Wuhu 37 Interactive Entertainment Network
Technology Group Co., Ltd.
2021 Interim Report
August 2021
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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Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,
supervisors and senior management of Wuhu 37 Interactive Entertainment Network Technology
Group Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the truthfulness,
accuracy and completeness of the contents of this Report, and shall be jointly and severally
liable for any misrepresentations, misleading statements or material omissions therein.
Li Weiwei, the Company’s legal representative, and Ye Wei, the Company’s Chief Financial
Officer, hereby guarantee that the financial statements carried in this Report are truthful,
accurate and complete.
All the Company’s directors have attended the Board meeting for the review of this Report.
There is uncertainty with respect to the plans and other forward-looking statements in this
Report, which shall not be deemed as promises to investors. Investors and other stakeholders
shall be fully aware of the risk and understand the difference between plans, forecasts and
promises.
Possible risks facing the Company and countermeasures have been detailed in “VII Risks
Facing the Company and Countermeasures” under “Part III Management Discussion and
Analysis” herein, which investors are kindly reminded to pay attention to.
The Board has approved an interim dividend plan as follows: based on 2,217,864,281 shares,
a cash dividend of RMB 1.5 (tax inclusive) per 10 shares is planned to be distributed to all the
shareholders of the Company, with no bonus issue from either profit or capital 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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Table of Contents
Part I Important Notes, Table of Contents and Definitions ................................................................................................. 2
Part II Corporate Information and Key Financial Information ............................................................................................. 6
Part III Management Discussion and Analysis .................................................................................................................... 9
Part IV Corporate Governance .......................................................................................................................................... 31
Part V Share Changes and Shareholder Information ........................................................................................................ 35
Part VI Financial Statements ............................................................................................................................................. 42
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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Documents Available for Reference
I The financial statements signed and stamped by the Company’s legal representative, and Chief Financial Officer ; and
II The originals of the announcements and documents disclosed to the public by the Company on the newspaper designated by the
CSRC for information disclosure during the Reporting Period.
The documents above are available at the Board Secretary’s Office of the Company.
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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Definitions
Term Definition
CSRC China Securities Regulatory Commission
SZSE/the Stock Exchange Shenzhen Stock Exchange
Company/ the Company/ the Listed Wuhu Shunrong Auto Parts Co., Ltd./Wuhu Shunrong Sanqi Interactive Entertainment Network
Company/ 37 Interactive Entertainment Technology Co., Ltd./ Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd.
37 Interactive Entertainment (Shanghai) 37 Interactive Entertainment (Shanghai) Technology Co., Ltd.
Company Law Company Law of the People's Republic of China
Securities Law Securities Law of the People's Republic of China
Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd./Articles of Association of Wuhu
Articles of Association Shunrong Sanqi Interactive Entertainment Network Technology Co., Ltd./Articles of Association of
Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd.
RMB, RMB’0,000 Expressed in the Chinese currency of Renminbi, expressed in tens of thousands of Renminbi
Reporting Period/the Reporting Period The period from 1 January 2021 to 30 June 2021
Period-end/end of the Reporting Period 30 June 2021
Clientless or browser kernel-based micro-client games that are based on web development
Browser games technologies and utilize standard protocols as basic 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 or other mobile
Mobile games
terminals
RPG Role playing game
ARPG Action role playing game
SLG Strategy game
STG Shooting game
SRPG Strategy role-playing game
MMO Massive Multiplayer Online
MMORPG Massive Multiplayer Online Role-Playing Game
MOBA Multiplayer Online Battle Arena
SIM Simulation game
Chengdu Pengwan Technology Co., Ltd. Chengdu Pengwan Technology Co., Ltd. and its subsidiaries
Zengame Technology Zengame Technology Holding Limited and its business entities
YOULIFE HOLDINGS YOULIFE HOLDINGS and its business entities
X.D.Network XD Inc. and its business entities
Jiangsu Aurora/Aurora Network/Jiangsu
Jiangsu Aurora Network Technology Co., Ltd.
Aurora Network
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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Guangzhou 37 Guangzhou 37 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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Part II Corporate Information and Key Financial Information
I Corporate Information
Stock name 37 Interactive Entertainment Stock code 002555
Place of listing Shenzhen Stock Exchange
Company name in Chinese 芜湖三七互娱网络科技集团股份有限公司
Abbr. (if any) 三七互娱
Company name in English (if
WUHU 37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD.
any)
Legal representative Li Weiwei
II Contact Information
Board Secretary Securities Affairs Representative
Name Ye Wei Wang Sijie
11/F, Creative Advertising Complex, Wuhu 11/F, Creative Advertising Complex, Wuhu
Office address Advertising Industrial Park, Middle Beijing Road, Advertising Industrial Park, Middle Beijing Road,
Jiujiang District, Wuhu City, Anhui Province Jiujiang District, Wuhu City, Anhui Province
Tel. 0553-7653737 0553-7653737
Fax 0553-7653737 0553-7653737
Email address ir@37.com ir@37.com
III Other Information
1. Contact Information of the Company
Indicate by tick mark whether any change occurred to the registered address, office address and their zip codes, website address
and email address of the Company in the Reporting Period.
□ Applicable √ Not applicable
No change occurred to the said information in the Reporting Period, which can be found in the 2020 Annual Report.
2. Media for Information Disclosure and Place where this Report is Lodged
Indicate by tick mark whether any change occurred to the information disclosure media and the place for lodging the Company’s
periodic reports in the Reporting Period.
□ Applicable √ Not applicable
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing the
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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Company’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said information can
be found in the 2020 Annual Report.
3. Other Information
Indicate by tick mark whether any change occurred to other information in the Reporting Period.
√ Applicable □ Not applicable
The Proposal on Increase in Registered Capital and Amendments to the Articles of Association was approved at the 17th Meeting of
the Fifth Board of Directors on 10 March 2021 and later at the First Extraordinary General Meeting of Shareholders of 2021 on 29
March 2021. As approved by the CSRC Reply on Approval of the Private Placement of Wuhu 37 Interactive Entertainment Network
Technology Group Co., Ltd. (CSRC Permit [2021] No. 16), the Company carried out a private placement of 105,612,584
RMB-denominated common shares with 14 subjects. Therefore, the Company’s registered capital has increased from
RMB2,112,251,697 to RMB2,217,864,281, and the relevant amendments have been made to the Company’s Articles of Association.
For the relevant announcement, please visit http://www.cninfo.com.cn.
IV Key Financial Information
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √ No
H1 2021 H1 2020 Change (%)
Operating revenue (RMB) 7,538,949,378.53 7,988,675,195.57 -5.63%
Net profit attributable to the Listed Company’s
853,717,855.65 1,699,736,123.46 -49.77%
shareholders (RMB)
Net profit attributable to the Listed Company’s
shareholders after deducting non-recurring 637,526,551.32 1,464,942,321.24 -56.48%
profits and losses (RMB)
Net cash flows from operating activities (RMB) 1,253,919,152.46 2,450,226,546.90 -48.82%
Basic earnings per share (RMB/share) 0.39 0.80 -51.25%
Diluted earnings per share (RMB/share) 0.39 0.80 -51.25%
Weighted average return on equity (%) 10.15% 22.05% -11.90%
30 June 2021 31 December 2020 Change (%)
Total assets (RMB) 13,976,131,131.48 10,564,331,499.85 32.30%
Equity attributable to the Listed Company’s
9,377,434,662.37 6,037,383,625.95 55.32%
shareholders (RMB)
V Accounting Data Differences under China’s Accounting Standards for Business Enterprises (CAS)
and International Financial Reporting Standards (IFRS) and Foreign Accounting Standards
1. Net Profit and Equity under CAS and IFRS
□ 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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No difference for the Reporting Period.
2. Net Profit and Equity under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No difference for the Reporting Period.
VI Non-recurring profits and losses
√ Applicable □ Not applicable
Unit: RMB
Items Amount Note
Gain or loss on disposal of non-current assets (inclusive of
180,785.65
impairment allowance write-offs)
Mainly due to refund of value-added
Government grants through profit or loss (exclusive of
tax and government grants other
government grants given in the Company’s ordinary course of
34,729,545.45 than super-deduction in the
business at fixed quotas or amounts as per the government’s
calculation of taxable amount for
uniform standards)
VAT
Mainly due to gains and dividends
Gain or loss on fair-value changes on trading and derivative
received in the period of holding
financial assets and liabilities & income from disposal of
equity investments, gains on disposal
trading and derivative financial assets and liabilities and other 185,547,167.31
of equity investments, and gains on
debt investments (exclusive of the effective portion of hedges
investments in wealth management
that arise in the Company’s ordinary course of business)
products
Non-operating income and expenses other than the above 1,563,764.86
Less: Income tax effects 5,807,136.13
Non-controlling interests effects (net of tax) 22,822.81
Total 216,191,304.33 --
Explanation of why the Company reclassifies as recurrent a non-recurring profits and losses item defined or listed in the Explanatory
Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring profits and
losses Items:
□ Applicable √ Not applicable
No such cases for the Reporting 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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Part III Management Discussion and Analysis
I Principal Activity of the Company in the Reporting Period
As one of the top 20 global public game companies, key cultural export companies of China, and civilized institutions in
Guangdong Province, 37 Interactive Entertainment is an outstanding listed Chinese A-share company engaged in comprehensive
cultural and entertainment offerings. The Company focuses on cultural and creative businesses based on the development,
publishing, and operation of mobile and browser games, as well as the development in segments such as film and television, music,
talent agent, anime, VR/AR, cultural health, social entertainment, and new consumption. It has been steadily advancing its
development strategy of “boutiqueization, diversification and globalization”. With “bringing joy to the world” as its mission, the
Company is dedicated to becoming an excellent and sustainable entertainment enterprise.
The Company operated in a steady and healthy manner in the Reporting Period. It continued to pursue its strategic objectives,
adhered to the strategy of “integration of R&D and operation”, as well as kept driving product diversification and global marketing.
During the Reporting Period, the Company recorded operating revenue of RMB 7.539 billion, with a year-over-year (YoY) decrease
of 5.63%; a profit before income tax expenses of RMB 1.006 billion, down by 49.51% YoY; and a net profit attributable to the Listed
Company’s shareholders of RMB 0.854 billion, declining by 49.77% YoY. As some major new products were just launched and
marketed in the Reporting Period, resulting in a higher ratio of selling expenses. So far, the expenditures on selling in Q1 have
started to generate returns. As a result, Q2 saw a net profit attributable to the Listed Company’s shareholders of RMB 0.737
billion,a growth of over 500% compared to that of Q1. The previous expenditures are expected to bring in profit as the operations
of these games grow mature over time.
(I) Development status of the industry where the Company operates in the Reporting Period
1. Changes in industry-related economic situation and their impacts on the Company
Under the support and guidance of national industrial policies, China's game market now presents healthy, prosperous, and
diversified development trends. Domestic game companies have paid more attention to social benefits, protection of minors, and
quality games, as well as cultural connotation and technology empowerment, and have been constantly creating quality contents
and promoting industry innovation and integration.
According to the 2020 China's Game Industry Report and China's Game Industry Report from January to June 2021 jointly
released by Game Publishing Committee of China Audio-video and Digital Publishing Association (CADPA) and China Game Industry
Research Institute, there are more than 660 million game users in China in 2020; the actual sales revenue of China's game market is
RMB278.687 billion, with a YoY increase of 20.71%, and the growth rate was 13.05% higher YoY. The scale of "Games Export" has
been further expanded. The actual sales revenue of independently-developed games in the overseas market was USD15.450 billion
with a YoY growth rate of 33.25%, which is 12.3% higher YoY. The internationalization level was further improved. From January to
June 2021, the actual sales revenue of China's game market is RMB150.493 billion, with a YoY increase of 7.89%, continuing to
maintain a steady growth rate. There are 667 million game users, with a YoY increase of 1.38%, indicating a slowdown in the
growth of game users. As a result of demographic shifts, competition in the game market will be more intense in the future, posing
higher requirements for enterprises and products. From January to June 2021, the actual sales revenue of China's
independently-developed online games in the domestic market was RMB130.112 billion, with a YoY increase of 8.3%, continuing to
occupy over 80% shares in the domestic market. Meanwhile, the Company has been actively expanding and developing the
overseas market. In the first half of the year, the actual sales revenue of independently-developed games in the overseas market
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was USD8.468 billion, with a YoY increase of 11.58%, indicating continuous increases in the overseas revenue from
independently-developed game products.
With the increasing improvements in the game production ecology, the average quality of products independently developed by
Chinese game companies constantly rose and became increasingly competitive in domestic and overseas markets. The industry
ushered in a new period of development. With the gradual disappearance of demographic dividend, the industry threshold has
been raised and game players have grown more mature. The mobile games have gradually transitioned from enjoying demographic
dividend period to enjoying content dividend, which led to the result that players were posing higher requirements for online
games. Game companies need to improve the quality of games to expand user base and willingness to pay, and ultimately achieve
an increase in the return on product investment.
The threshold of game development and barriers to competition have been substantially raised under this situation. Top game
companies embracing strengths in the R&D and publishing of quality products and operation are more likely to benefit from the
new situation. The Company has stepped into a high-quality development stage. It takes the main business as its core and deepens
the strategy of "integration of R&D and operation" and "dual engines at home and abroad". During the Reporting Period, the
Company kept its leading role in R&D capabilities by raising R&D investments and strengthening the output of quality games.
Moreover, it advanced the "diversification" strategy from the aspects of R&D and publishing, and reserved varied quality games on
different themes through independent development, investment in R&D-oriented companies, and enhanced cooperation with
developers capable of producing quality games. In addition, the Company, through independently developed AI systems,
consolidated refined operation, prolonged the life cycle of quality games, and improved operation efficiency.
2. Changes in industrial policy environment and their impacts on the Company
(1) On 6 June 2021, the Guidelines on Enhancing the Protection of Minors of the Steering Group of the Protection of Minors of
the State Council (hereinafter referred to as the “Guidelines”) were officially issued. Revolving around the implementation of the
Civil Code and the Law on the Protection of Minors, the Guidelines refined and specified the relevant articles of law, raising a total
of 25 tasks. Specifically, in terms of cyber protection, the Guidelines raised requirements such as improving the system of
regulations and policies, making more efforts to prevent minors from Internet addiction, and strengthening the online protection of
minors' personal information. During the Reporting Period, in accordance with the relevant requirements, the Company completed
the connection to the national real-name authentication system and strictly implemented the anti-addiction regulations for minors.
Meanwhile, the Company actively proceeded with the online game age suitability reminders and now has completed the release of
such reminders on the official channels of all its games. The Company also created an online game anti-addiction system for minors
across the whole process of R&D, publication, and operation of games, strictly restricting the time periods, duration, and
consumption for games by minors.
Additionally, the Company added contents applicable to children to its Privacy Policy in line with the user habits of juveniles
under 14 years old and their guardians. It contributed to turning China's gaming industry more standardized by actively
participating in the compilation of group standards for the gaming industry led by the China Audio-video and Digital Publishing
Association ("CADPA"), such as the Specifications on Age Ratings of Online Games, the Specifications on Parent Monitoring
Platforms, and Online Game Terminology.
(2) On 7 June 2021, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, and the
National Development and Reform Commission jointly released the Work Arrangements for Deepening the Extensive Deployment
and Application of IPv6 (hereinafter referred to as "the Work Arrangements"), which clarify the main goals and key tasks for the
extensive deployment of IPv6 in 2021, and make careful and accurate arrangements mainly from the aspects of enhancing network
carrying capacity, optimizing the service performance of apps, improving terminal support capacity, strengthening the R&D of key
technologies, promoting the formulation of standard specifications, and reinforcing security assurance, and aim to promote the
extensive deployment and application of IPv6 in a down-to-earth manner by taking multiple measures.
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As one of the first batch of Internet enterprises responding to the Action Plan for Advancing the Extensive Deployment of
Internet Protocol Version 6 (IPv6), the Company has completed the phased goals for upgrading and transformation of TOP100
domestic Internet apps to IPV6 with its products rated as excellent products in the overall assessment. Next, the Company will add
more products to the IPV6 upgrading plan to promote the integrated innovation of the Next Generation Internet and businesses.
(3) On 10 June 2021, the Data Security Law of the People's Republic of China (hereinafter referred to as the Data Security Law)
was adopted at the 29th session of the Standing Committee of the 13th National People's Congress of the People's Republic of
China. The Data Security Law is enacted for the purposes of regulating data processing activities, safeguarding data security,
promoting data development and utilization, and protecting the legal rights and interests of individuals and organizations. Different
from the Cybersecurity Law of the People's Republic of China that has come into force, the Data Security Law places more emphasis
on the security of data itself.
The Company gives priority to information security and takes the protection of the personal information and privacy of users
as the top priority in the information security management. To this end, the Company has made commitments to increasing
resource input and implementing the security responsibility policy in terms of data security and protection of privacy of users, and
has established information security policies and goals based on privacy protection; has formulated the principles of minimum
adequate use, individual consent, and consistent rights and liabilities in terms of collecting and managing users' privacy information,
so as to strictly protect the security of users' personal information and control information security risks. In terms of data
transmission, HTTPS encryption is adopted in the transmission of users' privacy information data to ensure security in the
transmission process; in terms of data storage, encrypted storage is adopted for user' privacy information data; in terms of data
access, the data storage server is isolated from external networks and cannot be accessed by any external network, and strict
authority control has been implemented for the access to all corresponding databases to realize multi-protection.
During the Reporting Period, 37 Interactive Entertainment increased the efforts in the research and development of
high-quality games, and protected intellectual property with great efforts at the same time. The Company used multiple methods
to protect its own legitimate rights and interests, and improved copyright awareness and copyright management to ensure its
compliance operation.
(II) Overview of the Company’s main businesses in the Reporting Period
1. Main businesses and business models of the Company
During the Reporting Period, the Company's main businesses included the development, publishing, and operation of online
games. The operating modes of the Company’s online games mainly include independent operation and third-party joint operation.
Under the independent operation mode, the Company obtains the licenses of games through independent R&D or being an
operator of other games, 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 games; providing unified management services for online
promotion, online customer service and top-up payment; and updating games 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 or game application
platforms to jointly operate games. And the aforesaid parties are responsible for the management of their own channels, including
operation, promotion, the recharge and charge system, while the Company provides technical support services along with game
developers.
2. Overview of the Company’s main businesses and products
During the reporting period, the domestic game industry entered a content dividend period.Game players' requirements for
the quality of online games have increased significantly, the effect of the boutique strategy has been obvious, and the development
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of high-quality games has been certified.The Company precisely grasped the industry development trends, made continuous
improvements in operation, and remained a top performer in the industry, while adhering to the "boutiqueization, diversification
and globalization" strategy.
During the Reporting Period, the Company recorded operating revenue of RMB 7.539 billion, with a YoY decrease of 5.63%; a
profit before income tax expenses of RMB 1.006 billion, down by 49.51% YoY; and a net profit attributable to the Listed Company’s
shareholders of RMB 0.854 billion, declining by 49.77% YoY. As some major new products were just launched and marketed in the
Reporting Period, resulting in a higher growth in selling expenses than that in operating revenue and thus causing a temporary
impact on the ratio of selling expenses in the period. Meanwhile, with the continual rollout of the Company’s “globalization”
strategy, the overseas business in the Reporting Period soared to a new high and the operating revenue from the overseas game
business increased by 111.03% YoY.
(I) Mobile game business
During the Reporting Period, the Company recorded operating revenue of RMB 7.067 billion from mobile games, a YoY
decrease of 4.65%. The mobile game offering has become more diversified, game quality sees considerable improvement, and the
mobile game business maintains the leading position in domestic and overseas markets.
① Research and development of mobile games
During the Reporting Period, the Company continuously exerted more efforts for R&D, and R&D investments grew YoY. The
Company’s R&D investments amounted to RMB 0.674 billion during the Reporting Period, up by 4.46% YoY. The total R&D
investments have reached RMB3.14 billion since 2018.
The R&D investments were mainly concentrated on improvement of product quality and exploration of product categories. In
2021, high-quality games independently developed by the Company like Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决),
Rong Yao Da Tian Shi (荣耀大天使), and Yun Duan Wen Xian (云端问仙) were released and have won public praise and market
recognition.
The "boutiqueization" strategy runs through the entire life cycle of the Company's independently developed products. The
Company is committed to making better the product engines, art design and sound quality of gaming products to meet the user
demand in experiencing high-quality games at the technical level; it is dedicated to gameplay innovation and interface interaction
to meet user demand in fun and smooth experience at the planning level. High-quality development and high-frequency iterations
turned new products more attractive to users, and allowed most independently developed products to maintain high gross billing
for a long time.
In July 2021, the mobile blockbuster battle strategy game Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决), which was
independently developed by 37 Interactive Entertainment, was officially released. As a blockbuster product with the highest quality,
best animation and art effects, and the perfect representation of the original plots among all Dou Luo IP-related products in the
current market, the game deeply implements the Company's product strategy of "boutiqueization", represents the Company's
in-depth understanding of the demands of users, perfectly represents famous animation scenes through technologies such as
panoramic 3D special effects, real-time seamless day-night switch, and dynamic volume-based ray tracing, and creates the Dou Luo
Da Lu that meets the fantasies of each fan of Dou Luo Da Lu with its multi-aspect gameplay design and construction of a friendly
social system.
Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决) is the in-depth continuation of the Company's idea of "boutiqueization"
and represents a practice of the current cutting-edge R&D technologies. The significance of the game for the Company is that it has
unified the Company's R&D process and underlying logic in the field of next-gen games, developed a set of systems that can be
inherited and constantly iterated, effectively improved the efficiency of game R&D and the ceiling for idea creation, and laid a solid
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foundation for the Company's boutiqueization strategy.
The Company improved the "diversification" of product R&D. R&D projects included game genres such as MMORPG, SLG,
SRPG and SIM. Extensive numbers and categories of products were prepared for the year 2021. The Company will continue
innovation in diversified aspects, including product types, themes, art performance, and gameplay. It will pay close attention to the
in-depth exploration of MMORPG, SLG, SRPG, SIM and endeavor to become a first-class game company that can provide global
players with various gaming products, based on quality content, operation experience in multiple types of products, and
advantages in numerical value and gameplay.
Meanwhile, the Company turned the product supply side more diversified, by buying a stake in and joining hands with
excellent developers. In order to further raise the product success rate, the Company established a rigorous evaluation process,
utilized its own advantages in numerical experiences to work out products along with game developers, thus ensuring a better
quality of games before their publishing.
During the Reporting Period, the R&D department developed the Zeus platform, a middle platform with AI big data computing
power. Supported by one-stop service module, the Zeus platform can do deep learning calculations flexibly and freely and realize
automated operation and maintenance. It can realize the automation and standardization across the whole process of R&D,
deployment and operation, and clear a path for interconnectivity between systems of different departments, thus greatly
automating systems and the original business process. The emergence of the platform marks the transfer of equipment resources
from reserved mode to on-demand dynamic expansion mode. It sharply cuts costs and increases margins, utilizes idle equipment
and provides a flexible computing power environment for data analysts.
② Publishing of mobile games
1) Domestic market
The Company's advantages in refined operations in the domestic mobile games publishing were highlighted during the
Reporting Period. The highest monthly gross billing of its domestic mobile games exceeded RMB1.4 billion, with the total number
of newly registered users surpassing 160 million and the highest number of MAUs of over 46 million.
During the Reporting Period, the Company adhered to the refined operation idea of "products + traffic + users", constantly
expanded its product matrix and offered diversified gaming experience to players by successively releasing games in different types
and on varied themes, including Rong Yao Da Tian Shi (荣耀大天使), Dou Luo Da Lu: Wu Hun Jue Xing (斗罗大陆：武魂觉醒) and
Jue Shi Xian Wang (绝世仙王), as well as Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决) launched in July, and achieved
remarkable results. The Company was ranked among the top in terms of market share in China's mobile game publishing market.
As a quality game released by the Company, Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决) is released through
"content-based publishing", in which the Company aims to construct a publishing system focusing on underlying gameplays, game
content, user experience, and creation of community cultures with the game as the foundation. Highly loyal to the original novel
and animation, the Company has consolidated the foundation of content-based publishing with excellent game quality, constantly
expanded user boundaries and target audience through some innovative publicity and publishing methods such as customizing
video programs according to product features and through private domain traffic operation, to constantly attract potential game
players.
The Company has been constantly making its brands younger and more personalized through interesting and emotional
marketing ideas and cross-sector collaboration between game IPs. In 2020, the adventure in another world theme MMORPG Yun
Shang Cheng Zhi Ge (云上城之歌) published by the Company was released. Specializing in adventure gameplays in an open world
with elegant 3D cartoon painting style, the game enjoyed wide popularity among younger users once it was released and became
one of the most successful MMO games in 2020. In June 2021, to celebrate its anniversary, the theme song Yun Shang Zhi Lu (云上
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之旅)of the game that was produced by the Company in cooperation with Qigu Culture and sung by Shan Bao (a popular virtual idol)
was officially released in the TME music league. As the anniversary activities inside and outside the game started successively, Yun
Shang Cheng Zhi Ge (云上城之歌) gained more than 10 million people exposure within a short period and drove the market of
younger users once again.
With respect to the successful release of Yun Shang Cheng Zhi Ge (云上城之歌), on the one hand, it broke through the
Company's previous ARPG-based product distribution ideas, the Company's distribution and operation capabilities in different
categories such as MMORPG have been greatly strengthened; on the other hand, Yun Shang Cheng Zhi Ge (云上城之歌) is a
pan-two-dimensional product with younger public. This distribution is also a successful exploration of the Company in younger
communities, laying a solid foundation for the following company’s distribution and operation of diversified products.
The Company applied the "diversification" strategy to multiple aspects, including products, promotion, and services, based on
its capabilities of operating multiple types of games. Thanks to the strategy, the Company reserved adequate products in terms of
type, theme, and quantity. Its product matrix covered different types of games, such as MMORPGs, card games, SLGs, and SIM
games, as well as varied themes, such as fantasy, mythology/martial arts, city life, campus and women-orientation.
During the Reporting Period, the Company insisted on operating with systematic flow management and adopted a diversified
approach of “multi-channel marketing + targeted advertising + long-term service” to accurately grasp user needs, accurately deliver
creative marketing plans to target groups and provide players with meticulous and comprehensive long-term service, with a
purpose of improving player satisfaction, activity and retention rate to prolong the product life cycle and accumulate higher gross
billing.
In terms of multi-channel marketing, the Company had formed a unique marketing approach featuring "branding + sales
effects". On the one hand, by selecting spokespersons that are consistent with the product’s connotation, the Company produced
high-quality micro-film-style promotional materials for promotion. With more advanced technology, more advanced visual
performance, more realistic force, more diverse production methods, and richer story content, it can quickly "break the circle" and
reach a wider user group; on the other hand, combinations were made with the short video platform to provide rich material
output and to meet the different cultural consumption needs of users in different angles, to further expand the scope of users, and
then to enlarge brand value and influence. For example, Rong Yao Da Tian Shi (荣耀大天使), a massive multiplayer online fantasy
3D role-playing mobile game, relying on massive customized marketing activities, integrated itself with traffic resources, reached
synergy between a quality game and extensive publicity and publication, realized the 2.0 upgrade of "branding + sales effects", and
gained its own "differentiated" advantage in the fantasy-based market based on its excellent art effects and gameplay design.
During the Reporting Period, the Company put its independently developed intelligent ad platform, "Quantum" and intelligent
operation analysis platform, "Destiny", into production. On the one hand, "Quantum" can connect with all mainstream channels to
achieve rapid and automatic advertising. Meanwhile, the platform can be used together with multiple systems and connect
procedures in series to greatly reduce the time to create plans, perform standardized processing of plans in batches, and maintain
plans automatically and systematically. Moreover, the platform can improve promotion efficiency and effect through big data
analysis and AI algorithms. On the other hand, "Destiny" is a comprehensive operational decision system for statistics, analysis and
prediction of game data. The system can accurately predict the life cycle of games through data analysis models,so as to improve
user stickiness and stabilize product life cycle.
2) Overseas market
During the Reporting Period, the Company significantly accelerated the strategic expansion of global footprint. Its overseas
operating revenue rose by 111.03% YoY. As of the end of the Reporting Period, its overseas brand, 37GAMES, covered many
countries and regions, whose products included SLGs, MMORPG, SIM and card games. During the Reporting Period, the highest
monthly gross billing of its overseas mobile games exceeded RMB500 million, with the total number of newly registered users
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
15
surpassing 30 million and the highest number of MAUs of over 8.5 million.
Benefiting from the adjustment of overseas operations, the Company's overseas business grew rapidly during the Reporting
Period. After years of accumulation of experience in publishing games overseas, the Company adjusted its overseas strategy from
the original "partition breakthrough" to publishing based on the organization structure of the tracks and categories. Under the
guidance of the new strategy, publishing personnel have a deeper understanding of the products and can be more effective. More
means of localized operations can be used by them.
In terms of "globalization", on the one hand, the Company continued to develop its global layout through the deployment of
SLG games in various themes such as western and military. After years of accumulation, the Company has effectively entered the
European and American markets with SLG products, and its impact has been improved globally. SLG games are products with long
life cycles in the game field. After the initial growth, there will be a long-term payback period in the following period, thus ensuring
the stable growth of the gross billing of the Company's overseas business in the future. On the other hand, in Southeast Asia, Japan
and South Korea, the Company still stayed ahead.
The market's first "Match 3 + SLG" product Puzzles & Survival published by the Company is attractive and its gameplay is
innovative. It perfectly integrated the most popular match-3 gameplay in the European and American markets with the traditional
heavy SLG gameplay, integrated selling points with ideas based on the product itself, constantly made innovations, offered a
unique audio-visual experience to users, and filled the gaps in the European and American markets. In 2021, it has secured its
position in the top 30 grossing charts among American games, showing outstanding performance and faster growth than similar
mobile games.
Besides the outstanding experience in the American market, Puzzles & Survival achieved remarkable results in global markets.
As a classic case of SLG games that successfully gain new user groups, the product not only attracted core SLG players, but also
charmed match-3 players with a large base in Europe and America, and player retention had also risen sharply. After it was officially
released in the Japanese Market, Puzzles & Survival quickly topped free download charts in both iOS and Google Play platforms,
made good results in the two platforms with rising ranks, and entered the head position of the top 20 grossing chart in Japan. After
it was released in Germany in 2021, Puzzles & Survival has quickly secured its position in the top 50 grossing chart and has
maintained a trend of steady growth. As at June 2021, the highest monthly gross billing of Puzzles & Survival exceeded RMB0.2
billion and the cumulative gross billing had exceeded RMB1 billion, and the game was listed top 10 in the iOS top grossing charts of
52 regions.
In addition, as an important carrier for Chinese cultural exchange, games should undertake the mission of cultural inheritance
with imaginative and creative ways of artistic presentation. In 2021, the Company was once again listed in the 2021-2022 national
key export enterprises of culture, as the Company, by promoting the deep integration of quality games and traditional Chinese
culture, had constantly advanced foreign players to take interest in the Chinese Culture in their experience and exploration of
games. For example, Call Me the Big Shopkeeper (叫我大掌柜), a mobile game simulating business operation in ancient China
published overseas by the Company, integrated historical and cultural elements in innovative ways, presented the authentic
simulation of business operation in ancient towns, constructed main scenarios starting with the style of "Chinese ink painting",
deeply impressed overseas players with various commercial buildings, crowded streets, carriages shuttling through streets, shouts
of street vendors, and charmingly naive figures, as well as featured operation styles of clinics, Chinese food, and taverns, and thus
won a large number of praises. In 2021, the game achieved good responses after it was published in countries such as South Korea,
Japan, and Vietnam, and has been ranking among the top in grossing charts in various regions.
During the Reporting Period, the Company had been constantly taking up top 10 places in the overseas revenue rank of
Chinese manufacturers released every month by App Annie, a world-leading mobile data and analysis company, and entered the
top 5 after rising steadily for months. Meanwhile, based on its extraordinary performance in the global game market, the Company
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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was included in the lists of the "Top 52 Overall Publishers of 2021" of App Annie. The Company pursues the publishing model of
publishing diversified, tailored games in big markets around the world, and continues offering more quality Chinese games to global
players.
3)Game pipeline
Based on the Company's dual-core and diversified product strategy, besides products such as Dou Luo Da Lu: Hun Shi Dui Jue
(斗罗大陆：魂师对决), Dou Luo Da Lu: Wu Hun Jue Xing (斗罗大陆：武魂觉醒), Yun Duan Wen Xian (云端问仙), Rong Yao Da Tian
Shi (荣耀大天使), Jue Shi Xian Wang (绝世仙王), Queen of Diamonds (一千克拉女王), and Call Me the Big Shopkeeper (叫我大掌
柜) that have been released in 2021in domestic market , and various popular games such as Puzzles & Survival, Call Me the Big
Shopkeeper (叫我大掌柜), Survival at Gunpoint, and Idol Angel (アイドルエンジェル),that have been released in 2021 in oversea
market,it is estimated that the subsequent products that are to be published by the Company in the domestic and oversea market
will include:
(2) Browser games
During the Reporting Period, the Company’s browser game business achieved operating revenue of RMB 0.46 billion, which
was lower than that of the same period of last year. It was mainly affected by both the shift of users to mobile phones and the
decrease in the number of browser game products. During the Reporting Period, the Company strengthened partnership with
domestic top browser game developers through strategic investment and business cooperation on the one hand, on the other
hand, the Company also refined the operation of its major quality games, improved user stickiness, stabilized the product life cycle,
and further maintained its operating revenue.
3. Cultural industry
With a strategic focus on quality content, the Company actively developed quality game R&D companies through strategic
investments involving MMORPG, SLG, SIM, card games, and other games, to make a strategic layout for the future growth of the
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
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publication sector businesses of the Listed Company.
While maintaining the high-speed growth of its core business, the Company exploited opportunities in film and television,
anime, music, VR/AR, cultural health, e-sports, and social entertainment with a strategic focus on quality content. As of the date of
this report, cultural and creative enterprises funded or acquired by the Company included:
Film and television: Youying Culture, Zhonghui Television, Mowei Pictures, JinhaiShiyi, etc.
Music: FenghuaQiushi
Talent agent: Original Plan, and T Entertainment
Anime: YHKT Entertainment, and IDRAGONS Creative Studio
VR/AR: Archiact
Cultural health: Wake
E-sports: AG E-Sports Club
Social Entertainment: Wuli Planet and Wonderful Party
Consumption: Nowwa Coffee
The Company's investment business has become more market-oriented and professional. The Company initiated and managed
multiple industrial investment funds as the fund manager, mainly focusing on fields such as big cultural innovations, technology,
mass consumption, and made investments in many excellent enterprises including DSMovie, Kapark, Yangji Mountain, Duokitty,
Dong Eating, INMO Technology, and HomeRun Technology.
The Company adhered to the long-term investment concept. Based on the main business of games, it reached audiences in
varied segments by investing in the upstream and downstream companies of the industry chain. With respect to investment
strategies, the Company paid close attention to new people, new products and technologies in the industry and overseas and
international distribution of products. In regard to the selection of investment targets, the Company valued the ability to constantly
output quality products, excellent team or talent reserves, and future growth potential. The Company continuously consolidated its
status in the cultural and creative industry by integrating quality resources in the industry.
In addition, companies in vertical fields where the Company invests have been more closely connected. For instance, Zhonghui
Television and YHKT Entertainment cooperated to purchase the copyright of Incarnation, a sci-fi blockbuster on bilibili.com, and
would make a series. "Original Plan", the talent agent, and "T Entertainment" are working with FenghuaQiushi, Zhonghui Television,
Mowei Pictures, and 37 Interactive Entertainment to maximize the outstanding talent resources. Besides, "DSMovie", a superb
domestic Multi-Channel Network (MCN), is used as a promotional channel to exert an amplified and superimposed effect on the
entertainment eco-system of 37 Interactive Entertainment.
In terms of film and television, the Company has invested a number of excellent film and television production enterprises,
having a successful participation in the production of excellent works such as Peace Breaker, Suspect X, Forever Young, Till The End
Of The World, Better Days, Crane New Arrival and Serenade of Peaceful Joy. The Company will gradually release more excellent film
and television works in the future. In terms of animation, the Company has invested in several outstanding domestic animation
producers. The Three-Body Problem, an animation adapted from Liu Cixin's science fiction novel, is expected to be released in 2022
by YHKT ENTERTAINMENT.
In the field of mass consumption, the Company has made investments in many excellent enterprises through industrial funds,
perceived the demands of the new-generation consumers, and sought original brands with the abilities to generate quality
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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products. Yangji Mountain, Duokitty, Dong Eating, and HomeRun Technology are top brands in their sub-industries.
The Company is further building a full industry chain in cultural and entertainment ecological layout. To promote the mutual
empowerment between industrial and cultural value, the Company has already integrated emerging fields into the 5G era,
including interactive games, virtual streamers, VR/AR industry chain and e-sports through M&A and equity investment. At the same
time, the Company will empower and coordinate strategically with the invested companies, offer 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.
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.
II Core Competitiveness Analysis
During the Reporting Period, the Company steadily promoted the development strategy of "boutiqueization, diversification
and globalization" and formed the following core competitiveness:
1. Industry-leading R&D strength
The Company carries on with its strategy of “integration of R&D and operation”, as well as emphasizes R&D investments and
talent cultivation. After years of efforts in R&D, the Company is ranked among the top in terms of R&D strengths. The Company's
independently developed products are characterized by high output, a high success rate and a long period, and center on
"boutiqueization and diversification". The Company keeps strengthening R&D. R&D investments amounted to RMB 0.674 billion
during the Reporting Period, up by 4.46% YoY. With the support of cutting-edge technologies like Next-Gen 3D engine, AI, and big
data analysis platforms, the Company has established a professional layout in multiple market segments like MMORPG, SRPG, SLG,
and SIM, and successfully developed eye-catching quality games like Dou Luo Da Lu: Wu Hun Jue Xing (斗罗大陆：武魂觉醒), and
Rong Yao Da Tian Shi (荣耀大天使), which are benchmarks for the R&D of quality games in the industry.
On the one hand, experienced users' awareness of game brands and demands for boutiqueization are on the rise.
"Boutiqueization" means that focus should be laid on improving the quality of game contents. The "boutiqueization" strategy runs
through the entire life cycle of the Company's independently developed products. Before the publication of games, the Company
carefully worked out details regarding gameplay design, art quality, music effects, etc.; after the publication of games, the
Company continued to invest in product iteration, user experience and other aspects to ensure high gross billing and a long life
cycle of games. To improve the development quality, product technology innovation is also very important. The Company has
integrated digital and intelligent technologies into its game publication business, created the intelligent ad system "Quantum" and
the operation analysis system "Destiny", explored quality contents through the refined analysis of creative ideas, and made
breakthroughs in output bottlenecks for creativity to improve the conversion rate. In terms of R&D, the Company has created the
Zeus platform, realizing the standardization and automation in the process from R&D to deployments and operation. Meanwhile,
based on the three data analysis systems, “Athena", "Poseidon" and "Ares", it helped the research team find and solve problems in
a quick and accurate way, further reduced development costs, substantially improved the quality of products, and provided
assistance for the refined operation of games.
On the other hand, in the face of both challenges and opportunities, the differentiated positioning of the "diversification"
strategy allowed products to better cover users. During the Reporting Period, the Company's R&D team, based on its R&D strengths
in ARPGs, expanded its game categories to MMORPG, SLG, SRPG, and SIM. It will continue to innovate in diversified aspects,
including product types, themes, art performance, and gameplay.
Adhering to the long-term development idea, the Company expanded from product upgrading to talent cultivation, opened up
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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development channels for professionals, and embraced employee diversity. Moreover, it encouraged innovation by employees and
increased the proportion of senior R&D staff to build an excellent team. The Company vigorously reformed the mechanism for R&D
project approval, shortened the evaluation cycle and established diversified indicators, so as to stimulate employees’ innovative
vitality. At the same time, the Company adjusted the incentive mechanism for the R&D department, established a tiered incentive
system for different categories of products, promoted the incentive for new categories of products, and encouraged employees to
be creative and step out of their comfort zone. The Company has also established a project lifecycle management process for game
development, which run through many links, such as idea creation, project approval, process and review, to achieve the risk control
of the entire R&D process, greatly improve the success rate of product R&D while effectively controlling the cost, and lay the
foundation for creating diverse, high-quality games. Internal management continued to improve, with leaner and more scientific
management in terms of game development.
2. Excellent publishing strength
During the Reporting Period, the Company maintained its leading position in mobile game and browser game publishing
business. 37 Interactive Entertainment enriched the product supply via independent R&D, investments, and cooperation with
excellent developers, improved the ability in publishing diverse, high-quality games and promoted the publishing strength to a new
height. In 2021, the Company expanded its product matrix and offered diversified gaming experience to players by launching quality
games in different types and on varied themes, including Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决), Rong Yao Da Tian
Shi (荣耀大天使), Yun Duan Wen Xian (云端问仙), Jue Shi Xian Wang (绝世仙王), Dou Luo Da Lu: Wu Hun Jue Xing (斗罗大陆：武
魂觉醒), and Queen of Diamonds (一千克拉女王) in the domestic mobile game market. Meanwhile, the Company has
accumulated rich experience in overseas game publishing thanks to years of practice. Breakthroughs have been made in the
publishing areas and game categories. With its overseas business covering over 200 countries and regions, the Company has
successfully opened the European and North American markets, led the Asian market and improved its global influence. The
Company successfully launched multiple independently-developed and agent products such as Puzzles & Survival, Call Me the Big
Shopkeeper (叫我大掌柜), Jing Ling Sheng Dian (精灵盛典), Swords of Archangels (大天使之剑), and Duo Luo Da Lu (斗罗大陆).
Going forward, the Company will further play its existing advantages in overseas markets, constantly expand the scale of overseas
business based on its strong game R&D capacity and localized marketing capabilities, and make new contributions to promoting the
Chinese culture industry and boosting cultural confidence.
The Company constantly sought innovative publishing approaches, and thus created a barrier to entry for competitors in game
publishing. First, the Company developed its own AI system to improve the ability of accurate ad placement. With this system, the
Company has optimized placement methods, improved the quality of materials, took advantage of high-quality materials, and
thereby effectively controlled the marketing cost. Second, the efficiency of publishing, including tool construction and data
algorithm to help form a real-time monitoring system and reduce cost waste. The Company puts forward the publishing idea of
“branding + sales effects”, grasps the market changes to carry out high-quality publicity, and uses good publishing ability to attract
target users to achieve good results.
In terms of operation optimization, the Company possesses 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, prolong the product life cycle, and accumulate higher gross billing.
In regard to promotion, through the two AI ad systems, i.e., "Quantum" and "Destiny", the Company conducted differentiated
iteration and refined operation for specific types of users of specific games and servers in order to enhance user interaction and
activity, activate the paid game ecology, and maximize the effect of life time value ("LTV").
3. Advantage of the model of “integration of R&D and operation”
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
20
As the Company’s business mode of "integration of R&D and operation” becomes sophisticated, it 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, at
the early stage of product R&D, the operation team can provide advises and suggestions to the R&D team based on its years of
experience and keen market insights.
4. Team strengths
The Company has been deeply involved in the field of cultural and creative industries for many years. Its core management
team has long been on the front lines of the industry, and has forward-looking capabilities for strategic layout. During the Reporting
Period, thanks to its outstanding performance in terms of the development speed and personnel training and development, the
Company won the title of "the Best Employer" of CNG. The Company has established a fully-fledged personnel training system. It
has completed the personnel system reform, made new promotion mechanism, appraisal mechanism and incentive mechanism.
The new system does not only make the employee’s growth path clearer, more open and more transparent but also motivates
their enthusiasm and creativity in a better way. The Company has always adhered to the entrepreneurial spirit like marathoners
and been clear about its goals. It aims to promote sustainable development, progressively realize long-term goals rather than
short-term ones, and stay at the forefront of the industry.
III Core Business Analysis
See contents under the heading “I Principal Activity of the Company in the Reporting Period”.
Year-over-year changes in key financial data:
Unit: RMB
H1 2021 H1 2020 Change (%) Main reason for change
This was mainly attributable to the different stages of games in
their life cycle. Games in the current period were mainly new
Operating
7,538,949,378.53 7,988,675,195.57 -5.63% ones at the introduction stage, while those in the same period
revenue
of last year were largely games at the mature stage, which
were able to generate stable gross billing.
Game revenue under the third-party joint operation model
Cost of sales 1,120,509,771.85 863,666,663.98 29.74% took up a larger share in the total revenue, resulting in an
increase in royalties cost.
The Company increased Internet traffic expenditures for a
variety of newly launched games such as Rong Yao Da Tian Shi
Distribution and (荣耀大天使), Dou Luo Da Lu: Wu Hun Jue Xing (斗罗大陆：武
4,785,388,947.28 4,549,628,282.98 5.18%
selling expenses 魂觉醒), Jue Shi Xian Wang (绝世仙王), and Puzzles & Survival
(launched globally), resulting in an increase in Internet traffic
fee charges.
The increased number of management personnel compared
General and
with the same period last year and the adjusted remuneration
administrative 222,001,708.95 166,919,490.05 33.00%
policy resulted in an increase in expenditures on employee
expenses
benefits. Meanwhile, office expenses also increased due to
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
21
higher depreciation and amortization expenses on the office
building and land, as well as a headcount increase.
Financial Combined effect of a decrease in interest expenses on loans
-25,875,545.40 9,827,281.57 -363.30%
expenses and an increase in interest income from banks
As the major games of certain subsidiaries were at an early
stage of promotion in H1, these subsidiaries recorded paper
losses in H1, while other profitable subsidiaries continued to
Income tax
162,728,946.02 110,659,828.94 47.05% pay their taxes, causing a YoY increase in income tax expenses.
expenses
The Company expects that its overall income tax rate for the
full year will decrease to a reasonable level as these deficit
subsidiaries see their major games start to generate profit.
The Company increased R&D investments, upsized the R&D
Research and team compared with the same period last year and refined the
development 673,649,742.25 644,896,512.00 4.46% remuneration and incentive mechanism, resulting in increased
investments expenditures on the remunerations and benefits of the R&D
personnel.
Revenue decreased, and receivables from third-party channel
platforms increased compared with the beginning of the year
Net cash flows which resulted in cash received from the sales of goods or
from operating 1,253,919,152.46 2,450,226,546.90 -48.82% rendering services decreased accordingly. Meanwhile,
activities remuneration payments for employees also rose resulting from
the number of the employee rose compared with the same
period last year.
A payment for the acquisition of land use rights was made in
Net cash flows
the same period of last year, while there was no such cash
used in/from
-835,664,111.30 -952,419,788.81 12.26% outflow in the Reporting Period. Meanwhile, the net amount of
investing
wealth management instrument redemptions and purchases
activities
increased.
Net cash flows
used in/from Cash received from the private placement in the Reporting
1,737,499,012.55 -180,181,077.21 1,064.31%
financing Period
activities
Combined effect of a decrease in net cash flows from operating
Net increase in
activities, a decrease in net cash flows used in investing
cash and cash 2,153,528,582.00 1,328,403,368.73 62.11%
activities, and an increase in net cash flows from financing
equivalents
activities
Significant changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable √ Not applicable
No such changes in the Reporting Period.
Breakdown of operating revenue:
Unit: RMB
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
22
H1 2021 H1 2020
As % of operating As % of operating Change (%)
Amount Amount
revenue (%) revenue (%)
Total operating revenue 7,538,949,378.53 100.00% 7,988,675,195.57 100.00% -5.63%
By operating division
Online games 7,538,949,378.53 100.00% 7,988,675,195.57 100.00% -5.63%
By product category
Mobile games 7,067,163,703.89 93.74% 7,412,153,082.93 92.78% -4.65%
Browser games 460,286,420.34 6.11% 564,975,213.48 7.07% -18.53%
Others 11,499,254.30 0.15% 11,546,899.16 0.14% -0.41%
By operating segment
Domestic 5,494,392,013.23 72.88% 7,019,815,819.74 87.87% -21.73%
Overseas 2,044,557,365.30 27.12% 968,859,375.83 12.13% 111.03%
Operating division, product category or operating segment contributing over 10% of operating revenue or operating profit:
√ Applicable □ Not applicable
Unit: RMB
Gross YoY change in YoY change in YoY change in
Operating revenue Cost of sales profit operating cost of sales gross profit
margin revenue (%) (%) margin (%)
By operating division
Online games 7,538,949,378.53 1,120,509,771.85 85.14% -5.63% 29.74% -4.05%
By product category
Mobile games 7,067,163,703.89 977,728,886.12 86.17% -4.65% 34.06% -3.99%
Browser games 460,286,420.34 135,756,614.09 70.51% -18.53% 5.62% -6.74%
By operating segment
Domestic 5,494,392,013.23 859,046,703.67 84.37% -21.73% 19.84% -5.42%
Overseas 2,044,557,365.30 261,463,068.18 87.21% 111.03% 78.09% 2.36%
Core business data restated according to the changed methods of measurement that occurred in the Reporting Period:
□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.
Operating division contributing over 10% of operating revenue or operating profit:
√ Applicable □ Not applicable
Unit: RMB
YoY change in YoY change in YoY change in
Gross profit
Operating revenue Cost of sales operating cost of sales gross profit
margin
revenue (%) (%) margin (%)
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
23
By operating division of customers
Online games 7,538,949,378.53 1,120,509,771.85 85.14% -5.63% 29.74% -4.05%
By product category
Mobile games 7,067,163,703.89 977,728,886.12 86.17% -4.65% 34.06% -3.99%
Browser games 460,286,420.34 135,756,614.09 70.51% -18.53% 5.62% -6.74%
By operating segment
Domestic 5,494,392,013.23 859,046,703.67 84.37% -21.73% 19.84% -5.42%
Overseas 2,044,557,365.30 261,463,068.18 87.21% 111.03% 78.09% 2.36%
Ongoing sales contracts with a single contract amount that is over RMB50 million and accounts for over 30% of the Company’s
audited operating revenue in the most recent accounting year:
□Applicable √ Not applicable
Breakdown of the cost of sales for the core business:
Unit: RMB
H1 2021 H1 2020
Breakdown of cost As % of cost of As % of cost of Change (%)
Amount Amount
sales sales
Royalties 1,014,617,869.61 90.55% 756,529,181.79 87.60% 34.11%
Cost of servers 83,168,344.41 7.42% 77,914,092.53 9.02% 6.74%
Amortization of
15,326,627.17 1.37% 22,029,060.95 2.55% -30.43%
copyright money
Other costs 7,396,930.65 0.66% 7,194,328.71 0.83% 2.82%
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
1. The overseas operating revenue increased by 111.03% YoY, primarily because the Company adjusted its overseas operating
strategy in the Reporting Period, and the overseas mobile game development and launch business continued to grow, resulting in a
significant increase in operating revenue.
2. Royalties in the cost of sales increased by 34.11% YoY, primarily because game revenue under the third-party joint operation
model took up a larger share in the total revenue in the Reporting Period, resulting in an increase in royalties cost.
3. Amortization of copyright money in the cost of sales went down by 30.43% YoY, mainly because copyright money was less used as
a way to obtain the operation rights for major games in the Reporting Period, resulting in a decrease in amortization cost of
copyright money.
IV Analysis of Non-Core Businesses
√ Applicable □ Not applicable
Unit: RMB
As % of profit
Amount Reason/source Recurrent or not
before income
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
24
tax expenses
Mainly due to gains on investments from disposal
of equity investments, dividends during the
Investment income 73,957,894.70 7.35% Not
period of holding equity investments, and wealth
management products
Gain/loss on changes Mainly due to changes in fair value of equity
106,592,018.27 10.59% Not
in fair value investments
Impairment loss on Losses on doubtful
1,130,937.77 0.11% Mainly due to losses on doubtful accounts
assets accounts are recurrent
Non-operating
2,204,522.71 0.22% Mainly due to compensation income Not
income
Non-operating Mainly due to donations and expenditures on
713,926.50 0.07% Not
expenses retirement of fixed assets
Mainly due to refund of VAT and other Refund VAT is recurrent
Other income 76,652,164.24 7.62% government grants given in the Company’s while other government
ordinary course of business grants are not.
V Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
30 June 2021 31 December 2020
Change in
As % of
As % of percentag Reason for any significant change
Amount total Amount
total assets e (%)
assets
Monetary Funds raised in a private placement of
3,927,610,090.55 28.10% 1,776,856,909.85 16.82% 11.28%
funds shares in the Reporting Period
The overseas game business expanded in
Accounts the Reporting Period, while the relevant
1,361,016,422.73 9.74% 1,164,657,998.35 11.02% -1.28%
receivable amounts receivable from third-party
channels/platforms were undue.
Long-term
equity 428,731,774.82 3.07% 360,566,552.56 3.41% -0.34% No significant change
investments
Fixed assets 906,707,500.39 6.49% 922,736,638.76 8.73% -2.24% No significant change
Construction of the Company’s
Construction in
10,232,260.08 0.07% 4,180,019.75 0.04% 0.03% Headquarters Building in Guangzhou
progress
commenced in the Reporting Period
Right-of-use 89,700,305.83 0.64% 0 0.00% 0.64% Right-of-use assets were recognized on
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
25
assets leases according to the new accounting
standard governing leases, which the
Company has adopted since 1 January
2021
Repayment of financings obtained through
Short-term
247,063,500.00 1.77% 889,324,326.07 8.42% -6.65% notes which became due in the Reporting
loans
Period
Contract
246,023,708.35 1.76% 204,231,829.45 1.93% -0.17% No significant change
liabilities
The present value of future rental
payments for office space occupied under
operating leases was recognized as lease
Lease liabilities 64,256,151.56 0.46% 0 0.00% 0.46%
liabilities according to the new accounting
standard governing leases in the Reporting
Period
Increases in the balances of low-risk bank’s
Trading wealth management products and
2,144,978,476.54 15.35% 1,321,234,029.61 12.51% 2.84%
financial assets structured deposits purchased by the
Company for higher capital returns
To enrich the product and IP pipeline, the
Company increased the prepayments of
Prepayments 1,116,715,243.28 7.99% 999,890,031.00 9.46% -1.47% royalties for licensed game operation, and
increased the prepayments of license fees
for IPs for self-developed games
Accounts Increase in Internet traffic fee charges
1,636,208,353.34 11.71% 1,078,096,658.12 10.21% 1.50%
payable payable
The Company paid for the acquisition of
minority interests in Guangzhou 37
Other payables 1,187,472,426.30 8.50% 1,317,972,818.79 12.48% -3.98%
Network Technology Co., Ltd. in the
Reporting Period
2. Major Assets Overseas
√ Applicable □ Not applicable
Mana As % of
Return Material
Asset value geme Control measures to the
Asset Source Location generated impairment
(RMB) nt protect asset safety Company’
(RMB) risk or not
model s equity
Income from Hong A sound business
Moneta
investments 774,934,802.60 Kong, the supervision 8.18% Not
ry funds
and operations US, etc. mechanism and a
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
26
sound risk control
mechanism have
been put in place
A sound business
Hong supervision
Other Investments in
Kong, mechanism and a
equity overseas 364,758,895.15 30,823,475.19 3.85% Not
South sound risk control
assets companies
Korea, etc. mechanism have
been put in place
Other
informa None
tion
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
27
VI Principal Subsidiaries and Joint Stock Companies
√ Applicable □ Not applicable
Principal subsidiaries and joint stock companies with an over 10% effect on the Company’s net profit:
Unit: RMB
Relationshi
Principal activity Registere Total Net Operating Operating
Name p with the Net profit
d capital assets assets revenue profit
Company
Development of
Jiangsu 6,250,000. 5,333,875 4,035,312 778,585,250. 125,721,761.3 105,017,20
Subsidiary mobile and
Aurora 00 ,811.08 ,776.61 47 6 2.66
browser games
Launch and
11,764,70 4,692,808 2,221,050 3,836,134,12 762,599,569.0 628,293,96
Guangzhou 37 Subsidiary operation of
6.00 ,416.27 ,907.43 3.00 8 2.64
mobile games
Subsidiaries obtained or disposed of in the Reporting Period:
□ Applicable √ Not applicable
Other information on principal subsidiaries and joint stock companies:
VII Risks Facing the Company and Countermeasures
1. Risk of industry regulation
The online game industry is regulated by relevant national policies and government departments. During recent years,
regulatory authorities have gradually attached importance to the healthy development of the online game industry, implementing
more stringent regulatory measures such as qualification management and content review for games’ development, publication
and operation. For example, the Standing Committee of the 13th National People's Congress revised the Law of the People's
Republic of China on the Protection of Minors for the second time at its 22nd session in October 2020, which came into effect on
June 1, 2021. The Law of the People's Republic of China on the Protection of Minors strengthens network protection, stipulating
that online games can be operated only after the approval of law. What’s more, China establishes a unified electronic identity
authentication system of online games for minors, specifies their online time, and stipulates penalties for network service providers
who do not fulfill their obligations to prevent online addiction and stop cyberbullying. During the operation of the game products, if
the Company violates or misunderstands the relevant regulations, there may be a risk that it will be punished by authorities or that
relevant works may not be published as planned because they do not meet the regulatory requirements.
In the long term, the regulation of the online game industry is becoming more and more standardized, which is conducive to
the healthy development of the industry. The enterprises with standardized operation will benefit from it. 37 Interactive
Entertainment will strictly abide by the requirements related to the development of the industry and support its policies and
regulations.
2. 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 demand for quality for game products Intense
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
28
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 investments, 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 digital marketing and operation, deepen the business strategy of multi-channel marketing, targeted advertising and
long-term services, and continuously enhance its core market competitiveness.
3. 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, and game enterprises fail to keep
up with them, 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 to the user experience and brand image. Consequently, its operation performance will be impaired.
In response, increasing R&D investments are needed to maintain continuous product innovation. The Company also needs to
dig deeper into operational data through independently developed AI systems, and timely adjust operational and R&D strategies,
to meet the core demands of users.
In terms of information security management and user privacy protection, based on strict management policies and process
system, the Company adopts industry-leading technologies and benchmark them with international standards, strictly controls
information security risks, and guarantees data security to ensure the security of users' personal information to the maximum
extent. In terms of information security, the Company defines and classifies security incidents to respond to possible data security
problems. The Company's current information security management system covers the three game platforms of the Group
including 37Online, 37Mobile, and 37GAMES (Overseas), and integrates all service suppliers of the platforms in the whole system
for management, which ensures the completeness of the systems and reduces the potential risks outside the system.
In terms of the implementation of data security, it carries out systematic and rigorous operations to encrypt the storage and
transmission of data assets in the whole process. 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. The Company adopts privacy enhancement technology to manage
users' private data, including de-identification and anonymization of users' personal information, which can be used to store the
personal information with recovered identification and the information after de-identification respectively, and enhances the
management of access and using authorities to ensure the security of users' personal information. 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.
4. Risks of core personnel turnover and countermeasures
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
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
29
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. In order to attract and retain outstanding management talents and
business elites, the Company has vigorously reformed the project mechanism, encouraged “bottom-up” project creation,
shortened the review cycle and established diversified indicators, so as to stimulate the innovative vitality of employees. In terms
of employee performance appraisal, the Company has broken the traditional salary incentive system based on gross billing, and set
up diversified KPIs based on employees' contribution and ability, and set up flexible team appraisal standards to encourage
employees’ creativity. Through the above mechanism changes, the Company increases the attractiveness to core staffs and R&D
personnel.
The Company has established “37 Interactive Entertainment Learning and Development Center” to provide sufficient training
and learning opportunities for employees and help them grow rapidly. At the same time, “37 Interactive Entertainment Learning
and Development Center” has set up academies with different specializations in each business group, focusing on professional
empowerment and talent cultivation around different needs for professional skill growth.
VIII Operating Performance Forecast for January-September 2021
Performance forecast: year-on-year decrease
Type of data in the table below: Interval data
January-Septe
January-September 2021 Change
mber 2020
Estimated net profit (RMB’0,000) 160,000.00 -- 170,000.00 226,022.61 Decrease -29.21% -- -24.79%
Basic earnings per share (RMB/share) 0.73 -- 0.77 1.07 Decrease -31.86% -- -27.60%
The Company estimates the net profit attributable to the Listed Company’s shareholders to be
between RMB 1.6 billion to RMB1.7 billion for January-September 2021, with the number estimated
to be between RMB 0.746 billion to RMB 0.846 billion for Q3 2021. The game business is characteristic
of large investment before payback. The Company has launched more new games in 2021, which are
now at the preliminary stage of promotion, resulting in a higher growth in selling expenses than that
in operating revenue and thus causing a temporary impact on the ratio of selling expenses. So far, the
expenditures on selling in Q1 have started to generate returns. As a result, Q2 2021 recorded a net
Notes profit attributable to the Listed Company’s shareholders of RMB 0.737 billion, representing a growth
of over 500% compared to Q1 2021. The previous expenditures are expected to bring in profit as the
operations of these games grow mature over time.
As previous investments start to pay back and more new games are launched, the Company
expects a quarter-on-quarter growth of over 15% in operating revenue, and a year-on-year growth of
over 30% in net profit attributable to the Listed Company’s shareholders, in Q3 2021. The Company’
s self-developed game Dou Luo Da Lu: Hun Shi Dui Jue (斗罗大陆：魂师对决) has been launched
globally and successively, expected to generate gross billing of over RMB 0.7 billion in August.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
30
Part IV Corporate Governance
I Annual and Extraordinary General Meetings of Shareholders Convened during the Reporting
Period
1. General Meetings of Shareholders Convened during the Reporting Period
Investor
Date of the Date of
Meeting Type participation Resolutions of the meeting
meeting disclosure
ratio
The First
1. The Proposal on Increase in Registered Capital and Amendments to
Extraordinary Extraordinar
the Articles of Association was approved; and
General y General 29 March 30 March
38.51% 2. The Proposal on Application for the General Meeting of
Meeting of Meeting of 2021 2021
Shareholders to Authorize the Board of Directors to Handle Matters
Shareholders Shareholders
in Relation to the Private Placement of Shares was approved.
of 2021
1. The 2020 Work Report of the Board of Directors was approved;
2. The 2020 Work Report of the Supervisory Committee was
approved;
3. The Chinese versions of the full 2020 Annual Report and its
Summary, along with the English version of the Summary, were
approved;
4. The 2020 Final Account Report was approved;
The 2020 5. The 2020 Final Dividend Plan was approved;
Annual
Annual 6. The Proposal on Appointment of Independent Auditor for 2021
General 23 June
General 47.76% 22 June 2021 Annual Financial Statements was approved;
Meeting of 2021
Meeting of 7. The Proposal on the Expected Guarantee Line for Subsidiaries in
Shareholders
Shareholders 2021 was approved;
8. The Proposal on Adjustments to the Remuneration Plan for
Non-independent Directors of the Fifth Board of Directors was
approved; ‘
9. The Proposal on the Use of Self-owned Idle Funds for Securities
Investment was approved; and
10. The Proposal on the Use of Self-owned Idle Funds for Entrusted
Wealth Management was approved.
II Interim Dividend Plan
√ Applicable □ Not applicable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
31
Bonus issue from profit (share/10 shares) 0
Cash dividend/10 shares (RMB) (tax inclusive) 1.5
Share base (share) 2,217,864,281
Cash dividends (RMB) (tax inclusive) 332,679,642.15
Cash dividends in other forms (such as share repurchase) (RMB) 0.00
Total cash dividends (including those in other forms) (RMB) 332,679,642.15
Distributable profit (RMB) 760,652,599.19
Total cash dividends (including those in other forms) as % of total
100.00%
profit to be distributed
Applicable cash dividend policy
If it is difficult to identify the development stage of the Company but it has a significant capital expenditure arrangement, when
making profit distribution, cash dividends shall account for no less than 20% in the profit distribution.
Details of the cash and/or stock dividend plan
Upon approval by the Board of Directors, the Company’s 2021 interim dividend plan is as follows: Based on the total issued
share capital (the total registered share capital less shares in the securities account for repurchases) on the date of record, a
cash dividend of RMB1.5 (tax inclusive) per 10 shares is planned to be distributed to all the shareholders of the Company, with
the remaining undistributed profit carried forward to the next year; and there will be no bonus issue from either profit or capital
reserves.
The above interim dividend plan is consistent with the Company’s performance growth, and also in line with relevant
provisions of the Company Law, the Securities Law, the Articles of Association and the Company’s shareholder return plan.
Therefore, it is legal, valid and reasonable.
III Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for
Employees
√ Applicable □ Not applicable
The third employee stock ownership plan (ESOP) has been reviewed and approved by the Fourth Meeting of the Fifth Board
of Directors, the Fourth Meeting of the Fifth Supervisory Committee and the Fourth Extraordinary General Meeting of Shareholders
of 2019. The Company transferred the shares repurchased from 11 April 2019 to 7 May 2019 to the ESOP at zero price. The shares
covered under the ESOP amount to 22,347,537 shares, accounting for 1.06% of the Company's total share capital. The ESOP
unlocked the underlying shares, which were received through non-trade transfer and other legitimate means, phase by phase 12
months after the date of the Company's announcement on the transfer of the last shares to the ESOP. The maximum lock-up period
is 36 months.
According to the third ESOP (draft), if the Company's performance target defined in the ESOP is achieved -- that is, the total net
profit (which is measured based on the net profit attributable to the Listed Company’s shareholders and does not include costs
incurred by the shares under this ESOP) in 2019 and 2020 is not lower than RMB3.2 billion), then 30% of the total number of shares
in this ESOP can be unlocked. According to the Audit Report issued by Huaxing Certified Public Accountants LLP (special general
partnership), the net profit attributable to the Listed Company’s shareholders in 2020 of RMB2.761 billion, and the net profit
attributable to the Listed Company’s shareholders minus the cost incurred by this ESOP in 2020 is RMB2.893 billion. Therefore, the
total net profit attributable to the Listed Company’s shareholders in 2019 and 2020 minus the cost incurred by this ESOP is
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
32
RMB5.077 billion. That is, the Company's performance target defined in the ESOP has been achieved. Therefore, 30% of the total
number of shares under this ESOP were unlocked 24 months after the date (27 July 2019) of the Company's announcement on the
transfer of the last shares to this ESOP upon the confirmation that the performance target has been achieved. That is, the lock-up
period of the second batch of shares (6,704,261 shares) under the Company's third ESOP will expire on 26 July 2021.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
33
IV Significant Events of Subsidiaries
√ Applicable □ Not applicable
Particulars about the commitment in relation to the 2020 annual performance of Guangzhou 37 Network Technology Co., Ltd.
(hereinafter, “Guangzhou 37 Network”):
Entities involved in the profit and shareholding increase commitment (namely, Xu Zhigao, He Hong, Liu Jun, and Liu Jiayu) have
undertaken in their transaction with the Company regarding the Company’s acquisition of a 20% indirect interest in Guangzhou 37
Network that the 2020, 2021 and 2022 annual net profits of Guangzhou 37 Network should not be lower than RMB1.2 billion,
RMB1.44 billion and RMB1.656 billion, respectively. Note: The said net profit refer to the consolidated (if applicable) net profit
attributable to Guangzhou 37 Network’s shareholders after deducting non-recurring profits and losses (except for statutory
government subsidies and tax preferences) in an accounting year of the commitment period. For further information, see the
Announcement on the Plan to Acquire a 20% Indirect Interest in Guangzhou 37 Network Technology Co., Ltd. disclosed by the
Company on the website http://www.cninfo.com.cn dated 8 December 2020.
As audited, the 2020 annual net profit attributable to Guangzhou 37 Network’s shareholders and the 2020 annual net profit
attributable to Guangzhou 37 Network’s shareholders after deducting non-recurring profits and losses (except for statutory
government subsidies and tax preferences) stood at RMB1,399.5432 million and RMB1,389.7833 million, respectively. As such, the
2020 annual net profit attributable to Guangzhou 37 Network’s shareholders after deducting non-recurring profits and losses
(except for statutory government subsidies and tax preferences) exceeded the promised annual net profit of RMB1.2 billion for
2020.
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
34
Part V Share Changes and Shareholder Information
I Share Changes
1. Share Changes
Unit: share
Before Increase/decrease in the Reporting Period (+/-) After
Share
Shares
s as
as
divide
dividend
Percenta nd Percenta
Number New issues converte Other Subtotal Number
ge (%) conve ge (%)
d from
rted
capital
from
reserves
profit
1. Restricted shares 743,503,103 35.20% 105,612,584 -65,757,025 39,855,559 783,358,662 35.32%
1.1 Shares held by the
government
1.2 Shares held by
state-owned 5,041,411 5,041,411 5,041,411 0.23%
corporations
1.3 Shares held by
743,503,103 35.20% 100,571,173 -65,757,025 34,814,148 778,317,251 35.09%
other domestic investors
Including: Shares
held by domestic 97,690,367 97,690,367 97,690,367 4.40%
corporations
Shares
held by domestic natural 743,503,103 35.20% 2,880,806 -65,757,025 -62,876,219 680,626,884 30.69%
persons
1.4 Shares held by
overseas investors
Including: Shares
held by overseas
corporations
Shares
held by overseas natural
persons
2. Un-restricted shares 1,368,748,594 64.80% 65,757,025 65,757,025 1,434,505,619 64.68%
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
35
2.1
RMB-denominated 1,368,748,594 64.80% 65,757,025 65,757,025 1,434,505,619 64.68%
common shares
2.2 Domestically listed
foreign shares
2.3 Overseas listed
foreign shares
2.4 Others
3. Total shares 2,112,251,697 100.00% 105,612,584 0 105,612,584 2,217,864,281 100.00%
Reasons for share changes:
√ Applicable □ Not applicable
With the Reply on Approval of the Application of Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd. for Private
Placement (CSRC Permit [2021] No. 16) issued by the CSRC, the Company was approved to issue no more than 105,612,584 shares
in a private placement. In the event of a changed share capital resulted from any bonus issue from profit or capital reserves, the
number of shares to be issued could be adjusted accordingly. Eventually, the Company issued 105,612,584 RMB-denominated
common shares (A-stock) in a private placement to 14 specified entities, increasing its total share capital from 2,112,251,697 shares
to 2,217,864,281 shares. These newly issued shares were allowed for public trading on 10 March 2021. For further information, see
the Report on the Private Placement of Shares by Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd. & the
Listing Announcement of these Shares (Summary) disclosed by the Company dated 8 March 2021.
Approval of share changes:
√ Applicable □ Not applicable
With the Reply on Approval of the Application of Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd. for Private
Placement (CSRC Permit [2021] No. 16) issued by the CSRC, the Company was approved to issue no more than 105,612,584 shares
in a private placement. In the event of a changed share capital resulted from any bonus issue from profit or capital reserves, the
number of shares to be issued could be adjusted accordingly. For further information, see the Announcement No. 2021-001 on the
Receipt of the CSRC Approval Document for the Private Placement disclosed by the Company on 13 January 2021.
Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to the Company’s
common shareholders and other financial indicators of the prior year and the prior accounting period, respectively:
√ Applicable □ Not applicable
Based on the diluted share capital of 2,217,864,281.00 shares, for the 12 months ended 31 December 2020, the basic earnings per
share, diluted earnings per share, and equity per share attributable to the Company’s common shareholders were RMB1.24,
RMB1.24 and RMB2.72, respectively; and for the six months ended 30 June 2021, the corresponding amounts were RMB0.39,
RMB0.39 and RMB4.23, respectively.
II Issuance and Listing of Securities
√ Applicable □ Not applicable
Name of stock Issue price Issued Listing Number Terminatio Index to Disclosure
Issue date
and its derivative (or interest number date approved for n date of disclosed date
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
36
securities rate) public trading transaction information
Stocks
Private Placement 24
10 March http://www.cn
of 37 Interactive February 27.77 105,612,584 105,612,584 8 March 2021
2021 info.com.cn
Entertainment 2021
Convertible corporate bonds, convertible corporate bonds with warrants, and corporate bonds
Other derivative securities
Particulars about the securities (exclusive of preference shares) issued in the Reporting Period:
With the Reply on Approval of the Application of Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd. for Private
Placement (CSRC Permit [2021] No. 16) issued by the CSRC, the Company was approved to issue no more than 105,612,584 shares
in a private placement. Eventually, the Company issued 105,612,584 RMB-denominated common shares (A-stock) in a private
placement to 14 specified entities, increasing its total share capital from 2,112,251,697 shares to 2,217,864,281 shares. These newly
issued shares were allowed for public trading on 10 March 2021.
III Shareholders and Their Holdings as at the Period-End
Unit: share
Number of preferred shareholders with
Number of common shareholders 161,103 0
resumed voting rights (if any) (see note 8)
5% or greater common shareholders or the top 10 common shareholders
Sharehol Increase/de Pledged, marked or
Restricted Un-restricted
Nature of ding Common crease in the frozen status
Name of shareholder common common
shareholder percenta shares held Reporting
shares held shares held Status Shares
ge Period
Domestic
Li Weiwei 14.52% 322,113,019 -39,300,000 271,059,764 51,053,255 Pledged 14,500,000
natural person
Domestic
Zeng Kaitian 11.06% 245,344,374 0 184,008,280 61,336,094 Pledged 9,100,000
natural person
Domestic
Hu Yuhang 8.53% 189,197,684 41,340,000 141,898,263 47,299,421 Pledged 7,800,000
natural person
Domestic
Wu Weihong 4.36% 96,692,962 -4,840,000 76,149,721 20,543,241
natural person
Hong Kong Securities Overseas
3.26% 72,268,007 -10,504,079 0 72,268,007
Clearing Company Ltd. corporation
Domestic
Wu Weidong 2.86% 63,323,257 -27,196,000 0 63,323,257
natural person
Domestic
Wu Xushun 2.26% 50,070,682 0 0 50,070,682
natural person
China Merchants Bank Other 1.14% 25,200,114 14,198,636 0 25,200,114
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
37
Co., Ltd.－Xingquan
Herun Mixed Securities
Investment Fund
China Merchants Bank
Co., Ltd.－Ruiyuan
Balanced Value
Other 1.05% 23,236,844 14,054,846 5,401,532 17,835,312
Three-Year Mixed
Securities Investment
Fund
China Everbright Bank
Company Limited Co.,
Ltd.－Xingquan
Business Model Other 1.01% 22,359,486 10,274,385 0 22,359,486
Selected Mixed
Securities Investment
Fund (LOF)
Strategic investor or general corporation
becoming a top-10 common shareholder in Not applicable
a rights issue (if any) (see note 3)
1. Among the top 10 shareholders of the Company, Wu Xushun is the father of Wu Weihong and Wu
Weidong, which makes them shareholders acting in concert.
Related or acting-in-concert parties among
2. The Company is not aware of whether there is, among the other top 10 shareholders, any related
the shareholders above
parties or acting-in-concert parties as defined in the Measures on the Administration of Acquisition of
Listed Companies.
Explain if any of the shareholders above
was involved in entrusting/being entrusted N/A
with voting rights or waiving voting rights
Special account for share repurchases (if
any) among the top 10 shareholders (see N/A
note 11)
Top 10 un-restricted common shareholders
Shares by class
Name of shareholder Un-restricted common shares held
Class Shares
RMB-denomina
Hong Kong Securities Clearing Company
72,268,007 ted common 72,268,007
Ltd.
shares
RMB-denomina
Wu Weidong 63,323,257 ted common 63,323,257
shares
RMB-denomina
Zeng Kaitian 61,336,094 61,336,094
ted common
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
38
shares
RMB-denomina
Li Weiwei 51,053,255 ted common 51,053,255
shares
RMB-denomina
Wu Xushun 50,070,682 ted common 50,070,682
shares
RMB-denomina
Hu Yuhang 47,299,421 ted common 47,299,421
shares
RMB-denomina
China Merchants Bank Co., Ltd.－Xingquan
25,200,114 ted common 25,200,114
Herun Mixed Securities Investment Fund
shares
China Everbright Bank Company Limited
RMB-denomina
Co., Ltd.－Xingquan Business Model
22,359,486 ted common 22,359,486
Selected Mixed Securities Investment Fund
shares
(LOF)
RMB-denomina
Wu Weihong 20,543,241 ted common 20,543,241
shares
RMB-denomina
Xu Zhigao 19,943,951 ted common 19,943,951
shares
Related or acting-in-concert parties among 1. Among the top 10 shareholders of the Company, Wu Xushun is the father of Wu Weihong and Wu
the top 10 un-restricted common Weidong, which makes them shareholders acting in concert.
shareholders, as well as between the top 2. The Company is not aware of whether there is, among the other top 10 shareholders, any related
10 un-restricted common shareholders and parties or acting-in-concert parties as defined in the Measures on the Administration of Acquisition of
the top 10 common shareholders Listed Companies.
Top 10 common shareholders engaged in
securities margin trading (if any) (see note None
4)
Indicate by tick mark whether any of the top 10 common shareholders or the top 10 un-restricted common shareholders of the
Company conducted any promissory repo during the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
IV Changes in the Shareholdings of Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
Incumbent Beginning Increase in Decrease in Ending Beginning Restricted Ending
Name Office title
/Former shareholding the period the period shareholding restricted shares restricted
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
39
(share) (share) (share) (share) shares granted in shares
granted the period granted
(share) (share) (share)
Chairman of
the Board
Li Weiwei Incumbent 361,413,019 0 -39,300,000 322,113,019 0 0 0
and General
Manger
Vice
Zeng
Chairman of Incumbent 245,344,374 0 0 245,344,374 0 0 0
Kaitian
the Board
Hu Yuhang Director Incumbent 147,857,684 41,340,000 0 189,197,684 0 0 0
Director and
Deputy
Yang Jun Incumbent 693,400 2,100,000 0 2,793,400 0 0 0
General
Manager
Independent
Li Yang Incumbent 0 0 0 0 0 0 0
Director
Independent
Chen Jianlin Incumbent 0 0 0 0 0 0 0
Director
Independent
Ye Xin Incumbent 0 0 0 0 0 0 0
Director
Liu Independent
Incumbent 0 0 0 0 0 0 0
Guangqiang Director
Chairman of
the
He Yang Incumbent 0 0 0 0 0 0 0
Supervisory
Committee
Cheng Lin Supervisor Incumbent 0 0 0 0 0 0 0
Liu
Supervisor Incumbent 0 0 0 0 0 0 0
Fengyong
Deputy
Zhu
General Incumbent 0 0 0 0 0 0 0
Huaimin
Manager
Chief
Financial
Ye Wei Officer and Incumbent 0 0 0 0 0 0 0
Board
Secretary
Total -- -- 755,308,477 43,440,000 -39,300,000 759,448,477 0 0 0
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
40
Part VI Financial Statements
I Independent Auditor’s Report
Are these interim financial statements audited by an independent auditor?
□ Yes √ No
They are unaudited by such an auditor.
II Financial Statements
Currency unit for the financial statements and the notes thereto: RMB
1. Consolidated Balance Sheet
Prepared by Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd.
30 June 2021
Unit: RMB
Item 30 June 2021 31 December 2020
Current assets:
Monetary funds 3,927,610,090.55 1,776,856,909.85
Transaction settlement funds
Loans to other banks
Trading financial assets 2,144,978,476.54 1,321,234,029.61
Derivative financial assets
Notes receivable
Accounts receivable 1,361,016,422.73 1,164,657,998.35
Accounts receivable financing
Prepayments 1,116,715,243.28 999,890,031.00
Premiums receivable
Reinsurance receivables
Receivable reinsurance contract reserve
Other receivables 102,076,932.89 85,138,773.10
Including: Interest receivable
Dividends receivable 10,100,000.00 10,100,000.00
Redemptory monetary capital for sale
Inventories
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
41
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets 282,207,588.96 452,435,284.38
Total current assets 8,934,604,754.95 5,800,213,026.29
Non-current assets:
Loans and advances to customers
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 428,731,774.82 360,566,552.56
Other equity investments 364,998,286.10 294,824,927.02
Other non-current financial assets 423,216,689.35 372,195,483.93
Investment properties
Fixed assets 906,707,500.39 922,736,638.76
Construction in progress 10,232,260.08 4,180,019.75
Productive living assets
Oil and gas assets
Right-of-use assets 89,700,305.83
Intangible assets 1,100,776,339.37 1,108,434,647.51
Development expenditure
Goodwill 1,589,065,048.53 1,589,065,048.53
Long-term deferred expenses 115,071,414.74 71,442,122.88
Deferred income tax assets 11,076,743.28 9,967,411.35
Other non-current assets 1,950,014.04 30,705,621.27
Total non-current assets 5,041,526,376.53 4,764,118,473.56
Total assets 13,976,131,131.48 10,564,331,499.85
Current liabilities:
Short-term loans 247,063,500.00 889,324,326.07
Loans from the central bank
Loans from other banks
Trading financial liabilities
Derivative financial liabilities
Notes payable 563,500,000.00 393,351,017.72
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
42
Accounts payable 1,636,208,353.34 1,078,096,658.12
Advances from customers
Contract liabilities 246,023,708.35 204,231,829.45
Financial assets sold under repurchase
agreements
Customer deposits and interbank deposits
Payables for acting trading of securities
Payables for underwriting of securities
Employee benefits payable 300,377,802.41 410,000,161.52
Taxes payable 188,664,415.76 160,224,192.87
Other payables 1,187,472,426.30 1,317,972,818.79
Including: Interest payable
Dividends payable 443,572,856.20
Handling charges and commissions payable
Reinsurance payables
Liabilities held for sale
Non-current liabilities due within one year 29,279,326.08
Other current liabilities 41,162,474.93 45,287,027.61
Total current liabilities 4,439,752,007.17 4,498,488,032.15
Non-current liabilities:
Insurance contract reserve
Long-term loans
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities 64,256,151.56
Long-term payables
Long-term employee benefits payable
Provisions
Deferred income
Deferred income tax liabilities 31,678.49 391,763.97
Other non-current liabilities
Total non-current liabilities 64,287,830.05 391,763.97
Total liabilities 4,504,039,837.22 4,498,879,796.12
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
43
Shareholders' equity:
Share capital 2,217,864,281.00 2,112,251,697.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves 2,953,245,644.37 114,693,519.91
Less: Treasury shares
Other comprehensive income -160,292,383.05 -149,074,272.37
Special reserves
Surplus reserves 4,868,573.36
General risk reserves
Retained earnings 4,361,748,546.69 3,959,512,681.41
Total equity attributable to shareholders of the
9,377,434,662.37 6,037,383,625.95
Company
Non-controlling interests 94,656,631.89 28,068,077.78
Total shareholders' equity 9,472,091,294.26 6,065,451,703.73
Total liabilities and shareholders’ equity 13,976,131,131.48 10,564,331,499.85
Legal representative: Li Weiwei Chief Financial Officer: Ye Wei
Board Secretary: Ye Wei
2. Balance Sheet of the Company
Unit: RMB
Item 30 June 2021 31 December 2020
Current assets:
Monetary funds 1,002,072,262.06 274,246.17
Trading financial assets 751,752,876.71
Derivative financial assets
Notes receivable
Accounts receivable
Accounts receivable financing
Prepayments
Other receivables 1,161,095,000.00 1,000,017,597.10
Including: Interest receivable
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
44
Dividends receivable 1,000,000,000.00
Inventories
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets 5,316,826.05 3,352,745.35
Total current assets 2,920,236,964.82 1,003,644,588.62
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 9,492,589,288.09 9,449,976,259.36
Other equity investments
Other non-current financial assets 29,040,909.54 29,040,909.54
Investment properties
Fixed assets
Construction in progress
Productive living assets
Oil and gas assets
Right-of-use assets 9,918,654.37
Intangible assets
Development expenditure
Goodwill
Long-term deferred expenses
Deferred income tax assets
Other non-current assets
Total non-current assets 9,531,548,852.00 9,479,017,168.90
Total assets 12,451,785,816.82 10,482,661,757.52
Current liabilities:
Short-term loans 150,000,000.00
Trading financial liabilities
Derivative financial liabilities
Notes payable
Accounts payable 186,277.50
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
45
Advances from customers
Contract liabilities
Employee benefits payable 382,546.97 492,264.00
Taxes payable 147,427.78 4,749,796.66
Other payables 2,328,050,805.51 3,062,581,644.17
Including: Interest payable
Dividends payable 443,572,856.20
Liabilities held for sale
Non-current liabilities due within one year 2,152,365.88
Other current liabilities
Total current liabilities 2,480,733,146.14 3,068,009,982.33
Non-current liabilities:
Long-term loans
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities 7,123,309.63
Long-term payables
Long-term employee benefits payable
Provisions
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 7,123,309.63
Total liabilities 2,487,856,455.77 3,068,009,982.33
Shareholders' equity:
Share capital 2,217,864,281.00 2,112,251,697.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves 6,598,481,707.33 3,759,929,582.87
Less: Treasury shares
Other comprehensive income -60,000,000.00 -60,000,000.00
Special reserves
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
46
Surplus reserves 446,930,773.53 442,062,200.17
Retained earnings 760,652,599.19 1,160,408,295.15
Total shareholders' equity 9,963,929,361.05 7,414,651,775.19
Total liabilities and shareholders’ equity 12,451,785,816.82 10,482,661,757.52
3. Consolidated Income Statement
Unit: RMB
Item H1 2021 H1 2020
1. Total operating revenue 7,538,949,378.53 7,988,675,195.57
Including: Operating revenue 7,538,949,378.53 7,988,675,195.57
Interest income
Premium income
Handling charge and commission income
2. Total operating costs and expenses 6,792,689,615.37 6,257,275,520.69
Including: Cost of sales 1,120,509,771.85 863,666,663.98
Interest expense
Handling charge and commission expenses
Surrenders
Net claims paid
Net amount provided as insurance contract
reserve
Expenditure on policy dividends
Reinsurance premium expenses
Taxes and surcharges 17,014,990.44 22,337,290.11
Distribution and selling expenses 4,785,388,947.28 4,549,628,282.98
General and administrative expenses 222,001,708.95 166,919,490.05
Research and development expenses 673,649,742.25 644,896,512.00
Financial expenses -25,875,545.40 9,827,281.57
Including: Interest expense 11,764,539.22 34,655,637.60
Interest income 30,785,993.18 23,176,748.76
Add: Other income 76,652,164.24 95,213,596.55
Investment income (“-” for loss) 73,957,894.70 108,093,257.02
Including: Share of profits and losses of joint
-7,279,101.80 13,131,170.06
ventures and associates
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
47
Gain on derecognition of financial
assets measured at amortised cost (“-” for loss)
Gain on exchange (“-” for loss)
Net gain on exposure hedges (“-” for loss)
Gain on changes in fair value (“-” for loss) 106,592,018.27 115,130,432.61
Impairment loss on credit (“-” for loss) 1,130,937.77 -7,237,074.09
Impairment loss on assets (“-” for loss) -44,335,968.65
Gain on disposal of assets (“-” for loss) 254,206.01 75,379.94
3. Operating profit (“-” for loss) 1,004,846,984.15 1,998,339,298.26
Add: Non-operating income 2,204,522.71 2,297,869.41
Less: Non-operating expenses 713,926.50 7,429,745.23
4. Profit before income tax expenses (“-” for loss) 1,006,337,580.36 1,993,207,422.44
Less: Income tax expenses 162,728,946.02 110,659,828.94
5. Net profit (“-” for net loss) 843,608,634.34 1,882,547,593.50
5.1 Classified by continuity of operations
5.1.1 Net profit from continuing operations (“-” for net
843,608,634.34 1,882,547,593.50
loss)
5.1.2 Net profit from discontinued operations (“-” for
net loss)
5.2 Classified by ownership of the equity
5.2.1 Net profit attributable to shareholders of the
853,717,855.65 1,699,736,123.46
Company
5.2.2 Net profit attributable to non-controlling interests -10,109,221.31 182,811,470.04
6. Other comprehensive income, net of tax -11,218,110.68 10,361,892.43
Other comprehensive income attributable to shareholders
-11,218,110.68 10,380,760.96
of the Company, net of tax
6.1 Other comprehensive income that will not be
-2,500,000.00
reclassified subsequently to profit or loss
6.1.1 Changes caused by remeasurement of
defined benefit pension schemes
6.1.2 Share of the other comprehensive income
of the investee accounted for using equity method that will
not be reclassified subsequently to profit or loss
6.1.3 Changes in fair value of other equity
-2,500,000.00
investments
6.1.4 Changes in the fair value of the company's
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
48
own credit risk
6.1.5 Others
6.2 Other comprehensive income that will be
-8,718,110.68 10,380,760.96
reclassified subsequently to profit or loss
6.2.1 Share of the other comprehensive income
of the investee accounted for using equity method that will
be reclassified subsequently to profit or loss
6.2.2 Changes in fair value of other equity
investments
6.2.3 Other comprehensive income arising from
the reclassification of financial assets
6.2.4 Allowance for credit impairments in other
debt investments
6.2.5 Cash flow hedge reserve
6.2.6 Exchange differences on translation of
-8,718,110.68 10,380,760.96
foreign currency financial statements
6.2.7 Others
Other comprehensive income attributable to
-18,868.53
non-controlling interests, net of tax
7. Total comprehensive income 832,390,523.66 1,892,909,485.93
Total comprehensive income attributable to
842,499,744.97 1,710,116,884.42
shareholders of the Company
Total comprehensive income attributable to
-10,109,221.31 182,792,601.51
non-controlling interests
8. Earnings per share:
8.1 Basic earnings per share 0.39 0.80
8.2 Diluted earnings per share 0.39 0.80
Where business combinations under common control occurred in the current period, the net profit achieved by the acquirees
before the combinations was RMB0.00, with the amount for the same period of last year being RMB0.00.
Legal representative: Li Weiwei Chief Financial Officer: Ye Wei
Board Secretary: Ye Wei
4. Income Statement of the Company
Unit: RMB
Item H1 2021 H1 2020
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
49
1. Operating revenue 0.00 0.00
Less: Cost of sales 0.00 0.00
Taxes and surcharges 30,644.49 21,933.20
Distribution and selling expenses
General and administrative expenses 6,139,344.71 2,375,644.75
Research and development expenses
Financial expenses -4,741,019.01 389,882.06
Including: Interest expense 2,429,147.82
Interest income 7,162,870.38 810.35
Add: Other income 4,634,292.84 439,106.01
Investments income (“-” for loss) 43,717,534.24 -714,419.97
Including: Share of profits and losses of joint ventures and
-714,419.97
associates
Gain on derecognition of financial assets
measured at amortised cost (“-” for loss)
Net gain on exposure hedges (“-” for loss)
Gain on changes in fair value (“-” for loss) 1,752,876.71
Impairment loss on credit (“-” for loss) 10,000.00 44,468.66
Impairment loss on assets (“-” for loss)
Gain on disposal of assets (“-” for loss)
2. Operating profit (“-” for loss) 48,685,733.60 -3,018,305.31
Add: Non-operating income 0.63
Less: Non-operating expenses
3. Profit before income tax expenses (“-” for loss) 48,685,733.60 -3,018,304.68
Less: Income tax expenses
4. Net profit (“-” for net loss) 48,685,733.60 -3,018,304.68
4.1 Net profit from continuing operations (“-” for net loss) 48,685,733.60 -3,018,304.68
4.2 Net profit from discontinued operations (“-” for net loss)
5. Other comprehensive income, net of tax
5.1 Other comprehensive income that will not be reclassified
subsequently to profit or loss
5.1.1 Changes caused by remeasurement of defined
benefit pension schemes
5.1.2 Share of the other comprehensive income of the
investee accounted for using equity method that will not be
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
50
reclassified subsequently to profit or loss
5.1.3 Changes in fair value of other equity investments
5.1.4 Changes in the fair value of the company's own
credit risk
5.1.5 Others
5.2 Other comprehensive income that will be reclassified
subsequently to profit or loss
5.2.1 Share of the other comprehensive income of the
investee accounted for using equity method that will be reclassified
subsequently to profit or loss
5.2.2 Changes in fair value of other equity investments
5.2.3 Other comprehensive income arising from the
reclassification of financial assets
5.2.4 Allowance for credit impairments in other debt
investments
5.2.5 Cash flow hedge reserve
5.2.6 Exchange differences on translation of foreign
currency financial statements
5.2.7 Others
6. Total comprehensive income 48,685,733.60 -3,018,304.68
7. Earnings per share:
7.1 Basic earnings per share
7.2 Diluted earnings per share
5. Consolidated Cash Flow Statement
Unit: RMB
Item H1 2021 H1 2020
1. Cash flows from operating activities:
Cash received from the sales of goods or rendering services 7,676,444,468.63 8,468,127,558.75
Net increase in customer deposits and interbank deposits
Net increase in loans from the central bank
Net increase in loans from other financial institutions
Premiums received on original insurance contracts
Net proceeds from reinsurance
Net increase in deposits and investments of policy holders
Interest, handling charges and commissions received
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
51
Net increase in loans from other banks
Net increase in proceeds from repurchase transactions
Net proceeds from acting trading of securities
Refunds of taxes and levies 6,041,391.30 6,317,294.49
Cash received relating to other operating activities 96,901,049.99 106,875,881.05
Sub-total of cash inflows from operating activities 7,779,386,909.92 8,581,320,734.29
Cash paid for purchases of goods and services 1,263,433,673.37 1,036,250,684.73
Net increase in loans and advances to customers
Net increase in deposits in the central bank and other banks and
financial institutions
Payments for claims on original insurance contracts
Net increase in loans to other banks
Interest, handling charges and commissions paid
Policy dividends paid
Cash paid to and on behalf of employees 930,199,318.50 580,145,971.94
Payments of taxes and levies 176,556,465.72 196,576,891.94
Cash paid relating to other operating activities 4,155,278,299.87 4,318,120,638.78
Sub-total of cash outflows used in operating activities 6,525,467,757.46 6,131,094,187.39
Net cash flows from operating activities 1,253,919,152.46 2,450,226,546.90
2. Cash flows from investing activities:
Cash received from disposal of investments 258,995,260.75 224,285,017.49
Cash received from investment income 53,461,764.70 53,388,661.32
Cash received from disposal of fixed assets, intangible assets and
691,899.95 614,635.00
other long-term assets
Net cash received from disposal of subsidiaries and other
business units
Cash received relating to other investing activities 2,157,163,728.00 4,678,500,000.00
Sub-total of cash inflows from investing activities 2,470,312,653.40 4,956,788,313.81
Cash paid for acquisition of fixed assets, intangible assets and
148,350,121.61 968,397,533.12
other long-term assets
Cash paid to acquire investments 361,478,743.09 86,020,569.50
Net increase in pledged loans granted
Net cash paid for the acquisition of subsidiaries and other
4,650,000.00
business units
Cash paid relating to other investing activities 2,791,497,900.00 4,854,790,000.00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
52
Sub-total of cash outflows used in investing activities 3,305,976,764.70 5,909,208,102.62
Net cash flows from/used in investing activities -835,664,111.30 -952,419,788.81
3. Cash flows from financing activities:
Cash received from capital contributions 2,980,232,843.10
Including: Cash received from capital contributions by
76,700,000.00
non-controlling interests of subsidiaries
Cash received from borrowings 247,468,500.00
Cash received relating to other financing activities 889,324,326.07
Sub-total of cash inflows from financing activities 3,227,701,343.10 889,324,326.07
Cash repayments of borrowings 889,324,326.07 281,176,106.33
Cash paid for interest and dividends 9,562,304.72 788,329,296.95
Including: Dividends paid by subsidiaries to non-controlling
120,000,000.00
interests
Cash paid relating to other financing activities 591,315,699.76
Sub-total of cash outflows used in financing activities 1,490,202,330.55 1,069,505,403.28
Net cash flows from/used in financing activities 1,737,499,012.55 -180,181,077.21
4. Effect of foreign exchange rate changes on cash and cash
-2,225,471.71 10,777,687.85
equivalents
5. Net increase/decrease in cash and cash equivalents 2,153,528,582.00 1,328,403,368.73
Add: Cash and cash equivalents at beginning of the period 1,774,081,508.55 2,135,260,406.77
6. Cash and cash equivalents at end of the period 3,927,610,090.55 3,463,663,775.50
6. Cash Flow Statement of the Company
Unit: RMB
Item H1 2021 H1 2020
1. Cash flows from operating activities:
Cash received from the sales of goods or rendering services
Refunds of taxes and levies
Cash received relating to other operating activities 599,338,422.69 650,095,006.21
Sub-total of cash inflows from operating activities 599,338,422.69 650,095,006.21
Cash paid for purchases of goods and services
Cash paid to and on behalf of employees 961,537.33 545,424.75
Payments of taxes and levies 2,178,758.00 21,933.20
Cash paid relating to other operating activities 2,370,904,582.14 1,016,292,709.85
Sub-total of cash outflows used in operating activities 2,374,044,877.47 1,016,860,067.80
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
53
Net cash flows from/used in operating activities -1,774,706,454.78 -366,765,061.59
2. Cash flows from investing activities:
Cash received from disposal of investments
Cash received from investment income 1,043,717,534.24 1,000,000,000.00
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
Cash received relating to other investing activities 550,000,000.00
Sub-total of cash inflows from investing activities 1,593,717,534.24 1,000,000,000.00
Cash paid for acquisition of fixed assets, intangible assets and
other long-term assets
Cash paid to acquire investments 568,434,240.00
Net cash paid for the acquisition of subsidiaries and other
business units
Cash paid relating to other investing activities 1,300,000,000.00
Sub-total of cash outflows used in investing activities 1,868,434,240.00
Net cash flows from/used in investing activities -274,716,705.76 1,000,000,000.00
3. Cash flows from financing activities:
Cash received from capital contributions 2,903,532,843.10
Cash received from borrowings 150,000,000.00
Cash received relating to other financing activities
Sub-total of cash inflows from financing activities 3,053,532,843.10
Cash repayments of borrowings
Cash paid for interest and dividends 2,311,666.67 633,675,509.10
Cash paid relating to other financing activities
Sub-total of cash outflows used in financing activities 2,311,666.67 633,675,509.10
Net cash flows from/used in financing activities 3,051,221,176.43 -633,675,509.10
4. Effect of foreign exchange rate changes on cash and cash
equivalents
5. Net increase/decrease in cash and cash equivalents 1,001,798,015.89 -440,570.69
Add: Cash and cash equivalents at beginning of the period 274,246.17 765,545.81
6. Cash and cash equivalents at end of the period 1,002,072,262.06 324,975.12
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
54
7. Consolidated Statement of Changes in Shareholders’ Equity
H1 2021
Unit: RMB
H1 2021
Equity attributable to shareholders of the Company
Other equity
instruments
Less:
Pre Per Speci Surplu Gener Total
Item Treas Other Non-controlli
Capital al s al risk Retained Other shareholders'
fer pet ng interests
Share capital Ot ury comprehensive Sub-total
reserves reser reserv reserv earnings s equity
red ual
her shar income
sh bo ves es es
s es
are nd
s s
1. Balance as at the 2,112,251,69 114,693,519. 28,068,077.7
-149,074,272.37 3,959,512,681.41 6,037,383,625.95 6,065,451,703.73
end of prior year 7.00 91 8
Add:
Adjustments for
-3,040,560.81 -3,040,560.81 -2,224.58 -3,042,785.39
changed accounting
policies
Adjustments for
corrections of
previous errors
Adjustments for
business
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
55
combinations under
common control
Others
2. Balance as at 2,112,251,69 114,693,519. 28,065,853.2
-149,074,272.37 3,956,472,120.60 6,034,343,065.14 6,062,408,918.34
beginning of year 7.00 91 0
3. Increase/
4,868,
decrease in the 105,612,584. 2,838,552,12 66,590,778.6
-11,218,110.68 573.3 405,276,426.09 3,343,091,597.23 3,409,682,375.92
period (“-” for 00 4.46 9
6
decrease)
3.1 Total
-10,109,221.
comprehensive -11,218,110.68 853,717,855.65 842,499,744.97 832,390,523.66
31
income
3.2 Capital
contribution and 105,612,584. 2,838,552,12 76,700,000.0
2,944,164,708.46 3,020,864,708.46
withdrawal by 00 4.46 0
shareholders
3.2.1 Common
shares contribution 105,612,584. 2,795,939,09 76,700,000.0
2,901,551,679.73 2,978,251,679.73
and withdrawal by 00 5.73 0
shareholders
3.2.2 Capital
contribution and
withdrawal by
holders of other
equity instruments
3.2.3 Share-based 42,613,028.7
42,613,028.73 42,613,028.73
payments included 3
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
56
in shareholders’
equity
3.2.4 Others
4,868,
3.3 Profit
573.3 -448,441,429.56 -443,572,856.20 -443,572,856.20
distribution
6
4,868,
3.3.1 Appropriation
573.3 4,868,573.36 4,868,573.36
to surplus reserves
6
3.3.2 Appropriation
to general risk
reserves
3.3.3 Distribution to
-448,441,429.56 -448,441,429.56 -448,441,429.56
shareholders
3.3.4 Others
3.4 Internal
transfers within
shareholders’
equity
3.4.1 Capital
reserves transferred
into capital (or
share capital)
3.4.2 Surplus
reserves transferred
into capital (or
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
57
share capital)
3.4.3 Surplus
reserves for making
up losses
3.4.4 Changes in
defined benefit
pension schemes
transferred into
retained earnings
3.4.5 Other
comprehensive
income transferred
into retained
earnings
3.4.6 Others
3.5 Special reserves
3.5.1 Increase in the
period
3.5.2 Used in the
period
3.6 Others
4,868,
4. Balance as at the 2,217,864,28 2,953,245,64 94,656,631.8
-160,292,383.05 573.3 4,361,748,546.69 9,377,434,662.37 9,472,091,294.26
end of the period 1.00 4.37 9
6
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
58
H1 2020
Unit: RMB
H1 2020
Equity attributable to shareholders of the Company
Other equity
instruments Less:
Spec Non-contr
Item Trea Total shareholders'
Pre Per Capital Other General
Share ial olling
ferr pet Ot reserve sury comprehensi Surplus reserves risk Retained earnings Others Sub-total equity
capital reser interests
ed ual her s shar ve income reserves
ves
sha bo s es
res nds
1. Balance as at the 2,112,251 73,153, -94,582,500. 7,029,307,859.0 264,400,74
227,390,965.90 4,711,093,895.82 7,293,708,603.53
end of prior year ,697.00 800.49 13 8 4.45
Add:
Adjustments for
changed
accounting policies
Adjustments for
corrections of
previous errors
Adjustments for
business
combinations
under common
control
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
59
Others
2. Balance as at 2,112,251 73,153, -94,582,500. 7,029,307,859.0 264,400,74
227,390,965.90 4,711,093,895.82 7,293,708,603.53
beginning of year ,697.00 800.49 13 8 4.45
3. Increase/
decrease in the 83,785, 10,380,760.9 1,160,226,655.5 66,740,026
1,066,060,614.36 1,226,966,682.51
period (“-” for 280.26 6 8 .93
decrease)
3.1 Total
10,380,760.9 1,710,116,884.4 182,792,60
comprehensive 1,699,736,123.46 1,892,909,485.93
6 2 1.51
income
3.2 Capital
contribution and 83,785, 3,947,425.
83,785,280.26 87,732,705.68
withdrawal by 280.26 42
shareholders
3.2.1 Common
shares
contribution and
withdrawal by
shareholders
3.2.2 Capital
contribution and
withdrawal by
holders of other
equity instruments
3.2.3 Share-based
83,785, 3,947,425.
payments included 83,785,280.26 87,732,705.68
280.26 42
in shareholders’
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
60
equity
3.2.4 Others
3.3 Profit -120,000,0
-633,675,509.10 -633,675,509.10 -753,675,509.10
distribution 00.00
3.3.1
Appropriation to
surplus reserves
3.3.2
Appropriation to
general risk
reserves
3.3.3 Distribution -120,000,0
-633,675,509.10 -633,675,509.10 -753,675,509.10
to shareholders 00.00
3.3.4 Others
3.4 Internal
transfers within
shareholders’
equity
3.4.1 Capital
reserves
transferred into
capital (or share
capital)
3.4.2 Surplus
reserves
transferred into
capital (or share
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
61
capital)
3.4.3 Surplus
reserves for
making up losses
3.4.4 Changes in
defined benefit
pension schemes
transferred into
retained earnings
3.4.5 Other
comprehensive
income transferred
into retained
earnings
3.4.6 Others
3.5 Special
reserves
3.5.1 Increase in
the period
3.5.2 Used in the
period
3.6 Others
156,93
4. Balance as at the 2,112,251 -84,201,739. 8,189,534,514.6 331,140,77
9,080.7 227,390,965.90 5,777,154,510.18 8,520,675,286.04
end of the period ,697.00 17 6 1.38
5
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
62
8. Statement of Changes in Shareholders’ Equity of the Company
H1 2021
Unit: RMB
H1 2021
Other equity
instruments Less:
Other
Item Treasu Special Surplus Total shareholders'
Prefe Perp
Share capital Capital reserves comprehensive Retained earnings Others
rred etual Othe ry reserves reserves equity
income
shar bond rs shares
es s
1. Balance as at the 2,112,251,697.
3,759,929,582.87 -60,000,000.00 442,062,200.17 1,160,408,295.15 7,414,651,775.19
end of prior year 00
Add:
Adjustments for
changed accounting
policies
Adjustments for
corrections of
previous errors
Others
2. Balance as at 2,112,251,697.
3,759,929,582.87 -60,000,000.00 442,062,200.17 1,160,408,295.15 7,414,651,775.19
beginning of year 00
3. Increase/ decrease 105,612,584.0
2,838,552,124.46 4,868,573.36 -399,755,695.96 2,549,277,585.86
in the period (“-” for 0
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
63
decrease)
3.1 Total
comprehensive 48,685,733.60 48,685,733.60
income
3.2 Capital
contribution and 105,612,584.0
2,838,552,124.46 2,944,164,708.46
withdrawal by 0
shareholders
3.2.1 Common
shares contribution 105,612,584.0
2,795,939,095.73 2,901,551,679.73
and withdrawal by 0
shareholders
3.2.2 Capital
contribution and
withdrawal by
holders of other
equity instruments
3.2.3 Share-based
payments included in 42,613,028.73 42,613,028.73
shareholders’ equity
3.2.4 Others
3.3 Profit
4,868,573.36 -448,441,429.56 -443,572,856.20
distribution
3.3.1 Appropriation
4,868,573.36 -4,868,573.36
to surplus reserves
3.3.2 Distribution to -443,572,856.20 -443,572,856.20
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
64
shareholders
3.3.3 Others
3.4 Internal transfers
within shareholders’
equity
3.4.1 Capital reserves
transferred into
capital (or share
capital)
3.4.2 Surplus
reserves transferred
into capital (or share
capital)
3.4.3 Surplus
reserves for making
up losses
3.4.4 Changes in
defined benefit
pension schemes
transferred into
retained earnings
3.4.5 Other
comprehensive
income transferred
into retained
earnings
3.4.6 Others
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
65
3.5 Special reserves
3.5.1 Increase in the
period
3.5.2 Used in the
period
3.6 Others
4. Balance as at the 2,217,864,281.
6,598,481,707.33 -60,000,000.00 446,930,773.53 760,652,599.19 9,963,929,361.05
end of the period 00
H1 2020
Unit: RMB
H1 2020
Other equity
instruments
Pref Perp Less: Other Special
Item Total shareholders'
Share capital erre etua Capital reserves Treasury comprehensiv reserv Surplus reserves Retained earnings Others
Oth equity
d l shares e income es
ers
shar bon
es ds
1. Balance as at the 2,112,251,697
3,622,063,902.37 -52,759,111.69 340,080,723.42 1,509,926,022.61 7,531,563,233.71
end of prior year .00
Add:
Adjustments for
changed
accounting policies
Adjustments for
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
66
corrections of
previous errors
Others
2. Balance as at 2,112,251,697
3,622,063,902.37 -52,759,111.69 340,080,723.42 1,509,926,022.61 7,531,563,233.71
beginning of year .00
3. Increase/
decrease in the
87,732,705.68 -636,693,813.78 -548,961,108.10
period (“-” for
decrease)
3.1 Total
comprehensive -3,018,304.68 -3,018,304.68
income
3.2 Capital
contribution and
87,732,705.68 87,732,705.68
withdrawal by
shareholders
3.2.1 Common
shares contribution
and withdrawal by
shareholders
3.2.2 Capital
contribution and
withdrawal by
holders of other
equity instruments
3.2.3 Share-based
87,732,705.68 87,732,705.68
payments included
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
67
in shareholders’
equity
3.2.4 Others
3.3 Profit
-633,675,509.10 -633,675,509.10
distribution
3.3.1 Appropriation
to surplus reserves
3.3.2 Distribution
-633,675,509.10 -633,675,509.10
to shareholders
3.3.3 Others
3.4 Internal
transfers within
shareholders’
equity
3.4.1 Capital
reserves
transferred into
capital (or share
capital)
3.4.2 Surplus
reserves
transferred into
capital (or share
capital)
3.4.3 Surplus
reserves for making
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
68
up losses
3.4.4 Changes in
defined benefit
pension schemes
transferred into
retained earnings
3.4.5 Other
comprehensive
income transferred
into retained
earnings
3.4.6 Others
3.5 Special reserves
3.5.1 Increase in
the period
3.5.2 Used in the
period
3.6 Others
4. Balance as at the 2,112,251,697
3,709,796,608.05 -52,759,111.69 340,080,723.42 873,232,208.83 6,982,602,125.61
end of the period .00
Should there be any discrepancy between the English version and the Chinese version of this Report, the Chinese version shall prevail.
69
