approval of
any) Non-public Offering of Shares of Wuhu Shunrong Sanqi Interactive Entertainment
Network Technology Co., Ltd. (Z.J.X.K. [2015] No. 2941) from CSRC , thus being
approved to issue at most 165,289,300 new shares by non-public offering and the funds
raised would be used for purchasing 40% shares of Shanghai Sanqi Interactive
Entertainment. Shanghai Sanqi Interactive Entertainment has become a wholly-owned
subsidiary of the Company since 2016. 4. On October 8th, 2018, as approved by the
Company’s 4th general meeting of shareholders in 2018, 100% shares of Wuhu
Shunrong Auto Parts Co., Ltd. (hereinafter referred to as “Auto parts Company”) held
by the Company were transferred. On November 29th, 2018, the industrial and
commercial registration of changes for the equity transfer of Auto parts Company was
completed. Since then, the Company will no longer hold the equity of Auto parts
Company, and exclude the financial information of Auto parts Company from its
consolidated financial statements.
Changes to controlling shareholders (if
None
any)
Note: On April 8th, 2019, the Company held the 3rd Extraordinary General Meeting of 2019, at which the Proposal on Advancing the
General Election of Non-independent Directors for the Fifth Board of Directors and the Proposal on Advancing the General Election
of Independent Directors for the Fifth Board of Directors were reviewed and approved. Seven directors nominated by Li Weiwei
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
were elected in the general election of Board of Directors and secured more than half of the seats on the Board of Directors. The
voting rights held by Li Weiwei have had a material influence on the resolution of the Company’s 3rd Extraordinary General Meeting
of 2019, played a decisive role in electing more than half of the members of the Company’s Board of Directors through this meeting,
and effectively controlled the majority of the new Board of Directors. Therefore, the controlling shareholders and actual controllers
of the Company were changed from Wu Xushun, Wu Weidong and Wu Weihong to Li Weiwei.
V. Other relevant information
Accounting Firm appointed by the Company
Name of the Accounting Firm GP Certified Public Accountants Co., Ltd. (Special General Partnership)
Business address of Accounting
10/F, Guangdong Holdings Tower, No. 555, East Dongfeng Road, Yuexiu District, Guangzhou
Firm
Signature of Certified Public
Xiong Yongzhong & Yang Xinchun
Accountant
Sponsors performing duty of continuous supervision employed by the Company during the reporting period
□Applicable √Not Applicable
Financial consultants performing duty of continuous supervision employed by the Company during the reporting period
√Applicable □Not Applicable
Name of financial consultant Business address Name of representative Continuous supervision period
GF Securities Headquarters,
No. 26, Machang Road, Tianhe May 9th, 2017 to December
GF Securities Co., Ltd. Lyu Shaoyu & Tian Li
District, Guangzhou City, 31st, 2018
Guangdong Province
VI. Main accounting data and financial index
Does the Company need to retroactively adjust or restate accounting data of previous years?
□ Yes √ No
Increase or decrease of
2018 2017 current year against 2016
previous year
Operating income (RMB) 7,632,679,668.47 6,188,828,116.75 23.33% 5,247,893,728.73
Net profits attributable to the listed
1,008,503,357.80 1,620,582,427.47 -37.77% 1,070,162,324.07
company shareholders (RMB)
Net profits attributable to listed
company shareholders after
474,909,138.00 1,048,251,240.84 -54.70% 1,010,769,599.36
deducting non-recurring profits and
losses (RMB)
Net cash flows from operating
1,954,433,620.84 1,831,895,928.30 6.69% 1,051,939,577.83
activities (RMB)
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Basic earning per share
0.47 0.76 -38.16% 0.51
(yuan/share)
Diluted earning per share
0.47 0.76 -38.16% 0.51
(yuan/share)
Weighted average rate of return on
16.59% 28.12% -11.53% 26.56%
equity
Increase or decrease
End of 2018 End of 2017 compared with the end End of 2016
of previous year
Total assets (RMB) 8,395,761,716.98 9,160,137,685.38 -8.34% 6,386,216,011.34
Net assets attributable to listed
5,972,675,405.86 7,016,770,210.85 -14.88% 4,523,665,282.04
company shareholders (RMB)
The Company uses the non-GAAP adjusted net profit attributable to common shareholders as a complementary indicator to
measure its actual operating results. The non-GAAP adjusted net profit attributable to common shareholders is not an independent
indicator, and its presentation does not imply replacement of the financial information prepared in accordance with the
requirements of ASBE. The non-GAAP adjusted net profit attributable to common shareholders of the Company during the current
period was RMB 1,501,161,065.93, which was equal to the net profit attributable to common shareholders (RMB
1,008,503,357.80) less the performance compensation due to mergers and acquisitions (RMB 446,156,583.73) and related goodwill
impairment (RMB 959,833,685.66), and after-tax income of accidental equity investment disposal (RMB 21,019,393.81). In
addition, no equity incentive fee occurred during the reporting period. In 2017, the non-GAAP adjusted net profit attributable to
common shareholders of the Company on the same basis was RMB 1,408,706,561.26. In this year, the non-GAAP adjusted net
profit attributable to common shareholders of the Company increased by 6.56% on a year-on-year basis.
VII. Data differences due to different accounting standards in China and the rest of the world
1. Differences regarding to net profits and net assets between financial statements disclosed according to
international standards and Chinese standards
□Applicable √Not Applicable
During the reporting period, there is no difference regarding to net profits and net assets between financial statements disclosed
according to international standards and Chinese standards.
2. Differences regarding to net profits and net assets between financial statements disclosed according to
standards of other countries and Chinese standards
□Applicable √Not Applicable
During the reporting period, there is no difference regarding to net profits and net assets between financial statements disclosed
according to standards of other countries and Chinese standards
VIII. Quarterly Key financial indicators
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Q1 Q2 Q3 Q4
Operating income 1,661,159,158.79 1,641,336,987.98 2,232,318,268.92 2,097,865,252.78
Net profits attributable to the listed
410,093,180.04 391,285,768.19 416,969,559.37 -209,845,149.80
company shareholders
Net profit attributable to listed
company shareholders after
392,281,177.22 368,901,354.63 407,269,424.34 -693,542,818.19
deducting non-recurring profits and
losses
Net cash flows from operating
562,120,649.09 415,115,368.87 411,326,826.18 565,870,776.70
activities
The net profit attributable to listed company shareholders in the fourth quarter was RMB -209,845,149.80, mainly due to the
Company’s provision of RMB 959,833,685.66 set aside for Shanghai Mokun’s goodwill impairment loss. The amount of the
impairment loss significantly exceeded the performance compensation and operating profit;
In the fourth quarter, the net profit attributable to listed company shareholders after deducting non-recurring profits and losses was
RMB -693,542,818.19, mainly because the Company recognized the compensation of RMB 453,859,535.09 arising from the failure
of performance commitments by Shanghai Mokun as non-recurring gains and losses, and the corresponding goodwill impairment of
RMB 959,833,685.66 as the recurring profits and losses.
Is there any significant difference between the above financial indicators or their sum and those in the Company’s disclosed quarterly
reports and semi-annual reports?
□ Yes √ No
IX. Non-recurring profits and losses and their amount
√Applicable □Not Applicable
Unit: RMB
Item Amount in 2018 Amount in 2017 Amount in 2016 Description
Mainly profit and loss from
Profits or losses on disposal of
the disposal of long-term
non-marketable asset, including offset 56,085,328.82 200,975,719.36 7,667,198.02
equity investment and fixed
amount accrued for impairment provision
assets.
Government subsidy included in current
profit or loss (except those closely related to Mainly government subsidy
enterprise operation and received based on 38,851,289.40 29,695,208.76 68,413,211.24 other than the refund of
consolidated national standard quota or value-added tax.
quantitative)
Funds occupation fees collected from
Mainly interest income
non-financial enterprises and included in 17,307,831.49 15,607,133.62
from borrowings.
current profit or loss
Profit or loss of asset whose investment or 16,941,398.12 13,370,838.07 6,931,102.57 Mainly the income from
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2018 Annual Report
management is entrusted to others bank’s financial products.
Except effective hedging business relating to
normal operating business of the company,
profit or loss caused by change in the fair Mainly the investment
value of held-for-trading financial asset and income from disposal of
-9,740,417.35 40,268,035.00 3,608,355.70
financial liabilities, and investment profit for available-for-sale financial
disposal of trading financial asset, trading assets.
financial liabilities and available-for-sales
financial assets.
Other non-operating revenue and
2,945,610.96 1,251,440.52 -8,461,639.08
expenditure except the foregoing items
Mainly including
performance compensation
income (the Company’s
impairment loss accrued
Other items consistent with definition of against the goodwill of
446,156,583.73 296,624,143.44
non-recurring profit and loss Shanghai Mokun Company
is RMB 959,833,685.66 and
included in recurring profit
and loss) and performance
compensation expenses.
Less: Affected amount of income taxes 33,857,857.74 36,707,567.83 10,764,962.34
Affected amount of minority interest
1,095,547.63 -11,246,235.69 8,000,541.40
income (after-tax)
Total 533,594,219.80 572,331,186.63 59,392,724.71 --
As to non-recurring profits and losses determined based on the definition provided in the Explanatory Announcement No. 1 on
Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, and the recurring
profits and losses determined from non-recurring profits and losses listed in the Explanatory Announcement No. 1 on Information
Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, reasoning shall be provided
□Applicable √Not Applicable
During the reporting period, the Company recognized no non-recurring profit and loss defined and listed in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and
Loss as recurring profit and loss.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Section III Business Overview
I. Main business in the reporting period
Does the Company need to comply with the disclosure requirements for special industries?
Yes
Software and IT services
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 -
Listed Companies Engaged in Software and IT Services.
During the reporting period, the Company focused on cultural and creative businesses based on the development, distribution
and operation of mobile games and browser games, and also development in cultural segments such as film and television, animation,
music, education, social contact, VR, etc. The Company’s comprehensive strength ranks 23rd among the top 100 Internet companies
in China, and 1st among A-share game companies due to steady promotion of development strategy of “perfection, diversification,
platformization and globalization” around IPs.
During the reporting period, the Company gained an operating income of RMB 7.633 billion, with a year-on-year increase of
23.33%; a total profit of RMB 1.219 billion, with a year-on-year decrease of 36.38%; a net profit attributable to the listed company
shareholders of RMB 1.009 billion, with a year-on-year decrease of 37.77%; a non-GAAP net profit of RMB 1.501 billion, with a
year-on-year increase of 6.56%.
The main reasons for changes in the net profit attributable to the listed company shareholders include:
1) During the reporting period, the performance compensation income and goodwill impairment loss were recognized due to
the under-performance of Shanghai Mokun, a subsidiary of the Company, therefore the net profit attributable to the listed company
shareholders was decreased by RMB 506 million;
2) In 2017, the Company disposed of the equities of Shanghai Zheyuan Culture & Media Co., Ltd., Shanghai Aurora Network
Technology Co., Ltd. and other companies, and recognized the after-tax investment income of RMB 200 million. No significant
equity disposal income existed in 2018;
3) In addition to the above-mentioned affects, the Company’s non-GAAP net profit also increased by 6.56%, and the main
reason for driving performance growth is the Company’s continued development in mobile games.
1. Changes in industry-related economic situation and their impacts on the Company
1) According to the China Game Industry Report of 2018 jointly released by China Game Publishing Committee (GPC) and
Gamma Data (CNG), the actual sales revenue of the Chinese game market reached RMB 214.44 billion in 2018 with a year-on-year
increase of 5.3%, and the number of Chinese game users reached 626 million in 2018 with an year-on-year increase of 7.3%. The
growth rate of Chinese game users exceeded that of 2014-2017. The actual sales revenue of mobile games was RMB 133.96 billion
with a year-on-year increase of 15.4%, and increased to 62.5% of total sales revenue of the Chinese game market on a year-on-year
basis; and the number of Chinese mobile game users was 605 million, with a year-on-year increase of 9.2% higher than that of 2017.
The mobile game market remains the main driver of overall growth in the game market.
During the reporting period, the Company’s transaction amount of domestic mobile game business totaled RMB 8.683 billion,
with a year-on-year increase of 85% higher than the average industry level. During the reporting period, the market share of the
Company’s domestic mobile game business was 6.48%.
2) On the one hand, the growth rate of the game industry is declining and the competition among participants in the game industry is
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
becoming increasingly fierce. On the other hand, the spiritual and cultural products available for selection are increasingly enriched,
and game users require more high-quality spiritual and cultural products, and the competition between different cultural consumer
segments is also developing. Providing high-quality products and valuable user services is an effective way to increase
competitiveness.
During the reporting period, the Company increased R&D investments, enhanced its output capability of high-quality games,
and strengthened cooperation with R&D vendors to expand the reserve of high-quality games, as well as further promoted the user
value through three-dimensional marketing methods and perfect operational services, thus further exploiting the mode of “integration
of R&D and operation” to help the Company gain a greater competitive advantage.
2. Changes in industrial policy environment and their impacts on the Company
In May 2017, General Office of the CPC Central Committee and the General Office of the State Council issued the Outline of
the National Plan for Cultural Development Reform in the 13th Five-Year Plan Period, which required “optimizing the layout of
cultural industries and accelerating the development of emerging industries such as online audiovisual services, mobile multimedia,
digital publishing, animation and games, creative design, 3D and giant screen movies”, and supporting the development of the game
industry.
During the reporting period, the Company actively responded to relevant requirements of industrial development, increased
investments in high-quality games and innovative gameplay settings, and vigorously protected intellectual property rights to ensure
compliant operations.
In December 2018, the General Office of the State Council issued the Regulations on Further Supporting the Development of
Cultural Enterprises, which explicitly increased the national supports for key enterprises and projects for national cultural exports and
strengthened the construction of national cultural export bases.
Sanqi Interactive Entertainment actively responds to the national “Go Out policy” for cultural industries, and strives to promote
Chinese cultural services to the rest of world. 37GAMES will further develop its first-mover advantage in overseas markets, and rely
on its advanced game R&D and localized marketing capabilities to continuously expand the scale of overseas business and create
more foreign currency earnings, thus escorting the exports of cultural industries and helping Chinese cultural and entertainment
enterprises to enhance their cultural confidence.
3. Main businesses, main products and business models of the Company
During the reporting period, the Company’s main businesses include the development, distribution and operation of mobile
games and browser games. The operating modes of the Company’s mobile games and browser games mainly include independent
operation and third-party joint operation.
Under the independent operation mode, the Company obtains the operation rights of game products through independent R&D
or agencies, and publishes and operates these products through its own or third-party channels. The Company is fully responsible for
the operation, promotion and maintenance of the game; providing unified management services for online promotion, online
customer service and top-up payment; and iteratively updating game products along with game developers based on the real-time
feedback of users and games.
Under the third-party joint operation mode, the Company cooperates with one or more game operators to jointly operate games.
The third-party game operators are responsible for operation and promotion of respective channels and management of recharge and
charge system, while the Company provides technical support services along with game developers.
During the reporting period, the Company disposed of the manufacturing and sales business of automotive plastic fuel tanks.
Apart from that, there is no significant change to the Company’s main businesses, main products and business models, and major
performance drivers.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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II. Material changes in major assets
1. Material changes in major assets
Major assets Material changes
The balance of equity assets at the end of the period increased by RMB 415 million compared to the opening
balance, mainly due to the new investment into the equity of Sanqi Guangzheng (Guangzhou) Cultural
Technology Investment Partnership (Limited Partnership), Shenzhen Zhonghui Television Culture
Equity assets Communication Co., Ltd., Shanghai Fenghua Qiushi Culture Media Co., Ltd., New Cues (Beijing) Television
Investment Co., Ltd. and other companies during the reporting period. Refer to Note 8 of the consolidated
financial statements, available-for-sale financial assets and Section 9 Long-term Equity Investments for more
details.
The balance of fixed assets at the end of the period decreased by RMB 256 million compared to the opening
Fixed assets
balance, mainly due to the disposal of Shunrong Auto Parts during the reporting period.
Construction in The balance of construction in process at the end of the period decreased by RMB 51 million compared to the
progress opening balance, mainly due to the disposal of Shunrong Auto Parts during the reporting period.
At the end of the period, the balance of notes receivable and accounts receivable increased by RMB 358
Notes receivable and
million compared to the opening balance, mainly due to the increase in operating income in the fourth quarter
accounts receivable
of the current year compared with the same period of the previous year.
At the end of the period, the balance of other current assets decreased by RMB 235 million compared to the
Other current assets
opening balance, mainly due to the decrease in performance compensation receivables.
At the end of the period, the balance of other receivables increased by RMB 404 million compared to the
Other receivables opening balance, mainly due to the increase in the amount of equity receivable from the disposal of Shunrong
Auto Parts during the reporting period.
The balance of goodwill at the end of the period decreased by RMB 962 million compared to the opening
Goodwill balance, mainly due to provision made by the Company for impairment on the goodwill formed by the merger
resulting from Shanghai Mokun’s failure to reach the expected performance in 2018.
The balance of other non-current assets at the end of the period decreased by RMB 113 million compared to
Other non-current the opening balance, mainly due to the recognition of prepaid equity investments to Shenzhen Zhonghui
assets Television Culture Communication Co., Ltd. as available-for-sale financial assets and decreases in
engineering equipment prepayment arising from the disposal of Shunrong Auto Parts.
2. Main foreign assets
□Applicable √Not Applicable
III. Analysis of core competitiveness
Does the Company need to comply with the disclosure requirements for special industries?
Yes
Software and IT services
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
The Company has steadily promoted the development strategy of “perfection, diversification, platformization and globalization”
around IPs to form the following core competitiveness:
1. Industry-leading R&D strength
Since the launch of the first self-developed product in 2014, the Company has launched nearly 20 self-developed products, of which
more than half of the products has a monthly transaction amount exceeding RMB 100 million. During the reporting period, a number
of self-developed quality games, such asYong Heng Ji Yuan (永恒纪元) , Chuan Qi Ba Ye (传奇霸业), andSwords of Archangels (大
天使之剑) , have achieved steady transaction amount in the markets at which these games have been launched for more than one
year. The Company’s self-developed products are characterized by high output, high success rate and long period, indicating that the
Company’s R&D strength is at the leading level in the industry.
The “Perfection” R&D strategy runs through the entire life cycle of the Company’s self-developed products: Before the launch of
games, the Company carefully worked out details of product planning, art quality, music effects, etc.; after the launch of games, the
Company continued to invest in product iteration, process optimization, user experience and other aspects to ensure the high
transaction amount and long period of games.
The Company has always attached great importance to R&D investments. During the reporting period, the Company incurred an
R&D expenditure of RMB 540 million, with a year-on-year increase of 22.94%. Through continuous R&D investments, the
Company has accumulated a large number of core technologies: A series of high-performance and stable game engines and
frameworks are independently developed by the Company to support the development of highly playable large-scale online games of
high performance and quality, which provide an important guarantee for the Company to continuously launch high-quality games. As
an important tool to enhance the product experience, the Company analyzes its game data through self-developed big data analysis
system, and uses the analysis results to provide accurate numerical reference for design of new products and iterative optimization of
previous products, thus improving the Company’s insights and capacity for process optimization in terms of product development.
The Company’s product research and development has always been market-oriented. The Company adheres to the principle of
sustainable development, constantly breaks through itself, and also maintains its advantages in the ARPG category while at the same
time making initial attempts in new areas. The leisure sports game Chao Neng Qiuqiu (working title)（超能球球（暂定名））, the
turn-based game Mobile Game AOD（手游项目AOD） and the simulation business game Code DG（代号DG）developed during the
reporting period are expected to be launched in 2019. As of the end of the reporting period, the Company was carrying out market
researches on other types of games such as SLG. In 2019, the Company will continue to make diversified innovation in product types,
themes, art performance, gameplay settings, etc.
As of the issuance date of this report, the Company was developing a browser game of MU X (working title)(奇迹X（暂定名）), and
mobile games such as Chuan Qi NB（传奇NB） Code YZD（代号YZD） Chuan Qi S（传奇S） Code DG（代号DG） Chao Neng
Qiuqiu (working title)（超能球球（暂定名））, An Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典） and Mobile Game
AOD（手游项目AOD）. With its accumulated experiences and continuous innovation, the Company is expected to continue to
produce long-period quality games that surpass theYong Heng Ji Yuan (永恒纪元) , Chuan Qi Ba Ye (传奇霸业), and Swords of
Archangels (大天使之剑) .
2. Excellent distribution strength
During the reporting period, the market share of the Company’s mobile game distribution business in China increased to 6.48%; the
Company’s browser game business in China also continued to maintain its leading position; while maintaining market advantages in
China’s Hong Kong, Macao, Taiwan and Southeast Asia, the Company has also made breakthroughs in the Japanese and South
Korean markets. The Company actively adheres to the “perfection and diversification” business strategy and promotes its own
business capacity to a new height through continuous innovation:
1) The promotion of “perfection” strategy is reflected in product supply before the launch of games and operation optimization after
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
the launch.
In terms of product supply, the Company has accumulated abundant product resources, established a rigorous evaluation process and
evaluation criteria for product introduction, and also utilized its own advantages in user data and numerical experiences to work out
products along with game developers, thus ensuring a better quality of games before their launch.
In terms of operation optimization, the Company has strong capabilities for operation and optimization in numerical management,
process optimization, event planning, etc. After the launch of games, the Company continues to improve the quality of games, attract
users through better contents, extend the product life cycle, and accumulate higher income.
2) The “diversification” strategy has achieved good results in multiple business dimensions such as products, promotion and services.
In terms of game products, the Company on the one hand brings a diversified layout to the product supply side through independent
research and development, investment in capital and cooperation with many large R&D manufacturers such as Tencent, NetEase,
Perfect World, Century Huatong Group, etc.; on the other hand, the Company has also made diversified attempts in product
categories and product themes, and achieved good results. Since 2018, the Company has successively launched a series of game
products with different categories and themes and excellent performances in the Chinese mobile game market, such as Gui Yu Mi
Cheng, Tu Long Po Xiao, Dou Luo Da Lu H5, etc. The successful launch of these games indicates that the Company’s multi-theme
and multi-category product matrix has begun to take shape and the Company has also accumulated preliminary success experiences
on the way to diversified development.
In terms of promotion, the Company adopts a multi-dimensional approach of “three-dimensional marketing + precise delivery” to
create a new idea for systemic flow management. In terms of three-dimensional marketing, the Company tries to meet the different
cultural consumption needs of users from different perspectives by choosing spokespersons who match the product connotation,
promoting games through high-quality micro-movie-style promotional materials, carrying out cross-border cooperation amongYong
Heng Ji Yuan (永恒纪元) , Xian Ling Jue Xing（仙灵觉醒）, and finance, catering and FMCG industries, and implanting public
welfare activities into game products. In terms of precise delivery, the Company analyzes big data such as “user portrait” and “user
model” with the user resources accumulated over the years to accurately deliver advertisements to targeted user groups and improve
the advertising effect.
In terms of services, the Company is committed to providing game users with comprehensive and detailed long-term services.
Through an improved user account and service system, and an experienced service team, the Company uses abundant product
supplies to provide users with comprehensive game products and one-stop services to continuously improve user satisfaction,
activation and retention, and also to extend the product life cycle.
3. Advantage of “integration of R&D and operation” mode
The “integration of R&D and operation” mode of the Company is conducive to making full use of resources and creating quality
products from a long-term perspective. On the one hand, the Company can ensure the stable supply of quality products to support the
operation development through strong R&D strengths. At the same time, the R&D team can utilize the feedback of the operation
department to optimize products and extend the product life cycle; on the other hand, in the early stages of product R&D, the
operation team can provide advices and suggestions to the R&D team with years of experiences and keen market insights.
Additionally, in the early stage of commercialization of products, the operation team can also support the R&D team to conduct a
large number of product tests, and utilize the promotion and marketing strategies to guide the R&D team to adjust the iterative
updates of product activities and improve the product success rate.
4. Team strengths
The Company has been deeply involved in the field of cultural and creative industries for many years. Its core management team
consists of experienced employees who have strong and forward-looking capabilities for strategic layout, while the core team
consists of highly skilled R&D personnel, creative operators, and highly efficient managers. The Company has always adhered to the
marathon-style entrepreneurial spirit, and constantly caught up to surpass the industry leader.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Section V Discussion and Analysis of Operation Status
I. Overview
Key performance indicators 2018 2017 Year-on-year change
Operating income (RMB 100 million) 76.33 61.89 23.33%
Total profit (RMB 100 million) 12.19 19.17 -36.38%
Net profits attributable to the listed company shareholders 10.09 16.21 -37.77%
(RMB 100 million)
Non-GAAP net profit (RMB 100 million) 15.01 14.09 6.56%
Net cash flows from operating activities (RMB 100 million) 19.54 18.32 6.69%
Basic earning per share (yuan/share) 0.47 0.76 -38.16%
Weighted average rate of return on equity 16.59% 28.12% -11.53%
During the reporting period, the Company has steadily promoted the development strategy of “perfection, diversification,
platformization and globalization” around IPs, making its comprehensive strength in the forefront among Chinese competitors.
During the reporting period, the Company achieved an operating income of RMB 7.633 billion, with a year-on-year increase of
23.33%, and the growth of distribution and R&D for mobile games was the main driver of overall income growth during the period.
The Company achieved a total profit of RMB 1.219 billion, with a year-on-year decrease of 36.38%; and a net profit
attributable to the listed company shareholders of RMB 1.009 billion, with a year-on-year decrease of 37.77%. The main reasons for
the year-on-year decline in net profit attributable to the listed company shareholders are stated as below: 1) During the reporting
period, the performance compensation income and goodwill impairment loss were recognized due to the under-performance of
Shanghai Mokun, a subsidiary of the Company, therefore the net profit attributable to shareholders was decreased by RMB 506
million; 2) In 2017, the Company disposed of the equities of Shanghai Zheyuan Culture & Media Co., Ltd., Shanghai Aurora
Network Technology Co., Ltd. and other companies, and recognized the after-tax investment income of RMB 200 million. No
significant equity disposal income existed in 2018;
The Company uses non-GAAP net profit as a complementary indicator to measure actual operating results. The Company’s
non-GAAP net profit for the period was RMB 1.501 billion, a year-on-year increase of 6.56%. The main driver for profit growth was
mainly the Company’s continued growth in mobile games.
(I) Mobile game business
During the reporting period, the Company achieved an operating income of RMB 5,582 million and a gross profit of RMB
4,518 million from mobile games, a year-on-year increase of 69.99% and 79.89% respectively. The Company’s business revenue
from and R&D investment into mobile games continue to increase, and the mobile game business maintains the leading position in
domestic and overseas markets.
1. Release of mobile games
(1) Domestic market
The Company continued to play a vital role in domestic mobile game publishing market. During the reporting period, the
market share of the Company’s mobile game business in China increased to 6.48%. During the reporting period, the Company
operated more than 5 products with a monthly gross billing of more than RMB 100 million, with the highest exceeding RMB 930
million, the total number of new registered users exceeding 110 million, and the greatest number of monthly active users exceeding
20 million.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
During the reporting period, the Company, based on its capability of operating different games, adjusted its publishing strategy
from simple “ARPG + SLG” to “diversification”. The Company applies diversification strategies at various levels such as products,
promotion and services in a creative manner.During the reporting period, the Company formed a broad partnership with well-known
internal and external firms such as Aurora Network, Tencent, NetEase, Perfect World, Century Huatong Group (CHT) and completed
a diversified product layout. The product matrix includes ARPG, MMO, CARD, SLG and other types, covering a wide range of
themes such as magic, western fantasy, eastern fantasy, adventure, fairy tales and nijigen. In 2018, more than 20 games of different
types and themes were launched. As of the issuance date of this report, the Company had obtained the exclusive right to operate 9
mobile games, including Sword and Rebirth（剑与轮回）, Zhu Yu Di Xia Cheng（猪与地下城）, Xian Ling 2 (working title)（仙
灵2（暂定名））, and rich reserves of independently-developed games such as Chao Neng Qiu Qiu (working title)（超能球球（暂定
名））, Code YZD(代号YZD), Chuan Qi S（传奇S）and Jing Ling Sheng Dian（精灵盛典）.
In the meantime, relying on its in-depth understanding of user demands, the Company created a new way of systemic traffic
operation, and adopted a diversified mode of “multi-channel marketing + targeted advertising + long-term service” to provide users
with comprehensive high-quality services for the whole process from their initial contact with the product to play the game and meet
the deeper spiritual and cultural needs of users.
(2) Overseas market
During the reporting period, the Company further executed global strategies, and made breakthroughs in newly developed
business areas such as Japan and Korea while maintaining competitiveness in advantageous areas such as China’s Hong Kong,
Macao, Taiwan and Southeast Asia. As of the end of the reporting period, the Company maintained good relations with many local
manufacturers in Hong Kong, Macao and Taiwan. 37GAMES, the Company’s overseas brand, covered more than 200 countries, and
operated nearly 80 mobile games around the world.
During the reporting period, the Company made breakthroughs in having games published in Japan and South Korea:Yong
Heng Ji Yuan (永恒纪元) , released in Japan in late June, achieved the highest monthly gross billing of over 10 million; the new
game : achieved a gross billing of over 10 million in Korea, ranked among Top 10 best-selling games.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
The Company also maintained its advantageous position in China’s Hong Kong, Macao, Taiwan and Southeast Asia: During the
reporting period, the self-developed product Swords of
Archangels (大天使之剑) H5 was launched in China’s
Hong Kong, Macao, Taiwan and Vietnam, and rose to
the top of bestselling games in merely two months after
its launching; Clans of Intrigue（楚留香） an MMORPG
launched in the reporting period, ranked first among
best-selling games in terms of downloads only three
days after launched in China’s Taiwan market, with the
maximum daily installations exceeding 150,000,
renewing the game downloading record on the day in Taiwan. Gui Yu Mi Cheng（鬼语迷城） launched at the end of the reporting
period was ranked 2nd in terms of best-selling games and 1st in terms of downloads in the first month when it was released in
China’s Taiwan.
During the reporting period, the Company constantly updated and iterated its flagship product,Yong Heng Ji Yuan (永恒纪元) ,
keeping a stable gross billing in China’s Hong Kong, Macao, Taiwan, Southeast Asia, Europe, America, Korea and other regional
markets.
As of the issuance date of this report, the Company has reserved many global products, including Western Magic SLG game
Code MH（代号MH） SLG game Code ZSJ（代号ZSJ）to gain a position in the global SLG market; in addition, the following games
were introduced to the Japanese market: card game SNK オールスター, female game Tian E Zuo（天鹅座）, nijigen game Mo
Wang Ji Hua（魔王计划） and others; the following games were introduced to the Korean market: nijigen game Dengeki Bunko
Crossing Void (电击文库：零境交错), SLG game Zhen Long Ba Ye（真龙霸业）, ARPG game An Hei Hou Yi（暗黑后裔） and
others; in addition, there are a wide variety of games, including Shi Hun: Long Yue Chuan Shuo (侍魂：胧月传说), Dou Luo Da Lu
（斗罗大陆H5）, Xi Wang M (希望M), which will be brought to overseas market in 2019 to help the Company further explore
overseas markets.
2. Research and development of mobile games
During the reporting period, the Company registered a year-on-year increase of 61.05% in the gross billing of mobile game
R&D business, and the increased proportion of the income from self-developed products enhanced the Company’s profitability. The
continuous investment into mobile game R&D is an important part of the Company’s “quality and diversified” business strategy. The
increased R&D investment mainly focuses on improvement of product quality and exploration of new product categories.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
To improve product quality, the Company is committed to make better the product engines, and the artistic and sound quality of
products to meet the user demand in experiencing high-quality games at technical level; it is dedicated to game innovation and
process optimization to meet user demand in fun and smooth experience at the planning level. High-quality development and
high-frequency iterations made new products attractive to users, and allowed most self-developed products to maintain high gross
billing for a long time. Since 2018, more than 10 self-developed mobile games have been launched, among which Dou Luo Da Lu
H5（斗罗大陆H5）and Yi Dao Chuan Shi（一刀传世） and other games achieved a monthly gross billing of over RMB 100 million.
The Company updated and iterated several long-cycled popular games that have been launched. For the Swords of Archangels (大天
使之剑) H5, the Company follows the long-term operation concept, and makes it an industry-standard H5 product through design
and development of innovative gameplay to satisfy user demands. For Yong Heng Ji Yuan (永恒纪元) , the Company’s R&D team
keeps updating and iterating the cross-server system in combination with the SLG game mode, to enhance the social interaction
between players, continuously optimize the version content, and enhance the game experience of new and old players.
In the exploration of new product categories, the Company set foot on R&D of casual sports games, turn-based games and
simulation and education games during the reporting period, and conducted preliminary research on the development of other
categories such as SLG. As of the issuance date of this report, Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, a casual
sports game developed by the Company, was under test and is expected to be launched in 2019. In the future, the goal of the
Company is to become a first-rate game developer capable of providing players with various game products, focusing on high-quality
content and utilizing its own advantages in anticipating user needs. It will apply core technologies to further explore new themes,
gameplay and categories, and to actively expand its product lines.
As of the end of the reporting period, the Company was developing 12 mobile games, including Chuan Qi NB（传奇NB） Code
YZD（代号YZD）, Chuanqi S（传奇S）, Code DG（代号DG）, Chao Neng Qiu Qiu (working title)（超能球球（暂定名））, An
Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典） and Mobile Game AOD（手游项目AOD）.
(II) Browser games
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
More than 36,000 new servers were opened in 2018 in the
domestic market, topping the ranking list of operation platforms in term
of server opening (source of data from 9k9k). During the reporting
period, the operating from the browser game business reached RMB
1,646 million, a slight drop year on year, which was mainly due to users’
shift to mobile clients and reduction in browser game products. The
Company improved user adhesiveness and stabilized the product life
cycle through refined operation of major high-quality games, while
strengthening cooperation with domestic top browser game developers
through strategic investment and business cooperation. A series of
excellent games were launched during the reporting period, including
The Rise of Taichi（太极崛起）, the browser game Zhen Mo Qu（镇魔
曲网页版）and Mie Shen（灭神）, which helps further stabilize the
operating income. At the same time, the Company continued its efforts
to develop browser games. MU X (working title)(奇迹X（暂定名）),
which is under development, and The Legendary Swordsman (working
title)（笑傲江湖（暂定名））, the game to be operated by the Company
as an agent, are expected to be launched in 2019.
(III) Other cultural and creative businesses
During the reporting period, the Company invested into other
fast-growing cultural and creative segments, while maintaining the
high-speed growth of its core business, and deeply explored the opportunity to extend film and television, animation, music, literature,
VR/AR, Internet health and other fields with a key focus centering a strategy on quality content, to create a brand that can provide
quality content for all ages. In addition to maintaining the existing layout in film, animation, music and other fields, the Company
made arrangements for new cultural and creative segments by investing in Internet sports (Wake Yoga), children's education
(Miaocode, KaDa Story), youth cultural communication (Eomchat), talent agent (Original Plan) and IP incubation (Jinhai Shiyi), to
provide high-quality content for all ages and segments.
Focusing on main game business and traffic operation advantages, combined with the previous layout of VR and AR, the
Company will empower and coordinate strategically with the invested companies, and prepare for the upcoming 5G era, offering
more high-quality content with new experience, create a one-stop cultural and entertainment ecosystem, and become the most trusted
cultural brand of China’s younger generation.
(IV) IP strategy
It’s a long-term development goal of the Company to create quality content and establish a quality content brand. Based on this,
the Company continues to explore high-quality IP for development of quality cultural products including games, relying on its own
advantages. During the reporting period, the Company had three new IP reserves: Astro Boy（阿童木） Seal Online（希望OL） and
The Ancient Century（上古世纪） and one IP cooperation project Dou Luo Da Lu H5（斗罗大陆H5）.As of the end of the reporting
period, the IPs of the Company’s reserves covered different segments, including games, animation, literature, film and television. The
cooperation projects Dou Luo Da Lu H5（斗罗大陆H5）, Yi Dao Chuan Shi（一刀传世） which was adapted from Chuan Qi（传
奇） and Seal Online had been launched as of the reporting date, all of which achieved a high gross billing. As of the issuance date of
this report, the web project of Miracle MU MU X (working title)(奇迹X（暂定名） and the mobile game Jing Ling Shen Dian (精灵
盛典）was at the late development stage, and are expected to be launched by 2019. Relying on its excellent IP strategy, the Company
will continue to build its cultural and creative strategy system, satisfy the diversified demands of users for entertainment, and exploit
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
the value extension space of IP in film and television, game, animation and comic, music and VR in depth.
II. Analysis of main business
1. General
See “I. Overview” in “Discussion and Analysis of Operation Status” for related content.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
2. Income and cost
(1) Composition of operating income
Unit: RMB
2018 2017
Year-on-year increase/decrease
Amount Proportion of operating revenue Amount Proportion of operating revenue
Total operating income 7,632,679,668.47 100% 6,188,828,116.75 100% 23.33%
By industry
Online game industry 7,247,460,500.55 94.95% 5,628,616,443.76 90.95% 28.76%
Automobile parts industry 385,219,167.92 5.05% 560,211,672.99 9.05% -31.24%
By products
Browser games 1,645,957,054.96 21.56% 2,298,860,026.39 37.15% -28.40%
Mobile games 5,581,764,190.33 73.13% 3,283,622,990.10 53.06% 69.99%
Automobile parts 385,219,167.92 5.05% 560,211,672.99 9.05% -31.24%
Others 19,739,255.26 0.26% 46,133,427.27 0.74% -57.21%
By regions
Domestic 6,705,946,316.22 87.86% 5,269,286,525.60 85.14% 27.26%
Overseas 926,733,352.25 12.14% 919,541,591.15 14.86% 0.78%
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.
Unit: RMB
2018 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Operating income 1,661,159,158.79 1,641,336,987.98 2,232,318,268.92 2,097,865,252.78 1,618,738,028.51 1,460,690,875.99 1,384,968,829.74 1,724,430,382.51
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Net profits attributable to
the listed company 410,093,180.04 391,285,768.19 416,969,559.37 -209,845,149.80 433,033,150.06 417,517,368.31 360,788,807.71 409,243,101.39
shareholders
Explain the reasons for seasonal (or periodic) characteristics of the Company’s business and fluctuation risks
The Company does not have seasonal or periodic characteristics in its business.
The net profit attributable to listed company shareholders in the fourth quarter was RMB -209,845,149.80, mainly due to the Company’s provision of RMB 959,833,685.66 set aside for
Shanghai Mokun’s goodwill impairment loss. The amount of the impairment loss significantly exceeded the performance compensation and operating profit.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(2) Industries, products or regions that account for over 10% of the Company’s operating income or
operating profit
√Applicable □Not Applicable
Does the Company need to comply with the disclosure requirements for special industries?
Yes
Software and IT services
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 -
Listed Companies Engaged in Software and IT Services.
Unit: RMB
Year-to-year Year-to-year
Year-to-year
Gross profit increase/decrease increase/decrease
Operating income Operating cost increase/decrease
margin of the operating of the operating
of gross profit
income cost
Industry of clients
Online game
7,247,460,500.55 1,525,929,424.69 78.95% 28.76% -0.52% 6.20%
industry
Automobile parts
385,219,167.92 285,491,515.41 25.89% -31.24% -31.10% -0.15%
industry
By products
Browser games 1,645,957,054.96 462,583,409.98 71.90% -28.40% -39.29% 5.04%
Mobile games 5,581,764,190.33 1,063,346,014.71 80.95% 69.99% 37.76% 4.46%
Automobile parts 385,219,167.92 285,491,515.41 25.89% -31.24% -31.10% -0.15%
Others 19,739,255.26 0.00 100.00% -57.21% 0.00% 0.00%
By regions
Domestic 6,705,946,316.22 1,565,632,670.32 76.65% 27.26% -10.31% 9.78%
Overseas 926,733,352.25 245,788,269.78 73.48% 0.78% 21.36% -4.49%
For change of statistical caliber for main business data during the reporting period, the Company adjusted the main business data
according to year-end statistical caliber
□Applicable √Not Applicable
(3) Whether the Company has goods sales revenue higher than service revenue
□ Yes √ No
(4) Performance of the major sales contracts signed by the Company as of the reporting period
□Applicable √Not Applicable
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2018 Annual Report
(5) Composition of operating cost
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 -
Listed Companies Engaged in Software and IT Services.
Composition of main business cost
Unit: RMB
Reporting period Amount of previous year
Year-on-year
Cost composition Proportion in Proportion in
Amount Amount increase/decrease
operating cost operating cost
Shared revenue from
1,404,939,973.86 77.56% 1,423,838,815.22 73.08% -1.33%
games
Cost of servers 63,107,660.73 3.48% 54,854,972.77 2.82% 15.04%
Amortization of
37,821,137.65 2.09% 54,778,687.09 2.81% -30.96%
copyright money
Production cost 20,060,652.45 1.11% 371,026.02 0.02% 5,306.80%
Direct materials cost 220,361,708.66 12.17% 337,461,925.72 17.32% -34.70%
Direct labor
14,430,238.31 0.80% 17,028,724.64 0.87% -15.26%
expenses
Manufacturing
50,699,568.44 2.80% 59,863,088.30 3.07% -15.31%
expenses
Total cost 1,811,420,940.10 100.00% 1,948,197,239.76 100.00% -7.02%
Industry category
Industry category
Unit: RMB
2018 2017
Year-on-year
Industry category Item Proportion in Proportion in
Amount Amount increase/decrease
operating cost operating cost
Online game Shared revenue
1,404,939,973.86 77.56% 1,423,838,815.22 73.08% -1.33%
industry from games
Online game
Cost of servers 63,107,660.73 3.48% 54,854,972.77 2.82% 15.04%
industry
Online game Amortization of
37,821,137.65 2.09% 54,778,687.09 2.81% -30.96%
industry copyright money
Online game
Production cost 20,060,652.45 1.11% 371,026.02 0.02% 5,306.80%
industry
Automobile parts Direct materials
220,361,708.66 12.17% 337,461,925.72 17.32% -34.70%
industry cost
Automobile parts Direct labor 14,430,238.31 0.80% 17,028,724.64 0.87% -15.26%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
27
2018 Annual Report
industry expenses
Automobile parts Manufacturing
50,699,568.44 2.80% 59,863,088.30 3.07% -15.31%
industry expenses
Description
None
(6) Whether the consolidation scope changes in the reporting period
√Yes □ No
See Note III. Consolidation scope change under Section V for details
(7) Significant changes or adjustments to businesses, products or services during the reporting period
√Applicable □Not Applicable
During the reporting period, the Company disposed of the manufacturing and sales business of automotive plastic fuel tanks. Apart
from that, there is no significant change to the Company’s main businesses, main products and business models, and major
performance drivers.
(8) Major sales customers and major suppliers
Major sales customers
Total sales revenue of top 5 customers (RMB) 2,557,588,746.03
Proportion of total sales revenue of top 5 customers
33.51%
against the total sales revenue
Proportion of related parties’ sales among the sales of top
0.00%
5 customers against total annual sales
Profile of top 5 customers
S/N Customer name Sales (RMB) Proportion to annual total sales revenue
1 No. 1 1,129,853,810.91 14.80%
2 No. 2 684,819,228.17 8.97%
3 No. 3 359,505,079.95 4.71%
4 No. 4 208,935,938.85 2.74%
5 No. 5 174,474,688.15 2.29%
Total -- 2,557,588,746.03 33.51%
Description of major customers’ other situation
□Applicable √Not Applicable
Major suppliers of the Company
Total purchase amount of top five suppliers (RMB) 565,682,491.87
Proportion of total purchase amount of top 5 suppliers 31.83%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
28
2018 Annual Report
against the total purchase amount
Proportion of related parties’ total purchase among the
purchase amount of top 5 suppliers against the total 0.00%
purchase amount
Profiles of top 5 suppliers
Proportion in annual total purchase
S/N Supplier Name Purchasing amount (RMB)
amount
1 No. 1 222,561,545.35 12.52%
2 No. 2 123,298,738.37 6.94%
3 No. 3 88,873,339.60 5.00%
4 No. 4 81,570,946.86 4.59%
5 No. 5 49,377,921.69 2.78%
Total -- 565,682,491.87 31.83%
Description of major customers’ other situation
□Applicable √Not Applicable
3. Expenses
Unit: RMB
Year-on-year
2018 2017 increase/decr Explanation
ease
This was mainly due to a huge year-on-year increase in Internet traffic
expenses of the Company’s mobile game business during the reporting
period. The increase in mobile game business expenses was mainly due
to the increase in the number of registered users. The number of new
users in the reporting period exceeded 110 million. The main reasons
were: (1) During the reporting period, games such as Gui Yu Mi Cheng,
Swords of Archangels H5, Xian Ling Jue Xing, and Tu Long Po Xiao
Selling and
were in the main promotion period; (2) Gui Yu Mi Cheng, Xian Ling Jue
distribution 3,347,261,308.33 1,908,207,466.32 75.41%
Xing and other products of new themes attracted users from more
expenses
market segments, which enlarged the Company’s customer acquisition
scope, and promoted the new theme products. Products of new themes
were effectively promoted. During the reporting period, games such as
Gui Yu Mi Cheng, Swords of Archangels H5, Xian Ling Jue Xing, and
Tu Long Po Xiao were in the main promotion period. In the same period
last year, the main source of income,Yong Heng Ji Yuan (永恒纪元)
and other games entered the peak period of gross billing.
Administrati Mainly because the Company received equity incentive fee of RMB 101
246,062,902.36 340,490,511.74 -27.73%
ve expense million in the same period last year, but did not receive such fee in the
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
29
2018 Annual Report
current period.
Financial Mainly due to the decrease in exchange losses during the reporting
17,097,099.24 28,555,783.27 -40.13%
expense period.
R&D Mainly due to the increase in the number of R&D personnel in the game
537,705,604.63 436,169,030.12 23.28%
expense business and the increase in salary during the reporting period.
4. R&D investment
√Applicable □Not Applicable
Since 2018, more than 10 self-developed mobile games have been launched, among which Dou Luo Da Lu H5（斗罗大陆H5）
and Yi Dao Chuan Shi（一刀传世） and other games achieved a monthly gross billing of over 100 million RMB. As of the issuance
date of this report, the Company was developing a browser game of MU X (working title)(奇迹X（暂定名）), and mobile games such
as Chuan Qi NB（传奇NB）, Code YZD（代号YZD）, Chuan Qi S（传奇S）, Code DG（代号DG）, Chao Neng Qiu Qiu (working
title)（超能球球（暂定名））, An Hei Hou Yi（暗黑后裔）, Jing Ling Sheng Dian（精灵盛典）and Mobile Game AOD（手游
项目AOD）. Through continuous R&D investment, deep technical accumulation and continuous innovation, the Company is
expected to continue to launch high-quality games to realize continuous revenue growth.
As of the end of the reporting period, the number of R&D staff decreased by 5.61% compared with that at the end of 2017,
mainly due to the Company’s disposal of Shunrong Auto Parts in November 2018, resulting a fall in the number of R&D staff by 178
compared with that at the beginning of the current period.
R&D investment
2018 2017 Change proportion (%)
Number of R&D staff 1,379 1,461 -5.61%
Proportion of R&D staff 60.94% 54.05% 6.89%
Amount of R&D investment
539,841,128.36 439,094,559.01 22.94%
(RMB)
Proportion of R&D investment
7.07% 7.09% -0.02%
in operating income
Amount of capitalized R&D
2,254,237.93 7,663,076.06 -70.58%
investment (RMB)
Percentage of capitalized R&D
0.42% 1.75% -1.33%
investment in R&D investment
The reason for the significant change in the proportion of total R&D investment in operating income compared with the previous
year
□Applicable √Not Applicable
Reasons and justification for the substantial change in the capitalization rate of R&D investment
□Applicable √Not Applicable
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 -
Listed Companies Engaged in Software and IT Services.
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Basic information of relevant
Project name Capitalized amount of R&D Schedule
projects
Get a genuine license, use 3D
At the late development stage,
engine support, and ARPG
Browser game projects 6,205,796.16 and expected to be launched by
browser games with MU client
2019.
games as the theme.
Basis for the above amount of capitalized R&D investment is as follows:
(1) Technically feasible in completing the use or sales of the intangible assets;
(2) Intention of the Company to complete the use or sales of the intangible assets for use and sale;
(3) There are markets for intangible assets, which can produce economic benefits for the Company;
(4) The Company has rich R&D experience and good business performance, gains the support of enough technique, finance and
other resources to accomplish the development of intangible assets, and is able to use or sell the intangible assets;
(5) The expenditures in the development period of intangible assets can be measured reliably.
The above projects have undergone rigorous evaluation through market research, project initiating report and development plan, and
the accounting treatment of capitalization of R&D expenditure has been properly reviewed, and the internal control of the
Company’s R&D expenditure is sound.
5. Cash flow
Unit: RMB
Item 2018 2017 Year-on-year increase/decrease
Sub-total of cash inflows from operating
7,656,830,471.69 6,764,509,897.17 13.19%
activities
Sub-total of cash outflows from operating
5,702,396,850.85 4,932,613,968.87 15.61%
activities
Net cash flows from operating activities 1,954,433,620.84 1,831,895,928.30 6.69%
Sub-total of cash inflows from investing
4,242,654,828.03 2,567,482,176.55 65.25%
activities
Sub-total of cash outflows from investing
4,297,762,675.44 3,935,420,406.47 9.21%
activities
Net cash flows from investing activities -55,107,847.41 -1,367,938,229.92 95.97%
Sub-total of cash inflows from financing
668,789,457.72 1,344,262,496.88 -50.25%
activities
Sub-total of cash outflows from financing
2,638,059,560.80 1,034,016,584.46 155.13%
activities
Net cash flows from financing activities -1,969,270,103.08 310,245,912.42 -734.74%
Net increase of cash and cash equivalents -65,170,587.19 761,697,925.86 -108.56%
Description of main factors influencing major year-on-year changes in relevant data
√Applicable □Not Applicable
1. The sub-total of cash inflows from investing activities increased by 65.25% from the previous year, mainly due to the increase in
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
31
2018 Annual Report
the Company’s redemption of financial products during the reporting period.
2. The cash inflow of financing activities decreased by 50.25% from the previous year, mainly due to: 1) the Company’s issuance of
shares to raise funds in the same period last year; 2) decrease in the Company’s bank loans during the reporting period.
3. The sub-total of cash inflows from investing activities increased by 155.13% from the previous year, mainly due to the Company’s
payment for acquiring the minority shareholders’ equity of Jiangsu Aurora during the reporting period.
Reasons for the significant difference between the net cash flow from the Company’s operating activities and the net profit for the
year during the reporting period
□Applicable √Not Applicable
III. Analysis of non-main business
√Applicable □Not Applicable
Unit: RMB
Amount Proportion of total profit Cause Is it consistently applied?
Mainly due to investment
Investment income 80,543,972.30 6.61% profits from the disposal of No
equity investment
Mainly due to the asset
Asset impairment 1,049,355,112.25 86.06% impairment losses of the No
goodwill of Shanghai Mokun.
Mainly due to the income from
performance compensation
Non-operating
463,914,478.18 38.05% recognized resulting from the No
income
under-performance of Shanghai
Mokun
Mainly refund of VAT upon Refund of VAT upon collection
collection and other can be consistently applied, but
Other profits 97,647,310.60 8.01%
government subsidies related to other government subsidies
daily operations. cannot be consistently applied.
IV. Analysis of assets and liabilities
1. Significant changes in the composition of assets
Unit: RMB
End of 2018 End of 2017
Increase/d
Proportion Proportion
ecrease of Explanation
Amount of total Amount of total
proportion
assets assets
Monetary fund 1,532,965,200.05 18.26% 1,580,910,931.98 17.26% 1.00% No significant change.
Accounts 1,298,554,481.23 15.47% 884,909,012.77 9.66% 5.81% Mainly due to the increase in operating income
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
32
2018 Annual Report
receivable in the fourth quarter of the current year
compared with the same period of the previous
year.
Mainly due to the disposal of Shunrong Auto
Inventories 101,828,085.31 1.11% -1.11%
Parts during the reporting period.
Mainly due to the new investment into the
equity of Sanqi Guangzheng (Guangzhou)
Cultural Technology Investment Partnership
Long-term equity
555,602,013.99 6.62% 376,972,832.08 4.12% 2.50% (Limited Partnership), Shanghai Fenghua
investments
Qiushi Culture Media Co., Ltd., New Cues
(Beijing) Television Investment Co., Ltd. and
other companies during the reporting period.
Mainly due to the disposal of Shunrong Auto
Fixed assets 36,458,454.56 0.43% 292,395,887.17 3.19% -2.76%
Parts during the reporting period.
Construction in
50,672,878.42 0.55% -0.55% No significant change.
progress
Short-term loan 369,000,000.00 4.40% 372,054,500.00 4.06% 0.34% No significant change.
Long-term loans 281,176,106.33 3.35% 310,775,272.06 3.39% -0.04% No significant change.
Mainly due to the increase in the amount of
Other receivables 792,425,628.90 9.44% 388,694,512.02 4.24% 5.20% equity receivable from the disposal of Shunrong
Auto Parts during the reporting period.
Other current Mainly due to the decrease in the performance
356,865,377.91 4.25% 592,189,323.99 6.46% -2.21%
assets compensation receivables.
Mainly due to provision made by the Company
for impairment on the goodwill formed by the
Goodwill 1,578,567,397.76 18.80% 2,540,312,996.76 27.73% -8.93% merger resulting from Shanghai Mokun’s
failure to reach the expected performance in
2018.
Mainly due to the increase in the cost of
Notes payable
Internet traffic resulting from the year-on-year
and accounts 1,082,362,368.29 12.89% 741,792,973.33 8.10% 4.79%
increase in Internet traffic expenses during the
payable
reporting period.
2. Assets and liabilities measured by fair value
√Applicable □Not Applicable
Unit: RMB
Profits and
Change in fair Impairment Purchase
Beginning losses from Sales amount in
Item value included accrued in amount in Ending balance
balance change of fair current period
in equity current period current period
value in this
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
33
2018 Annual Report
period
Financial assets
3. Financial assets
81,100,692.72 31,572,708.00 -52,732,066.85 35,582,900.00 16,845,591.30 78,678,642.57
available for sale
Subtotal of financial
81,100,692.72 31,572,708.00 -52,732,066.85 35,582,900.00 16,845,591.30 78,678,642.57
assets
Total of the above 81,100,692.72 31,572,708.00 -52,732,066.85 35,582,900.00 16,845,591.30 78,678,642.57
Financial liabilities 0.00 0.00
Whether there is significant change to measurement attributes of main assets during the reporting period
□ Yes √ No
3. Restriction of main assets and rights as if the end of the reporting period
1. The prepaid purchase price of Company’s subsidiaries corresponding to the borrowing with the office building as the mortgage
was RMB 799,637,688.54 in total.
2. In the bank account balance of the Company’s subsidiaries, RMB 12,925,183.70 was the restricted fund, and RMB 4,299,671.56
was the guarantee.
V. Analysis of Investment Situations
1. Overview
√Applicable □Not Applicable
Investment amount during the reporting
Investment amount of previous year (yuan) Change %
period (yuan)
1,914,383,167.80 2,401,535,373.99 -20.29%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
34
2018 Annual Report
2. Major equity investment during the reporting period
√Applicable □Not Applicable
Unit: RMB
Progress as Antici Involved
Name of Way of Investm Current Date of
Investment Sharehold Capital Product of the pated in Index of disclosure (if
invested Main businesses contributi Partner ent investment disclosure
amount ing ratio sources types balance reven lawsuit any)
company on period profit and loss (if any)
sheet date ue or not?
Announcement of Wuhu
Technology development, technology
Shunrong Sanqi
transfer, technical consultation, technical
Industrial Interactive
services in the field of network technology
and Entertainment Network
and computer technology; computer system
Jiangsu Long-te R&D of commercial February Technology Co., Ltd. on
integration, network engineering, animation Purchase 1,400,000,000.00 20.00% Self-owned None 0.00 157,665,891.95 No
Aurora rm games changes 8th, 2018 Acquiring 20% equity of
design, creative services; graphic design
have been Jiangsu Aurora Network
and production; sales of computer
registered Technology Co., Ltd.
hardware, software and auxiliary
(Announcement No.:
equipment.
2018-008)
Announcement on the
Subsidiary’s Intention to
Industrial Invest in and Receive
Investmen and Shares of Huai’an Sanqi
Huai’an Equity investment, investment and asset Long-te t commercial December Yijian
Purchase 155,215,923.89 60.30% Self-owned None 238,480.95 No
Sanqi management in the cultural media industry. rm managem changes 4th, 2018 Pan-Entertainment Asset
ent have been Management Center
registered (Limited Partnership)
(Announcement No.:
2018-090)
Beijing Organizational culture and art exchange Capital 25,000,000.00 2.50% Self-owned None Long-te Culture Industrial No
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
35
2018 Annual Report
Chenming activities; film and television planning; increase rm media and
Media economic information consultation; commercial
Co., Ltd. animation design; design, production, changes
agency and release of ads; conference have been
services; hosting exhibition and display registered
events; technology promotion.
Technology consulting, technical services,
technology development and technology
transfer in network technology,
communication technology, computer
technology, information technology,
Industrial
Shanghai electronic technology, intelligent
and
Zhangmen technology and multimedia professional
Capital Long-te R&D of commercial
g Network fields, communication engineering, network 10,000,000.00 10.00% Self-owned None No
increase rm games changes
Technolog engineering, computer system integration,
have been
y Co., Ltd. graphic design and production, art design,
registered
design and production of various ads, the
use of self-owned media to release ads,
business information consulting (except for
brokerage), R&D and sales of electronic
products.
Production, reproduction, distribution,
Industrial
Hebei copyright transactions and agency
and
Youying transactions of TV dramas, TV variety
Capital Long-te Culture commercial
Culture shows, TV feature shows, animated story, 26,800,000.00 7.00% Self-owned None No
increase rm media changes
Spreading columns and radio play (production of TV
have been
Co., Ltd. dramas requires separate licenses)
registered
(operating with licenses); design,
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
36
2018 Annual Report
production and agent of domestic
advertising business, release of domestic
outdoor advertising, organization of cultural
and artistic exchange activities (except for
commercial performance); marketing
planning; corporate image planning.
Planning of cultural and artistic exchange
activities, design, production, agent and
release of various advertisements, etiquette
services, exhibition and display services,
animation design, network technology
(acting as a technology intermediary is not
Shanghai permitted); technology development, Industrial
Touch technology transfer, technology consulting and
Culture and technical services in the field of Capital Long-te Culture commercial
15,000,000.00 10.00% Self-owned None No
Communi computer software and hardware increase rm media changes
cation Co., technology; investment management, have been
Ltd. literary creation, photography services registered
(other than developing and enlargement
printing), computer system integration;
sales of computers, software and auxiliary
equipment (other than dedicated products
for computer information system security)
and electronic products.
Shanghai Cultural and artistic exchanges and Industrial
Original planning, corporate image planning, Capital Long-te Culture and
10,000,000.00 2.50% Self-owned None No
Plan animation design and production, etiquette increase rm media commercial
Culture & services, exhibition and conference changes
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
37
2018 Annual Report
Media Co. services, design, production, agency and have been
Ltd. release of various ads, organization and registered
planning of public relations activities,
performance broker; technological
development, technology transfer, technical
consulting and technical services in the field
of computer and network technology;
e-commerce (value-added
telecommunications and financial services
are not permitted); sales of daily necessities
and cosmetics; production of radio and
television programs.
Technology R&D, technical consulting,
technical services and transfer of
technology results: computer software and
hardware, network technology, education
software; computer system integration, data
processing technology services; education
Hangzhou Industrial
information consultation (other than
Honghua Children’s and
services for studying abroad and agencies
Duoduo Capital Long-te digital commercial
for studying abroad); copyright agency, 16,978,390.00 5.00% Self-owned None No
Network increase rm reading changes
conference and exhibition; sales of:
Technolog platform have been
electronic products (other than electronic
y Co., Ltd. registered
publications), communication equipment,
articles, toys and audio-visual products for
children; design, production, agent and
release of: domestic ads; value-added
telecom services; wholesale and retail of
publications; computer animation design,
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
38
2018 Annual Report
electronic equipment leasing, art training,
organization and planning of cultural and
artistic exchange activities (other than
performances and performance agencies);
commercial Internet culture services;
production of radio and television
programs; import and export of goods
Management of entrusted assets (it is not
permitted to engage in trust, financial asset
management, securities asset management,
etc.); equity investment; investment
consulting, business management
consulting; corporate marketing planning;
cultural event planning; planning of culture
and art exchange activities themed at film
Shenzhen
and television; organization and planning of Industrial
Zhonghui
public relations activities; planning of and
Television
conference affairs and activities; planning Long-te Culture commercial
Culture Others 50,000,000.00 3.85% Self-owned None No
of etiquette events; corporate image rm media changes
Communi
planning; investment in film and television have been
cation Co.,
projects; investment in cultural industry registered
Ltd.
projects; creation of literary scripts, music
works, songs, folk art, calligraphy and seal
cutting works; technological development,
technology transfer, technical consultation
and technical maintenance in film and
television culture; multimedia design;
animation design; graphic design;
advertising business; radio play, TV drams,
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
39
2018 Annual Report
cartoons (production must be declared
separately), special topics, columns
(excluding political news), production,
reproduction and distribution of variety
shows, film distribution.
Technology development, technical
consultation, technical services, technology Industrial
Jiangsu
transfer in the fields of network technology and
Yezi
and computer technology; design and Capital Long-te R&D of commercial
Network 15,000,000.00 20.00% Self-owned None -1,098,251.51 No
production of various ads; animation increase rm games changes
Technolog
design; computer graphic design and have been
y Co., Ltd.
production; sales of computer software and registered
auxiliary equipment.
Sanqi
Guangzhe Guangz Announcement on the
ng hou Subsidiary’s Proposed
(Guangzh Securiti Foreign Investment and
ou) es Industrial Participation in the
Cultural Innovat Investmen and Establishment of Sanqi
Corporate financial consulting; investment
Technolog Newly-es ion Long-te t commercial December Guangzheng
consulting; investment of corporate’s own 45,000,000.00 45.00% Self-owned No
y tablished Invest rm managem changes 4th, 2018 (Guangzhou) Cultural
funds; project investment
Investmen ment ent have been Technology Investment
t Manag registered Partnership (Limited
Partnershi ement Partnership)
p (Limited Co., (Announcement No.:
Partnershi Ltd. 2018-088)
p)
Chengdu R&D and sales of computer hardware and Capital 12,000,000.00 20.00% Self-owned None Long-te R&D of Industrial -388,213.60 No
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
40
2018 Annual Report
Popcorn software and electronic products; network increase rm games and
Interactive technology development; computer system commercial
Entertain integration; basic software services; changes
ment application software services; technology have been
Technolog import and export. registered
y Co., Ltd.
Production of broadcasting and television
programs; cultural entertainment brokerage;
performance brokerage; technical
consulting services for electronic products
and accessories; intelligent technology
consulting and related services; computer
hardware development; computer network
system engineering services; computer
technology transfer; development and
Industrial
construction of computer network platform;
Mango and
computer technology consultation;
Excellent Long-te Culture commercial
computer technology development and Others 35,582,900.00 0.18% Self-owned None No
Media rm media changes
technical services; information network
Co., Ltd. have been
communication audio-visual program
registered
business; sales of electronic products and
accessories and intelligent products; R&D
of electronic products and intelligent
technologies; retail of household chemicals,
daily necessities, cultural and sports goods,
toys, hardware tools, household appliances,
clothing, shoes and hats, furniture,
communication equipment and jewelry;
development and sales of tourism products,
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
41
2018 Annual Report
tourism information consulting and related
services; advertising design and outdoor
advertising, and agent for television and
newspaper advertising; event planning,
exhibition and training; sales of
pre-packaged food and liquor; retail of
Chinese medicine, health food, medical
equipment, audio-visual products, book and
newspaper; information service of
second-class value-added telecom business
(excluding fixed-line telephone information
service business and mobile network
information service); part-time insurance
agency; import and export of various
commodities and technologies (other than
those limited or prohibited by the country);
fertilizer retail; sales of packaged seeds that
are not repackaged; sales of tree and crop
seeds.
Total -- -- 1,816,577,213.89 -- -- -- -- -- -- 0.00 156,417,907.79 -- -- --
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
42
2018 Annual Report
3. Major non-equity investment during the reporting period
√Applicable □Not Applicable
Unit: RMB
Accumulat
Is it
Industries Investment ed gains as Reasons for failure
Way of fixed Accumulated input Date of
relevant for amount during Capital Project Anticipated of the end to reach planned
Project name contribut assets amount as of the end disclosure (if Index of disclosure (if any)
investment the reporting sources progress revenue of the schedule or
ion investme of reporting period any)
projects period reporting expected revenue
nt
period
12F, 14F, 17F~23F
office premises, Announcement on the
underground 3F and Subsidiary’s Purchase of
Own +
4F parking spaces of Commercial real Office Space and
Others Yes 40,940,000.00 836,804,793.02 mortgage 0.00 0.00 Not applicable April 26th, 2017
Zhongrong Plaza, estate Supporting Parking Lot
loans
No. 666, Huangpu (Announcement No.:
Avenue, Tianhe 2017-034)
District, Guangzhou
Total -- -- -- 40,940,000.00 836,804,793.02 -- -- 0.00 0.00 -- -- --
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
43
2018 Annual Report
4. Financial assets that are measured by fair value
√Applicable □Not Applicable
Unit: RMB
Profits and losses
Change in fair
from change of Purchase amount during Amount sold during the Accumulated
Assets category Initial investment cost value included in Ending amount Capital sources
fair value in this the reporting period reporting period investment income
equity
period
Share 112,016,157.36 0.00 -21,159,358.85 35,582,900.00 12,178,155.94 -9,114,992.25 78,678,642.57 Self-owned
Total 112,016,157.36 0.00 -21,159,358.85 35,582,900.00 12,178,155.94 -9,114,992.25 78,678,642.57 --
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
44
2018 Annual Report
5. Utilization of raised fund
√Applicable □Not Applicable
(1) Utilization of raised fund
√Applicable □Not Applicable
Unit: RMB 10,000
Total
Total Proportion
raised fund Accumulat
amount of Total of Use and Amount of
with ed total Total
Year of Total used raised amount of accumulat expenditur raised fund
Way of fund changed raised fund amount of
fund amount of fund raised fund ed raised e of left unused
raising purpose with unused
raising raised fund during the that has fund with unused for over
during the changed raised fund
reporting been used changed raised fund two years
reporting purpose
period purpose
period
Non-public
2017 45,596.25 45,596.25 45,596.25 0 0 0.00% 0 -- 0
offerings
Total -- 45,596.25 45,596.25 45,596.25 0 0 0.00% 0 -- 0
Description of overall utilization of raised fund
Upon verification of Reply on Verification of Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd.
Issuing Shares to, Purchasing Assets from, and Raising Supporting Funds from Wuhu Shunrong Sanqi Mutual Entertainment
Network Technology Co., Ltd. (Z.J.X.K. [2017] No. 579) from China Securities Regulatory Commission, Wuhu Shunrong Sanqi
Interactive Entertainment Network Technology Co., Ltd. issued, in the form of non-public offerings, 17,866,869 shares of common
stocks (“A-shares”) with par value of RMB 1 per share and issue price of 25.52 yuan/share to two specific investors: Shenzhen
State-owned Enterprise Structural Adjustment, Investment Attraction & M&A Equity Investment Fund Partnership (Limited
Partnership) and Shenzhen Yidun Media Investment Fund Partnership (Limited Partnership), and the total raised funds were RMB
455,962,496.88. After deducting the issuance expenses of RMB 31,313,316.06 (including tax), and considering the VAT input tax
of RMB 1,768,867.93, the net raised funds were RMB 426,418,048.75. As of June 30th, 2017, the supporting fund raised from the
above issuance was in place and verified by Pan-China Certified Public Accountants (Special Ordinary Partnership), which issued
the Capital Verification Report (T.J.Y. [2017] No. 3-64) on July 1st, 2017. The raised fund was mainly used for purchasing 68.43%
equity of Shanghai Mokun and 49.00% equity of Jiangsu Zhiming, with cash consideration of RMB 422,642,500.00 and relevant
intermediary fees of RMB 33,320,000.00 for this transaction.
(2) Change items of the raised fund
√Applicable □Not Applicable
Unit: RMB 10,000
Whether Total Total Investme Accumul Investme Date on Benefits Whether Significa
Committed investment
the committe investme nt ated nt which the realized realize nt change
project and investment
project d nt after amount investme schedule project during the to the
of extra raised fund
has been investme adjustme during nt at the will reach the expected project
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
45
2018 Annual Report
changed nt nt (1) the amount at closing expected reporting benefits feasibility
(includin amount reporting the period (3) use state period
g partial for raised period closing ＝(2)/(1)
change) fund period (2)
Committed investment project
Cash consideration for
purchasing 68.43% May 31st,
No 33,346.25 33,346.25 0 33,346.25 100.00% -330.17 No No
equity of Shanghai 2017
Mokun
Cash consideration for
purchasing 49.00% May 31st,
No 8,918 8,918 0 8,918 100.00% 3,155.69 Yes No
equity of Jiangsu 2017
Zhiming
Fees for intermediary June
agency related to the No 3,332 3,332 0 3,332 100.00% 30th, 0 Yes No
transaction 2017
Subtotal of committed
-- 45,596.25 45,596.25 0 45,596.25 -- -- 2,825.52 -- --
investment projects
Investment of extra raised fund
None
Total -- 45,596.25 45,596.25 0 45,596.25 -- -- 2,825.52 -- --
Description and reason
During the reporting period, due to the restrictions on the publication number and the overall decline in
for failure to reach
growth rate of the game industry, the R&D and launch schedule of Shanghai Mokun, a subsidiary of the
planned schedule or
Company, was not up to expectations, resulting in its major games failing to be launched in 2018 and
expected revenue (by
generate revenue and profits and Shanghai Mokun’s operating results lower than expected.
individual project)
Description of major
change to project None
feasibility
Amount, purpose and Not applicable
use schedule of extra
raised fund
Change of Not applicable
implementation
location of raised fund
investment project
Adjustment of Not applicable
implementation mode
of raised fund
investment project
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
46
2018 Annual Report
Applicable
Before the raised funds were in place, to ensure the smooth implementation of the Company’s
restructuring, the Company made a preliminary investment in the use of raised funds by self-raised fund
Initial input and
according to the actual situation, including the payment of the cash consideration of RMB 50 million for
replacement of raised
the transaction, and relevant intermediary agency of RMB 4,466,000, totaling RMB 54,466,000. After the
fund investment project
raised funds were in place, the Proposal on Replacing the Funds That Have Been Put into Investment
Projects with the Raised Funds was reviewed and approved at the 7th Meeting of the 4th Board of Directors,
and it was agreed to use RMB 54,466,000 of the raised funds to replace the pre-invested self-raised funds.
Use idle raised fund as Not applicable
temporary
supplementary working
capital
Amount of raised fund Not applicable
balance and reasons for
project implementation
Use and expenditure of
As of the end of the reporting period, the Company's raised funds have been used up, without any surplus.
unused raised fund
Other problems or
circumstances in the
None
use and disclosure of
raised fund
(3) Change items of the raised fund
□Applicable √Not Applicable
No change items of the raised funds during the reporting period.
VI. Major asset and equity sales
1. Sales of major assets
□Applicable √Not Applicable
The Company did not sell major assets during the reporting period.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
47
2018 Annual Report
2. Sales of major equity
√Applicable □Not Applicable
Profits Is it
contributed Percentage of implemented
by the equity profits as
to the listed contributed scheduled?
Transactio
company by sales of Pricing Is it an Relationship Are the equity If not,
Sold n price Impact of the selling on the Date of
Counterparty Sale date from the assets to the principle of associated with the involved fully explain the Index of disclosure
equity (10,000 Company disclosure
beginning of listed selling equity transaction? counterparty transferred? reasons and
yuan)
this year to company of the measures
the sale date total net the
(RMB profits Company
10,000) has taken.
By divesting the auto component Announcement of
sector assets with low profitability Wuhu Shunrong Sanqi
that are not suitable for the Interactive
Refer to the
Wuhu long-term strategy of listed Companies Entertainment
appraisal
Ningzhong Shunrong Novemb companies, the Company can use under control Network Technology
value, Implemented September
Auto Parts Auto er 30th, 81,900 125.84 its resources to focus on -0.94% Yes of the Yes Co., Ltd. on Selling
determined as schedule 21st, 2018
Technology Parts 2018 developing cultural and creative controlling Auto Parts Assets and
through
Co., Ltd. industries, improve asset operation shareholders Associated
consultation
efficiency, and improve the asset Transaction
quality and profitability of listed (Announcement No.:
companies. 2018-075)
VII. Analysis of Main Holding and Joint-Stock Company
√Applicable □Not Applicable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
48
2018 Annual Report
Main subsidiaries and joint-stock companies affecting more than 10% of the Company’s net profit
Unit: RMB
Registered
Company name Company type Main businesses Total assets Net asset Operating income Operating profit Net profit
capital
Shanghai Sanqi
Subsidiary Online games 10,000,000.00 6,933,137,265.67 4,056,858,080.40 7,283,837,859.03 1,076,368,498.40 1,463,682,662.09
Interactive Entertainment
Acquisition and disposal of subsidiaries during this reporting period
√Applicable □Not Applicable
Method for acquisition and disposal of
Company name Influence on overall production, operation and performance
subsidiaries during this reporting period
This equity sale was a reasonable choice made by the Company based on its development strategy. By divesting
the auto component sector assets with low profitability that are not suitable for the long-term strategy of listed
Shunrong Auto Parts Sale
companies, the Company can use its resources to focus on developing cultural and creative industries, improve
asset operation efficiency, and improve the asset quality and profitability of listed companies.
Major holding and joint-stock companies
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
49
2018 Annual Report
VIII. The Structured Entity Controlled by the Company
□Applicable √Not Applicable
IX. Prospect on the future development of the Company
(I) Development strategy and business plan for 2019
After years of development, the Chinese game market has seen a drop in growth rate of the actual sales revenue, and a
single-digit growth rate of game users for five consecutive years. As the Chinese game industry enters a mature stage, the growth
drivers have changed from “demographic dividend” to “content dividend”. Against the backdrop, the Company remains committed to
the development strategy of “quality, diversification, platform, and globalization”, and develops incrementally on basis of existing
advantages, while exploring other fields to create space for future development.
1. Quality-development strategy
Quality content is an important guarantee for the survival and development of the Company. In 2019, the Company will take
the following measures to increase the quality content reserve:
1) Enhance independent R&D strength: Increase R&D investment and the reserve of high-quality R&D talents, and enhance
our own ability to produce high-quality products;
2) Strengthen cooperation with upstream high-quality content providers such as Tencent, NetEase, Perfect World and Century
Huatong, and increase the reserve of high-quality content;
3) Further explore and support the development of high-quality R&D companies and R&D teams through investment in capital
and strategic cooperation, and expand the supply of quality products;
4) Strengthen IP development: Continue to explore high-quality IPs, deeply understand the essence of IPs, select highly fit IPs
for product development to match the characteristics of target game users; continue to create original IPs, bring forth the new through
continuous iterative development of excellent original works, add rich content to enhance the awareness of product IPs, and thus
increase the value of IPs.
2. Diversification strategy
The Company’s diversification strategy includes two aspects: diversification of products and diversification of traffic operation.
1) In terms of product diversification, the Company will intensify its attempt to new products, themes, gameplays and
technologies in the process of R&D and operation, and enhance our ability to develop and operate diversified products in 2019;
2) In terms of diversified traffic operation, the Company will improve traffic conversion efficiency and increase profit margin
by adopting a diversified mode of “three-dimensional marketing + precise delivery + long-term service” in 2019.
3. Platform strategy
The Company’s goal is to become a high-quality content platform, and create a brand providing a wide range of cultural
consumer goods in games, movies, animation, music, literature, VR/AR, Internet health, Internet education for all ages. In 2019, the
Company will further explore high-quality content targets, improve the layout of cultural and creative industry chain through
investment in capital, and expand the coverage of products, especially the coverage of the young, to become a cultural and creative
brand that accompanies the growth of the young generation of China.
4. Globalization strategy
In 2019, the company will keep advancing its globalization strategy.
On one hand, the Company will focus on developing high-potential markets such as the United States, Japan and South Korea
depending on localized product selection and marketing tools to achieve new growth. In terms of products, the Company will focus
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
50
2018 Annual Report
on breakthroughs in operating SLG products in global market. As of the issuance date of this report, it has reserves of such SLG
games as developed by excellent teams with successful experience, including Western Magic Code MH（代号MH）and Code ZSJ
（代号ZSJ）, to gain a position in the global SLG market. In terms of regional development, it will focus on the development of the
Japanese and Korean markets in 2019 based on the initial breakthrough in the Japanese and Korean markets in 2018. As of the
issuance date of this report, it has a wealth of products targeting the two markets: card games SNK オールスター, female game
Tian E Zuo（天鹅座）, nijigen game Mo Wang Ji Hua（魔王计划）and Dengeki Bunko: Crossing Void（电击文库：零境交错）,
SLG game Zhen Long Ba Ye（真龙霸业）, ARPG game An Hei Hou Yi（暗黑后裔） and others.
On the other hand, the Company will introduce more diversified products into China’s Hong Kong, Macao and Taiwan,
Southeast Asia and other advantageous areas to meet the diversified used demands to further enhance its dominant position.
(II) Possible risks
1. Market competition risks and countermeasures
The online game industry is facing increasingly fierce competition as it gradually matures. The development of various
Internet-based cultural creative segments other than online games is further exacerbating external competition. At the same time,
online game users are also maturing, and online game users have increasingly higher standards for game products. Intense market
competition will challenge the Company’s development in terms of products and market channels.
In response, the Company will continue to increase R&D investment, R&D and innovation in product creativity, gameplay,
theme, art and technology. It will maintain close cooperation with excellent developers to guarantee the supply of quality products,
and continue to connect users with quality games. In terms of market channels, the Company will further bring into play the role of
new ideas in traffic operation, deepen the business strategy of three-dimensional marketing, precision delivery and long-term services,
and continuously enhance its core market competitiveness.
2. Business risks and countermeasures
The online game industry is characterized by fast product update, limited life cycle and fast change of user preference. Game
enterprises need to increase their investment in technology development and closely keep in pace with trend of the industrial
technologies. If the technology, products and other aspects of the game undergo major changes, but game enterprises fail to keep up
with the development of industry technology, their products will fail to meet the market demands. At the same time, information
security and user privacy protection arouse great public concerns. If the Company leaks users’ information due to negligence, there
will be a significant damage on the user experience and brand image. Consequently, its operation performance will be impaired.
In response, increasing input in product R&D is needed to maintain continuous product innovation. The Company also needs to
dig deeper into operational data, continuously update the understanding of changes in target users’ preferences, and timely adjust
operational strategies and R&D directions, to meet the core demands of users.
A strict internal control system for information security management and user privacy protection has been set up to ensure the
security of users’ information to the maximum extent. In terms of information security, the Company has developed a series of
internal control systems to define and classify security incidents and to respond to possible data security problems. Information
security audits take place once every six months for systematic control of information security risks. In terms of privacy protection,
the Privacy Policy has been established, which provides in details the rules and standards for collection and use of users’ personal
information and sets forth the reasonable and feasible security measures adopted for protection of users’ personal information. In this
way the Company will make sure with greatest efforts that all users’ personal information are protected at the highest level. The
Company ensures that it runs the business in compliance with applicable laws and regulations throughout the world, and protects the
users’ right to manage personal information. A response procedure has been stipulated to inform users of any possible cost and
necessary actions needed to be taken.
3. Risks of core personnel turnover and countermeasures
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
A stable and high-quality talent team for game development, operation and management is an important guarantee for the
Company to maintain its core competitive advantage. If the Company fails to effectively build a core talent team, give reasonable
incentives and manages the core personnel, the employees’ enthusiasm and creativity will be affected, which will have an adverse
impact on the Company’s core competitiveness.
In response, much attention has been attached to cultivation and acquisition of professional talents. The Company creatively
builds a platform-based talent management mechanism, according to which excellent game producers are rewarded with high project
bonus, and given discretion of research and creation. The Company maintains the stability of core technology and management
personnel by signing agreements with core personnel, creating a favorable working environment and building a great corporate
culture. Meanwhile, the Company helps employees to realize their potential through a well-trained employee training system, and
rationally manages the team by using a clear rule of survival of the fittest to reinforce the team’s dynamics.
Section V Financial Report
I. Financial Statements
Unit in statements in financial notes: RMB
1. Consolidated balance sheet
Prepared by: Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd.
December 31st, 2018
Unit: RMB
Item Ending balance Beginning balance
Current assets:
Monetary fund 1,532,965,200.05 1,580,910,931.98
Transaction settlement funds
Loans to other banks
Financial assets measured at fair value
with changes included in current profits
and losses
Derivative financial assets
Notes receivable and accounts
1,298,554,481.23 940,249,012.77
receivable
Wherein: Notes receivable 55,340,000.00
Accounts receivable 1,298,554,481.23 884,909,012.77
Prepayments 193,770,132.83 283,516,789.29
Premiums receivable
Reinsurance premiums receivable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
52
2018 Annual Report
Reinsurance contract reserves
receivable
Other receivables 792,425,628.90 388,694,512.02
Wherein: Interest receivable 64,445.20 582,592.17
Dividends receivable
Redemptory monetary capital for sale
Inventories 101,828,085.31
Assets held-for-sale 7,536,816.46 75,066,714.34
Non-current assets due within one
year
Other current assets 356,865,377.91 592,189,323.99
Total current assets 4,182,117,637.38 3,962,455,369.70
Non-current assets:
Disbursement of advances and loans
Available-for-sale financial assets 1,119,291,025.55 882,481,586.86
Held-to-maturity investment
Long-term receivables
Long-term equity investments 555,602,013.99 376,972,832.08
Investment property
Fixed assets 36,458,454.56 292,395,887.17
Construction in progress 50,672,878.42
Productive biological assets
Oil and gas assets
Intangible assets 14,296,437.04 44,898,112.29
Development expenditure 6,205,796.16 4,070,272.43
Goodwill 1,578,567,397.76 2,540,312,996.76
Long-term deferred expenses 74,286,546.49 79,803,089.59
Deferred income tax assets 27,325,270.01 11,810,692.92
Other non-current assets 801,611,138.04 914,263,967.16
Total non-current assets 4,213,644,079.60 5,197,682,315.68
Total assets 8,395,761,716.98 9,160,137,685.38
Current liabilities:
Short-term loan 369,000,000.00 372,054,500.00
Loan from central bank
Receipt of deposits and deposits from
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
53
2018 Annual Report
other banks
Loans from other banks
Financial liabilities measured at fair
value with changes included in current
profits and losses
Derivative financial liabilities
Notes payable and accounts payable 1,082,362,368.29 741,792,973.33
Account received in advance 94,628,742.59 84,886,734.84
Financial assets sold for repurchase
Service charges and commissions
payable
Payroll payable 121,978,401.18 113,480,021.50
Tax payable 89,275,803.43 58,281,315.47
Other payables 108,142,599.83 61,962,553.64
Wherein: Interests payable 52,841.84 390,533.38
Dividends payable
Reinsured accounts payable
Reserves for insurance contract
Receivings from securities trading for
customers
Receivings from vicariously sold
securities
Liabilities held for sale
Non-current liabilities due within one
29,599,165.73 28,117,893.57
year
Other current liabilities 97,256,568.16 57,738,251.19
Total current liabilities 1,992,243,649.21 1,518,314,243.54
Non-current liabilities:
Long-term loans 281,176,106.33 310,775,272.06
Bonds payable 27,163,239.26
Wherein: Preferred shares
Perpetual capital securities
Long-term payables
Long-term remuneration payable
Estimated liabilities
Deferred income 3,903,715.32 17,226,474.44
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Deferred income tax liabilities 4,735,906.20
Other non-current liabilities
Total non-current liabilities 289,815,727.85 355,164,985.76
Total liabilities 2,282,059,377.06 1,873,479,229.30
Owners’ equity:
Share capital 2,124,870,253.00 2,148,110,844.00
Other equity instruments 1,947,846.62
Wherein: Preferred shares
Perpetual capital securities
Capital reserve 298,739,967.21 1,972,639,580.66
Less: Treasury stock
Other comprehensive income 46,376,346.58 -25,087,592.30
Special reserves
Surplus reserve 170,477,835.88 99,561,946.09
General risk provisions
Undistributed profit 3,332,211,003.19 2,819,597,585.78
Total equity attributable to parent company
5,972,675,405.86 7,016,770,210.85
owners
Minority shareholders' equity 141,026,934.06 269,888,245.23
Total owners' equities 6,113,702,339.92 7,286,658,456.08
Total liabilities and owners’ equity 8,395,761,716.98 9,160,137,685.38
Legal representative: Li Weiwei Accounting supervisor: Ye Wei Legal representative of the accounting firm: Ye Wei
2. Balance sheet of parent company
Unit: RMB
Item Ending balance Beginning balance
Current assets:
Monetary fund 4,325,959.18 5,437,518.91
Financial assets measured at fair value
with changes included in current profits and
losses
Derivative financial assets
Notes receivable and accounts
receivable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
55
2018 Annual Report
Wherein: Notes receivable
Accounts receivable
Prepayments 63,300.00
Other receivables 1,391,766,571.39 1,655,547,345.04
Wherein: Interest receivable
Dividends receivable 500,000,000.00
Inventories
Assets held-for-sale 69,996,897.11
Non-current assets due within one year
Other current assets 1,165,393.00 403,527,827.28
Total current assets 1,397,321,223.57 2,134,509,588.34
Non-current assets:
Available-for-sale financial assets 179,996,897.11 60,000,000.00
Held-to-maturity investment
Long-term receivables
Long-term equity investments 6,402,393,690.49 5,754,424,925.15
Investment property
Fixed assets
Construction in progress
Productive biological assets
Oil and gas assets
Intangible assets
Development expenditure
Goodwill
Long-term deferred expenses
Deferred income tax assets 8,090.43 3,334,186.37
Other non-current assets 50,000,000.00
Total non-current assets 6,582,398,678.03 5,867,759,111.52
Total assets 7,979,719,901.60 8,002,268,699.86
Current liabilities:
Short-term loan 369,000,000.00 369,000,000.00
Financial liabilities measured at fair
value with changes included in current
profits and losses
Derivative financial liabilities
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Notes payable and accounts payable 36,357,038.26
Account received in advance
Payroll payable 484,767.87 539,632.89
Tax payable 1,745,935.68 17,271,522.21
Other payables 711,616,794.64 565,476,999.44
Wherein: Interests payable 52,841.84 390,533.38
Dividends payable
Liabilities held for sale
Non-current liabilities due within one
year
Other current liabilities 936,428.02
Total current liabilities 1,119,204,536.45 953,224,582.56
Non-current liabilities:
Long-term loans
Bonds payable
Wherein: Preferred shares
Perpetual capital securities
Long-term payables
Long-term remuneration payable
Estimated liabilities
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities 1,119,204,536.45 953,224,582.56
Owners’ equity:
Share capital 2,124,870,253.00 2,148,110,844.00
Other equity instruments
Wherein: Preferred shares
Perpetual capital securities
Capital reserve 3,952,461,239.82 4,401,934,248.25
Less: Treasury stock
Other comprehensive income
Special reserves
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Surplus reserve 170,477,835.88 99,561,946.09
Undistributed profit 612,706,036.45 399,437,078.96
Total owner’s equity 6,860,515,365.15 7,049,044,117.30
Total liabilities and owners’ equity 7,979,719,901.60 8,002,268,699.86
3. Consolidated profit statement
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Total operating income 7,632,679,668.47 6,188,828,116.75
Wherein: Operating incomes 7,632,679,668.47 6,188,828,116.75
Interest incomes
Earned insurance premium
Incomes from service
charges and commissions
II. Total operating cost 7,041,943,419.64 5,039,424,012.89
Wherein: Operating costs 1,811,420,940.10 1,948,197,239.76
Interest payment
Service charges and
commission expenses
Refunded premium
Net amount of
compensation payout
Net amount of reserves for
reinsurance contract
Policy dividend payment
Reinsured expenses
Taxes and additional
33,040,452.73 26,508,097.89
charges
Selling and distribution
3,347,261,308.33 1,908,207,466.32
expenses
Administrative expense 246,062,902.36 340,490,511.74
R&D expense 537,705,604.63 436,169,030.12
Financial expense 17,097,099.24 28,555,783.27
Wherein: Interest fee 44,631,901.22 32,858,899.90
Interest income 27,632,671.32 24,363,295.31
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Assets impairment losses 1,049,355,112.25 351,295,883.79
Add: Other profits 97,647,310.60 111,259,077.18
Investment profit (“-”
80,543,972.30 256,030,245.92
indicates the loss)
Wherein: Investment income
7,617,107.86 -11,139,329.07
of joint-venture and partnership
Income from changes in fair
value (“-” indicates the loss)
Exchange income (“-”
indicates the loss)
Assets disposal income (“-”
1,289,755.10 1,055,284.09
indicates the loss)
III. Operation profit (“-” indicates the
770,217,286.83 1,517,748,711.05
loss)
Add: Non-operating income 463,914,478.18 403,057,922.86
Less: Non-operating expense 14,812,283.49 4,187,038.90
IV. Total profit (“-” indicates the total
1,219,319,481.52 1,916,619,595.01
loss)
Less: Income taxes 67,889,647.39 80,119,872.98
V. Net profit (“-” indicates the loss) 1,151,429,834.13 1,836,499,722.03
(I) Net profit of going concern (“-”
1,150,171,412.45 1,826,090,011.93
indicates net loss)
(II) Net profit of discontinuing
1,258,421.68 10,409,710.10
operation (“-” indicates net loss)
Net profits attributable to parent
1,008,503,357.80 1,620,582,427.47
company owners
Gain and loss of minority
142,926,476.33 215,917,294.56
shareholders
VI. After-tax net of other
71,463,938.88 -19,783,336.38
comprehensive incomes
After-tax net of other comprehensive
incomes owned by the owner of the 71,463,938.88 -20,469,057.23
parent company
(I) Other comprehensive incomes
that cannot be classified into profit and
loss
1. Re-measurement of
changes in defined benefit plan
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
2. Other comprehensive
incomes that cannot be reclassified into
profits and losses under the equity
method
(II) Other comprehensive incomes
that would be classified into profit and 71,463,938.88 -20,469,057.23
loss
1. Other comprehensive
incomes that can be reclassified into
profits and losses under the equity
method
2. Loss and profit of
change in fair value of 52,307,268.18 -21,799,686.38
available-for-sale financial assets
3. Loss and profit of
available-for-sale financial assets of
held-to-maturity investments
4. Effective part of hedge
profit and loss of cash flow
5. Translation difference in
19,156,670.70 1,330,629.15
the foreign currency financial statement
6. Others
Other comprehensive income net of
685,720.85
tax attributed to minority stockholders
VII. Total comprehensive income 1,222,893,773.01 1,816,716,385.65
Total comprehensive income
1,079,967,296.68 1,600,113,370.24
attributable to parent company owners
Total comprehensive income
142,926,476.33 216,603,015.41
attributable to minority shareholders
VIII. Earnings per share:
(I) Basic earning per share 0.47 0.76
(II) Diluted earning per share 0.47 0.76
For combination of enterprises under the same control in this period, the net profit realized by the merged party before combination
was: 0.00 yuan, net profit realized by the merged party in last times: RMB 0.00.
Legal representative: Li Weiwei Accounting supervisor: Ye Wei Legal representative of the accounting firm: Ye Wei
4. Profit statement of parent company
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Item Amount incurred in the current period Amount incurred in the previous period
I. Operating income 0.00 751,646.53
Less: Operating cost 0.00 31,646.53
Taxes and additional charges 1,439,813.45 1,349,357.00
Selling and distribution
expenses
Administrative expense 48,933,572.35 17,159,274.42
R&D expense
Financial expense 16,087,126.85 4,144,539.06
Wherein: Interest fee 23,907,281.20 19,681,094.85
Interest income 8,065,073.02 15,735,776.78
Assets impairment losses -13,304,383.76 10,753,616.43
Add: Other profits 191,216.36 156,969.20
Investment profit (“-”
766,968,765.34 -294,252,732.59
indicates the loss)
Wherein: Investment income
-2,136,170.23 -1,555,025.80
of joint-venture and partnership
Income from changes in fair
value (“-” indicates the loss)
Assets disposal income (“-”
indicates the loss)
II. Operating profit ("-" indicates the
714,003,852.81 -326,782,550.30
loss)
Add: Non-operating income 401,364,984.06
Less: Non-operating expense 805,483.09
III. Total profit (“-” indicates the total
713,198,369.72 74,582,433.76
loss)
Less: Income taxes 4,039,471.84 13,852,445.44
IV. Net profit (“-” indicates the loss) 709,158,897.88 60,729,988.32
(I) Net profit of going concern (“-”
709,158,897.88 60,729,988.32
indicates net loss)
(II) Net profit of discontinuing
operation (“-” indicates net loss)
V. Net of tax of other comprehensive
incomes
(I) Other comprehensive incomes
that cannot be classified into profit and
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
loss
1. Re-measurement of
changes in defined benefit plan
2. Other comprehensive
incomes that cannot be reclassified into
profits and losses under the equity
method
(II) Other comprehensive incomes
that would be classified into profit and
loss
1. Other comprehensive
incomes that can be reclassified into
profits and losses under the equity
method
2. Loss and profit of
change in fair value of
available-for-sale financial assets
3. Loss and profit of
available-for-sale financial assets of
held-to-maturity investments
4. Effective part of hedge
profit and loss of cash flow
5. Translation difference in
the foreign currency financial statement
6. Others
VI. Total comprehensive income 709,158,897.88 60,729,988.32
VII. Earnings per share:
(I) Basic earning per share
(II) Diluted earning per share
5. Consolidated cash flow statement
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Cash flows from operating activities:
Cash received from sales of goods
7,517,301,512.57 6,627,148,304.92
or rendering of services
Net increase of deposits from
customers and other banks
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Net increase of loans from central
bank
Net increase of loans from other
financial institutions
Cash received from receiving
insurance premium of original
insurance contract
Net cash received from reinsurance
business
Net increase of policy holder
deposits and investment funds
Disposal of financial assets
measured at fair value with changes
included in profits and losses
Cash received from interests, fees
and commissions
Net increase of loans from other
banks
Net capital increase of repurchase
business
Refunds of taxes and levies 58,796,021.20 81,575,068.42
Cash received from other operating
80,732,937.92 55,786,523.83
activities
Sub-total of cash inflows from
7,656,830,471.69 6,764,509,897.17
operating activities
Cash paid for purchasing goods
1,592,652,631.45 1,918,243,942.60
and services
Net increase of customer's loans
and advances
Net increase of deposits in central
bank and other banks
Cash paid for indemnity of original
insurance contract
Cash paid for interests, service
charges and commissions
Cash paid for policy dividends
Cash paid to and on behalf of
716,621,799.73 597,184,300.24
employees
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Payments of taxes and levies 258,651,093.19 363,818,448.62
Other cash paid relating to
3,134,471,326.48 2,053,367,277.41
operating activities
Sub-total of cash outflows from
5,702,396,850.85 4,932,613,968.87
operating activities
Net cash flows from operating activities 1,954,433,620.84 1,831,895,928.30
II. Cash flows from investing activities:
Cash received from withdrawal of
421,971,645.20 304,550,800.00
investments
Cash received from returns on
66,495,799.11 25,999,566.33
investments
Net cash received from disposal of
fixed assets, intangible assets and other 13,201,717.90 8,909,245.08
long-term assets
Net cash received from disposal of
160,122,465.82
subsidiaries and other business units
Other cash received relating to
3,580,863,200.00 2,228,022,565.14
investing activities
Sub-total of cash inflows from investing
4,242,654,828.03 2,567,482,176.55
activities
Cash paid to procure fixed assets,
intangible assets and other long-term 324,484,119.63 1,018,821,190.70
assets
Cash paid to acquire investments 227,024,902.40 344,220,277.93
Net increase of pledge loans
Net cash received from payment of
155,074,986.19 450,009,937.84
subsidiaries and other business entities
Cash payments relating to other
3,591,178,667.22 2,122,369,000.00
investment activities
Sub-total of cash outflows from
4,297,762,675.44 3,935,420,406.47
investing activities
Net cash flows from investing activities -55,107,847.41 -1,367,938,229.92
III. Cash flows from financing
activities:
Cash received from capital
19,789,457.72 433,862,496.88
contribution
Wherein: Cash from the
19,789,457.72 4,900,000.00
investment of minority shareholders of
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
the subsidiaries
Cash received from borrowings 649,000,000.00 910,400,000.00
Cash received from issuance of
debentures
Other cash received relating to
financing activities
Sub-total of cash inflows from
668,789,457.72 1,344,262,496.88
financing activities
Cash repayments of amounts
680,172,393.57 572,506,834.37
borrowed
Cash payments for interest
expenses and distribution of dividends 557,419,932.16 368,016,434.03
or profits
Wherein: Dividends and profits
paid by subsidiaries to minority 90,000,000.00 128,000,000.00
shareholders
Other cash payments relating to
1,400,467,235.07 93,493,316.06
financing activities
Sub-total of cash outflows from
2,638,059,560.80 1,034,016,584.46
financing activities
Net cash flows from financing activities -1,969,270,103.08 310,245,912.42
IV. Influence of exchange rate change
4,773,742.46 -12,505,684.94
on cash and cash equivalents
V. Net increase of cash and cash
-65,170,587.19 761,697,925.86
equivalents
Add: Opening balance of cash and
1,580,910,931.98 819,213,006.12
cash equivalents
VI. Balance of cash and cash
1,515,740,344.79 1,580,910,931.98
equivalents at the end of period
6. Cash flow statement of parent company
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Cash flows from operating activities:
Cash received from sales of goods
831,026.44
or rendering of services
Refunds of taxes and levies
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Cash received from other operating
2,839,071,058.58 1,173,262,433.61
activities
Sub-total of cash inflows from
2,839,071,058.58 1,174,093,460.05
operating activities
Cash paid for purchasing goods
31,646.53
and services
Cash paid to and on behalf of
2,906,501.07 3,096,452.80
employees
Payments of taxes and levies 17,678,775.88 1,484,543.09
Other cash paid relating to
1,695,271,506.47 1,204,811,508.30
operating activities
Sub-total of cash outflows from
1,715,856,783.42 1,209,424,150.72
operating activities
Net cash flows from operating activities 1,123,214,275.16 -35,330,690.67
II. Cash flows from investing activities:
Cash received from withdrawal of
497,690,000.00 195,000,000.00
investments
Cash received from returns on
224,996,712.32 1,582,261.90
investments
Net cash received from disposal of
fixed assets, intangible assets and other
long-term assets
Net cash received from disposal of
subsidiaries and other business units
Other cash received relating to
6,000,000.00
investing activities
Sub-total of cash inflows from investing
722,686,712.32 202,582,261.90
activities
Cash paid to procure fixed assets,
intangible assets and other long-term
assets
Cash paid to acquire investments 1,400,000,000.00
Net cash received from payment of
372,642,500.00
subsidiaries and other business entities
Cash payments relating to other
investment activities
Sub-total of cash outflows from
1,400,000,000.00 372,642,500.00
investing activities
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Net cash flows from investing activities -677,313,287.68 -170,060,238.10
III. Cash flows from financing
activities:
Cash received from capital
428,962,496.88
contribution
Cash received from borrowings 649,000,000.00 560,000,000.00
Cash received from issuance of
debentures
Other cash received relating to
financing activities
Sub-total of cash inflows from
649,000,000.00 988,962,496.88
financing activities
Cash repayments of amounts
649,000,000.00 561,000,000.00
borrowed
Cash payments for interest
expenses and distribution of dividends 446,695,312.14 228,181,607.55
or profits
Other cash payments relating to
317,235.07 4,313,316.06
financing activities
Sub-total of cash outflows from
1,096,012,547.21 793,494,923.61
financing activities
Net cash flows from financing activities -447,012,547.21 195,467,573.27
IV. Influence of exchange rate change
on cash and cash equivalents
V. Net increase of cash and cash
-1,111,559.73 -9,923,355.50
equivalents
Add: Opening balance of cash and
5,437,518.91 15,360,874.41
cash equivalents
VI. Balance of cash and cash
4,325,959.18 5,437,518.91
equivalents at the end of period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
7. Consolidated statement of changes in owners' equity
Amount of current period
Unit: RMB
Current period
Total owners' equity attributable to the parent company
Other equity instruments
Perpet Minority
Item Total owner’s
ual Less: Other
Special General risk Undistributed shareholders'
Prefer equity
Share capital capita Capital reserve Treasur comprehensive Surplus reserve
red Others reserves provisions profit equity
l y stock income
shares
securi
ties
I. Balance at the
end of previous 2,148,110,844.00 1,947,846.62 1,972,639,580.66 -25,087,592.30 99,561,946.09 2,819,597,585.78 269,888,245.23 7,286,658,456.08
year
Add: Changes
to accounting
policies
Fund for
corrections of
errors of previous
period
Business
combination under
the same control
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Others
II. Beginning
2,148,110,844.00 1,947,846.62 1,972,639,580.66 -25,087,592.30 99,561,946.09 2,819,597,585.78 269,888,245.23 7,286,658,456.08
balance at this year
III.
Increased/decrease
d amount this year -23,240,591.00 -1,947,846.62 -1,673,899,613.45 71,463,938.88 70,915,889.79 512,613,417.41 -128,861,311.17 -1,172,956,116.16
(“-” indicates
decrease)
(I) Total
comprehensive 71,463,938.88 1,008,503,357.80 142,926,476.33 1,222,893,773.01
income
(II) Owner
investment and -23,240,591.00 -1,947,846.62 -1,669,411,237.39 -181,787,787.50 -1,876,387,462.51
decreased capital
1. Ordinary share
-23,240,591.00 -446,970,507.71 7,286,957.72 -462,924,140.99
invested by Owners
2. Capital invested
by other equity
instrument holders
3. Amounts of
share-based
payments
recognized in
owners' equity
4. Others -1,947,846.62 -1,222,440,729.68 -189,074,745.22 -1,413,463,321.52
(III) Profit 70,915,889.79 -495,889,940.39 -90,000,000.00 -514,974,050.60
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
distribution
1. Appropriation to
70,915,889.79 -70,915,889.79
surplus reserves
2. Appropriation of
general risk
reserves
3. Distribution to
owners (or -424,974,050.60 -90,000,000.00 -514,974,050.60
shareholders)
4. Others
(IV) Internal
transfer of owners'
equity
1. Capital (or share
capital) from
capital reserves
2. Capital (or share
capital) from
surplus reserves
3. Surplus reserves
for making up
losses
4. Set the income
from the carrying
forward and
retaining of benefit
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
plan change
amount
5. Others
(V) Special
reserves
1. Withdrawn
amount of this
period
2. Using amount
this period
(VI) Others -4,488,376.06 -4,488,376.06
IV. Closing balance
of this accounting 2,124,870,253.00 298,739,967.21 46,376,346.58 170,477,835.88 3,332,211,003.19 141,026,934.06 6,113,702,339.92
period
Amount of previous period
Unit: RMB
Previous period
Total owners' equity attributable to the parent company
Other equity instruments
Minority
Item Perpet Total owner’s
Less: Other General
Special Surplus Undistributed shareholders'
ual equity
Share capital Preferre Capital reserve Treasur comprehensive risk
capital reserves reserve profit equity
Others
d shares y stock income provisions
securit
ies
I. Balance at the end 2,084,794,788.00 1,947,846.62 934,484,599.29 -4,618,535.07 93,488,947.26 1,413,567,635.94 205,489,001.44 4,729,154,283.48
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
of previous year
Add: Changes
to accounting
policies
Fund for
corrections of errors
of previous period
Business
combination under
the same control
Others
II. Beginning
2,084,794,788.00 1,947,846.62 934,484,599.29 -4,618,535.07 93,488,947.26 1,413,567,635.94 205,489,001.44 4,729,154,283.48
balance at this year
III.
Increased/decreased
amount this year 63,316,056.00 1,038,154,981.37 -20,469,057.23 6,072,998.83 1,406,029,949.84 64,399,243.79 2,557,504,172.60
(“-” indicates
decrease)
(I) Total
comprehensive -20,469,057.23 1,620,582,427.47 216,603,015.41 1,816,716,385.65
income
(II) Owner
investment and 63,316,056.00 1,038,154,981.37 -24,203,771.62 1,077,267,265.75
decreased capital
1. Ordinary share
63,316,056.00 1,148,009,452.24 4,900,000.00 1,216,225,508.24
invested by Owners
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
2. Capital invested
by other equity
instrument holders
3. Amounts of
share-based
payments 85,836,485.00 15,147,615.00 100,984,100.00
recognized in
owners' equity
4. Others -195,690,955.87 -44,251,386.62 -239,942,342.49
(III) Profit
6,072,998.83 -214,552,477.63 -128,000,000.00 -336,479,478.80
distribution
1. Appropriation to
6,072,998.83 -6,072,998.83
surplus reserves
2. Appropriation of
general risk reserves
3. Distribution to
owners (or -208,479,478.80 -128,000,000.00 -336,479,478.80
shareholders)
4. Others
(IV) Internal transfer
of owners' equity
1. Capital (or share
capital) from capital
reserves
2. Capital (or share
capital) from surplus
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
reserves
3. Surplus reserves
for making up losses
4. Set the income
from the carrying
forward and
retaining of benefit
plan change amount
5. Others
(V) Special reserves
1. Withdrawn
amount of this
period
2. Using amount this
period
(VI) Others
IV. Closing balance
of this accounting 2,148,110,844.00 1,947,846.62 1,972,639,580.66 -25,087,592.30 99,561,946.09 2,819,597,585.78 269,888,245.23 7,286,658,456.08
period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
8. Statement of changes in owner's equity of parent company
Amount of current period
Unit: RMB
Current period
Other equity instruments Other
Less:
Item comprehen Special Undistributed Total owner’s
Perpetual
Share capital Preferred Capital reserve Treasury Surplus reserve
capital Others sive reserves profit equity
shares stock
securities income
I. Balance at the end of
2,148,110,844.00 4,401,934,248.25 99,561,946.09 399,437,078.96 7,049,044,117.30
previous year
Add: Changes to
accounting policies
Fund for
corrections of errors of
previous period
Others
II. Beginning balance at this
2,148,110,844.00 4,401,934,248.25 99,561,946.09 399,437,078.96 7,049,044,117.30
year
III. Increased/decreased
amount this year (“-” -23,240,591.00 -449,473,008.43 70,915,889.79 213,268,957.49 -188,528,752.15
indicates decrease)
(I) Total comprehensive
709,158,897.88 709,158,897.88
income
(II) Owner investment and -23,240,591.00 -449,473,008.43 -472,713,599.43
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
decreased capital
1. Ordinary share invested
-23,240,591.00 -449,473,008.43 -472,713,599.43
by Owners
2. Capital invested by other
equity instrument holders
3. Amounts of share-based
payments recognized in
owners' equity
4. Others
(III) Profit distribution 70,915,889.79 -495,889,940.39 -424,974,050.60
1. Appropriation to surplus
70,915,889.79 -70,915,889.79
reserves
2. Distribution to owners (or
-424,974,050.60 -424,974,050.60
shareholder)
3. Others
(IV) Internal transfer of
owners' equity
1. Capital (or share capital)
from capital reserves
2. Capital (or share capital)
from surplus reserves
3. Surplus reserves for
making up losses
4. Set the income from the
carrying forward and
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
retaining of benefit plan
change amount
5. Others
(V) Special reserves
1. Withdrawn amount of this
period
2. Using amount this period
(VI) Others
IV. Closing balance of this
2,124,870,253.00 3,952,461,239.82 170,477,835.88 612,706,036.45 6,860,515,365.15
accounting period
Amount of previous period
Unit: RMB
Previous period
Other equity instruments
Less: Other
Item Special Total owner’s
Perpetual
Share capital Preferred Capital reserve Treasury comprehensive Surplus reserve Undistributed profit
capital Others reserves equity
shares stock income
securities
I. Balance at the end of
2,084,794,788.00 3,253,924,796.01 93,488,947.26 553,259,568.27 5,985,468,099.54
previous year
Add: Changes to
accounting policies
Fund for
corrections of errors of
previous period
Others
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
II. Beginning balance at this
2,084,794,788.00 3,253,924,796.01 93,488,947.26 553,259,568.27 5,985,468,099.54
year
III. Increased/decreased
amount this year (“-” 63,316,056.00 1,148,009,452.24 6,072,998.83 -153,822,489.31 1,063,576,017.76
indicates decrease)
(I) Total comprehensive
60,729,988.32 60,729,988.32
income
(II) Owner investment and
63,316,056.00 1,148,009,452.24 1,211,325,508.24
decreased capital
1. Ordinary share invested
63,316,056.00 1,148,009,452.24 1,211,325,508.24
by Owners
2. Capital invested by other
equity instrument holders
3. Amounts of share-based
payments recognized in
owners' equity
4. Others
(III) Profit distribution 6,072,998.83 -214,552,477.63 -208,479,478.80
1. Appropriation to surplus
6,072,998.83 -6,072,998.83
reserves
2. Distribution to owners (or
-208,479,478.80 -208,479,478.80
shareholder)
3. Others
(IV) Internal transfer of
owners' equity
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
1. Capital (or share capital)
from capital reserves
2. Capital (or share capital)
from surplus reserves
3. Surplus reserves for
making up losses
4. Set the income from the
carrying forward and
retaining of benefit plan
change amount
5. Others
(V) Special reserves
1. Withdrawn amount of
this period
2. Using amount this period
(VI) Others
IV. Closing balance of this
2,148,110,844.00 4,401,934,248.25 99,561,946.09 399,437,078.96 7,049,044,117.30
accounting period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
II. Item notes to consolidated financial statement
1. Monetary funds
Unit: RMB
Item Ending balance Beginning balance
Cash on hand 29,585.32 59,238.53
Bank deposit 1,526,769,012.67 1,573,326,143.60
Other monetary funds 6,166,602.06 7,525,549.85
Total 1,532,965,200.05 1,580,910,931.98
Wherein: Total amount deposited in the
382,759,855.68 309,430,937.71
foreign countries
Other notes
Other monetary funds are the balances of third party payment platforms and portfolio accounts for the Company and its subsidiaries.
2. Notes receivable and accounts receivable
Unit: RMB
Item Ending balance Beginning balance
Notes receivable 55,340,000.00
Accounts receivable 1,298,554,481.23 884,909,012.77
Total 1,298,554,481.23 940,249,012.77
(1) Notes receivable
1) Type of bills receivable is listed
Unit: RMB
Item Ending balance Beginning balance
Bank acceptance 55,340,000.00
Total 55,340,000.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(2) Accounts receivable
1) Disclosure of accounts receivable types
Unit: RMB
Ending balance Beginning balance
Book balance Provision for bad debts Book balance Provision for bad debts
Type
Proportio Accrual Book value Accrual Book value
Amount Amount Amount Proportion Amount
n proportion proportion
Accounts receivable with
provision for bad debts
withdrawn based on the 1,367,120,440.35 100.00% 68,565,959.12 5.02% 1,298,554,481.23 932,039,535.47 99.73% 47,130,522.70 5.06% 884,909,012.77
credit risk feature
portfolio
Receivables of individual
account with insignificant
2,493,589.80 0.27% 2,493,589.80 100.00%
amount but accrued for
provision of bad debts
Total 1,367,120,440.35 100.00% 68,565,959.12 5.02% 1,298,554,481.23 934,533,125.27 100.00% 49,624,112.50 5.31% 884,909,012.77
Receivables of individual account with significant amount and accrued provision for bad account at the end of this period:
□Applicable √Not Applicable
Accounts receivable with bad debts provisions accrued by aging analysis method in the portfolio:
√Applicable □Not Applicable
Unit: RMB
Ending balance
Aging
Accounts receivable Provision for bad debts Accrual proportion
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Items within 1 year
Subtotal within 1 year 1,365,178,454.75 68,258,899.39 5.00%
1 - 2 year (s) 1,415,470.24 141,547.02 10.00%
2 - 3 years 488,724.86 146,617.46 30.00%
3 - 4 years 37,790.50 18,895.25 50.00%
4 - 5 years 80.00%
Over 5 years 100.00%
Total 1,367,120,440.35 68,565,959.12 5.02%
Description of basis for this portfolio determination:
Receivables of same aging share similar characteristics of credit risk
Receivables with bad debts provisions accrued by balance percentage method in the portfolio:
□Applicable √Not Applicable
Account receivables with bad debts provisions accrued by other methods in the portfolio:
None
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 12 - Listed Companies Engaged in Software and IT Services.
The Company does not have any account receivable with age of more than 3 years and high single amount.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
2) Reserve of the bad debts that are accrued, withdrew and taken back in current period
The provision for bad debt accrued in this current period is RMB 24,946,245.78 and the provision for bad debts returned back or
taken back in this current period is RMB 0.00.
Including important provision for bad debt returned back or taken back in this current period:
Unit: RMB
Organization name Amount returned back or taken back Change the way of return
3) Accounts receivables actually written off in this period
Unit: RMB
Item Verification amount
Receivable software operating income 2,499,329.10
Including important notes for cancellation of receivables after verification:
Unit: RMB
Verification Generated from
Nature of account
Organization name Verification amount Verification reason procedures related party
receivables
performed transactions or not
Note for cancellation of account receivables after verification:
In the current period, the write-off of the provision for bad debts is RMB 2,499,329.10, and the amount arising from the reduction of
bad debt provision due to disposal of subsidiaries is RMB 3,505,070.06.
4) Top five arrears balance of accounts receivable by the end of the period
Unit: RMB
Organization name Book balance Percentage in accounts Provision for bad debts
receivable (%)
No. 1 645,500,526.41 47.22% 32,275,026.32
No. 2 56,721,344.85 4.15% 2,836,067.24
No. 3 54,887,510.53 4.01% 2,744,375.53
No. 4 49,540,943.92 3.62% 2,477,047.20
No. 5 38,602,959.32 2.82% 1,930,147.97
Subtotal 845,253,285.03 61.82% 42,262,664.26
3. Prepayments
(1) Prepayments listed by aging
Unit: RMB
Closing balance Beginning balance
Aging
Amount Proportion Amount Proportion
Within 1 year 146,868,718.41 75.80% 198,328,892.96 69.95%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
1 - 2 year(s) 39,028,966.61 20.14% 56,723,653.42 20.01%
2 - 3 years 4,642,733.10 2.40% 28,413,652.41 10.02%
Over 3 years 3,229,714.71 1.66% 50,590.50 0.02%
Total 193,770,132.83 -- 283,516,789.29 --
The explanation for the reasons of failure in in-time settlement for significant amount of advance payment with aging of more than 1
year:
Unit: RMB
Unit Amount of prepayment with Unsettlement reasons
age of more than 1 year
WEBZEN INC. 20,670,730.34 The game has not been launched
Total 20,670,730.34 /
(2) Top five ending balances of prepayments classified by prepayment objects:
Unit: RMB
Organization name Book balance Proportion in remaining pre-paid amount
No. 1 20,670,730.34 10.67%
No. 2 18,725,822.60 9.66%
No. 3 18,000,000.00 9.29%
No. 4 12,353,760.00 6.38%
No. 5 10,427,258.32 5.38%
Subtotal 80,177,571.26 41.38%
Other notes:
None
4. Other receivables
Unit: RMB
Item Ending balance Beginning balance
Interest receivable 64,445.20 582,592.17
Other receivables 792,361,183.70 388,111,919.85
Total 792,425,628.90 388,694,512.02
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(1) Interest receivable
1) Classification of interests payable
Unit: RMB
Item Ending balance Beginning balance
Fixed-term deposits 64,445.20 582,592.17
Total 64,445.20 582,592.17
(2) Other receivables
1) Classification of other receivables
Unit: RMB
Ending balance Beginning balance
Book balance Provision for bad debts Book balance Provision for bad debts
Type
Proportio Accrual Book value Book value
Amount Amount Amount Proportion Amount Accrual proportion
n proportion
Other accounts
receivable withdrawn
provision for bad debts 819,655,662.79 99.98% 27,294,479.09 3.33% 792,361,183.70 411,171,304.86 100.00% 23,059,385.01 5.61% 388,111,919.85
based on credit risk
feature combination
Other receivables of
individual account with
insignificant amount 200,000.00 0.02% 200,000.00 100.00%
and accrued for
provision of bad
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
85
2018 Annual Report
account
Total 819,855,662.79 100.00% 27,494,479.09 3.35% 792,361,183.70 411,171,304.86 100.00% 23,059,385.01 5.61% 388,111,919.85
Other receivables of individual account with significant amount and with bad debt provision accrued at the end of current period:
□Applicable √Not Applicable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Other receivable with provisions of bad debts accrued by aging analysis method in the portfolio:
√Applicable □Not Applicable
Unit: RMB
Ending balance
Aging
Other receivables Provision for bad debts Accrual proportion
Items within 1 year
Subtotal within 1 year 334,249,175.30 16,712,458.76 5.00%
1 - 2 year (s) 80,725,203.02 8,070,461.36 10.00%
2 - 3 years 1,122,916.40 336,874.92 30.00%
3 - 4 years 147,368.07 73,684.05 50.00%
4 - 5 years 80.00%
Over 5 years 2,101,000.00 2,101,000.00 100.00%
Total 418,345,662.79 27,294,479.09 6.52%
Description of basis for this portfolio determination:
Receivables of same aging share similar characteristics of credit risk
Other receivables with bad debts provisions accrued by balance percentage method in the portfolio:
□Applicable √Not Applicable
Other receivables with provisions of bad debts accrued by other methods in the portfolio:
√Applicable □Not Applicable
Other accounts receivable Ending balance
(by unit) Other receivables Provision for Accrual Reason for not accruing
bad debts proportion
Wuhu Ningzhong Auto RMB - - For single tests of controlling
Parts Technology Co., Ltd. 401,310,000.00 shareholders’ funds, the present
value of estimated future cash
flows is equal to the book value.
Total - - /
RMB
401,310,000.00
2) Reserve of the bad debts that are accrued, withdrew and taken back in current period
The provision for bad debt accrued in this current period is RMB 5,538,704.08 and the provision for bad debts returned back or taken
back in this current period is RMB 0.00.
Including important provision for bad debt transferred back or recovered in this period:
Unit: RMB
Organization name Amount carried forward or recovered Change the way of return
3) Accounts receivables actually written off in this period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Unit: RMB
Item Verification amount
Important notes for cancellation of other receivables after verification:
Unit: RMB
Verification Generated from
Nature of other
Organization name Verification amount Verification reason procedures related party
receivables
performed transactions or not
Note for cancellation of other receivables after verification:
In the current period, the disposal of subsidiaries reduced the amount of bad debt provision by RMB 1,103,610.00.
4) Classification of other receivables based on the fund nature
Unit: RMB
Fund nature Ending book value Opening book balance
Security, deposit and imprest 69,863,183.59 45,432,385.25
Related parties borrowing 267,459,561.64
Receivable sharing and royalty 33,563,609.65 33,849,014.57
Equity-related receivables 448,486,888.88 57,768,000.00
Performance compensation receivables 260,868,040.88
Others 7,073,939.79 6,662,343.40
Total 819,855,662.79 411,171,304.86
5) Other accounts receivable in top five based on year-end balance collected from arrears party
Unit: RMB
Proportion in total Ending balance of
Organization name Fund nature Ending balance Aging ending balance of provision for bad
other receivables debts
Wuhu Ningzhong Auto Parts Equity disposal
401,310,000.00 Within 1 year 48.95%
Technology Co., Ltd. receivables
Original shareholders of Shanghai
Mokun Digital Technology Co.,
Performance
Ltd. (Zhangshu Wangzhong
compensation 260,868,040.88 Within 1 year 31.82% 13,043,402.04
Investment Management Center
receivables
(Limited Partnership), Yang
Dongmai, Chen Wei)
Jiangyin Zhongnan Heavy Equity disposal
42,768,000.00 1 - 2 year(s) 5.22% 4,276,800.00
Industries Co., Ltd receivables
Tibet is also complex Advertising Cash deposit and Within 1 year, 1 - 2
24,450,000.00 2.98% 1,347,500.00
Co., Ltd. pledge years
Cash deposit and
Hefei Intermediate People’s Court 20,000,000.00 Within 1 year 2.44% 1,000,000.00
pledge
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Total -- 749,396,040.88 -- 91.41% 19,667,702.04
5. Inventories
Does the Company need to comply with the disclosure requirements for real estate industry?
No
(1) Classifications of inventories
Unit: RMB
Ending balance Beginning balance
Item Devaluation Devaluation
Book balance Book value Book balance Book value
provision provision
Raw material 54,932,578.33 54,932,578.33
Products in
3,074,467.07 3,074,467.07
process
Commodity
0.00 45,497,455.50 1,676,415.59 43,821,039.91
stocks
Total 0.00 103,504,500.90 1,676,415.59 101,828,085.31
Does the Company need to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 4 -
Listed Companies Engaged in Seed Industry and Planting Business?
No
Does the Company need to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No. 11 -
Listed Companies Engaged in Jewelry Related Business?
No
(2) Inventory valuation allowance
Unit: RMB
Increased amount of current period Decreased amount of current period
Beginning
Item Write-back or Ending balance
balance Withdrawing Others Others
write-off
Commodity
1,676,415.59 4,004,132.44 5,680,548.03 0.00
stocks
Total 1,676,415.59 4,004,132.44 0.00 0.00 5,680,548.03 0.00
In the current period, the disposal of subsidiaries reduced the amount of inventory valuation allowance by RMB 5,680,548.03.
(3) Description for amount of borrowing costs capitalization in the final balance of the inventory
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(4) Finished but not calculated assets that is formed by construction contract at the end of the period.
Unit: RMB
Item Amount
Other notes:
None
6. Assets held-for-sale
Unit: RMB
Carrying value at the end Estimated disposal
Item Fair value Estimated disposal date
of the period expense
Available-for-sale
7,536,816.46 7,536,816.46 0.00 December 31st, 2019
financial assets
Total 7,536,816.46 7,536,816.46 0.00 --
Other notes:
The above assets are expected to be disposed of within the next 12 months.
7. Other current assets
Unit: RMB
Item Ending balance Beginning balance
Financing products of bank 116,000,000.00 110,000,000.00
Retained VAT and VAT to be certified 115,335,389.59 76,813,938.41
Prepaid income tax 6,410,819.68 4,010,401.52
Performance compensation receivables 119,119,168.64 401,364,984.06
Total 356,865,377.91 592,189,323.99
Other notes:
Performance compensation receivables are arising from the acquisition of 68.43% equities from Shanghai Mokun Digital Technology
Co., Ltd. in 2017 and the signing of profit compensation agreement with Yang Dongmai, Chen Wei and Zhangshu Wangzhong
Investment Management Center (Limited Partnership) (original shareholders of Shanghai Mokun). According to the calculation
methods stipulated in the profit compensation agreement; Shanghai Mokun Digital Technology Co., Ltd.’s audited net profit
attributable to shareholders of the parent company after deducting non-recurring gains and losses in 2016, 2017 and 2018; and the
impairment amount of goodwill and the calculation method of impairment compensation at the end of 2018, it is calculated that three
original shareholders of Shanghai Mokun Digital Technology Co., Ltd. in 2018 should compensate the Company at a price of RMB
453,859,535.09, of which: cash compensation is RMB 260,868,040.88 and included in other receivables; and stock compensation is
RMB 192,991,494.21 and calculated at the issue price of RMB 17.27/share. In addition, 12,618,556 shares shall be offered to the
Company as compensation, and their fair value shall be calculated to be RMB 119,119,168.64 based on the market price on
December 31st, 2018.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
8. Available-for-sale financial assets
(1) Information of available-for-sale financial assets
Unit: RMB
Ending balance Beginning balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Equity instrument
1,131,091,025.55 11,800,000.00 1,119,291,025.55 894,281,586.86 11,800,000.00 882,481,586.86
available for sale:
Fair value
71,141,826.11 71,141,826.11 57,541,101.92 57,541,101.92
measurements
Measured at cost 1,059,949,199.44 11,800,000.00 1,048,149,199.44 836,740,484.94 11,800,000.00 824,940,484.94
Total 1,131,091,025.55 11,800,000.00 1,119,291,025.55 894,281,586.86 11,800,000.00 882,481,586.86
(2) Available-for-sale financial assets measured at fair values at the end of the period
Unit: RMB
Classification of
Equity instrument Available-for-sale
available-for-sale financial Total
available for sale liability instrument
assets
Costs of equity
instruments/amortized costs of 57,810,972.60 57,810,972.60
debt instruments
Fair value 71,141,826.11 71,141,826.11
Change amount of fair value
accumulatively included in 13,330,853.51 13,330,853.51
other comprehensive incomes
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(3) Available-for-sale financial assets measured by cost at the end of term
Unit: RMB
Book balance Impairment provision
Increase in Shareholding ratio in Cash bonus of current
Invested company Increase in Decrease in Beginning Decrease in
Beginning balance Ending balance current Ending balance invested companies period
current period current period balance current period
period
Shenzhen Mokylin
60,000,000.00 60,000,000.00 1.95%
Technology Co., Ltd.
Tianjin Purple
Dragon Singular
Point Interactive 25,264,211.00 2,148,421.10 23,115,789.90 1.72%
Entertainment Co.,
Ltd.
Hangzhou Southern
69,996,897.11 69,996,897.11 10.00%
Pictures Co., Ltd.
Shenzhen Zhonghui
Television Culture
50,000,000.00 50,000,000.00 3.85%
Communication Co.,
Ltd.
Chengdu Jule
100,000.00 100,000.00 100,000.00 100,000.00 8.00%
Technology Co., Ltd.
Beijing Jizhi Xunyou
6,000,000.00 6,000,000.00 6,000,000.00 6,000,000.00 10.00%
Technology Co., Ltd.
Shenzhen QiFun
50,000,000.00 50,000,000.00 6.22%
Network Corp. Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
92
2018 Annual Report
Gortune Investment
1,000,000.00 1,000,000.00 0.20%
Co., Ltd
Guangzhou
Joyegame Software 4,000,000.00 4,000,000.00 4,000,000.00 4,000,000.00 15.00%
Co., Ltd.
Suzhou Youge
Hulian Venture
Investment Center 5,000,000.00 5,000,000.00 2.98%
(Limited
Partnership)
Chengdu 91ACT
Technology 52,731,000.00 52,731,000.00 17.01% 2,440,350.00
Company
Guangzhou Xiaoyi
Network Technology 200,000.00 200,000.00 200,000.00 200,000.00 10.00%
Co., Ltd.
Xiamen Intensive
Joint Technology 8,000,000.00 8,000,000.00 10.00%
Co., Ltd.
Beijing Chinese Anci
Equity Investment
Fund Management 50,000,000.00 50,000,000.00 16.67%
Center (Limited
Partnership)
Hunan Tianlei
Network Technology 1,500,000.00 1,500,000.00 1,500,000.00 1,500,000.00 10.00%
Co., Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
93
2018 Annual Report
Shanghai Mango
Creative Equity
240,000,000.00 66,418,508.59 173,581,491.41 7.78% 4,956,454.96
Investment Fund
(L.P.)
Beijing Colorful
Game Technology 5,000,000.00 5,000,000.00 8.54%
Co., Ltd.
Jiangsu Mingtong
Information 50,000,000.00 50,000,000.00 5.00%
Technology Co., Ltd.
Zhongsheng
Chunqiu Film and
9,000,000.00 9,000,000.00 5.00%
TV Culture (Beijing)
Co., Ltd.
Shanghai Mango
Interactive
42,000,000.00 42,000,000.00
Entertainment
Technology Co., Ltd.
Wafa Games Limited 875.06 875.06 10.00%
SNK Corporation 1,036.35 1,036.35 1.42%
Miaocode Education
BVI Holding 6,863,200.00 6,863,200.00 3.00%
Limited
Archiact Interactive
20,587,940.96 1,036,481.90 21,624,422.86 7.86%
Ltd.
Tianjin Digital Color 80,000,000.00 80,000,000.00 1.51%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
94
2018 Annual Report
Interactive
Technology Co., Ltd.
Tianshe (Shanghai)
Culture & Media 10,000,000.00 10,000,000.00 18.30%
Co., Ltd.
Shanghai Quwei
Network Technology 7,000,000.00 7,000,000.00 4.75%
Co., Ltd.
Antic gameworld
38,332.98 38,332.98 5.00%
co.,ltd
X.D. Network Co.,
100,050,000.00 100,050,000.00 2.38% 1,194,183.75
Ltd.
Najia Technology
40,000,000.00 40,000,000.00 7.20%
(Shenzhen) Co., Ltd.
Shenzhen Zen-game
18,000,000.00 18,000,000.00 2.78% 2,166,684.00
Technology Co., Ltd.
Haojiahuo Media
Fund I Partners
5,000,000.00 1,100,000.00 3,900,000.00 20.00%
(Limited
Partnership)
Beijing Chenming
25,000,000.00 25,000,000.00 2.50%
Media Co., Ltd.
Beijing Longri
2,999,193.00 2,999,193.00 10.00%
Technology Co., Ltd.
Xiamen Huoyou
5,000,000.00 5,000,000.00 7.00%
Information
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
95
2018 Annual Report
Technology Co., Ltd.
Shanghai
Zhangmeng Network 10,000,000.00 10,000,000.00 10.00%
Technology Co., Ltd.
Hebei Youying
Culture Spreading 26,800,000.00 26,800,000.00 7.00%
Co., Ltd.
Shanghai Touch
Culture
15,000,000.00 15,000,000.00 10.00%
Communication Co.,
Ltd.
Wake Of Light
Network Technology 9,900,000.00 9,900,000.00 7.00%
Co., Ltd.
Shanghai Original
Plan Culture & 10,000,000.00 10,000,000.00 2.50%
Media Co. Ltd.
Beijing Jinhai Shiyi
Culture Media Co., 7,500,000.00 7,500,000.00 15.00%
Ltd.
Hangzhou Honghua
Duoduo Network 16,978,390.00 16,978,390.00 5.00%
Technology Co., Ltd.
Beijing Blueberry
Time Technology 2,623,200.00 2,623,200.00 10.02%
Co., Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
96
2018 Annual Report
Beijing Yuge
2,000,000.00 2,000,000.00 10.00%
Technology Co., Ltd.
YHKT
Entertainment Co., 14,400,000.00 14,400,000.00 8.10%
Ltd.
Guangzhou Xuyang
Network Technology 1,000,000.00 1,000,000.00 10.00%
Co., Ltd.
Changzhou Pengyou
Interactive
Entertainment 1,500,000.00 1,500,000.00 15.00%
Network Technology
Co., Ltd.
Wuji Entertainment
Games Co., Ltd. 2,583,703.75 2,583,703.75 14.16%
(Korea)
111,705,262.6 1,059,949,199.4
Total 836,740,484.94 334,913,977.17 11,800,000.00 11,800,000.00 -- 10,757,672.71
7 4
(4) Change of impairment of available-for-sale financial assets in the reporting period
Unit: RMB
Equity instrument available for Available-for-sale liability
Classification of available-for-sale financial assets Total
sale instrument
Balance of opening impairment accrued 11,800,000.00 11,800,000.00
Accruing of current period 52,732,066.85 52,732,066.85
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
97
2018 Annual Report
Wherein: Transfer in from other comprehensive income 52,732,066.85 52,732,066.85
Decrease in current period 52,732,066.85 52,732,066.85
Balance of closing impairment accrued 11,800,000.00 11,800,000.00
9. Long-term equity investment
Unit: RMB
Increase or decrease in this period
Closing
Addition Profit and loss on Other Profit or cash
Beginning Other Withdrawn balance of
Invested company al Negative investments comprehensive dividend Ending balance
balance equity impairment Others depreciation
investme investment confirmed with income declared to be
change provision reserves
nts equity method adjustment distributed
I. Joint ventures
II. Associates
Yangzhou Fuhai Sanqi
Internet Cultural
50,000,000.00 5,000.00 -1,868,895.65 48,136,104.35
Investment Center
(Limited Partnership)
Chengdu Epietheus
0.00 0.00 2,205,871.87
Technology Co., Ltd.
Shenzhen Yiwan
Network Technology 5,530,326.40 -986,852.06 4,543,474.34
Co., Ltd.
Penta Game Co., Ltd. 530,972.63 91,040.99 -622,013.62 0.00
Shanghai Tingting
0.00 0.00 6,718,402.50
Network Technology
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
98
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Co., Ltd.
Shanghai Aoting
Network Technology 0.00 0.00 2,978,876.18
Co., Ltd.
Shanghai Moe Palace
Network Technology 2,462,825.73 -2,462,825.73 0.00 2,462,825.73
Co., Ltd.
Beijing Zhuayou
Interactive Network 0.00 0.00 4,874,914.55
Technology Co., Ltd.
YHKT Entertainment
5,830,002.99 -5,830,002.99 0.00
Co., Ltd.
Longzhang Network
Technology 5,722,316.69 -530,438.17 5,191,878.52
(Shanghai) Co., Ltd.
Shenzhen Zhanlong
Interactive
7,313,570.51 -732,632.93 6,580,937.58
Entertainment
Technology Co., Ltd.
Huai’an Sanqi Yijian
Pan-Entertainment
Asset Management 101,677,840.80 8,407,544.53 -110,085,385.33 0.00
Center (Limited
Partnership)
Xiamen Yiqi
Investment 2,125,258.74 -462,336.57 1,662,922.17
Management Co., Ltd.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Mango (Xiamen)
Creative Incubation
Equity Investment 38,646,762.21 516,747.41 39,163,509.62
Fund Partnership
(Limited Partnership)
Chengdu 91ACT
23,501,260.32 -57,515.85 -23,443,744.47 0.00
Technology Company
Chengdu Mofei
10,962,498.78 4,814,920.27 15,777,419.05
Technology Co., Ltd.
Chengdu Modu
10,969,974.47 -1,264,717.03 9,705,257.44
Technology Co., Ltd.
Chengdu Pengwan
57,102,073.65 922,526.36 -2,234,228.00 55,790,372.01
Technology Co., Ltd.
Shanghai Fuhai Sanqi
Investment 3,000,419.01 -13,417.91 2,987,001.10
Management Co., Ltd.
Shanghai Jueli Culture
29,729,869.92 -2,136,170.23 27,593,699.69
Media Co., Ltd.
Jiangsu Yezi Network 15,000,0
-1,098,251.51 13,901,748.49
Technology Co., Ltd. 00.00
Beijing Xize
Interactive 6,000,00
-488,215.07 5,511,784.93
Entertainment 0.00
Technology Co., Ltd.
Sanqi Guangzheng 45,000,0
45,000,000.00
(Guangzhou) Cultural 00.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Technology
Investment Partnership
(Limited Partnership)
Chengdu Popcorn
Interactive 12,000,0
-388,213.60 11,611,786.40
Entertainment 00.00
Technology Co., Ltd.
Shanghai Yuhouyi
Network Technology 21,866,859.23 -1,632,900.41 20,233,958.82
Co., Ltd.
Shaoxing Shangyu
4,900,00
Zhangyu Network -253,649.26 4,646,350.74
0.00
Technology Co., Ltd.
Khorgos Tuolu
3,600,00
Lingyin Culture 3,600,000.00
0.00
Technology Co., Ltd.
Shanghai Fenghua
Qiushi Culture Media 3,414,788.87 129,263,558.53 132,678,347.40
Co., Ltd.
New Cues (Beijing)
Television Investment 1,363,745.68 99,921,715.66 101,285,461.34
Co., Ltd.
Longzhang Animation
(Shanghai) Co., Ltd.
86,505,0
Subtotal 376,972,832.08 0.00 7,617,107.86 0.00 0.00 -2,234,228.00 -2,462,825.73 89,204,127.78 555,602,013.99 19,240,890.83
00.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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86,505,0
Total 376,972,832.08 0.00 7,617,107.86 0.00 0.00 -2,234,228.00 -2,462,825.73 89,204,127.78 555,602,013.99 19,240,890.83
00.00
Other notes
(1) Other changes in the current period include: The disposal of Wuji Entertainment Games Co., Ltd. (a subsidiary of the Company) caused its shareholding company - Penta Game Co., Ltd. to
reduce the other amount of RMB 622,013.62; as the joint venture of Tibet Taifu Culture Media Co., Ltd., a subsidiary of the Company, YHKT Entertainment Co., Ltd. and Chengdu 91ACT
Technology Company decreased their shareholding ratio this year, and the other amount was reduced by RMB 5,830,002.99 and RMB 23,443,744.47, respectively with long-term equity
investment as available-for-sale financial assets; the Company acquired the remaining equity of Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership) and
included it in its consolidated statements, resulting in the reduction of other amounts of RMB 110,085,385.33; in addition, Shanghai Fenghua Qiushi Culture Media Co., Ltd. and New Cues
(Beijing) Television Investment Co., Ltd., the original joint stock company of Huai’an Sanqi Yijian Pan-Entertainment Asset Management Center (Limited Partnership), were included in the
Company’s long-term equity investment, adding to other amounts by RMB 129,263,558.53 and RMB 99,921,715.66.
(2) As of the end of the reporting period, Longzhang Animation (Shanghai) Co., Ltd. has not recognized an excess loss of RMB 7,906,627.53.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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10. Fixed Assets
Unit: RMB
Item Ending balance Beginning balance
Fixed assets 36,458,454.56 292,395,887.17
Total 36,458,454.56 292,395,887.17
(1) Status of fixed assets
Unit: RMB
Houses and Machinery and Electric and office
Item Motor vehicles Total
buildings equipment equipment
I. Original carrying
value:
1. Balance at the
beginning of this 164,616,484.07 321,150,698.63 18,039,511.37 120,026,021.36 623,832,715.43
period
2. Increase of this
29,728,748.00 35,686,559.35 181,780.37 20,925,975.65 86,523,063.37
period
(1) Purchasing 27,876,250.00 2,319,334.98 181,780.37 20,925,975.65 51,303,341.00
(2)
Construction in
1,852,498.00 33,367,224.37 35,219,722.37
progress
transferred-in
(3) Increase by
business
combination
3. Decrease of this
194,345,232.07 356,837,257.98 11,796,962.89 23,971,485.65 586,950,938.59
period
(1) Disposal or
122,256.76 13,259,910.76 6,747,003.55 20,129,171.07
discard as useless
(2) Disposal of
subsidiaries or 194,222,975.31 343,577,347.22 11,796,962.89 17,224,482.10 566,821,767.52
liquidation
4. Ending balance 6,424,328.85 116,980,511.36 123,404,840.21
II. Accumulated
depreciation
1. Balance at the 39,642,480.79 177,572,760.75 9,547,888.32 87,385,476.20 314,148,606.06
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
beginning of this
period
2. Increase of this
5,098,435.17 23,736,930.77 2,433,786.65 16,050,267.65 47,319,420.24
period
(1) Accruing 5,098,435.17 23,736,930.77 2,433,786.65 16,050,267.65 47,319,420.24
3. Decrease of this
44,740,915.96 201,309,691.52 8,847,579.27 19,623,453.90 274,521,640.65
period
(1) Disposal or
24,841.74 872,458.22 5,063,458.30 5,960,758.26
discard as useless
(2) Disposal of
subsidiaries or 44,716,074.22 200,437,233.30 8,847,579.27 14,559,995.60 268,560,882.39
liquidation
4. Ending balance 3,134,095.70 83,812,289.95 86,946,385.65
III. Provision for
impairment of assets
1. Balance at the
beginning of this 17,288,222.20 17,288,222.20
period
2. Increase of this
period
(1) Accruing
3. Decrease of this
17,288,222.20 17,288,222.20
period
(1) Disposal or
701,638.09 701,638.09
discard as useless
(2) Disposal of
subsidiaries or 16,586,584.11 16,586,584.11
liquidation
4. Ending balance
IV. Book value
1. Ending book
3,290,233.15 33,168,221.41 36,458,454.56
value
2. Book value at
the beginning of 124,974,003.28 126,289,715.68 8,491,623.05 32,640,545.16 292,395,887.17
period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
11. Construction in progress
Unit: RMB
Item Ending balance Beginning balance
Construction in progress 50,672,878.42
Total 50,672,878.42
(1) Status of construction under progress
Unit: RMB
Ending balance Beginning balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Phase II
equipment 51,102,382.68 429,504.26 50,672,878.42
engineering
Total 51,102,382.68 429,504.26 50,672,878.42
(2) Change of significant construction during the period
Unit: RMB
Proportio
n of Wherein:
Accumul Capitali
accumula Amount
Amount of Endi ated zation
Increased Amount of tive Project of
Project Budg Beginning transfer-in ng amount rate of Capital
amount of other decreases engineeri progres capitalize
name et balance fixed assets at balan of interest sources
current period of this period ng s d interest
current period ce capitalize for this
investme in current
d interest period
nt in period
budget
Phase II
equipment 51,102,382.68 159,573,327.28 35,219,722.37 175,455,987.59
engineering
Total 51,102,382.68 159,573,327.28 35,219,722.37 175,455,987.59 -- -- --
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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12. Intangible assets
(1) Status of intangible assets
Unit: RMB
Cost of
Non-patent
Item Land use rights Patent right publication Domain name Game copyright Trademark Office software Total
technology
number
I. Original carrying value
1. Balance at the
26,840,827.98 433,225.73 354,930.00 12,778,182.04 102,289,169.43 1,093,770.09 13,789,477.71 157,579,582.98
beginning of this period
2. Increase of this
0.00 46,757.09 0.00 0.00 0.00 10,923.36 2,188,309.03 2,245,989.48
period
(1) Purchasing 46,757.09 2,188,309.03 2,235,066.12
(2) Internal R&D
(3) Increase by
business combination
(4) Exchange rate
0.00 0.00 0.00 0.00 10,923.36 10,923.36
variation
3. Decrease of this period 26,840,827.98 479,982.82 8,849,452.49 238,929.14 3,617,392.10 40,026,584.53
(1) Disposal 8,849,452.49 8,849,452.49
(2) Disposal of
26,840,827.98 479,982.82 238,929.14 3,617,392.10 31,177,132.04
subsidiaries or liquidation
4. Ending balance 354,930.00 12,778,182.04 93,439,716.94 865,764.31 12,360,394.64 119,798,987.93
II. Accumulated amortization 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
1. Balance at the
5,039,376.59 88,303.26 354,930.00 2,395,909.31 65,733,536.40 421,636.24 7,422,677.44 81,456,369.24
beginning of this period
2. Increase of this
494,536.68 34,752.89 0.00 638,909.16 3,480,714.04 26,424.53 3,293,272.55 7,968,609.85
period
(1) Accruing 494,536.68 34,752.89 0.00 638,909.16 3,480,714.04 17,073.10 3,293,272.55 7,959,258.42
(2) Exchange rate
0.00 0.00 0.00 0.00 0.00 9,351.43 0.00 9,351.43
variation
3. Decrease of this
5,533,913.27 123,056.15 6,357,983.58 74,362.67 2,680,855.64 14,770,171.31
period
(1) Disposal 103,771.15 6,357,983.58 6,461,754.73
(2) Disposal of
5,533,913.27 19,285.00 74,362.67 2,680,855.64 8,308,416.58
subsidiaries or liquidation
4. Ending balance 354,930.00 3,034,818.47 62,856,266.86 373,698.10 8,035,094.35 74,654,807.78
III. Provision for impairment
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
of assets
1. Balance at the
30,440,779.99 784,321.46 31,225,101.45
beginning of this period
2. Increase of this
period
(1) Accruing
3. Decrease of this
377,358.34 377,358.34
period
(1) Disposal
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2018 Annual Report
4. Ending balance 30,440,779.99 406,963.12 30,847,743.11
IV. Book value 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1. Ending book value 9,743,363.57 142,670.09 492,066.21 3,918,337.17 14,296,437.04
2. Book value at the
21,801,451.39 344,922.47 10,382,272.73 6,114,853.04 672,133.85 5,582,478.81 44,898,112.29
beginning of period
The ratio of intangible assets formed through the internal research and development of the Company at the end of the period to the balance of intangible assets is 16.48%.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
13. Development expenditure
Unit: RMB
Beginning Ending
Item Increased amount of current period Decreased amount of current period
balance balance
Item I 3,951,558.23 2,254,237.93 6,205,796.16
Item II 118,714.20 118,714.20
Total 4,070,272.43 2,254,237.93 118,714.20 6,205,796.16
Other notes
14. Goodwill
(1) Carrying value of goodwill
Unit: RMB
Name of the Increase in current period Decrease in current period Ending balance
invested company
Beginning Formed through
and the matter
balance business Others Disposal Others
which forms
combination
goodwill
Shanghai Sanqi
Interactive 1,578,065,048.53 1,578,065,048.53
Entertainment
Wuji
Entertainment 1,911,913.34 1,911,913.34
Games Co., Ltd.
Chengdu
Shengge Times
Network 263,737.88 263,737.88
Technology Co.,
Ltd.
Shanghai Mokun 1,259,793,585.93 1,259,793,585.93
Total 2,840,034,285.68 2,838,122,372.34
(2) Goodwill impairment
Unit: RMB
Name of the Increase in current period Decrease in current period Ending balance
invested company Beginning
and the matter balance Withdrawing Others Disposal Others
which forms
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
goodwill
Chengdu
Shengge Times
Network 263,737.88 263,737.88
Technology Co.,
Ltd.
Shanghai Mokun 299,457,551.04 959,833,685.66 1,259,291,236.70
Total 299,721,288.92 959,833,685.66 1,259,554,974.58
Information about the asset group or portfolio in which the goodwill is recognized
Name of asset group Composition Carrying amount Determination method Whether it is consistent with the asset
(Unit: RMB) group recognized at the date of
acquisition and the time of goodwill
impairment test in previous years
Shanghai Sanqi All assets and Shanghai Sanqi Interactive Yes
Interactive liabilities of 3,527,707,463.90 Entertainment can bring
Entertainment Shanghai Sanqi independent cash flows and is
Interactive therefore identified as a portfolio
Entertainment
Shanghai Mokun All assets and Shanghai Mokun can bring Yes
liabilities of 106,085,800.19 independent cash flows and is
Shanghai Mokun therefore identified as a portfolio
Explain the process of goodwill impairment test, key parameters (such as the growth rate in forecast period, growth rate in steady
period, profit rate, discount rate, forecast period, etc. for estimation of the present value of future cash flows), and the recognition
method of goodwill impairment loss:
At the end of 2018, the book value of the goodwill formed by the merger of above-mentioned companies was apportioned to
relevant asset groups with a reasonable method as of the date of acquisition, and the relevant asset groups containing goodwill were
also tested for impairment. The recoverable amount of the goodwill formed by the merger is calculated by the Company based on the
present value of estimated future cash flows, and the above key data are determined based on historical experiences and forecasts on
market development.
Shanghai Mokun: The current value of the expected future cash flow of the asset group refers to the evaluation basis, evaluation
process and evaluation results in the Evaluation Report (L.X.(Z.)P.B.Z. [2019] No. A0043) issued by Guangdong Union Trust
Evaluation Co., Ltd. In 2018, due to the restrictions on the publication number and the overall decline in growth rate of the game
industry, the launch schedule of Shanghai Mokun’s developed games was not up to expectations, resulting in its major games failing
to be launched in 2018 and generate revenue and profits and Shanghai Mokun’s operating results lower than expected. In 2018, the
future cash flow was estimated based on the financial budget and perpetual cash flow of the asset group approved by the management
for five years. The annualized growth rate of operating income in the next five years will range from 15.91% to 7%. The perpetual
cash flow after the next five years will be determined by the level of the final year at the detailed forecast period, combined with the
industry development trend. The discount rate for calculating the present value is 14.11%, which is the pre-tax discount rate that
reflects the specific risks of the relevant asset group. Compared with the present value of the asset group including goodwill, a
provision for impairment of goodwill of RMB 959,833,685.66 shall be set aside this year.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Shanghai Sanqi Interactive Entertainment: The management prepares the cash flow forecast for the next five years based on the
most recent financial budget, and estimates the cash flow for the perpetual period. It is expected that the annual growth rate of
operating income will be 20%-0% in the next 5 years. The perpetual cash flow after the next five years will remain stable, and the
discount rate for calculating the present value will be 13.74%. Compared with the present value of the asset group including goodwill,
the goodwill of Shanghai Sanqi Interactive Entertainment is not impaired.
Impact of goodwill impairment test
In 2018, due to the restrictions on the publication number and the overall decline in growth rate of the game industry, the R&D
and launch schedule of Shanghai Mokun, a subsidiary of the Company, was not up to expectations, resulting in its major games
failing to be launched in 2018 and generate revenue and profits and Shanghai Mokun’s operating results lower than expected. In
2018, the committed net profit was RMB 168.00 million and Shanghai Mokun’s net profit attributable to shareholders of the parent
company after deducting non-recurring gains and losses in 2018 was RMB -4.8249 million. According to the relevant provisions of
Accounting Standards for Business Enterprises and the Company’s accounting policies, the Company conducted an impairment test
on the goodwill formed by the acquisition of equities from Shanghai Mokun, and the difference of the total amount of goodwill at the
end of the year and the fair value of net identifiable assets minus the assessed value of all equities was deemed as the amount of
goodwill impairment that should be accrued at the end of 2018.
Other notes
None
15. Long-term deferred expenses
Unit: RMB
Amortization
Increased amount of
Item Beginning balance amount of the Other decreases Ending balance
current period
current period
Cost of copyright
74,821,106.66 55,766,989.82 59,910,845.76 502,309.77 70,174,940.95
agency
Trade mark
99,838.19 96,894.93 2,943.26
registration fee
Cost of building
4,882,144.74 1,601,805.24 2,375,287.70 4,108,662.28
decoration
Total 79,803,089.59 57,368,795.06 62,383,028.39 502,309.77 74,286,546.49
Other notes
None
16. Deferred income tax assets and deferred income tax liabilities
(1) Non-offset deferred income tax assets
Unit: RMB
Item Ending balance Beginning balance
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Deductible temporary Deferred income tax Deductible temporary
Deferred income tax assets
differences assets differences
Provision for assets
130,272,445.92 22,476,347.10 36,779,247.42 7,231,974.30
impairment
Deductible losses 23,377,176.05 3,718,400.30 3,304,795.02 826,198.75
Changes in fair value of
available-for-sale financial 23,559,590.80 2,091,835.89
assets (impairment losses)
Accrued performance
7,536,817.40 1,130,522.61 3,756,740.62 338,106.66
compensation receivables
Governmental subsidies
recognized into deferred 8,817,182.16 1,322,577.32
income
Total 161,186,439.37 27,325,270.01 76,217,556.02 11,810,692.92
(2) Details of unrecognized deferred income tax assets
Unit: RMB
Item Ending balance Beginning balance
Deductible temporary differences 80,408,693.08 114,160,721.60
Deductible losses 122,954,217.39 186,240,044.70
Total 203,362,910.47 300,400,766.30
(3) Deductible losses of unrecognized deferred income tax assets will be expired at the end of following
years
Unit: RMB
Year Ending amount Initial amount Remarks
2019 5,191,066.43
2020 2,058,386.09 29,786,482.41
2021 18,045,171.61 53,635,799.65
2022 85,382,375.75 97,626,696.21
After 2022 17,468,283.94
Total 122,954,217.39 186,240,044.70 --
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
17. Other non-current assets
Unit: RMB
Item Ending balance Beginning balance
Prepayment for engineering equipment 68,399,174.14
Prepayment for equity investment 50,000,000.00
Prepayment for house purchase 801,611,138.04 795,864,793.02
Total 801,611,138.04 914,263,967.16
Other notes:
None
18. Short-term Loans
(1) Classification of short-term loans
Unit: RMB
Item Ending balance Beginning balance
Guaranteed loans 369,000,000.00 372,054,500.00
Total 369,000,000.00 372,054,500.00
Description of classification of other short-term borrowings:
The Company classifies short-term borrowings by borrowing conditions.
19. Notes payable and accounts payable
Unit: RMB
Item Ending balance Beginning balance
Accounts payable 1,082,362,368.29 741,792,973.33
Total 1,082,362,368.29 741,792,973.33
(1) List of accounts payable
Unit: RMB
Item Ending balance Beginning balance
Payables on materials 78,742,772.74
Payable shared profits of games 508,051,919.40 406,735,668.55
Payable internet traffic costs 560,422,006.00 219,833,849.91
Other payable costs 13,888,442.89 36,480,682.13
Total 1,082,362,368.29 741,792,973.33
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(2) Significant accounts payable with age of more than one year
Unit: RMB
Item Ending balance Reasons for outstanding or non-carryover
Shengji Information Technology
6,866,723.87 In the process of reconciliation
(Shanghai) Co., Ltd.
Total 6,866,723.87 --
Other notes:
None
20. Account received in advance
(1) List of account received in advance
Unit: RMB
Item Ending balance Beginning balance
Advances on sales 2,085,495.91
Recharge received in advance 94,547,117.27 81,795,279.69
Shared profits received in advance 1,005,959.24
Others 81,625.32
Total 94,628,742.59 84,886,734.84
21. Staff salaries payable
(1) List of staff salaries payable
Unit: RMB
Decrease in current
Item Beginning balance Increase in current period Ending balance
period
I. Short-term
112,808,985.92 701,173,947.60 692,849,384.25 121,133,549.27
remuneration
II. Post-employment
benefit-defined 596,785.58 39,018,138.69 38,940,125.19 674,799.08
contribution plans
III. Dismiss welfares 74,250.00 1,171,439.98 1,075,637.15 170,052.83
Total 113,480,021.50 741,363,526.27 732,865,146.59 121,978,401.18
(2) List of short-term remuneration
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Decrease in current
Item Beginning balance Increase in current period Ending balance
period
1. Salaries, bonus,
108,121,922.68 620,043,409.78 607,671,407.42 120,493,925.04
allowances and subsidies
2. Staff welfare expenses 36,155,187.78 36,155,187.78
3. Social insurance
342,764.93 21,444,703.98 21,407,991.85 379,477.06
premiums
Wherein: Medical
299,439.24 18,304,959.00 18,271,766.75 332,631.49
insurance premiums
Industrial
injuries insurance 6,233.18 574,387.94 575,034.84 5,586.28
premium
Maternity
28,595.97 1,972,851.71 1,967,583.68 33,864.00
insurance premiums
Critical
8,496.54 592,505.33 593,606.58 7,395.29
illness insurance
4. Housing provident
223,868.00 18,764,192.84 18,738,999.84 249,061.00
fund
5. Union expenses and
employee educational 4,120,430.31 4,766,453.22 8,875,797.36 11,086.17
expenditure
Total 112,808,985.92 701,173,947.60 692,849,384.25 121,133,549.27
(3) List of defined contribution plans
Unit: RMB
Decrease in current
Item Beginning balance Increase in current period Ending balance
period
1. Basic endowment
582,242.35 37,633,046.65 37,561,162.84 654,126.16
insurance
2. Unemployment
14,543.23 1,385,092.04 1,378,962.35 20,672.92
insurance premiums
Total 596,785.58 39,018,138.69 38,940,125.19 674,799.08
Other notes:
None
22. Taxes payable
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Item Ending balance Beginning balance
VAT 33,574,036.91 22,778,212.15
Enterprise income tax 51,032,839.33 31,249,164.08
Individual income tax 971,561.88 1,078,087.62
Urban maintenance and construction tax 1,366,222.30 929,920.78
Education surtax 590,668.51 497,953.99
Local education surcharge 392,703.75 331,969.34
Housing property tax 454,278.16
Land use tax 253,945.28
Water conservancy funds 397,874.74 182,693.41
Stamp tax 591,306.68 485,653.80
River management fees 39,257.62
Embankment protection fee 179.23 179.24
Outbound income tax 358,410.10
Total 89,275,803.43 58,281,315.47
Other notes:
None
23. Other payables
Unit: RMB
Item Ending balance Beginning balance
Interests payable 52,841.84 390,533.38
Other payables 108,089,757.99 61,572,020.26
Total 108,142,599.83 61,962,553.64
(1) Interest payable
Unit: RMB
Item Ending balance Beginning balance
Interest payable for short-term loan 52,841.84 390,533.38
Total 52,841.84 390,533.38
Significant interest overdue but unpaid:
Unit: RMB
Borrower Default penalty Overdue reason
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(2) Other payables
1) Other accounts payable listed by the nature of accounts
Unit: RMB
Item Ending balance Beginning balance
Deposit and guarantee deposit 8,360,000.00 7,650,158.00
Payable temporary receipts 2,000,000.00
Freight and storage charges 9,825,807.62
Investment funds payable 8,500,000.00 35,448,685.81
Equity funds 86,936,207.21
Others 4,293,550.78 6,647,368.83
Total 108,089,757.99 61,572,020.26
24. Non-current liability due within one year
Unit: RMB
Item Ending balance Beginning balance
Long-term loans due within 1 year 29,599,165.73 28,117,893.57
Total 29,599,165.73 28,117,893.57
Other notes:
Non-current liabilities due within one year are the mortgage loans due within one year for house purchase by legal persons that are
used by the subsidiaries of the Company for the purchase of office space.
25. Other current liabilities
Unit: RMB
Item Ending balance Beginning balance
Temporarily estimated output tax 89,719,750.76 53,981,510.57
Payable performance compensation 7,536,817.40 3,756,740.62
Total 97,256,568.16 57,738,251.19
Movements in short-term bonds payable:
Unit: RMB
Amortizat
Issuance Withdraw Repayme
ion of
Name of Nominal Issuing Bond Issuing Beginnin in the ing nts in the Ending
premium
bonds value date period amount g balance current interest at current balance
or
period par period
discount
Other notes:
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Payable performance compensation is the performance compensation arising from canceling 357,483 shares of Jiangyin Zhongnan
Heavy Industries Co., Ltd due to Shanghai Aurora Networks Technology Co., Ltd. transferred in 2017 failing to satisfy its
performance commitment in 2018.
26. Long-term loans
(1) Classification of long-term loans
Unit: RMB
Item Ending balance Beginning balance
Mortgage, guaranteed loan 281,176,106.33 310,775,272.06
Total 281,176,106.33 310,775,272.06
Description of classification of other long-term borrowings:
Long-term borrowings are the mortgage loans for house purchase by legal persons that are used by the subsidiaries of the Company
for the purchase of office space. The Company assumes joint and several liabilities for these borrowings.
Other instructions, including interest rate range:
The applicable interest rate is 105% of the benchmark interest rate for 5-year RMB loans from financial institutions.
27. Bonds payable
(1) Bonds payable
Unit: RMB
Item Ending balance Beginning balance
Convertible corporate bonds 27,163,239.26
Total 27,163,239.26
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
(2) Increase and decrease of bonds payable (excluding other financial instruments like preferred shares and perpetual capital securities that were classified
into financial liabilities)
Unit: RMB
Issuance in the Withdrawing Amortization of Repayments in the Decrease in
Name of bonds Nominal value Issuing date Bond period Issuing amount Beginning balance Ending balance
current period interest at par premium or discount current period current period
private
December December 1st,
convertible 23,028,000.00 20,237,720.27 23,288,349.08 1,151,400.00 718,643.84 25,158,392.92 0.00
2nd, 2016 2021
bonds 1st
private
December December 1st,
convertible 3,831,571.35 3,367,303.68 3,874,890.18 191,578.57 119,573.36 4,186,042.11 0.00
2nd, 2016 2021
bonds 2nd
Total -- -- -- 23,605,023.95 27,163,239.26 1,342,978.57 838,217.20 29,344,435.03
(3) Description of the conversion conditions and time of convertible corporate bonds
The issuer of convertible corporate bonds at the beginning of the period is Wuji Entertainment Games Co., Ltd. (Korea), a holding subsidiary of the Company, and the holder of convertible
corporate bonds can request conversion during the period from the date of one year from the date of issuance to one month before the expiration date. The decrease of convertible corporate
bonds in this period is due to the disposal for control loss by Wuji Entertainment Games Co., Ltd. (Korea).
28. Deferred income
Unit: RMB
Item Beginning balance Increase in current period Decrease in current period Ending balance Cause
Governmental subsidy related to
Government subsidies 8,817,182.17 681,000.00 9,498,182.17
assets
Deferred income from royalty income 8,409,292.27 1,931,196.96 6,436,773.91 3,903,715.32 Royalty income
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Total 17,226,474.44 2,612,196.96 15,934,956.08 3,903,715.32 --
Items revolving governmental subsidies:
Unit: RMB
Amount of
Amounts of new Amount of other Amount of cost
non-operating
Items of liabilities Beginning balance subsidies in income in current offset in the current Other movements Ending balance Related to assets/income
income in
current period period. period
current period
Project subsidies of Automotive Fuel
650,000.08 119,166.67 -530,833.41 Related to assets
System R&D Center
Subsidy for the purchase of single
152,896.27 25,163.35 -127,732.92 Related to assets
equipment by SMEs
Provincial “6+1” subsidies for
building independent innovation 699,833.33 90,566.67 -609,266.66 Related to assets
capacity in Anhui Province
Special funds for development of
provincial enterprises of Nanling
383,333.35 45,833.33 -337,500.02 Related to assets
Country Commission of Economy and
Information Technology
Provincial innovation enterprise R&D
215,062.50 25,437.50 -189,625.00 Related to assets
equipment subsidy
2015 provincial special fund to build
219,687.50 25,437.50 -194,250.00 Related to assets
an innovative province
Subsidies for R&D and purchase of
666,400.00 71,866.67 -594,533.33 Related to assets
instruments and equipment
2016 provincial special fund to build
666,400.00 71,866.67 -594,533.33 Related to assets
an innovative province
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
2017 Construction fund supports for
building manufacturing strong
provinces, and equipment subsidies
3,363,000.00 313,500.00 -3,049,500.00 Related to assets
for technological transformation
projects to improve industrial
foundation
Reward and subsidy for industrial
technology reform of Country
1,668,677.50 154,247.50 -1,514,430.00 Related to assets
Commission of Economy and
Information Technology
2017 provincial special fund to build
an innovative province of Nanling
County Commission of Economy and 131,891.64 12,191.65 -119,699.99 Related to income
Information Technology (technology
division)
Special funds for development of
county-level foreign trade enterprises 681,000.00 -681,000.00 Related to assets
in 2017
Total 8,817,182.17 681,000.00 955,277.51 -8,542,904.66
Other notes:
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
29. Share capital
Unit: RMB
Changes (+/-) in this time
Shares
Beginning balance converted from Ending balance
Stock issue Dividend stock Others Subtotal
accumulated
reserves
Total number of
2,148,110,844.00 -23,240,591.00 -23,240,591.00 2,124,870,253.00
shares
Other notes:
According to the resolution of the Company’s 2017 annual general meeting of shareholders, as Shanghai Mokun failed to fulfill its
2017 annual performance commitment, Yang Dongmai and other performance compensation obligors should compensate for a total
of 23,240,591 shares. The Company will repurchase and cancel these shares according to relevant agreements, resulting in changes to
the Company’s registered capital and equity: The Company’s registered capital decreased from RMB 2,148,110,844 to RMB
2,124,870,253, and the Company’s equity decreased from 2,148,110,844 shares to 2,124,870,253 shares.
30. Other equity instruments
(1) Statement of changes in financial instruments such as outstanding preferred shares and perpetual
capital securities issued at the end of the period
Unit: RMB
Outstanding Beginning balance Increase in current period Decrease in current period Ending balance
financial
Quantity Book value Quantity Book value Quantity Book value Quantity Book value
instruments
Equity component
value of convertible 1 1,947,846.62 1 1,947,846.62
corporate bonds
Total 1 1,947,846.62 1 1,947,846.62
The changes in other equity instruments in the current period, the reasons for the changes, and the basis for relevant accounting
treatment:
The decrease in this period is the reduction of equity component value of convertible corporate bonds due to disposal of Wuji
Entertainment Games Co., Ltd. (a subsidiary of the Company).
Other notes:
None
31. Capital reserves
Unit: RMB
Item Beginning balance Increase in current period Decrease in current Ending balance
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
period
Capital Premium (share
1,965,229,405.38 35,892,959.50 1,705,304,196.89 295,818,167.99
premium)
Other capital reserves 7,410,175.28 4,488,376.06 2,921,799.22
Total 1,972,639,580.66 35,892,959.50 1,709,792,572.95 298,739,967.21
Other notes, involving changes in the current period and change reasons:
(1) The increase in capital premium in this year included the increase of capital reserve of RMB 18,745,498.96 due to the exercise of
conversion rights by the shareholders of preferred shares of Wuji Entertainment Games Co., Ltd. (a subsidiary of the Company);
increase of capital reserve of RMB 14,644,959.82 due to Shanghai Sanqi Interactive Entertainment (a subsidiary wholly owned by
the Company) transferring its subsidiaries - Guangzhou Huoshanhu Company and Anhui Sanqi to Guangzhou Sanqi (a holding
subsidiary of the Company); increase of capital reserve of RMB 2,502,500.72 in Shanghai Mokun, a subsidiary of the Company, due
to the increase in capital of minority shareholders.
The decrease in capital premium in this year included the 20% equities of Jiangsu Aurora acquired by the Company offsetting the
capital reserve - equity premium by RMB 1,248,120,566.34; the acquisition of 15% equities of Guangzhou Huoshanhu by
Guangzhou Sanqi (a subsidiary of the Company) offsets capital reserve-share premium by RMB 7,710,622.12; Shanghai Mokun, a
subsidiary of the Company, failed to achieve its performance commitments, so it repurchased shares to offset the capital reserve by
RMB 449,473,008.43.
(2) The decrease in other capital reserve in this period was due to the fact that as the joint venture of Tibet Taifu Culture Media Co.,
Ltd., a subsidiary of the Company, YHKT Entertainment Co., Ltd. decreased its shareholding ratio this year with long-term equity
investment as available-for-sale financial assets and caused other capital reserve to decline by RMB 4,488,376.06.
32. Other comprehensive income
Unit: RMB
Amount incurred in the current period
Attribu
Less: The amount
table to
calculated in other
Attributable to minorit
Beginning Accrual before comprehensive
Item Less: Income parent y Ending balance
balance income tax in income in earlier
taxes company after shareh
this period period and carried
tax olders
over to profit and loss
after
in current period.
tax
II. Other comprehensive
incomes that would be
-25,087,592.30 52,311,844.22 -23,888,000.86 4,735,906.20 71,463,938.88 46,376,346.58
classified into profit and
loss
Variable Loss
and Profit of fair value
-25,470,466.38 31,572,708.00 -25,470,466.38 4,735,906.20 52,307,268.18 26,836,801.80
of salable financial
assets
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Translation
difference in the foreign
382,874.08 20,739,136.22 1,582,465.52 19,156,670.70 19,539,544.78
currency financial
statement
Other total
-25,087,592.30 52,311,844.22 -23,888,000.86 4,735,906.20 71,463,938.88 46,376,346.58
comprehensive income
Other notes, involving conversion of the effective component of the cash flow hedging profit and loss to the initially recognized
amount of the hedged items:
None
33. Surplus reserves
Unit: RMB
Decrease in current
Item Beginning balance Increase in current period Ending balance
period
Statutory surplus
99,561,946.09 70,915,889.79 170,477,835.88
reserves
Total 99,561,946.09 70,915,889.79 170,477,835.88
Surplus reserve notes, involving changes in the current period and change reasons:
The company shall reserve 10% of the net profit of the parent company as the provision for legal surplus.
34. Undistributed profits
Unit: RMB
Item Current period Previous period
Adjustment of undistributed profits of previous year 2,819,597,585.78 1,413,567,635.94
Undistributed profits at the beginning of the period
2,819,597,585.78 1,413,567,635.94
after adjustment
Add: Net profit owned by parent company owners in
1,008,503,357.80 1,620,582,427.47
this year
Less: Appropriation to legal surplus reserves 70,915,889.79 6,072,998.83
Dividends payable on common stock 424,974,050.60 208,479,478.80
Undistributed profits at the end of the period 3,332,211,003.19 2,819,597,585.78
Details of undistributed profits at the beginning of adjustment period:
1) Due to retroactive adjustment of Enterprise Accounting Standard and its relevant new provisions, the affected undistributed profit
at the beginning of the period is RMB 0.00.
2) Due to changes in accounting policies, the affected undistributed profit at the beginning of the period is RMB 0.00.
3) Due to correction of significant accounting errors, the affected undistributed profit at the beginning of the period is RMB 0.00.
4) Due to changes of consolidation scope caused by the same control, the affected undistributed profit at the beginning of the period
is RMB 0.00.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
5) Due to all the other adjustments, the affected undistributed profit at the beginning of the period is RMB 0.00.
35. Operating income and operating costs
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Income Cost Income Cost
Main business 7,632,679,668.47 1,811,420,940.10 6,188,729,008.57 1,948,067,595.79
Other businesses 99,108.18 129,643.97
Total 7,632,679,668.47 1,811,420,940.10 6,188,828,116.75 1,948,197,239.76
36. Taxes and additional charges
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Urban maintenance and construction tax 10,486,240.49 7,941,837.63
Education surtax 4,693,077.15 3,518,238.96
Housing property tax 1,248,953.90 1,145,438.72
Land use tax 2,563,885.00 3,207,777.30
Vehicle and vessel use tax 22,325.20 20,389.47
Stamp tax 8,003,772.08 6,703,094.58
Local education surcharge 3,269,512.10 2,345,492.62
Water conservancy funds 2,752,686.81 1,404,336.13
Construction fund for cultural undertakings 104,319.98
River management fees 7,404.96
Others 109,767.54
Total 33,040,452.73 26,508,097.89
Other notes:
None
37. Sales expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Salary and welfare 125,454,065.25 94,862,624.16
Depreciation cost 2,201,939.07 2,452,462.02
Office expense 1,171,092.14 2,294,285.34
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Internet traffic fee 3,188,625,479.94 1,767,614,006.47
Traveling expense 1,462,185.31 2,725,380.16
Transportation and storage fees 18,091,042.19 27,201,590.38
Entertainment expenses 4,025,796.16 4,151,221.02
Others 6,229,708.27 6,905,896.77
Total 3,347,261,308.33 1,908,207,466.32
Other notes:
None
38. Management expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Salary and welfare 138,154,150.37 122,730,667.18
Office expense 25,604,123.72 34,206,282.94
Traveling and conference fees 12,780,600.56 12,278,341.07
Fees of depreciation and amortization 11,959,200.23 13,818,326.98
Business entertainment expense 12,180,998.39 13,901,648.09
Rentals 23,245,925.37 20,591,183.94
Agency and consulting fees 19,134,146.42 15,404,989.50
Share payment 100,984,100.00
Others 3,003,757.30 6,574,972.04
Total 246,062,902.36 340,490,511.74
Other notes:
None
39. R&D expense
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Salary and welfare 439,113,908.11 344,422,361.03
Operation and maintenance fees 42,414,470.88 36,523,870.96
Fees of depreciation and amortization 13,015,245.63 18,421,390.26
Design cost 17,566,420.48 16,667,400.08
Traveling and transportation expenses 5,135,780.17 3,677,004.63
Office expense 7,584,107.07 6,566,727.06
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Rent and office utilities 5,107,935.40 2,220,064.44
Others 7,767,736.89 7,670,211.66
Total 537,705,604.63 436,169,030.12
Other notes:
None
40. Financial expenses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Interest payment 44,631,901.22 32,858,899.90
Service charges and others paid to
645,223.32 606,729.28
financial authorities
Less: Interest incomes 27,632,671.32 24,363,295.31
Exchange gains and losses -547,353.98 19,453,449.40
Total 17,097,099.24 28,555,783.27
Other notes:
None
41. Asset impairment losses
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
I. Losses on bad debts 30,322,401.56 19,082,968.12
II. Inventory devaluation losses 4,004,132.44 66,962.78
III. Available-for-sale financial asset impairment losses 52,732,066.85 3,000,000.00
V. Long-term equity investment impairment losses 2,462,825.74 11,593,317.05
VII. Fixed asset impairment losses 17,288,222.20
IX. Construction in progress impairment losses 429,504.26
XII. Intangible asset impairment losses 377,358.34
XIII. Goodwill impairment losses 959,833,685.66 299,457,551.04
Total 1,049,355,112.25 351,295,883.79
Other notes:
None
42. Other profits
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Sources of other incomes Amount incurred in the current period Amount incurred in the previous period
Government subsidies 97,647,310.60 111,259,077.18
Total 97,647,310.60 111,259,077.18
43. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Long-term equity investment income measured by equity
7,617,107.86 -11,139,329.07
method
Investment profits by the disposal of long-term equity
6,403,021.73 218,512,763.55
investment
Investment profit by marketable financial assets during
10,930,309.95 10,503,501.81
the holding period
Investment profit by the disposal of marketable financial
-9,740,417.35 20,264,211.00
assets
Original equity treated as investment income from
48,392,551.99 1,411,495.72
disposal
Bank yields from financial products 16,941,398.12 13,370,838.07
Others 3,106,764.84
Total 80,543,972.30 256,030,245.92
Other notes:
None
44. Income from disposal of assets
Unit: RMB
Source of income from asset disposal Amount incurred in the current period Amount incurred in the previous period
Gains (losses) from disposal of fixed assets 1,289,755.10 1,055,284.09
Total 1,289,755.10 1,055,284.09
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
45. Non-operating income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period Amount recognized into current non-recurring profits and losses
Government subsidies 11,200.00
Tort compensation 8,891,208.00 1,528,930.43 8,891,208.00
Performance compensation
453,859,535.09 401,364,984.06 453,859,535.09
receivables
Others 1,163,735.09 152,808.37 1,163,735.09
Total 463,914,478.18 403,057,922.86
Government subsidy recognized in current losses and gains:
Unit: RMB
Do subsidies
Whether it is a Amount incurred
affect the profit Amount incurred Related to
Subsidy items Entity Reason Nature and type special subsidy in the previous
and loss of the in this period assets/income
or not? period
year?
Subsidies received from the government to encourage
VAT immediate levy Tax bureaus in Shanghai,
Subsidies and support specific industries and segments No No 58,796,021.20 81,575,068.42 Related to income
and refund Guangzhou, Huai’an, etc.
(according to national policies and regulations)
Return of handling Tax bureaus in Guangzhou, Subsidies received from the government for the
charges of individual Huai’an, Shanghai, Nanling Subsidies protection of certain utility services or socially No No 1,463,852.75 1,135,760.56 Related to income
income tax County (Anhui), etc. necessary product supply or price control functions
Social insurance fund
Subsidies received from the government for the
Subsidy for post management centers in
Subsidies protection of certain utility services or socially No No 690,765.77 665,044.69 Related to income
stability Guangzhou, Huai’an, Wuhu,
necessary product supply or price control functions
Shenzhen, etc.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Huai’an Software Park Subsidies received for compliance with local support
Subsidies for Huai’an
Management Development Subsidies policies for investment promotion by local No No 4,556,098.16 10,516,637.23 Related to income
Software Park
Co., Ltd. governments
Subsidies for Internet
Huai’an Hongze District Subsidies received for compliance with local support
Industry Base in
Internet Industry Base Subsidies policies for investment promotion by local No No 1,011,370.36 Related to income
Hongze District,
Management Co., Ltd. governments
Huai’an City
Subsidies from Huai’an Economic and
Huai’an Overseas Technological Development Subsidies received for compliance with local support
Students Pioneer Park Zone Overseas Students Subsidies policies for investment promotion by local No No 3,007,996.25 3,540,171.40 Related to income
Management Pioneer Park Management governments
Committee Office
Tax Bureau of Shanghai Subsidies received for compliance with local support
Tax rebate from
Jiading District and Pudong Subsidies policies for investment promotion by local No No 1,298,632.80 Related to income
Shanghai government
New Area governments
Finance and Taxation
Subsidies received for compliance with local support
Service Center in Wuhu
Industrial subsidies Subsidies policies for investment promotion by local No No 2,167,000.00 4,935,700.00 Related to income
Machinery Industry
governments
Development Zone
Management Committee of
Subsidies received for compliance with local support
Anhui Xinwu Economic &
Industrial subsidies Subsidies policies for investment promotion by local No No 961,399.64 Related to income
Technological Development
governments
Zone
Treasury Payment Center of Subsidies received for compliance with local support
Industrial subsidies Wuhu Jiujiang District Subsidies policies for investment promotion by local No No 12,856,498.14 Related to income
Finance Bureau governments
Industrial subsidies Wuhu Advertising Industry Subsidies Subsidies received for compliance with local support No No 62.00 268,618.87 Related to income
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Park Asset Management policies for investment promotion by local
Co., Ltd. governments
Provincial Financial
Research Funds for
Department of Science and
Research and Subsidies for research and development, technology
Technology of Guangdong Subsidies No No 1,777,800.00 Related to income
Development of renewal and renovation
Province
Enterprises in
Guangdong Province
Subsidies to
Guangzhou Science,
Guangzhou Subsidies for research and development, technology
Technology and Innovation Subsidies No No 853,900.00 100,000.00 Related to income
enterprises’ R&D renewal and renovation
Commission
investment
Special fund for
The Bureau of Science,
subsidies to
Technology, Industry & Subsidies for research and development, technology
Guangzhou Subsidies No No 0.00 100,000.00 Related to income
Informatization of Tianhe renewal and renovation
enterprises’ R&D
District, Guangzhou
investment
Special subsidy of
Tianhe District to
The Bureau of Science,
support development
Technology, Industry & Subsidies for research and development, technology
of software Subsidies No No 500,000.00 Related to income
Informatization of Tianhe renewal and renovation
development and
District, Guangzhou
enterprise R&D
investment
Special subsidy of
Office of Talent Affairs,
Tianhe District to Subsidies for research and development, technology
Tianhe District Committee Subsidies No No 200,000.00 Related to income
support innovation renewal and renovation
of Guangzhou
and entrepreneurship
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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of high-level talents
Special fund of
The Bureau of Science,
Tianhe District for Subsidies received for compliance with local support
Technology, Industry &
subsidies to Thero Subsidies policies for investment promotion by local No No 500,000.00 500,000.00 Related to income
Informatization of Tianhe
brand building governments
District, Guangzhou
service
Funding support of
Guangzhou Municipal Subsidies received for compliance with local support
Tianhe District for
Development and Reform Subsidies policies for investment promotion by local No No 200,000.00 Related to income
cultural and creative
Commission governments
industry
Provincial financial Jiangsu Department of
Subsidies for research and development, technology
reward for enterprise Finance, Department of Reward No No 2,000,000.00 Related to income
renewal and renovation
R&D expenses Science and Technology
Supporting subsidy
Subsidies received for compliance with local support
from the Finance Finance Bureau of Jiading
Subsidies policies for investment promotion by local No No 0.00 1,339,770.00 Related to income
Bureau of Jiading District, Shanghai
governments
District, Shanghai
Nanling Economic
Reward for “Four Subsidies received for compliance with local support
Development Zone
Standards” Reward policies for investment promotion by local No No 110,000.00 120,000.00 Related to income
Construction Investment
enterprises governments
Co., Ltd.
Reward for “Four Subsidies received for compliance with local support
Statistics Bureau of Wuhu
Standards” Reward policies for investment promotion by local No No 3,000.00 2,000.00 Related to income
County
enterprises governments
Reward for scientific
Science & Technology Subsidies for research and development, technology
and technical Reward No No 52,000.00 50,000.00 Related to income
Bureau of Wuhu County renewal and renovation
innovation of Science
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
& Technology Bureau
Reward and subsidy
Wuhu Municipal Subsidies received for compliance with local support
to province with
Commission of Economy Reward policies for investment promotion by local No No 0.00 500,000.00 Related to income
strong manufacturing
and Information Technology governments
power
Return of handling Subsidies received for compliance with local support
charges of VAT and Huai’an Tax Service Reward policies for investment promotion by local No No 71,081.94 25,238.00 Related to income
enterprise income tax governments
Incentive fund for Huai’an Municipal Science Subsidies for research and development, technology
Reward No No 100,000.00 Related to income
high-tech enterprises and Technology Bureau renewal and renovation
Science and Technology
District-level
Division of Huai’an
supporting incentive Subsidies for research and development, technology
Economic and Reward No No 100,000.00 Related to income
fund for high-tech renewal and renovation
Technological Development
enterprises
Zone
Incentive fund for
cultivation of Jiangsu Department of Subsidies for research and development, technology
Reward No No 55,555.00 Related to income
provincial new Finance renewal and renovation
high-tech enterprises
Special fund of Subsidies received for compliance with local support
Department of Commerce of
commercial Reward policies for investment promotion by local No No 110,100.00 Related to income
Jiangsu Province
development governments
Rebates of VAT Subsidies received for compliance with local support
levied by South Sam Sung Tax Office Subsidies policies for investment promotion by local No No 9,633.64 Related to income
Korea governments
Supporting subsidy of Internal Revenue Services Subsidies received for compliance with local support
Subsidies No No 0.00 1,348,511.17 Related to income
Guro, Seoul, South and Government of Guro, policies for investment promotion by local
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Korea Seoul, South Korea governments
2017 supporting fund
for animation of Shanghai Municipal
Subsidies received for compliance with local support
Shanghai Municipal Administration of Culture
Subsidies policies for investment promotion by local No No 0.00 235,849.06 Related to income
Administration of and Tourism, Radio and
governments
Culture and Tourism, Television
Radio and Television
People’s Government of Subsidies received for compliance with local support
Tax return of Jiading
Jiading District of Shanghai Subsidies policies for investment promotion by local No No 0.00 518,800.00 Related to income
District Government
Municipality governments
2016 city-level
Management Committee of Subsidies received for compliance with local support
directing fund for
Huai’an Software Park of Reward policies for investment promotion by local No No 0.00 400,000.00 Related to income
cultural industry
Jiangsu Province governments
development
Economic Development
Bureau of Huai’an
Incentive fund for Subsidies for research and development, technology
Economic and Reward No No 0.00 400,000.00 Related to income
offshore outsourcing renewal and renovation
Technological Development
Zone
Subsidies for Subsidies received for compliance with local support
Leading Group Office for
Huaishang Talent Subsidies policies for investment promotion by local No No 0.00 150,000.00 Related to income
Talent Affairs of Huai’an
Project governments
Special incentive of
Tianhe District Subsidies received for compliance with local support
Finance Bureau of Tianhe
Business and Finance Reward policies for investment promotion by local No No 0.00 122,100.00 Related to income
District
Bureau for governments
introduction of key
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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enterprises
Support for fashion
creative animation of
Culture, Radio, Film, Subsidies received for compliance with local support
Guangzhou Municipal
Television & Public Subsidies policies for investment promotion by local No No 0.00 400,000.00 Related to income
Bureau of Finance
Press Bureau of governments
Guangzhou
Municipality
Special subsidies for
The Bureau of Science,
rents of key industrial Subsidies received for compliance with local support
Technology, Industry &
enterprises granted by Subsidies policies for investment promotion by local No No 0.00 90,100.00 Related to income
Informatization of Tianhe
the Finance Bureau governments
District, Guangzhou
of Tianhe District
Supporting fund of
the Finance Bureau Human Resources and
of the Khorgas Social Security Bureau of
Economic the Khorgas Economic Subsidies received for compliance with local support
Development Zone Development Zone Subsidies policies for investment promotion by local No No 0.00 118,857.00 Related to income
Management Management Committee of governments
Committee of Xinjiang Uygur
Xinjiang Uygur Autonomous Region
Autonomous Region
Copyright grant of Subsidies received from the government to encourage
Copyright Association of
Shanghai Copyright Subsidies and support specific industries and segments No No 0.00 3,500.00 Related to income
Shanghai
Association (according to national policies and regulations)
2016 Excellent Huai’an Municipal Bureau
Subsidies for research and development, technology
Copyright of Chuan of Culture, Radio, Film and Reward No No 0.00 3,000.00 Related to income
renewal and renovation
Qi Ba Ye (传奇霸业) Television Press and
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
of Huai’an Publication (Copyright)
2016 policy fund for
promotion of
provincial foreign Subsidies received for compliance with local support
Commerce Bureau of
trade transferred by Subsidies policies for investment promotion by local No No 0.00 64,500.00 Related to income
Nanling County
the Commerce governments
Bureau of Nanling
County
Subsidies for blue
collar apartment rents
Nanling Economic
granted by Nanling Subsidies received for compliance with local support
Development Zone
Economic Subsidies policies for investment promotion by local No No 0.00 27,648.00 Related to income
Construction Investment
Development Zone governments
Co., Ltd.
Construction
Investment Co., Ltd.
Jishan Town Government of Subsidies received for compliance with local support
Return of land use tax Nanling County, Anhui Subsidies policies for investment promotion by local No No 1,857,265.44 1,411,521.00 Related to income
Province governments
Project subsidies of
Anhui Department of Subsidies for research and development, technology
Automotive Fuel Subsidies No No 119,166.67 130,000.00 Related to assets
Finance renewal and renovation
System R&D Center
Subsidy for the Wuhu Municipal
Subsidies for research and development, technology
purchase of single Commission of Economy Subsidies No No 25,163.35 27,450.92 Related to assets
renewal and renovation
equipment by SMEs and Information Technology
Provincial “6+1” Nanling County
Subsidies for research and development, technology
subsidies for building Commission of Economy Subsidies No No 90,566.67 98,800.00 Related to assets
renewal and renovation
independent and Information Technology
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
innovation capacity
Special funds for
development of
provincial enterprises
Nanling County
of Nanling Country Subsidies for research and development, technology
Commission of Economy Subsidies No No 45,833.33 50,000.00 Related to assets
Commission of renewal and renovation
and Information Technology
Economy and
Information
Technology
Provincial innovation
Wuhu Municipal Science Subsidies for research and development, technology
enterprise R&D Subsidies No No 25,437.50 27,750.00 Related to assets
and Technology Bureau renewal and renovation
equipment subsidy
2015 provincial
Nanling County
special fund to build Subsidies for research and development, technology
Commission of Economy Subsidies No No 25,437.50 27,750.00 Related to assets
an innovative renewal and renovation
and Information Technology
province
Subsidies for R&D
Nanling County
and purchase of Subsidies for research and development, technology
Commission of Economy Subsidies No No 71,866.67 78,400.00 Related to assets
instruments and renewal and renovation
and Information Technology
equipment
2016 provincial
special fund to build Wuhu Municipal Science Subsidies for research and development, technology
Subsidies No No 71,866.67 78,400.00 Related to assets
an innovative and Technology Bureau renewal and renovation
province
Subsidies for Nanling County
Subsidies for research and development, technology
technologically Commission of Economy Subsidies No No 313,500.00 57,000.00 Related to assets
renewal and renovation
transformed and Information Technology
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
equipment to make
the foundation of
industry development
more solid for
provinces with strong
manufacturing power
Nanling County
Reward and subsidy Subsidies for research and development, technology
Commission of Economy Subsidies No No 154,247.50 14,022.50 Related to assets
for technology reform renewal and renovation
and Information Technology
2017 provincial
Nanling County
special fund to build Subsidies for research and development, technology
Commission of Economy Subsidies No No 12,191.65 1,108.36 Related to assets
an innovative renewal and renovation
and Information Technology
province
Reward for scientific Nanling County
Subsidies for research and development, technology
and technical Commission of Economy Reward No No 200,000.00 Related to income
renewal and renovation
innovation and Information Technology
Nanling County
Reward for invention Subsidies for research and development, technology
Commission of Economy Reward No No 86,000.00 Related to income
patent renewal and renovation
and Information Technology
2017 provincial Subsidies received for compliance with local support
Commerce Bureau of
supporting fund of Subsidies policies for investment promotion by local No No 96,000.00 Related to income
Nanling County
foreign trade policy governments
Reward and subsidy
for specialized, Nanling County
Subsidies for research and development, technology
sophisticated, special Commission of Economy Subsidies No No 1,000,000.00 Related to income
renewal and renovation
and new SMEs and and Information Technology
provincial industry
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
design center which
are identified in the
province
Subsidy of the Wuhu
Joint Conference
Office for Air
Wuhu Municipal Subsidies received from the government for the
Pollution Prevention
Environmental Protection Subsidies protection of certain utility services or socially No No 0.00 11,200.00 Related to income
and Control on the
Bureau necessary product supply or price control functions
elimination of
heavy-polluting
vehicles
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
46. Non-operating expenses
Unit: RMB
Amount incurred in the Amount incurred in the previous Amount recognized into current
Item
current period period non-recurring profits and losses
External donation 3,454,249.54 134,259.40 3,454,249.54
Losses on the damage and retirement of
1,107,986.48 1,107,986.48
non-current assets
Payable performance compensation 7,702,951.36 3,756,740.62 7,702,951.36
Fine and fine for delaying payment 32,392.81 219,253.60 32,392.81
Others 2,514,703.30 76,785.28 2,514,703.30
Total 14,812,283.49 4,187,038.90
Other notes:
None
47. Income taxes
(1) Income tax sheet
Unit: RMB
Amount incurred in the current
Item Amount incurred in the previous period
period
Income taxes of current period 88,775,602.71 83,470,564.82
Deferred income tax -20,885,955.32 -3,350,691.84
Total 67,889,647.39 80,119,872.98
(2) Accounting profit and income tax expenses adjustment process
Unit: RMB
Item Amount incurred in the current period
Total profit 1,219,319,481.52
Income tax expenses calculated at legal/applicable tax rate 304,829,870.39
Impact of various tax rates applicable to subsidiaries -325,192,357.62
Adjustment of impact on the income tax in the previous period 3,411,685.40
Impact of non-taxable income -10,974,398.80
Impact of the non-deductible costs, expenses and losses 152,848,212.09
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Impact of deductible losses of unrecognized deferred income tax
-17,450,098.57
assets in the previous period
Impact of deductible temporary differences or deductible loss of
7,148,912.28
unrecognized deferred income tax assets of this period
Impact of weighted R&D cost deduction -46,224,603.40
Others -507,574.39
Income taxes 67,889,647.39
Other notes
48. Other comprehensive income
For details, please refer to Note 32 - Other comprehensive income.
49. Items of cash flow statements
(1) Cash received from other operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Operational incomings and outgoings
7,170,260.47 3,000,000.00
received
Government subsidies received 38,577,011.89 29,104,526.97
Interest income received 10,849,579.35 8,756,161.69
Deposits and guarantees received 12,431,744.54 6,814,202.79
Other amounts received 11,704,341.67 8,111,632.38
Total 80,732,937.92 55,786,523.83
Description of other received cash relevant to operating activities:
None
(2) Cash paid relating to other operating activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Out-of-pocket expenses 3,091,233,883.86 2,029,450,687.59
Payment of guarantee and reserve 36,152,700.88 19,562,859.61
Service charge 645,223.32 606,729.28
Non-operating expense 5,635,594.16 430,298.28
Other payables 803,924.26 3,316,702.65
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Total 3,134,471,326.48 2,053,367,277.41
Description of other cash paid relating to operating activities:
None
(3) Other cash received relating to investment activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Government subsidies related to assets
5,235,700.00
received
Financial products 3,580,863,200.00 2,212,369,000.00
Earnest money for repurchase of equities 6,000,000.00
Return of copyright money 4,417,865.14
Total 3,580,863,200.00 2,228,022,565.14
Description of other cash received relating to investing activities:
None
(4) Other cash payments relating to investing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Financial products 3,586,863,200.00 2,122,369,000.00
Payment of performance compensation 15,795.67
Guarantee for government freezing 4,299,671.55
Total 3,591,178,667.22 2,122,369,000.00
Description of other cash payments relating to investing activities:
None
(5) Other cash payments relating to financing activities
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Issuing costs of raised fund 4,313,316.06
Cash payment for acquisition of minority
1,400,150,000.00 89,180,000.00
stocks of subsidiary
Repurchase of treasury stocks 317,235.07
Total 1,400,467,235.07 93,493,316.06
Description of cash payments relating to financing activities:
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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None
50. Supplementary data of cash flow statement
(1) Supplementary data of cash flow statement
Unit: RMB
Supplementary data Amount of current period Amount of previous period
1. Net profits transferred to cash flow of
-- --
operation activities:
Net profit 1,151,429,834.13 1,836,499,722.03
Add: Provision for assets impairment 1,049,355,112.25 351,295,883.79
Depreciations of fixed assets, oil and gas
47,319,420.24 54,913,911.20
assets, and productive biological assets
Amortization of intangible assets 7,959,258.42 19,083,068.70
Amortization of long-term deferred expenses 62,383,028.39 86,013,536.69
Losses on disposal of fixed assets, intangible
assets and other long-term assets (“-” -1,289,755.10 -1,055,284.09
indicates the profit)
Losses at discard of fixed assets (“-”
1,107,986.48
indicates the profit)
Financial expense (“-” indicates the profit) 22,428,003.26 45,364,584.84
Losses on investments (“-” indicates the
-80,543,972.30 -256,030,245.92
profit)
Decrease of deferred income tax assets (“-”
-23,600,218.04 -3,350,691.84
indicates increase)
Decrease of inventories (“-” indicates
24,488,168.49 -30,413,122.55
increase)
Decrease of operational receivable items (“-”
-482,254,618.57 -244,342,642.44
indicates increase)
Increase of operational payable items (“-”
621,807,956.92 270,541,351.33
indicates decrease)
Others -446,156,583.73 -296,624,143.44
Net cash flows from operating activities 1,954,433,620.84 1,831,895,928.30
2. Major investments and financing activities
-- --
not related to cash expenditure and income:
3. Changes of cash and cash equivalent: -- --
Ending cash balance 1,515,740,344.79 1,580,910,931.98
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Less: Cash balance at the beginning of the
1,580,910,931.98 819,213,006.12
period
Net increase of cash and cash equivalents -65,170,587.19 761,697,925.86
(2) Net cash paid for acquisition of subsidiaries in the current period
Unit: RMB
Amount
Cash or cash equivalent paid in the current period for the business
155,215,923.89
combination in the current period
Wherein: --
Huai’an Sanqi 155,215,923.89
Less: Cash and cash equivalent held by subsidiary on purchase date 140,937.70
Wherein: --
Huai’an Sanqi 140,937.70
Wherein: --
Net cash paid for acquisition of the subsidiary 155,074,986.19
Other notes:
None
(3) Net cash received for the disposal of subsidiaries in the current period
Unit: RMB
Amount
Cash or cash equivalent received in current period for the disposal
420,169,978.90
of subsidiaries in the current period
Wherein: --
Shunrong Auto Parts 417,690,000.00
Wuji Entertainment Games Co., Ltd. 2,479,978.90
Less: Cash and cash equivalent held by subsidiary at the date of
260,047,513.08
losing control
Wherein: --
Shunrong Auto Parts 232,034,091.47
Wuji Entertainment Games Co., Ltd. 28,013,421.61
Wherein: --
Net cash received for the disposal of subsidiaries 160,122,465.82
Other notes:
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
None
(4) Constitution of cash and cash equivalent
Unit: RMB
Item Ending balance Beginning balance
I. Cash 1,515,740,344.79 1,580,910,931.98
Wherein: Cash on hand 29,585.32 59,238.53
Bank deposit available for payment
1,509,544,157.41 1,573,326,143.60
at any time
Other monetary fund available for
6,166,602.06 7,525,549.85
payment at any time
III. Balance of cash and cash equivalents at
1,515,740,344.79 1,580,910,931.98
the end of period
Other notes:
The ending balance of cash and cash equivalents in 2018 annual cash flow statement was RMB 1,515,740,344.79. The ending
balance of monetary funds on the balance sheet as of December 31st, 2018 was RMB 1,532,965,200.05. The difference of RMB
17,224,855.25 was the guarantee and frozen fund not meeting the cash and cash equivalent standard.
51. Assets with limited ownership or right of use
Unit: RMB
Item Carrying value at the end of the period Reason for restriction
RMB 12,925,183.70 was the frozen fund
Monetary fund 17,224,855.26 in bank account, and RMB 4,299,671.56
was the guarantee
Borrowing of the Company’s subsidiaries
Other non-current assets 799,637,688.54 with the office building corresponding to
the prepaid purchase price as the mortgage
Total 816,862,543.80 --
Other notes:
None
52. Foreign currency monetary items
(1) Monetary items in foreign currency
Unit: RMB
Balance of foreign currency at Balance in RMB at the end of
Item Exchange rate
the end of period period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Monetary fund -- --
Wherein: USD 58,717,072.67 6.8632 402,987,013.15
EUR 79,895.03 7.8741 629,101.46
HKD 2,248,414.35 0.8764 1,970,510.34
KRW 425,522,955.00 0.0061 2,595,690.03
NT 7,799,117.00 0.2244 1,750,121.85
JPY 1,131,161.00 0.0625 70,697.56
THB 1,856,586.38 0.2128 395,081.58
Accounts receivable -- --
Wherein: USD 15,479,578.51 6.8632 106,239,443.23
EUR 16,672.53 7.8741 131,281.17
HKD 38,880,089.32 0.8764 34,074,510.28
PHP 18,676,829.00 0.1311 2,448,532.28
RM 5,419,450.42 1.6609 9,001,165.20
THB 64,283,102.33 0.2128 13,679,444.18
TRY 206,472.59 1.2978 267,960.13
IDR (Indonesian
6,246,489,120.87 0.0005 3,123,244.56
Rupiah)
VND 32,192,102,114.71 0.0003 9,657,630.63
KRW 783,163,539.00 0.0061 4,777,297.59
AUD 826,855.17 4.8310 3,994,537.33
JPY 408,755,016.97 0.0625 25,547,188.56
GBP 414.65 8.7485 3,627.57
BRL 2,511.74 1.7680 4,440.76
PLN 437.93 1.8345 803.38
CAD 6.25 5.0300 31.44
SGD 375,691.38 5.0376 1,892,582.90
INR 9,315.00 0.0988 920.32
SEK 72.80 0.7680 55.91
RUB 9,532.32 0.0981 935.12
Other receivables
Wherein: USD 640,000.00 6.8632 4,392,448.00
NT 68,500.00 0.2244 15,371.40
Accounts payable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Wherein: NT 116,384,895.97 0.2244 26,116,770.66
USD 20,061,742.56 6.8632 137,687,751.54
EUR 7,984.30 7.8741 62,869.18
THB 28,007.57 0.2128 5,960.01
VND 4,676,607,625.40 0.0003 1,402,982.29
HKD 29,385.09 0.8764 25,753.09
JPY 1,061,811.00 0.0625 66,363.19
Other notes:
(2) Notes to overseas operational entities, including disclosures of overseas principal places of business,
functional currencies and the basis of choosing the currency of important overseas operational entities, as
well as the reasons for the change in functional currencies (if any).
√Applicable □Not Applicable
The Company’s wholly-owned subsidiary Vogue Entertainment International and its six subsidiaries, G-MEI Network, Wisdom
Entertainment International, Wisdom Game International, Top Increase, 37 Games Company, 37 Games Entertainment Limited
(hereinafter referred to as “Vogue Entertainment International”) and Easy Gaming, Inc. are mainly engaged in overseas business.
Taking USD as the bookkeeping base currency can better reflect the actual situation of Vogue Entertainment International and Easy
Gaming, Inc. The Company carefully considers and combines existing financial settlement conditions and future. To more accurately
reflect the information of Vogue Entertainment International and Easy Gaming, Inc., the bookkeeping currency was changed from
RMB to USD from January 1st, 2018. This bookkeeping currency change is accounted for using the future applicable method.
53. Government subsidies
(1) Basic information on government subsidies
Unit: RMB
Amount included in current
Type Amount Presented item
profits and losses
Governmental subsidy related
681,000.00 Deferred income
to assets
Government Subsidy Related to
96,692,033.09 Other profits 96,692,033.09
Income
(2) Return of government subsidies
□Applicable √Not Applicable
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
III. Consolidation scope change
1. Business combinations not under the same control
(1) Business combination not under common control in current period
Unit: RMB
Revenue of Net profit of
Acquiree Acquiree
Stock Confirmation
Name of Time point of Equity control Share Purchasing from from
controlling basis on
acquiree stock control cost ratio date purchase date purchase date
mode purchase day
to the end of to the end of
term term
2018.11.30
Huai’an November Cash November
155,215,923.89 60.30% actual handover 4,769,618.99
Sanqi 30th, 2018 purchase 30th, 2018
date
Other notes:
Pursuant to the Priority Limited Partnership Share Transfer Agreement signed between the Company and China Resources SZITIC
Trust Co., Ltd. in November 2018, the follow-up supplementary agreement, and the purchase agreement signed with Guangdong
Yijian Investment Co., Ltd, the Company acquired 60.30% equity of Huai’an Sanqi in cash. For the transaction price of the assets to
be purchased, refer to the book value of the identifiable net assets at the purchasing date as stipulated in the Priority Limited
Partnership Share Transfer Agreement and the follow-up supplementary agreement, and the transaction price was RMB
155,215,923.89.
The Company originally held 39.70% equity of Huai’an Sanqi, and became a wholly-owned subsidiary of the Company after
acquisition of 60.30% in cash.
(2) Merger cost and goodwill
Unit: RMB
Combination cost Huai’an Sanqi
- Cash 155,215,923.89
- Fair value on the acquisition date of the equities held before the
98,626,954.68
acquisition date
Total merger cost 253,842,878.57
Less: Proportion of fair value of identifiable net assets acquired 253,842,878.57
Amount of goodwill/ merger cost which is less than the definable
0.00
net assets fair proportion
Recognition method for fair value on the combined costs and description of contingent consideration and its change:
For the transaction price of the assets to be purchased, refer to the book value of the identifiable net assets at the purchasing date as
stipulated in the Priority Limited Partnership Share Transfer Agreement and the follow-up supplementary agreement, and it was
determined by the parties to this restructuring transaction to be RMB 155,215,923.89.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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The main reasons for the large goodwill:
Not applicable
Other notes:
None
(3) Identifiable assets and liabilities of acquiree on the acquisition date
Unit: RMB
Huai’an Sanqi
Fair value on purchase day Book value on purchase day
Monetary fund 140,937.70 140,937.70
Receivables 25,875,923.89 25,875,923.89
Long-term equity investments 229,185,274.20 229,185,274.20
Accounts payable 1,359,257.22 1,359,257.22
Net asset 253,842,878.57 253,842,878.57
Net asset acquired 253,842,878.57 253,842,878.57
Recognition method for identifiable assets and fair value:
Determined by book value.
Contingent liabilities of the acquiree assumed in business combination:
None
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2. Disposal of subsidiaries
Whether there are cases where the control over investment in subsidiary is lost in single disposal
□ Yes √ No
Unit: RMB
Difference of
enjoyed net Amount of other
asset share of comprehensive
Recognition methods
the subsidiary Proportion of Carrying value Profits or losses income, related to
Ratio of Time Fair value of and main assumption
Disposal Disposal Determination basis between remaining of remaining attributing to equity investment
disposal point of remaining equity for fair value of
Name of subsidiary price of method of time point of consolidated equity on the equity on the remaining equity of original
equity losing on the date of remaining equity on
equity of equity losing control financial date of losing date of losing re-measured by subsidiary, carried
(%) control losing control the date of losing
statements control control fair values forward to the
control
corresponding to profit and loss on
disposal price investments
and investment
Novemb The equity transfer
Shunrong Auto 819,000, Right
100.00% er 30th, procedure was 6,470,484.05 -
Parts 000.00 offering
2018 completed
Decemb The equity transfer
Wuji Entertainment 6,935,70 Right Equity transaction
40.74% er 31st, procedure was -1,117,205.48 14.16% 1,533,960.59 2,583,703.75 1,049,743.16
Games Co., Ltd. 0.00 offering price
2018 completed
Other notes:
None
Whether there are cases where investment in subsidiary is disposed step by step through multiple transactions and the control is lost in the current period
□ Yes √ No
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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3. Merger scope change for other reasons
Notes to changes in scope of combination due to other reasons (e.g., establishment of new subsidiaries, liquidation of subsidiaries,
etc.) and their related circumstances:
Company name Cause of changes Establishment/Change date
Anhui Wanhu Newly-established March 1st, 2018
Zhuhai Miaohu Newly-established April 26th, 2018
Zhuhai Shangjie Newly-established April 26th, 2018
Khorgas Mopeng Newly-established May 29th, 2018
Ningbo Langkun Newly-established July 26th, 2018
Shanghai Jiakun Newly-established July 17th, 2018
Guangzhou Sanqi Culture & Newly-established August 9th, 2018
Entertainment
Anhui Zhusheng Newly-established October 11th, 2018
37Games.Japan Co., Ltd. Newly-established December 17th, 2018
Guangzhou Jisheng Write-off March 23rd, 2018
Guangzhou Jishi Write-off May 24th, 2018
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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IV. Rights and interests in other parties
1. Rights and interests in subsidiary
(1) Organization of enterprise group
Principal place of Shareholding ratio
Name of subsidiary Registered address Business nature Acquisition method
business Directly Indirectly
Level 1 subsidiary
Shanghai Sanqi Interactive
Guangzhou Shanghai Software 100.00% Business combination not under common control
Entertainment
Tibet Xintai Tibet Tibet Investment 100.00% Establishment
Guangzhou Sanqi Culture &
Guangzhou Guangzhou Software 100.00% Establishment
Entertainment
Level 2 subsidiary
Shanghai Yingtong Guangzhou Shanghai Software 100.00% Business combination not under common control
Anhui Vogue Entertainment Guangzhou Wuhu Software 100.00% Business combination not under common control
Guangzhou Sanqi Guangzhou Guangzhou Software 80.00% Business combination not under common control
British Virgin
Vogue Entertainment International British Virgin Islands Software 100.00% Business combination not under common control
Islands
Jiangsu Aurora Guangzhou Huai’an Software 20.00% 80.00% Business combination not under common control
Guangzhou Xingzhong Guangzhou Guangzhou Software 100.00% Business combination not under common control
Shanghai Guanhang Guangzhou Shanghai Software 100.00% Business combination not under common control
Anhui Jiashang Guangzhou Wuhu Software 100.00% Business combination not under common control
Easy Gaming, Inc. United States United States Software 100.00% Business combination not under common control
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Khorgas Sanqi Xinjiang Xinjiang Investment 100.00% Establishment
Level 3 subsidiary
Shanghai Zhiren Guangzhou Shanghai Software 100.00% Business combination not under common control
Zhuhai Shangjie Zhuhai Zhuhai Software 100.00% Establishment
G-MEI Network Taiwan British Virgin Islands Software 100.00% Business combination not under common control
British Virgin
Top Increase British Virgin Islands Software 100.00% Business combination not under common control
Islands
Shanghai Mobile Game Guangzhou Shanghai Software 80.00% Business combination not under common control
Chengdu Shengge Times Network
Chengdu Chengdu Software 80.00% Business combination not under common control
Technology Co., Ltd.
Beijing Shangheng Guangzhou Beijing Software 80.00% Business combination not under common control
Jiangsu Jiaqu Guangzhou Huai’an Software 80.00% Business combination not under common control
Guangzhou Huoshanhu Guangzhou Guangzhou Software 80.00% Establishment
Anhui Sanqi Guangzhou Wuhu Software 80.00% Establishment
Anhui Wanhu Guangzhou Wuhu Software 80.00% Establishment
Zhuhai Miaohu Zhuhai Zhuhai Software 80.00% Establishment
Guangzhou Sanqi Interactive
Guangzhou Guangzhou Software 100.00% Establishment
Entertainment
Anhui Aurora Guangzhou Wuhu Software 100.00% Establishment
Guangzhou Jisheng Guangzhou Guangzhou Software 100.00% Establishment
Anhui Xuhong Guangzhou Wuhu Advertising 100.00% Establishment
Anhui Guanyu Guangzhou Wuhu Advertising 100.00% Business combination not under common control
Anhui Zhusheng Guangzhou Wuhu Software 100.00% Establishment
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Level 4 subsidiary
Tibet Taifu Tibet Tibet Software 100.00% Business combination not under common control
Software and
Khorgas Xinghui Xinjiang Xinjiang Information 100.00% Establishment
Technology Service
Jiangsu Zhiming Guangzhou Huai’an Software 49.00% 51.00% Business combination not under common control
37Games Entertainment Co., Ltd. Hong Kong Hong Kong Software 100.00% Business combination not under common control
British Virgin
Wisdom Game International British Virgin Islands Software 100.00% Business combination not under common control
Islands
Wisdom Entertainment International Hong Kong Hong Kong Software 100.00% Business combination not under common control
37 Games Company South Korea South Korea Software 100.00% Business combination not under common control
Software and
Khorgos Xinrui Xinjiang Xinjiang Information 80.00% Establishment
Technology Service
Level 5 subsidiary
Tibet Yaotong Guangzhou Tibet Software 100.00% Establishment
Tibet Shengge Guangzhou Tibet Software 100.00% Establishment
Shanghai Mokun Shanghai Shanghai Software 100.00% Combination not under the same control
Business services
Huai’an Sanqi Huai’an Huai’an 100.00% Business combination not under common control
industry
Software and
Khorgas Qianyu Xinjiang Xinjiang Information 100.00% Establishment
Technology Service
37Games.Japan Co., Ltd. Japan Japan Software 100.00% Establishment
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Level 6 subsidiary
Shanghai Langkun Shanghai Shanghai Software 76.50% Business combination not under common control
Shanghai Miji Shanghai Shanghai Software 100.00% Business combination not under common control
Shanghai Kunkun Shanghai Shanghai Software 100.00% Business combination not under common control
Shanghai Aojue Shanghai Shanghai Software 100.00% Business combination not under common control
Khorgas Mopeng Xinjiang Xinjiang Software 100.00% Establishment
Level 7 subsidiary
Khorgas Jiaji Xinjiang Xinjiang Software 76.50% Business combination not under common control
Shanghai Jiakun Shanghai Shanghai Software 76.50% Establishment
Ningbo Langkun Xinjiang Xinjiang Software 76.50% Establishment
The shareholding ratio in the subsidiary is different from the percentage of the voting rights:
Not applicable
Basis for a company to control the invested organization with half or less than half of voting rights and a company not to control the invested organization with more than half of voting rights:
Not applicable
For important structured entities that are included in the scope of consolidation, the basis for control:
Not applicable
Basis for determining whether the company is an agent or a client:
Not applicable
Other notes:
None
(2) Key no-wholly owned subsidiaries
Unit: RMB
Name of subsidiary Shareholding ratio of Profit and loss belonging to minority Dividend declared to be distributed to minority Balance of minority equity at the end of period
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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minority shareholders shareholder of the current period shareholder of the current period
Guangzhou Sanqi 20.00% 133,337,736.30 90,000,000.00 147,368,592.82
Notes to shareholding ratio of minority shareholders of subsidiaries which is different from the percentage of the voting rights:
Not applicable
Other notes:
None
(3) Main financial information of key non-wholly owned subsidiaries
Unit: RMB
Name Ending balance Beginning balance
of
Non-current Non-current Non-current Current Non-current
subsidi Current assets Total assets Current liabilities Total liabilities Current assets Total assets Total liabilities
assets liabilities assets liabilities liabilities
ary
Guang
zhou 2,156,907,783.27 127,801,334.17 2,284,709,117.44 1,516,725,501.90 31,140,651.44 1,547,866,153.34 1,043,430,956.42 115,896,348.84 1,159,327,305.26 531,531,578.14 34,416,645.44 565,948,223.58
Sanqi
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Name of subsidiary Cash flows from Total consolidated Cash flows from operating
Operating incomes Net profit Total consolidated income Operating income Net profit
operating activities income activities
Guangzhou Sanqi 3,593,993,326.91 666,688,681.51 666,688,681.51 1,464,777,160.65 2,098,517,906.50 470,530,214.76 470,530,214.76 863,880,248.47
Other notes:
None
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2. Change of owner’s equity share in subsidiaries and the business of subsidiaries still under control
(1) Notes on change of owner’s equity share in subsidiaries
Name of subsidiary Change time Shareholding ratio Shareholding ratio after
before change change
Jiangsu Aurora February 2018 80.00% 100.00%
Guangzhou Huoshanhu June 2018 85.00% 80.00%
Anhui Sanqi June 2018 100.00% 80.00%
(2) Effect of the transaction on minority interests and attributable to owners' equity of the parent company
Unit: RMB
Jiangsu Aurora Anhui Sanqi Guangzhou Huoshanhu
- Cash 1,400,000,000.00 150,000.00
Total of purchase cost/ disposal
1,400,000,000.00 150,000.00
consideration
Less: Subsidiaries’ share of net
assets calculated based on share 151,879,433.66 -5,028,053.57 -1,756,284.13
of equity received/disposed.
Balance 1,248,120,566.34 5,028,053.57 1,906,284.13
Wherein: Capital reserves
1,248,120,566.34 5,028,053.57 1,906,284.13
adjustment
Other notes
(1) In the current year, the Company acquired 20% equity of Jiangsu Aurora from Hu Yuhang by paying cash of RMB 1.4 billion,
and completed the procedures for industrial and commercial change on February 7th, 2018. According to the Evaluation Report on
the Shareholders’ Equity Assets of Jiangsu Aurora Network Technology Co., Ltd. Involved in the Equities Acquisition by Wuhu
Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd. (L.X.(Z.)P.B.Z. [2017] No. A0553) issued by Guangdong
Union Trust Evaluation Co., Ltd., the assessed value of Jiangsu Aurora’s total shareholders’ equity was RMB 7,004,652,200, and the
consideration price agreed by the parties to the transaction was RMV 1.4 billion.
(2) In June 2018, the Company acquired 15% of Guangzhou Huoshanhu’s equity from Wang Ziqiang by paying cash of RMB
150,000.00, and completed the procedures for industrial and commercial changes on July 18th, 2018.
In June 2018, the Company transferred 100% equity of Guangzhou Huoshanhu and Anhui Sanqi to Guangzhou Sanqi Network
Technology Co., Ltd., one of its holding subsidiaries. After the transfer, the Company indirectly held 80% equity of Guangzhou
Huoshanhu Information Technology Co., Ltd. and Anhui Sanqi Network Technology Co., Ltd. Guangzhou Huoshanhu Information
Technology Co., Ltd. completed the procedures for industrial and commercial changes on July 18th, 2018, and Anhui Sanqi Network
Technology Co., Ltd. completed the procedures for industrial and commercial changes on August 3rd, 2018.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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3. Equity in jointly operated arrangements or joint ventures
(1) Key joint ventures or associates
Shareholding ratio Accounting treatment
Names of joint ventures or associated Principal place Registered Business methods of joint
enterprises of business address nature Directly Indirectly ventures or associated
enterprises
Yangzhou Fuhai Sanqi Internet Cultural
Yangzhou Yangzhou Investment 25.46% Equity method
Investment Center (Limited Partnership)
Mango (Xiamen) Creative Incubation Equity
Investment Fund Partnership (Limited Xiamen Xiamen Investment 31.75% Equity method
Partnership)
Shanghai Fenghua Qiushi Culture Media Co.,
Shanghai Shanghai Investment 20.00% Equity method
Ltd.
New Cues (Beijing) Television Investment
Beijing Beijing Investment 20.00% Equity method
Co., Ltd.
The shareholding ratio in the joint ventures or associates is different from the percentage of the voting rights:
Not applicable
Evidence of voting right below 20% but significant, or voting right over 20% but not significant:
Not applicable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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(2) Main financial information on key associated enterprises
Unit: RMB
Ending balance/Amount incurred in the current period Opening balance/Amount incurred in previous period
Huai’an Sanqi
Mango (Xiamen) Creative Yangzhou Fuhai
Yangzhou Fuhai Sanqi Shanghai New Cues Yijian Mango (Xiamen) Creative
Incubation Equity Sanqi Internet
Internet Cultural Fenghua Qiushi (Beijing) Television Pan-Entertainment Incubation Equity Investment
Investment Fund Cultural Investment
Investment Center Culture Media Investment Co., Asset Management Fund Partnership (Limited
Partnership (Limited Center (Limited
(Limited Partnership) Co., Ltd. Ltd. Center (Limited Partnership)
Partnership) Partnership)
Partnership)
Current assets 59,887,123.89 96,865,384.60 88,732,285.69 174,005,448.14 72,887,128.32 2,530,160.27 116,887,443.92
Non-current assets 139,000,000.00 26,500,000.00 41,926,172.74 17,240,844.95 37,750,000.00 233,574,085.99 9,300,000.00
Total assets 198,887,123.89 123,365,384.60 130,658,458.43 191,246,293.09 110,637,128.32 236,104,246.26 126,187,443.92
Current liabilities 35,247,574.35 142,418,605.58 4,465,358.22
Total liabilities 35,247,574.35 142,418,605.58 4,465,358.22
Total shareholders’ equity attributed
198,887,123.89 123,365,384.60 95,410,884.08 48,827,687.51 110,637,128.32 236,104,246.26 121,722,085.70
to parent company
Share of net assets calculated at
48,136,104.35 39,163,509.62 19,082,176.82 9,765,537.50 50,000,000.00 101,677,840.80 38,646,762.21
shareholding ratio
- Goodwill 113,596,170.58 91,519,923.84
Book value of equity investment on
48,136,104.35 39,163,509.62 132,678,347.40 101,285,461.34 50,000,000.00 101,677,840.80 38,646,762.21
associates
Operating income 22,850,573.32 9,309,366.03
Net profit -7,680,004.43 1,628,080.84 17,073,944.37 5,994,031.50 137,128.32 11,067,234.25 -4,262,166.26
Total consolidated income -7,680,004.43 1,628,080.84 17,073,944.37 5,994,031.50 137,128.32 11,067,234.25 -4,262,166.26
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Dividend from associated
enterprises received in the current 8,769,681.68
year
Other notes
None
(3) Financial information summary on less important joint ventures and associated enterprises
Unit: RMB
Ending balance/Amount incurred in the current period Opening balance/Amount incurred in previous period
Joint ventures: -- --
Totals of the following items calculated as per respective
-- --
shareholding proportion
Affiliated enterprises: -- --
Total investment book value 229,338,591.28 186,648,229.07
Totals of the following items calculated as per respective
-- --
shareholding proportion
- Net profit 4,099,680.58 -10,183,932.08
- Total consolidated income 4,099,680.58 -10,183,932.08
Other notes
Except for Yangzhou Fuhai Sanqi Internet Cultural Investment Center (Limited Partnership), Mango (Xiamen) Creative Incubation Equity Investment Fund Partnership (Limited Partnership),
Shanghai Fenghua Qiushi Culture Media Co., Ltd. and New Cues (Beijing) Television Investment Co., Ltd., other associates are of slight importance.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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(4) Excess deficit in joint ventures or associated enterprises
Unit: RMB
Accumulated unconfirmed Unconfirmed loss of the current
Names of joint ventures or Accumulated unconfirmed loss
losses recognized in the period (or shared net profits of
associated enterprises at the end of the period
previous period the current period)
Longzhang Animation
-5,201,916.08 -2,704,711.45 -7,906,627.53
(Shanghai) Co., Ltd.
Other notes
None
V. Risk associated with financial instruments
The target of risk management by the Group is to balance risk and profit, and minimize the negative influence of risk on the
Company's operation performance, and maximize the profit of shareholder and other equity investors. Base on this risk management
target, the fundamental strategy of the Company's risk management is to identify and analyze various risks in the Company, establish
appropriate risk tolerance baseline, manage risks, and to supervise all risks promptly and reliably so as to control risk in limited
scope.
The various risks related to financial instruments Company faces in its daily activities mainly include credit risk, liquidity risk and
market risk. The policy that has been examined and authorized by the management to manage the risks is summarized as follows.
(I) Risks of credit
Credit risk refers to the possibility of financial loss borne by one party caused by the failure to performance obligation by another
party of the financial instrument.
The Company's credit risk is mainly derived from bank deposits and receivables. To control the above-mentioned relevant risks, the
Company adopts the following measures.
1. Bank deposit
The Company deposits bank deposits in financial institutions with higher credit ratings, so its credit risk is lower.
2. Receivables
The Company regularly conducts credit evaluations for customers who use credit-based transactions. Based on the results of the
credit evaluation, the Company chooses to conduct transactions with recognized customers of good credit, and monitors the balance
of its receivables to avoid significant risks of bad debts.
As the Company's risk points of accounts receivable are distributed among multiple partners and customers, as of December 31st,
2018, 61.82% of the Company’s accounts receivable (December 31st, 2017: 51.36%) was from the top five balance customers. The
company does not have significant credit concentration risks.
(II) Liquidity risk
Liquidity risk refers to the risk of a shortage of funds when the Company is required to settle its obligations in the form of cash or
other financial assets. The liquidity risk may result from the inability to sell financial assets at fair value as soon as possible; or from
the inability of the other party to repay their contractual debts; or from debts that are due in advance; or from the inability to generate
expected cash flows.
The Company’s current financial assets can meet working capital needs and capital expenditures, so it does not assume significant
liquidity risks.
(III) Market risk
Market risk refers to the possibility of fluctuation in the fair value of financial instruments or future cash flow caused by market price
change. Market risk includes interest rate risk and foreign exchange risk.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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1. Interest rate risk
Interest rate risk refers to the possibility of fluctuation in the fair value of financial instruments/future cash flow caused by market
interest rate change. The Company does not have the risk of changes in market interest rates.
2. Foreign currency risk
Exchange rate risk refers to the possibility of fluctuation of the fair value of financial instruments or future cash flows due to changes
in foreign exchange rates. The exchange rate risk of the company mainly related to monetary assets and debts of foreign currency.
The main business place of the Company is in Mainland China and the main activities is calculated in RMB. Therefore, the market
risk of foreign exchange changes tolerated by the Company is not significant.
The ending foreign currency monetary assets and liabilities of the Company can be found in the description of foreign currency
monetary items under Item Notes to Consolidated Financial Statement in the notes to the financial statements.
VI. Disclosure of fair value
1. Ending fair value of assets and liabilities measured at fair value
Unit: RMB
Ending fair value
Item Level I measurement of Level II measurement of Level III measurement of
Total
fair value fair value fair value
I. Continuous fair value
-- -- -- --
measurements
(II) Available-for-sale
71,141,826.11 71,141,826.11
financial assets
(2) Equity instrument
71,141,826.11 71,141,826.11
investment
II. Non-continuous
-- -- -- --
measurement of fair value
(I) Assets held-for-sale 7,536,816.46 7,536,816.46
2. Determining basis for the market price of continuous and non-continuous first-level fair value-measured
project
The fair value of available-for-sale financial assets and hold-for-sale is determined based on the open market value.
VII. Related parties and related transaction
1. Information of the Company's parent company
Percentage of the
Shareholding ratio of
Name of parent Company's vote
Registered address Business nature Registered capital the parent company
company rights held by the
against the Company
parent company
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Description of the information of the Company's parent company
Final controllers of the Company are Wu Xushun, Wu Weihong and Wu Weidong.
Other notes:
Actual controller of the Company
Name of affiliated parties Percent of stocks of the Company (%) The percent of voting share of the Company (%)
Wu Xushun 7.89 7.89
Wu Weihong 6.99 6.99
Wu Weidong 6.16 6.16
Wu Xushun is in father-daughter relation with Wu Weihong, and father-son relation with Wu Weidong. The above three shareholders
held a total of 21.04% of the Company's shares.
2. Information of the Company's subsidiaries
Details of the subsidiaries of the company are shown in Note IX: Rights and Interests in Other Bodies.
3. Affiliates and joint ventures of the Company
For the important joint ventures or affiliated enterprises of the Company, please refer to Notes IX: Rights and Interests in Other
Entities.
Details on other joint ventures or associated enterprises with balance from related party transactions with the Company this period or
earlier are as follows:
Names of joint ventures or associated enterprises Relation with the Company
Shenzhen Yiwan Network Technology Co., Ltd. An associated enterprise of the Company
Chengdu Pengwan Technology Co., Ltd. An associated enterprise of the Company
Shanghai Tingting Network Technology Co., Ltd. An associated enterprise of the Company
Chengdu Mofei Technology Co., Ltd. An associated enterprise of the Company
Longzhang Animation (Shanghai) Co., Ltd. An associated enterprise of the Company
Chengdu Modu Technology Co., Ltd. An associated enterprise of the Company
Shenzhen Zhanlong Interactive Entertainment Technology Co., Ltd. An associated enterprise of the Company
Longzhang Network Technology (Shanghai) Co., Ltd. An associated enterprise of the Company
Shaoxing Shangyu Zhangyu Network Technology Co., Ltd. An associated enterprise of the Company
Shanghai Yuhouyi Network Technology Co., Ltd. An associated enterprise of the Company
Shanghai Fuhai Sanqi Investment Management Co., Ltd. An associated enterprise of the Company
Chengdu Popcorn Interactive Entertainment Technology Co., Ltd. An associated enterprise of the Company
Jiangsu Yezi Network Technology Co., Ltd. An associated enterprise of the Company
Shanghai Aoting Network Technology Co., Ltd. An associated enterprise of the Company
Shanghai Aurora Network Technology Co., Ltd. An associate of the Company before March 31st, 2017
Shanghai Mokun An associate of the Company before May 31st, 2017, and a subsidiary of
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the Company after May 31st, 2017.
An associate of the Company before November 30th, 2018, and a
Huai’an Sanqi
subsidiary of the Company after November 30th, 2018.
Other notes
1. The Company disposed of the joint venture Shanghai Aurora Network Technology Co., Ltd. on March 31st, 2017, and disclosed
amount of the related party transaction with it in the previous period from January to March 2017.
2. The Company completed the overall acquisition of Shanghai Mokun on May 31st, 2017, and disclosed amount of the related party
transaction with it in the previous period from January to May 2017.
4. Other affiliated parties
Names of other related parties Relationship between other affiliated parties and the Company
A related person for the past 12 months ended January 31st, 2018, (Vice
Shenzhen Mokylin Technology Co., Ltd. Chairman and General Manager of the Company and a director of this
company)
A related person (Deputy General Manager of the Company and a director
Beijing Colorful Game Technology Co., Ltd.
of this company)
A related person (a director and Deputy General Manager of the
Shenzhen QiFun Network Corp. Ltd.
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
Guangzhou Joyegame Software Co., Ltd.
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
Chengdu 91ACT Technology Company
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
Xiamen Huoyou Information Technology Co., Ltd.
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
Shanghai Zhangmeng Network Technology Co., Ltd.
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
Shanghai Mango Interactive Entertainment Technology Co., Ltd.
Company, and a director of this company)
A related person (a director and Deputy General Manager of the
YHKT Entertainment Co., Ltd.
Company, and a director of this company)
A company under of the controlling shareholders before November 13th,
Wuhu Ningzhong Auto Parts Technology Co., Ltd.
2018
Natural person who holds more than 5% of the shares of a listed company,
Li Weiwei
Vice Chairman and General Manager
Zeng Kaitian Natural person who holds more than 5% of the shares of a listed company
Other notes
Vice Chairman and General Manager of the Company, and a director of Shenzhen Mokylin Technology Co., Ltd. before January 31st,
2017, that is, a related person of this company for the past 12 months ended January 31st, 2018. During the reporting period, the
related party transaction with it disclosed was the amount incurred in January 2018.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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5. Status of associated transaction
(1) Associated transaction regarding trade of goods and labor services
Profile on purchasing products and obtaining labor services
Unit: RMB
Amount incurred in Approved transaction Whether it exceeds the Amount incurred in the previous
Related party Details of transaction between related parties
the current period amount transaction amount period
Shenzhen Yiwan Network Shared revenue from games, copyright money
194,977.48 400,000.00 No 212,164.40
Technology Co., Ltd. purchasing and commissioned R&D fees
Chengdu Pengwan Shared revenue from games and commissioned R&D
6,482,280.85 40,127,600.00 No 26,751,740.93
Technology Co., Ltd. fees
Shanghai Aurora Network Shared revenue from games, copyright money
No 11,932,597.82
Technology Co., Ltd. purchasing
Shanghai Tingting Network Shared revenue from games and commissioned R&D
300,592.09 300,400.00 Yes 7,495,417.36
Technology Co., Ltd. fees
Shenzhen Mokylin Shared revenue from games and commissioned R&D
155,553.92 500,000.00 No 5,490,077.96
Technology Co., Ltd. fees
Shared revenue from games, copyright money
Shanghai Mokun No 1,051,125.60
purchasing
Chengdu Mofei Shared revenue from games, copyright money
36,644,866.42 38,500,000.00 No 157,157.40
Technology Co., Ltd. purchasing
Beijing Colorful Game
Shared revenue from games 674,552.81 5,715,000.00 No 952,493.00
Technology Co., Ltd.
Shenzhen QiFun Network Shared revenue from games, copyright money
45,803.04 10,000,000.00 No 121,757.67
Corp. Ltd. purchasing
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Guangzhou Joyegame Shared revenue from games and commissioned R&D
No 8,279.46
Software Co., Ltd. fees
Chengdu 91ACT
Shared revenue from games 10,000,000.00 No 255,657.80
Technology Company
Longzhang Animation Shared revenue from games, copyright money
6,202,792.26 49,700,000.00 No 514,216.26
(Shanghai) Co., Ltd. purchasing
Xiamen Huoyou
Information Technology Shared revenue from games 432,497.68 500,000.00 No
Co., Ltd.
Shanghai Zhangmeng
Network Technology Co., Shared revenue from games 433,686.77 Yes
Ltd.
Chengdu Modu Shared revenue from games and commissioned R&D
1,794,731.88 6,000,000.00 No
Technology Co., Ltd. fees
Shenzhen Zhanlong
Interactive Entertainment Shared revenue from games 2,707,232.67 2,000,000.00 Yes
Technology Co., Ltd.
Longzhang Network
Technology (Shanghai) Commissioned R&D expense 546,721.82 Yes
Co., Ltd.
Shanghai Mango
Shared revenue from games and fees for new product
Interactive Entertainment 895,684.27 6,342,800.00 No 4,228,519.65
design
Technology Co., Ltd.
Shaoxing Shangyu
Zhangyu Network Shared revenue from games 76,623.87 112,000,000.00 No
Technology Co., Ltd.
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Shanghai Aoting Network
Shared revenue from games No 38,453.71
Technology Co., Ltd.
Profile on selling products/providing labor services
Unit: RMB
Amount incurred in the previous
Related party Details of transaction between related parties Amount incurred in the current period
period
Shanghai Yuhouyi Network Technology Co., Ltd. Software operating income 18,624,476.80 5,545,397.18
Shanghai Mango Interactive Entertainment Technology
Software operating income 20,037.16 840,274.48
Co., Ltd.
Shenzhen Mokylin Technology Co., Ltd. Income from evaluation service, technical service fees 473,057.78
Beijing Colorful Game Technology Co., Ltd. Software operating income 5,557.51 12,466.87
Shanghai Fuhai Sanqi Investment Management Co., Ltd. Service consultation income 1,870,000.00
Note to related party transactions for the purchase and sale of goods, provision and acceptance of labor services
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(2) Affiliated-party guarantee
The company acts as the guarantor
Unit: RMB
Has the guarantee been
The guaranteed Amount of guarantee Starting date of guarantee Ending date of guarantee
fulfilled?
The company acts as the guaranteed
Unit: RMB
Has the guarantee been
Guarantor Amount of guarantee Starting date of guarantee Ending date of guarantee
fulfilled?
Li Weiwei, Zeng Kaitian 210,000,000.00 May 23rd, 2017 May 22nd, 2018 Yes
Li Weiwei, Zeng Kaitian 90,000,000.00 May 24th, 2017 May 22nd, 2018 Yes
Li Weiwei, Zeng Kaitian 69,000,000.00 June 9th, 2017 June 8th, 2018 Yes
Li Weiwei, Zeng Kaitian 80,000,000.00 January 30th, 2018 November 16th, 2018 Yes
Li Weiwei, Zeng Kaitian 200,000,000.00 February 28th, 2018 November 16th, 2018 Yes
Li Weiwei, Zeng Kaitian 210,000,000.00 June 22nd, 2018 June 21st, 2019 No
Li Weiwei, Zeng Kaitian 159,000,000.00 June 25th, 2018 June 21st, 2019 No
Status of associated guarantee
(3) Asset transfer and debt restructuring of affiliated party
Unit: RMB
Details of transaction between Amount incurred in the current Amount incurred in the
Related party
related parties period previous period
Wuhu Ningzhong Auto Parts
Disposal of equity 819,000,000.00
Technology Co., Ltd.
(4) Remuneration for key management personnel
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Remuneration for key management
17,574,216.02 14,575,079.96
personnel
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6. Accounts receivable and payable by related parties
(1) Receivables
Unit: RMB
Ending balance Beginning balance
Project name Related party
Book balance Provision for bad debts Book balance Provision for bad debts
Accounts receivable Shanghai Yuhouyi Network Technology Co., Ltd. 2,091,604.00 104,580.20 5,473,326.88 273,666.34
Shanghai Mango Interactive Entertainment
Accounts receivable 141,403.60 7,070.18
Technology Co., Ltd.
Accounts receivable Beijing Colorful Game Technology Co., Ltd. 370.22 18.51 13,214.88 660.74
Prepayment Chengdu Modu Technology Co., Ltd. 1,000,000.00
Prepayment Chengdu Mofei Technology Co., Ltd. 2,000,000.00 842,842.60
Prepayment Longzhang Animation (Shanghai) Co., Ltd. 14,485,783.74
Longzhang Network Technology (Shanghai) Co.,
Prepayment 2,061,081.07 1,982,010.00
Ltd.
Prepayment Shenzhen QiFun Network Corp. Ltd. 2,264,856.00 1,978,994.10
Prepayment Chengdu 91ACT Technology Company 1,450,617.07
Chengdu Popcorn Interactive Entertainment
Prepayment 1,000,000.00
Technology Co., Ltd.
Shenzhen Zhanlong Interactive Entertainment
Prepayment 650,147.37
Technology Co., Ltd.
Prepayment Jiangsu Yezi Network Technology Co., Ltd. 3,000,000.00
Prepayment Shenzhen Yiwan Network Technology Co., Ltd. 2,193,140.33 1,757,963.61
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Other receivables Wuhu Ningzhong Auto Parts Technology Co., Ltd. 401,310,000.00
(2) Payables
Unit: RMB
Project name Related party Ending book value Opening book balance
Accounts payable Chengdu Mofei Technology Co., Ltd. 11,483,657.92
Accounts payable Chengdu Modu Technology Co., Ltd. 1,794,731.88
Accounts payable Chengdu Popcorn Interactive Entertainment Technology Co., Ltd. 175,699.90
Accounts payable Shanghai Zhangmeng Network Technology Co., Ltd. 1,941,996.00
Accounts payable Chengdu Pengwan Technology Co., Ltd. 311,961.83 11,622,401.24
Accounts payable Guangzhou Joyegame Software Co., Ltd. 3,951.38
Accounts payable Shenzhen Mokylin Technology Co., Ltd. 14,717,281.13
Accounts payable Shaoxing Shangyu Zhangyu Network Technology Co., Ltd. 33,370.33
Accounts payable Shanghai Mango Interactive Entertainment Technology Co., Ltd. 490,418.65 346,198.97
Accounts payable Beijing Colorful Game Technology Co., Ltd. 1,512,769.27 1,138,598.90
Accounts payable Shanghai Aoting Network Technology Co., Ltd. 7,360.48 7,360.48
Accounts payable Shanghai Tingting Network Technology Co., Ltd. 299,979.17 727,664.83
Accounts payable Shenzhen Yiwan Network Technology Co., Ltd. 339,622.58
Other payables Chengdu Modu Technology Co., Ltd. 6,000,000.00
Other payables Chengdu Mofei Technology Co., Ltd. 6,000,000.00
Other payables Huai’an Sanqi 19,032,685.81
Other payables YHKT Entertainment Co., Ltd. 2,000,000.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Other payables Xiamen Huoyou Information Technology Co., Ltd. 5,000,000.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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VIII. Share-based payment
1. Overview of share payment
□Applicable √Not Applicable
IX. Commitment and contingencies
1. Material commitments
The existence of material commitments at the balance sheet date
As of December 31st, 2018, the Company had no major commitments needed to be disclosed for normal production and business
activities.
2. Contingencies
(1) The existence of material contingencies at the balance sheet date
As of December 31st, 2018, the Company had no major contingencies needed to be disclosed for normal production and business
activities.
(2) The fact that the Company has no significant contingencies required to be disclosed should also be
explained
The Company does not have material commitments or contingencies that need to be disclosed.
3. Others
X. Events after the Balance Sheet Date
1. Profit distribution
Unit: RMB
Proposed distributed profits or dividends 423,246,120.00
Profits or dividends that are approved to be issued after deliberation 423,246,120.00
2. Description of events after the balance sheet date
The Company held the 23rd meeting of the 4th Board of Directors on January 3rd, 2019 and the first Extraordinary General
Meeting of 2019 on January 21st, 2019, at which the Plan for Repurchasing Shares of the Company by Centralized Competitive
Bidding was reviewed and approved. The Company held the 24th meeting of the 4th Board of Directors on January 21st, 2019, at
which the Proposal on Amending and Supplementing the “Plan for Repurchasing Shares of the Company by Centralized Competitive
Bidding” was reviewed and approved. The Company intends to use its own funds or self-raised funds to concentrate buy back shares
of the Company by centralized competitive bidding. The repurchase amount is not less than RMB 300 million (included) and not
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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more than RMB 600 million (included), with the repurchase price not exceeding 15.00 yuan / share (included). The specific
repurchase quantity is based on the number of shares actually repurchased at the end of the repurchase period. On April 11th, 2019,
the Company repurchased shares through a stock repurchase special securities account for the first time by centralized competitive
bidding. A total of 8,639,653 shares were repurchased, accounting for 0.41% of the Company’s current total share capital, with
highest price of 13.73 yuan / share and the lowest price of 13.13 yuan / share. The total amount paid was RMB 116,113,041.13
(excluding transaction costs). This repurchase was in line with the requirements of the Company’s repurchase program.
On February 28th, 2019, the Company’s wholly-owned subsidiary Tibet Taifu Culture Media Co., Ltd. (hereinafter referred to
as “Tibet Taifu”) and Beijing Zhaoxi Guangnian Information Technology Co., Ltd. (hereinafter referred to as “Zhaoxi Guangnian
Company”) signed the Equity Transfer Agreement of Shanghai Mokun Digital Technology Co., Ltd., under which it sold 100%
equity of Shanghai Mokun Digital Technology Co., Ltd. held by Tibet Taifu to Zhaoxi Guangnian Company at a price of RMB 110
million. The procedures for the industrial and commercial change have been completed for this transaction.
On March 13th, 2019, the Company received a notice from Wu Xushun, one of the controlling shareholders and actual
controllers of the Company. Wu Xushun subscribed offline the shares of Yinhua MSCI China A-Share Index Exchange-Traded
Open-Ended Securities Investment Fund (hereinafter referred to as “Yinhua MSCI China ETF), and directly purchased Yinhua MSCI
China ETF shares with 21,200,000 shares, to subscribe for the fund share corresponding to the value of 21,200,000 shares. After the
completion of the share swap, Wu Xushun’s shareholding ratio decreased to 5.12%, so the total shareholding ratio of Wu Xushun, the
original largest shareholder, and his persons acting in concert Wu Weihong and Wu Weidong (hereinafter referred to as “Wu Family”)
fell to 18.27%, resulting in a change in the Company’s largest shareholder from Wu Family to Li Weiwei.
On April 8th, 2019, the Company held the 3rd Extraordinary General Meeting of 2019, at which the Proposal on Advancing
the General Election of Non-independent Directors for the Fifth Board of Directors and the Proposal on Advancing the General
Election of Independent Directors for the Fifth Board of Directors were reviewed and approved. The Company officially completed
the general election of the Board of Directors, and the Fifth Board of Directors was formed. Li Weiwei, Yang Jun and Chen Xialin,
who were recommended by Li Weiwei for non-independent directors, were elected. Candidates Ni Ning, Zhu Ning, Yin Bin and
Chen Jianlin for independent directors were elected. Seven members of the Company’s Fifth Board of Directors were recommended
by Li Weiwei. Based on the above facts, the voting rights held by Li Weiwei have had a material influence on the resolution of the
Company’s 3rd Extraordinary General Meeting of 2019, and played a decisive role in electing more than half of the members of the
Company’s Board of Directors through this meeting, effectively controlling the majority of the new board of directors, that is owning
the controlling right of a listed company as specified in provisions of the Listing Rules. After the reelection, Li Weiwei became the
controlling shareholder and actual controller of the Company.
The Company held the 26th Meeting of the 4th Board of Directors on March 18th, 2019, at which the Proposal on Changing the
Name of the Company was reviewed and approved. The Company plans to change its Chinese name from “芜湖顺荣三七互娱网络
科技股份有限公司” to “芜湖三七互娱网络科技集团股份有限公司”. (The final company name is subject to the approval of the
Administration for Industry and Commerce).
XI. Other Important Events
1. Discontinued operation
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
Discontinued operating profit
Item Income Fees Total profit Income taxes Net profit attributable to the owner of
parent company
Shunrong
385,219,167.92 386,251,651.91 443,643.42 -814,778.26 1,258,421.68 1,258,421.68
Auto Parts
Other notes
The expenses are the operating costs, taxes and surcharges and current operating expenses for the January to November of the year.
2. Segment information
(1) Basis for determining reportable divisions and accounting policies
The Company determines the reporting segment based on internal organizational structure, management requirement and internal
reporting system, and determines the reporting segment based on the industry segment. The performance of the auto parts business
and the online game business were assessed separately. Each segment uses assets and liabilities separately.
(2) Financial information of reportable divisions
Unit: RMB
Automotive Parts Online Games Business
Item Offset among segments Total
Business Division Division
Operating income 385,219,167.92 7,247,460,500.55 7,632,679,668.47
Operating cost 285,491,515.41 1,487,131,978.05 1,772,623,493.46
Total assets 8,435,308,789.48 8,435,308,789.48
Total liabilities 2,282,059,377.06 2,282,059,377.06
3. Other significant transactions and events having influence on the investors' decisions
The Proposal on the Company’s Phase II ESOP Plan (Draft) and Its Summary, the Proposal on the Management Rules of the
Company's Phase II ESOP, and the Proposal on Requesting the General Meeting of Shareholders to Authorize the Board of Directors
to Handle Matters Related to the Company's Phase II ESOP were reviewed and approved at the Company’s 16th meeting of the 4th
Board of Directors held on July 2nd, 2018 and the 2nd Extraordinary General Meeting of 2018 held on July 18th, 2018. On September
5th, 2018, the Company’s Phase II ESOP has been transferred to the unlimited tradable shares of the Company held by the
Company’s actual controllers Wu Weihong and Wu Weidong through the block trading method, totaling 26,310,527 shares,
accounting for 1.24% of the Company's total share capital. The total transaction amount is RMB 249,999,996.58 (including
transaction costs), with the average transaction price being 9.50 yuan/share.
As of September 5th, 2018, the Company has completed the purchase of shares in the Phase II Employee Stock Ownership
Plan within 6 months after reviewed and approved at the Company's General meeting of Shareholders. The shares purchased in this
shareholding plan are locked in accordance with the regulations, and the lock-up period will be from September 6th, 2018 to
September 5th, 2019.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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2018 Annual Report
XII. Notes to Main Items of Financial Statements of Parent Company
1. Other receivables
Unit: RMB
Item Ending balance Beginning balance
Dividends receivable 500,000,000.00
Other receivables 891,766,571.39 1,655,547,345.04
Total 1,391,766,571.39 1,655,547,345.04
(1) Dividend receivable
1) Dividends receivable
Unit: RMB
Item (or invested organization) Ending balance Beginning balance
Shanghai Sanqi Interactive Entertainment 500,000,000.00
Total 500,000,000.00
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(2) Other receivables
1) Classification of other receivables
Unit: RMB
Ending balance Beginning balance
Book balance Provision for bad debts Book balance Provision for bad debts
Type
Accrual Book value Book value
Amount Proportion Amount Amount Proportion Amount Accrual proportion
proportion
Other accounts receivable
withdrawn provision for bad
891,798,933.09 100.00% 32,361.70 0.00% 891,766,571.39 1,668,884,090.50 100.00% 13,336,745.46 0.80% 1,655,547,345.04
debts based on credit risk
feature combination
Total 891,798,933.09 100.00% 32,361.70 0.00% 891,766,571.39 1,668,884,090.50 100.00% 13,336,745.46 0.80% 1,655,547,345.04
Other receivables of individual account with significant amount and with bad debt provision accrued at the end of current period:
□Applicable √Not Applicable
Other receivable with provisions of bad debts accrued by aging analysis method in the portfolio:
√Applicable □Not Applicable
Unit: RMB
Ending balance
Aging
Other receivables Provision for bad debts Accrual proportion
Items within 1 year
Subtotal within 1 year 317,234.07 15,861.70 5.00%
1 - 2 year (s) 40,000.00 4,000.00 10.00%
2 - 3 years 30.00%
Over 3 years 25,000.00 12,500.00 50.00%
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2018 Annual Report
3 - 4 years 25,000.00 12,500.00 50.00%
Total 382,234.07 32,361.70
Description of basis for this portfolio determination:
Other receivables of same aging share similar characteristics of credit risk
Other receivables with bad debts provisions accrued by balance percentage method in the portfolio:
□Applicable √Not Applicable
Other receivables with provisions of bad debts accrued by other methods in the portfolio:
√Applicable □Not Applicable
The related accounts (including the controlling shareholder) within the scope of the consolidation have a lower credit risk, and the provision for bad debts of other receivables in the portfolio is
0%. The ending balance of other receivables in this portfolio is RMB 891,416,699.02, and the ending balance of bad debt provision is RMB 0.00.
2) Reserve of the bad debts that are accrued, withdrew and taken back in current period
The provision for bad debt accrued in this current period is RMB 0.00 and the provision for bad debts returned back or taken back in this current period is RMB 13,304,383.76.
Including important provision for bad debt transferred back or recovered in this period:
Unit: RMB
Organization name Amount carried forward or recovered Change the way of return
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3) Classification of other receivables based on the fund nature
Unit: RMB
Fund nature Ending book value Opening book balance
Deposits and guarantees 65,000.00 65,000.00
Amount of affiliated parties 490,106,699.02 1,402,274,181.21
Related parties borrowing 266,543,561.64
Equity disposal receivables 401,310,000.00
Others 317,234.07 1,347.65
Total 891,798,933.09 1,668,884,090.50
4) Other accounts receivable in top five based on year-end balance collected from arrears party
Unit: RMB
Proportion in total Ending balance of
Organization name Fund nature Ending balance Aging ending balance of provision for bad
other receivables debts
Wuhu Ningzhong
Equity disposal
Auto Parts 401,310,000.00 Within 1 year 45.00%
receivables
Technology Co., Ltd.
Amount of affiliated
Anhui Xuhong 300,000,000.00 Within 1 year 33.64%
parties
Shanghai Sanqi
Amount of affiliated
Interactive 170,000,000.00 Within 1 year 19.06%
parties
Entertainment
Amount of affiliated
Tibet Xintai 20,100,000.00 Within 1 year 2.25%
parties
Zhangshu Wangzhong
Investment
Others 166,745.03 Within 1 year 0.02% 8,337.25
Management Center
(Limited Partnership)
Total -- 891,576,745.03 -- 99.97% 8,337.25
2. Long-term equity investment
Unit: RMB
Ending balance Beginning balance
Item Impairment Impairment
Book balance Book value Book balance Book value
provision provision
Investment to
6,374,799,990.80 6,374,799,990.80 5,724,695,055.23 5,724,695,055.23
subsidiaries
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2018 Annual Report
Investment into
associated
27,593,699.69 27,593,699.69 29,729,869.92 29,729,869.92
enterprises and
joint ventures
Total 6,402,393,690.49 6,402,393,690.49 5,754,424,925.15 5,754,424,925.15
(1) Investment to subsidiaries
Unit: RMB
Estimated accrued
Ending balance of
Beginning Increase in Decrease in impairment
Invested company Ending balance depreciation
balance current period current period provision of
reserves
current period
Shanghai Sanqi
Interactive 4,720,000,000.00 4,720,000,000.00
Entertainment
Shunrong Auto
749,895,064.43 749,895,064.43
Parts
Jiangsu Zhiming 254,799,990.80 254,799,990.80
Jiangsu Aurora 1,400,000,000.00 1,400,000,000.00
Total 5,724,695,055.23 1,400,000,000.00 749,895,064.43 6,374,799,990.80
(2) Investment into associates and joint ventures
Unit: RMB
Increase or decrease in this period
Addi Other Profit or
Ending
tiona Profit and loss comprehe cash
Investment Beginning Negative Other Withdrawn Ending balance of
l on investments nsive dividend
company balance investmen equity impairmen Others balance depreciation
inves confirmed with income declared to
t change t provision reserves
tmen equity method adjustme be
ts nt distributed
I. Joint ventures
II. Associates
Shanghai Jueli
Culture Media 29,729,869.92 -2,136,170.23 27,593,699.69
Co., Ltd.
Subtotal 29,729,869.92 -2,136,170.23 27,593,699.69
Total 29,729,869.92 -2,136,170.23 27,593,699.69
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3. Operating incomes and operating costs
Unit: RMB
Amount incurred in the current period Amount incurred in the previous period
Item
Income Cost Income Cost
Main business 751,646.53 31,646.53
Total 751,646.53 31,646.53
Other notes:
None
4. Investment income
Unit: RMB
Item Amount incurred in the current period Amount incurred in the previous period
Long-term equity investment income
700,000,000.00
measured by cost method
Long-term equity investment income
-2,136,170.23 -1,555,025.80
measured by equity method
Investment profits by the disposal of
69,104,935.57 -295,279,968.69
long-term equity investment
Investment profit by marketable financial
1,582,261.90
assets during the holding period
Investment profit by the disposal of
1,000,000.00
marketable financial assets
Total 766,968,765.34 -294,252,732.59
XIII. Supplementary data
1. Incidental profit or loss statement in current period
√Applicable □Not Applicable
Unit: RMB
Item Amount Description
Mainly profit and loss from the
Losses and profits on disposal of non-current assets 56,085,328.82 disposal of long-term equity
investment and fixed assets.
Government subsidy included in current profit or loss (except those closely Mainly government subsidy other
related to enterprise operation and received based on consolidated national 38,851,289.40 than the refund of value-added
standard quota or quantitative) tax.
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2018 Annual Report
Funds occupation fees collected from non-financial enterprises and included Mainly interest income from
17,307,831.49
in current profit or loss borrowings.
Mainly the income from bank’s
Profit or loss of asset whose investment or management is entrusted to others 16,941,398.12
financial products.
Except effective hedging business relating to normal operating business of
the company, profit or loss caused by change in the fair value of Mainly the investment income
held-for-trading financial asset and financial liabilities, and investment profit -9,740,417.35 from disposal of available-for-sale
for disposal of trading financial asset, trading financial liabilities and financial assets.
available-for-sales financial assets.
Other non-operating revenue and expenditure except the foregoing items 2,945,610.96
Mainly including performance
compensation income (the
Company’s impairment loss
accrued against the goodwill of
Other items consistent with definition of non-recurring profit and loss 446,156,583.73 Shanghai Mokun Company is
RMB 959,833,685.66 and
included in recurring profit and
loss) and performance
compensation expenses.
Less: Affected amount of income taxes 33,857,857.74
Affected amount of minority interest income 1,095,547.63
Total 533,594,219.80 --
As to non-recurring profits and losses determined based on the definition provided in the Explanatory Announcement No. 1 on
Information Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, and the recurring
profits and losses determined from non-recurring profits and losses listed in the Explanatory Announcement No. 1 on Information
Disclosure for Companies Offering Their Securities to the Public - Non-Recurring Profit and Loss, reasoning shall be provided
□Applicable √Not Applicable
2. Return on equity and earnings per share
Earnings per share
Weighted average rate
Profits during reporting period Basic earning per share Diluted earning per share
of return on equity
(yuan/share) (yuan/share)
Net profits attributable to the company common
16.59% 0.47 0.47
shareholders
Net profits attributable to the company common
shareholders after deducting non-recurring profits and 7.81% 0.22 0.22
losses
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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3. Data differences due to different accounting standards in China and the rest of the world
(1) Differences regarding net profits and net assets between financial statements disclosed by international
standards and Chinese standards
□Applicable √Not Applicable
(2) Differences regarding to net profits and net assets between financial statements disclosed by overseas
standards and Chinese standards
□Applicable √Not Applicable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
182