Wuhu 37 Interactive Entertainment Network
Technology Group Co., Ltd.
2020 Interim Report
August 2020
Part I Important Notes, Table of Contents and DefinitionsThe Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,supervisors and senior management of Wuhu 37 Interactive Entertainment Network TechnologyGroup 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 severallyliable for any misrepresentations, misleading statements or material omissions therein.
Li Weiwei, the Company’s legal representative, and Ye Wei, the Company’s Chief FinancialOfficer & Board Secretary, hereby guarantee that the financial statements carried in this Reportare truthful, accurate and complete.
All the Company’s directors have attended the Board meeting for the review of this Report.
Possible risks facing the Company and countermeasures have been detailed in “X RisksFacing the Company and Countermeasures” under “Part IV Operating Performance Discussionand Analysis” herein, which investors are kindly reminded to pay attention to.
The Company is subject to the disclosure requirements for listed companies engaged insoftware and IT services.
The Board has approved an interim dividend plan as follows: based on 2,112,251,697 shares,a cash dividend of RMB 3 (tax inclusive) per 10 shares is planned to be distributed to all theshareholders of the Company, with no bonus issue from either profit or capital reserves.
Table of Contents
Part I Important Notes, Table of Contents and Definitions ...... 2
Part II Corporate Information and Key Financial Information ...... 5
Part III Business Summary ...... 8
Part IV Operating Performance Discussion and Analysis ...... 13
Part V Significant Events ...... 34
Part VI Share Changes and Shareholder Information ...... 37
Part VII Financial Statements ...... 40
Definitions
Term
| Term | Definition |
| CSRC | China Securities Regulatory Commission |
| SZSE/the Stock Exchange | Shenzhen Stock Exchange |
| Company/ the Company/ the Listed Company/ 37 Interactive Entertainment | Wuhu Shunrong Auto Parts Co., Ltd./Wuhu Shunrong Sanqi Interactive Entertainment Network 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 | Articles of Association of Wuhu Shunrong Auto Parts Co., Ltd./Articles of Association of Wuhu 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 2020 to 30 June 2020 |
| Period-end/end of the Reporting Period | 30 June 2020 |
| Browser games | Clientless or browser kernel-based micro-client games that are based on web development technologies and utilize standard protocols as basic transmission modes. Game users can play browser games directly through an Internet browser |
| Mobile games | Games that are downloaded via mobile network and run on mobile phones or other mobile terminals |
| RPG | Role playing game |
| ARPG | Action role playing game |
| SLG | Strategy game |
| STG | Shooting game |
| MMO | Massive Multiplayer Online |
| MOBA | Multiplayer Online Battle Arena |
| Chengdu Pengwan Technology Co., Ltd. | Chengdu Pengwan Technology Co., Ltd. and its subsidiaries |
| Wangzhong Investment | ZhangshuWangzhong Investment Management Center (Limited Partnership) |
| Zengame Technology | Zengame Technology Holding Limited and its business entities |
| X.D.Network | XD Inc. and its business entities |
| Jiangsu Aurora/Aurora Network/Jiangsu Aurora Network | Jiangsu Aurora Network Technology Co., Ltd. |
| Guangzhou 37 | Guangzhou 37 Network Technology Co., Ltd. |
Part II Corporate Information and Key Financial InformationI Corporate Information
Stock name
| 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 any) | WUHU 37 INTERACTIVE ENTERTAINMENT NETWORK TECHNOLOGY GROUP CO.,LTD. | ||
| Legal representative | Li Weiwei | ||
II Contact Information
| Board Secretary | Securities Affairs Representative | |
| Name | Ye Wei | Wang Sijie |
| Office address | 11/F, Creative Advertising Complex, Wuhu Advertising Industrial Park, Middle Beijing Road, Jiujiang District, Wuhu City, Anhui Province | 11/F, Creative Advertising Complex, Wuhu Advertising Industrial Park, Middle Beijing Road, 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 addressand 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 2019 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’speriodic 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
Company’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said information canbe found in the 2019 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 Amendments to the Articles of Association was approved at the 12th Meeting of the Fifth Board of Directors on 29April 2020 and later at the First Extraordinary General Meeting of Shareholders of 2020 on 15 May 2020. As such, the business termof the Company has been changed to “permanent” and its name in English to “WUHU 37 INTERACTIVE ENTERTAINMENT NETWORKTECHNOLOGY GROUP CO.,LTD.”. 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 2020 | H1 2019 | Change (%) | |
| Operating revenue (RMB) | 7,988,675,195.57 | 6,070,957,503.06 | 31.59% |
| Net profit attributable to the Listed Company’s shareholders (RMB) | 1,699,736,123.46 | 1,033,074,405.38 | 64.53% |
| Net profit attributable to the Listed Company’s shareholders after deducting non-recurring profits and losses (RMB) | 1,464,942,321.24 | 949,369,446.08 | 54.31% |
| Net cash flows from operating activities (RMB) | 2,450,226,546.90 | 616,354,936.37 | 297.53% |
| Basic earnings per share (RMB/share) | 0.80 | 0.49 | 63.27% |
| Diluted earnings per share (RMB/share) | 0.80 | 0.49 | 63.27% |
| Weighted average return on equity (%) | 22.05% | 16.31% | 5.74% |
| 30 June 2020 | 31 December 2019 | Change (%) | |
| Total assets (RMB) | 12,470,434,893.08 | 10,145,259,855.73 | 22.92% |
| Equity attributable to the Listed Company’s shareholders (RMB) | 8,189,534,514.66 | 7,029,307,859.08 | 16.51% |
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
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
| Items | Amount | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 75,379.94 | |
| Government grants through profit or loss (exclusive of government grants given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) | 49,692,383.85 | Mainly due to refund of value-addad tax and government grants other than super-deduction in the calculation of taxable amount for VAT |
| Gain or loss on fair-value changes on trading and derivative financial assets and liabilities & income from disposal of trading and derivative financial assets and liabilities and other debt investments (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) | 206,999,039.68 | |
| Non-operating income and expenses other than the above | -5,127,802.70 | |
| Less: Income tax effects | 12,310,377.16 | |
| Non-controlling interests effects (net of tax) | 4,534,821.39 | |
| Total | 234,793,802.22 | -- |
Explanation of why the Company reclassifies as recurrent an non-recurring profits and losses item defined or listed in theExplanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurringprofits and losses Items:
□ Applicable √ Not applicable
No such cases for the Reporting Period.
Part III Business SummaryI Principal Activity of the Company in the Reporting Period
The Company is required to comply with the disclosure requirements of the SZSE Industrial Information Disclosure Guide No.12—Listed Companies Engaged in Software and IT Services.
During the Reporting Period, the Company focused on cultural and creative businesses based on the development, publishing,and operation of mobile and browser games, as well as the development in segments such as film and television, music, anime, VR,cultural health, e-learning for children, and social entertainment. As a top performer in the industry, the Company steadilyadvanced its development strategy of "boutiqueization, diversification, platformization and globalization".During the Reporting Period, the Company achieved robust performance growth and recorded operating revenue ofRMB7,989 million, with a year-over-year (YoY) increase of 31.59%; a profit before income tax expenses of RMB1,993 million, up by
54.41% YoY; and a net profit attributable to the Listed Company’s shareholders of RMB1,700 million, rising by 64.53% YoY. Theabove growth was mainly attributable to a YoY growth of 36.59% in mobile games in the first half of 2020.
1. Changes in industry-related economic situation and their impacts on the Company
China's game market has developed rapidly. In accordance with the 2019-2020 Report on the Competitiveness of Listed GameEnterprises issued by Gamma Data, China's gaming industry has grown quickly since 2019, especially in the first half of 2020. Theactual sales revenue of the mobile game market accounted for 75.7% of the Chinese game market in 2020. According to the ChinaMobile Games Annual Market Comprehensive Analysis 2020 H1 released by Analysys, 37 Interactive Entertainment’s market sharein domestic mobile games publishing has further risen to 10.51%.
The competition landscape of the gaming industry has changed. In the first half of 2020, on the one hand, the industry'sattention was increasingly concentrated on top games and leading manufacturers, suggesting a prominent "head" effect in theindustry. On the other hand, players were posing higher requirements for online games, which had substantially raised thethreshold of game development and barriers to competition. Top game companies embracing strengths in the R&D and publishingof quality products and operation are more likely to benefit from the new situation.
The Company furthered the strategy of "integration of R&D and operation". During the Reporting Period, the Company kept itsleading role in R&D capabilities by raising R&D investments and strengthened the output of quality games. Moreover, it advancedthe "diversification" strategy from the aspects of R&D and publishing, and reserved varied quality games on different themesthrough independent development, investment in R&D-oriented companies, and enhanced cooperation with developers capable ofproducing quality games. In addition, the Company, through independently developed AI systems, consolidated refined operation,prolonged the life cycle of quality games, improved operation efficiency, and gave full play to the "integration of R&D andoperation" model.
2. Changes in industrial policy environment and their impacts on the Company
(1) An important article of General Secretary Xi Jinping entitled Speech on COVID-19 Prevention and Control at Meeting ofStanding Committee of Political Bureau of CPC Central Committee was published in Qiushi 2020 Issue 4 on February 16, 2020. Thearticle stressed that, "Great efforts shall be exerted to stabilize consumer spending. Expanding consumption is one of the crucialmethods to offset the impact of the epidemic. China will accelerate the release of emerging consumption potential, vigorouslyenrich the application scenarios of 5G technology, push the end-consumer market including 5G mobiles, and promote consumption
in e-commerce, e-government affairs, online education, and Internet-based entertainment." Further promotion of 5G technologywill bring opportunities for new growth to the online gaming industry.Furthermore, the overall operation of cloud gaming was made based on R&D strengths. During the Reporting Period, theCompany leveraged on its R&D strengths to actively reserve cloud gaming technologies, including building internal cloud andproviding computing and network supports for cloud gaming; developing a universal framework covering user interaction, videodecoding, and cloud server communication to support the universal light Apps for cloud gaming; and developing ads based ongame demos integrating game demos based on the cloud gaming service framework for promotion.
(2) In June 2020, the 20th Meeting of the Standing Committee of the 13th National People's Congress ("NPC") reviewed theSecond Reading Draft of the Law on the Protection of Minors ("Draft Revisions"). The Second Reading Draft planned to strengthenjuvenile protection online, required to build a unified online game electronic authentication system for minors nationwide, andspecified the online game service time for minors. Besides, it asked Internet service providers ("ISPs") to enhance user andinformation management and timely adopt appropriate measures to control illegal information or criminal offenses againstjuveniles. Meanwhile, the Second Reading Draft specified penalties for ISPs who fail to fulfill obligations, such as anti-addiction andanti-cyberbully obligations.The Company promoted the standardized development of the industry. During the Reporting Period, 37 InteractiveEntertainment fully upgraded the "real-name registration and anti-addiction system for minors" and launched it on all itsindependent operation online games (including browser and mobile games) early this year. Additionally, the Company addedcontents applicable to children to its Privacy Policy in line with the user habits of juveniles under 14 years old and their guardians. Itcontributed to turning China's gaming industry more standardized by actively participating in the compilation of group standardsfor the gaming industry led by the China Audio-video and Digital Publishing Association ("CADPA"), such as the Specifications onAge Ratings of Online Games, the Specifications on Parent Monitoring Platforms, and Online Game Terminology.
(3) In July 2020, the General Office of the State Council issued the Legislative Work Plan of the State Council for 2020(hereinafter referred to as the "Plan"). The Plan mentioned that the Standing Committee of the NPC would be invited to review theCultural Industry Promotion Law (Draft). Previously, the Ministry of Justice published a notice to solicit public opinions on theCultural Industry Promotion Law of the People’s Republic of China (Draft for Review) in December 2019, which determined toinvest more resources in the three key processes, namely, creation and production, cultural enterprises, and the cultural market,and support talent, technology, finance, and taxation. The formulation of the "Cultural Industry Promotion Law" reflected theimportance attached by China to cultural industry development. The Cultural Industry Promotion Law will serve as significantguidance to cultural industry development direction and drive high-quality development of the cultural industries of China.
37 Interactive Entertainment facilitated the diffusion of traditional Chinese culture. Recently, China has become the largestonline gaming market around the world. Chinese games have become a vital cultural carrier to "tell Chinese stories". 37 InteractiveEntertainment, engaging in cultural industries, has centered on the games business, earnestly expanded its business presence tofilm and television, anime, and music, and paid close attention to innovative development and talent cultivation. Over the past twoyears, it endeavored to promote overseas business, and took advantage of its experience, strengths, and the cultural carrier ofgames to facilitate the diffusion of traditional Chinese culture.
3. Main businesses and business models of the Company
During the Reporting Period, the Company's main businesses included the development, publishing, and operation of mobilegames and browser games. The operating modes of the Company’s mobile games and browser games mainly include independentoperation 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 fullyresponsible for the operation, promotion and maintenance of the games; providing unified management services for onlinepromotion, online customer service and top-up payment; and updating games along with game developers based on the real-timefeedback of users and games.Under the third-party joint operation mode, the Company cooperates with one or more game operators or game applicationplatforms to jointly operate games. And the aforesaid parties are responsible for the management of their own channels, includingoperation, promotion, the recharge and charge system, while the Company provides technical support services for third partiesalong with game developers.II Significant Changes in Major Assets
1. Significant Changes in Major Assets
Major assets
| Major assets | Main reason for significant changes |
| Equity assets | No significant change in equity assets |
| Fixed assets | The ending balance of fixed assets increased 1853.66%, or RMB873 million, compared to the beginning balance, primarily driven by the transfer of office building from construction in progress to fixed assets. |
| Intangible assets | No significant change in intangible assets |
| Construction in progress | The ending balance of construction in progress decreased 100.00%, or RMB797 million, compared to the beginning balance, primarily driven by the transfer of office building from construction in progress to fixed assets. |
| Monetary funds | The ending balance of monetary funds increased 61.52%, or RMB1,324 million, compared to the beginning balance, primarily driven by the increase in revenue, including a year-over-year increase of RMB1,834 million in net cash flows from operating activities. |
| Other current assets | The ending balance of other current assets increased 36.11%, or RMB45 million, compared to the beginning balance, primarily driven by the combined effects of the increase in term deposits held in bank and of the decrease in overpaid and pending VAT. |
| Other non-current assets | The ending balance of other non-current assets increased 308.82%, or RMB837 million, compared to the beginning balance, primarily driven by the payment made in the Reporting Period for acquisition of land use rights together with the relevant tax and fees. |
2. Major Assets Overseas
□ Applicable √ Not applicable
III Core Competitiveness AnalysisDuring the Reporting Period, the Company steadily promoted the development strategy of "boutiqueization, diversification,platformization and globalization" and formed the following core competitiveness:
1. Industry-leading R&D strength
The Company is ranked among the top in terms of R&D strengths. It has always emphasized R&D investments and talentcultivation. Particularly, R&D investments increased significantly during the Reporting Period. Meanwhile, the Company'sindependently developed products are characterized by high output, a high success rate and a long period, and center on"boutiqueization and diversification". During the Reporting Period, a number of independently developed quality games, such asYong Heng Ji Yuan (永恒纪元) and Swords of Archangels H5 (大天使之剑H5), have achieved steady gross billing in the marketsafter being launched for more than one year.
(1) Prominent YoY increase in R&D investments
The Company’s R&D investments amounted to RMB645 million during the Reporting Period, up by 102.48% YoY. It expandedfrom product upgrading to talent cultivation, established a training system for young employees, and embraced employee diversity.Moreover, the Company encouraged innovation by employees, welcomed employees with diversified backgrounds, and strove toprovide global players with more quality content.
(2) "Boutiqueization and diversification" of independently developed products
First, the "boutiqueization" strategy greatly improved the R&D success rate. The "boutiqueization" strategy runs through theentire life cycle of the Company's independently developed products. Before the launch of games, the Company carefully workedout details regarding product planning, art quality, music effects, etc.; after the launch of games, the Company continued to investin product iteration, process optimization, user experience and other aspects to ensure high gross billing and a long life cycle ofgames. In the meantime, its independently developed AI systems assisted in producing "quality games". The Company offeredprecise reference value for the design of new products and iteration and optimization of existing products, improved productdevelopment and procedure optimization, and substantially enhanced product experience, by analyzing and studying theenormous data accumulated with the two independently developed AI ad systems, i.e. "Quantum" and "Destiny", as well as thethree platform-based big data products—"Athena", "Ares", and "Poseidon".
Second, the Company made breakthroughs in the "diversification" strategy. During the Reporting Period, the Company's R&Dteam, based on its R&D strengths in ARPGs, expanded its game categories to card games and SLGs. It will continue innovation indiversified aspects, including product types, themes, art performance, and gameplay. The main products developed during theReporting Period were mobile games like Code Xiu Xian (代号修仙) and Code DL (代号DL). With its profound experience andcontinuous innovation, the Company is expected to continue to produce long-life-cycle quality games that surpass Yong Heng JiYuan (永恒纪元) and Swords of Archangels (大天使之剑).
2. Excellent publishing strength
Publishing capabilities were enhanced. The Company constantly promoted the "boutiqueization, diversification andplatformization" strategy and published multiple types of quality games on different themes. According to the China Mobile GamesAnnual Market Comprehensive Analysis 2020 H1 released by Analysys, its market share in domestic mobile games publishingfurther rose to 10.51% during the Reporting Period. Its highest monthly gross billing of domestic mobile games under operationsurpassed RMB1.8 billion. Newly registered users totaled over 132 million. The highest number of monthly active users (MAUs) wasup to 82 million. Besides, the Company maintained its leading position in domestic browser games, strengthened the precisedistribution capabilities of independently developed AI systems, and dramatically improved operation efficiency.
(1) Improvement in publishing capabilities based on the "boutiqueization" strategy
The "boutiqueization" strategy applies to product supply before the launch of games and operation optimization after thelaunch.
In terms of product supply, the Company has garnered abundant product resources, established a rigorous evaluation processand evaluation criteria for product introduction, and also utilized its own advantages in user data and numerical experiences towork out products along with game developers, thus ensuring a better quality of games before their launch.In terms of operation optimization, the Company possesses strong capabilities for operation and optimization in numericalmanagement, process optimization, event planning, etc. After the launch of games, the Company continues to improve the qualityof games, attract users through better contents, prolong the product life cycle, and accumulate higher gross billing.
(2) Efficiency improvement in multiple aspects based on the "diversification" strategy
With the "diversification" strategy, the Company achieved good results in multiple aspects, including products, promotion, andservices.
With respect to products, on the one hand, 37 Interactive Entertainment enriched the product supply via independent R&D,investments, and cooperation with excellent developers. On the other hand, the Company constantly explored diversification inproduct types and themes. During the Reporting Period, the Company expanded its product matrix and offered diversified gamingexperience to players by launching quality games in different types and on varied themes, including Yun Shang Cheng Zhi Ge (云上城之歌), to the domestic mobile game market.
In regard to promotion, the Company independently developed the two AI ad systems, i.e. "Quantum" and "Destiny", as wellas the three platform-based big data products—"Athena", "Ares", and "Poseidon". Besides, it mined big data on user demandgraphs according to behavior characteristics like browsing of game ads and in-game activities. 37 Interactive Entertainment, basedon the AI systems, diverted users with the same demands to the same game or the same server. Therefore, it conducteddifferentiated iteration and refined operation for specific types of users of specific games and servers in order to enhance userinteraction and activity, activate the paid game ecology, and maximize the effect of life time value ("LTV").
In terms of services, the Company is committed to providing players with comprehensive, detailed, and long-term services.Through an improved user account and service system, and an experienced service team, the Company uses abundant productsupplies to provide users with comprehensive gaming products and one-stop services to continuously improve user satisfaction,activation and retention, and also to extend the product life cycle.
3. Advantage of the model of "integration of R&D and operation"
The efficiency of R&D and operation was improved. The model of “integration of R&D and operation” of the Company isconducive to making full use of resources and creating quality products from a long-term perspective. On the one hand, theCompany can ensure the stable supply of quality products to support the operation development and reduce its reliance onexternal supplies through strong R&D strengths. At the same time, the R&D team can utilize the feedback of the operationdepartment to optimize products and extend the product life cycle. On the other hand, at the early stage of product R&D, theoperation 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 fighting entrepreneurial spirit was upheld. The Company has been deeply involved in the field of cultural and creativeindustries for many years. Its core management team consists of experienced employees who engage in front-line work and havestrong and forward-looking capabilities for strategic layout, while the core team consists of highly skilled R&D personnel, creativeoperators, and highly efficient managers. The Company has always adhered to the entrepreneurial spirit like marathoners andconstantly caught up to surpass the industry leader.
Part IV Operating Performance Discussion and AnalysisI OverviewThe competition landscape of the domestic gaming industry underwent great changes during the Reporting Period. The "head"effect was prominent. The industry ushered in a new period of development. The Company precisely grasped the industrydevelopment trends, made continuous improvements in operation, and remained a top performer in the industry, while adheringto the "boutiqueization, diversification, platformization and globalization" strategy.During the Reporting Period, the Company achieved robust performance growth and recorded operating revenue ofRMB7,989 million, with a year-over-year (YoY) increase of 31.59%; a profit before income tax expenses of RMB1,993 million, up by
54.41% YoY; and a net profit attributable to the Listed Company’s shareholders of RMB1,700 million, rising by 64.53% YoY. Thegrowth of publishing and R&D for mobile games was the main driver for the increase in overall revenue and profit during theReporting Period.(I) Mobile game businessDuring the Reporting Period, the Company recorded operating revenue of RMB7,412 million from mobile games, a YoYincrease of 36.59%. Its gross profit margin remained stable. The Company’s business revenue from, and R&D investments in,mobile games continue to increase, and the mobile game business maintains the leading position in domestic and overseasmarkets.
1. Research and development of mobile games
During the Reporting Period, the Company continuously exerted more efforts for R&D, published more independentlydeveloped products, and improved the profitability of individual product from the previous year. Especially, the Company achieveda significant increase in the gross billing of mobile game R&D business, thereby enhancing the Company's profitability.R&D investments grew YoY. The Company’s R&D investments amounted to RMB645 million during the Reporting Period, up by
102.48% YoY. The continuous investment into mobile game R&D is an important pillar of the Company’s “boutiqueization,diversification and globalization” business strategy. The R&D investments were mainly concentrated on improvement of productquality and exploration of product categories.
Product quality was improved. The "boutiqueization" strategy runs through the entire life cycle of the Company'sindependently developed products. The Company is committed to making better the product engines, art design and sound qualityof gaming products to meet the user demand in experiencing high-quality games at the technical level; it is dedicated to gameinnovation and process optimization to meet user demand in fun and smooth experience at the planning level. High-qualitydevelopment and high-frequency iterations turned new products more attractive to users, and allowed most independentlydeveloped products to maintain high gross billing for a long time.
Product diversification was intensified. The Company improved the "diversification" of product R&D. During the ReportingPeriod, it made new attempts at multiple types of games, including simulation games ("SIM" games), card games, and SLGs: 37Interactive Entertainment has published independently developed SIM games to overseas markets. Besides, it will release the cardgame Code DL (代号DL) this year. In addition, the quality SLG, Wild Frontier (狂野西境), has been published globally, especiallyEuropean and American markets. The Company will continue innovation in diversified aspects, including product types, themes, artperformance, and gameplay. It will pay close attention to the in-depth exploration of SLGs and card games 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 withexcellent developers. In order to further raise the product success rate, the Company established a rigorous evaluation process,utilized its own advantages in user data and numerical experiences to work out products along with game developers, thusensuring a better quality of games before their launch.
A cloud gaming system is being built. The Company is currently committed to building a better cloud gaming system, including:
building internal cloud, providing computing and network supports for cloud gaming; building cloud gaming operation services,proactively developing efficient game video transcoding and decoding technologies; developing a universal framework with userinteraction, video decoding, and cloud server communication, so as to support the universal light apps for cloud gaming. In theupcoming 5G era, the Company’s smooth transition among cloud gaming technologies is expected to bring new experiences togame players.
2. Publishing of mobile games
(1) Domestic market
During the Reporting Period, according to the China Mobile Games Annual Market Comprehensive Analysis 2020 H1 releasedby Analysys, the Company's market share in the domestic mobile game market jumped to 10.51%, suggesting its prominentadvantage in "refined" operation. The highest monthly gross billing of its domestic mobile games exceeded RMB1.8 billion, with thetotal number of newly registered users surpassing 132 million and the highest number of MAUs of over 82 million. Meanwhile, theCompany continuously promoted the "boutiqueization, diversification and platformization" strategy, and published multiple typesof quality games on different themes to expand its product matrix.
(1.1) Product life cycle prolonged via "refined" operation
During the Reporting Period, the Company accurately understood users' needs, delivered advertisements to target groupsaccurately, and provided a full range of high-quality services from initial contact, access to games to start of games, therebyprolonging the product life cycle and accumulating higher gross billing. The Company has achieved this by adhering to the core ideaof systemic traffic management and the diversified methods of "multi-channel marketing + targeted advertising + long-termservice" that cover "products + promotion + users" under the principles of "refinement, datamation and intelligentization".
Self-developed AI systems facilitated "refined" operation. During the Reporting Period, the Company put its independentlydeveloped intelligent ad platform, "Quantum" and intelligent operation analysis platform, "Destiny", into production. On the onehand, "Quantum" can connect with all mainstream channels to achieve rapid and automatic advertising. Meanwhile, the platformcan be used together with multiple systems and connect procedures in series to greatly reduce the time to create plans, performstandardized processing of plans in batches, and maintain plans automatically and systematically. Moreover, the platform canimprove promotion efficiency and effect through big data analysis and AI algorithms. On the other hand, "Destiny" is acomprehensive operational decision system for statistics, analysis and prediction of game data. The system can accurately predictthe life cycle of games through data analysis models. It supports operation teams to adopt differentiated event marketing based onuser data, so that customer service can focus on higher value user services to generate more revenue.
(1.2) Product supply enriched via the "diversification" strategy
During the Reporting Period, 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 Companyreserved adequate products in terms of type, theme, and quantity. Its product matrix covered different types of games, such as
ARPGs, MMO games, card games, SLGs, and SIM games, as well as varied themes, such as fantasy, mythology/martial arts, city life,campus and galgames.The product pipeline is strong. During the Reporting Period, the Company offered diversified gaming experience to players bylaunching quality games in different types and on varied themes, including Hun Dun Qi Yuan (混沌起源) and Yun Shang Cheng ZhiGe (云上城之歌). As of the date of this report, the Company’s pipeline of independently developed games include Code NB (代号NB), Code DL (代号DL), etc. Besides, it distributes and operates an array of domestic agency games, including:
Fantasy and swordsman games: Code JZ (代号JZ) and Code XN (代号XN)Card games: My Girls (王牌高校)SIM games: Code RS (代号RS)MMORPG: Code GC (代号GC)Galgames: Queen of Diamonds (一千克拉女王)
(2) Overseas market
During the Reporting Period, the Company significantly accelerated the strategic expansion of global footprint. Its overseasoperating revenue rose by 94.77% YoY. As of the end of the Reporting Period, its overseas brand, 37GAMES, covered over 200countries and regions, whose products included RPGs, card games, and SLGs in a dozen of languages, such as traditional Chinese,English, Japanese, simplified Chinese, and Thai.
The product pipeline for the overseas market was enriched via multiple means. During the Reporting Period, the Companyinput resources in the upstream and downstream of the industry chain, invested in outstanding R&D-oriented companiesworldwide, and promoted the localization of products. Furthermore, it achieved results in the "globalization" of overseas business.The Company published products overseas from a global vision by expanding its layout from advantageous regions to the wholeworld, while maintaining the competitiveness in advantageous regions like Southeast Asia, Japan, and South Korea. Since this year,the Company has distributed SLGs on multiple themes, such as Western, military, and apocalypse, which are highly received byglobal players.
Multiple games were well received. As of the date of this report, 37 Interactive Entertainment achieved remarkable results inseveral games published globally: SNK All Star (SNKオールスター) rose quickly to the top of the Google Play Store and iOS AppStore app lists, after being launched in Japan. Within less than one month after its launch, the SLG, Heroes of Three Kingdoms (三国英雄たちの夜明け), was highly received by players. Swords of Archangels H5 (大天使之剑H5) was ranked No. 1 on top grossingchart in Vietnam. During the Reporting Period, the Company constantly updated and iterated its flagship product, Yong Heng JiYuan (永恒纪元), keeping a stable gross billing in regional markets. MU: Across Time (奇迹MU：跨时代) was launched in HongKong, Macao, and Taiwan regions of China in February this year and quickly came out top on the list of best-selling games on AppStore and the free game list on the Google Play Store.
The global footprint expansion was accelerated. The Company will continue to expand its global footprint by launching severalquality SLGs in the second half of the year. As of the date of this report, the quality SLG of Wild Frontier (狂野西境) had beenlaunched globally, especially in Europe and North America. The Western fantasy game, P&C, was released in Europe and NorthAmerica as well. It quickly opened the market and maintained a stable increase in gross billing, attributable to its innovativegameplay of RPG plus SLG. Furthermore, based on the stable growth of gross billing, the Company will introduce card games inJapan catering for the taste of local players, and primarily promote MMO games in South Korea in the second half of the year.
Main products to be promoted overseas in the second half of 2020 also include:
SIM games: Code ZG (代号ZG)SLGs: Code FRZ (代号FRZ) and Code FO (代号FO)Card games: Code OX (代号OX)Casual RPGs: Code CM (代号CM)MMO games: Code E (代号E) and Code AH (代号AH)(II) Browser gamesRefined operation supported the steady growth of operating revenue. During the Reporting Period, the operating revenuefrom the browser game business reached RMB565 million. The gross profit margin rose by 2.75% YoY. The Company will continueto launch new products in the second half of the year. The Company strengthened partnership with domestic top browser gamedevelopers through strategic investment and business cooperation on the one hand, on the other hand, the Company also refinedthe operation of its major quality games, improved user stickiness, stabilized the product life cycle, and further maintained itsoperating revenue.(III) Cultural industryThe Company invested into other fast-growing cultural and creative segments, while maintaining the high-speed growth of itscore business. The Company exploited opportunities in 5G cloud gaming, film and television, anime, music, VR/AR, cultural health,e-learning for children, and social entertainment with a strategic focus on quality content. As of the date of this report, cultural andcreative enterprises funded or acquired by the Company included:
Film and television: DSMovie, Youying Culture, Zhonghui Television, Mowei Pictures, JinhaiShiyi, etc.Music: FenghuaQiushiTalent agent: Original Plan and Haohao BangyangAnime: YHKT Entertainment, IDRAGONS Creative Studio, and JunengwanVR/AR: ArchiactCultural health: WakeE-learning for children: KaDa Story and MiaocodeSocial entertainment: Wuli PlanetConsumption: Mutual Help Parking and Nowwa CoffeeThe long-term value investment concept was upheld. In terms of investment concept and logic, the Company adhered to thelong-term investment concept. Based on the main business of games, it reached audiences in varied segments by investing in theupstream and downstream companies of the industry chain. With respect to investment strategies, the Company paid closeattention to new products and technologies in the industry and overseas and international distribution of products. In regard to theselection of investment targets, the Company valued the ability to constantly output quality products, excellent team or talentreserves, and future growth potential. The Company continuously consolidated its status in the cultural and creative industry byintegrating quality resources in the industry.A closed loop of the entertainment eco-system has been developed. The Company made constant efforts to create a closedloop of the entertainment eco-system and achieved favorable multi-directional synergy in the first half of the year. 37 Interactive
Entertainment's mobile game, "The King of Fighters (拳魂觉醒)", performed noticeably well and achieved outstanding results athome and abroad in the first half of the year, thanks to the integration of the SNK IP under DIGital Color where the Company holdsequity. Meanwhile, Karma Game led by a top producer and the project of Chengdu Xinghe Interactive Entertainment TechnologyCo., Ltd. are about to go live and expected to bring good returns in key overseas SLG markets. In addition, companies in verticalfields where the Company invests have been more closely connected. For instance, Zhonghui Television and YHKT Entertainmentcooperated to purchase the copyright of "Incarnation", a sci-fi blockbuster on bilibili.com, and would make a series. "Original Plan",the talent agent of He Luoluo and Liu Xiening who made a debut at "Creation Camp 2019" and "Creation Camp 2020", respectively,and "Haohao Bangyang" are working with FenghuaQiushi, Zhonghui Television, and 37 Interactive Entertainment to maximize theoutstanding talent resources. Besides, "DSMovie", a superb domestic Multi-Channel Network (MCN), is used as a promotionalchannel to exert an amplified and superimposed effect on the entertainment eco-system of 37 Interactive Entertainment.The education division is taking shape gradually. The education division serves as a key and long-term sector of 37 InteractiveEntertainment. Miaocode.com, a platform offering online programming training courses to kids acquired by the Company, hasgrown to be a top-performing company in China. It will establish chain stores to integrate in-person classes in order to makehigh-quality courses available to increasing users. In terms of content and quantity, the audiobook platform of "KaDa Story" hasbecome a top platform in China and achieved positive growth and profitability amid the COVID-19 pandemic. Likewise, "WakeYoga", an online yoga platform, has turned profitable despite the pandemic. Overall, the Company has achieved sound progress inthe education division by devoting enormous resources in quality content and traffic operation.Returns on investments were good. As of the date of this report, the Company's many target investees have shown the greatpotential for development, and the Company's investment strategies in the whole cultural and creative industrial chain have begunto produce preliminary results. In March 2020, the Company exited from ZLONGAME and obtained considerable return. In June2020, the Company partially exited from X.D.Network after its IPO, gaining substantial return. This deal won the CV Source the BestExit of the Year. Additionally, the Company participated in the management of Fuhai 37 Fund. After its investment target, Weimob,went public, the fund exited and obtained high return.Investments are made in new areas. In the coming future, the Company will focus on the main business of games and continueto invest in entertainment technologies. In connection to previous operations in VR, AR and cloud gaming, the Company willactively explore, in the 5G era, operations in emerging fields such as interactive games, virtual hosts, VR social and esports, in a bidto empower and coordinate strategically with the invested companies, offer more high-quality content with new experience, createa one-stop cultural and entertainment ecosystem, and become the most trusted cultural brand of China’s younger generation.(IV) IP strategyIt’s a long-term development goal of the Company to create quality content and establish a quality content brand. Based onthis, the Company continues to explore, by the methods of internal incubation and external access, high-quality IPs for thedevelopment of quality cultural products including games, relying on its own advantages.A cultural and creative strategy system was built based on the IP strategy. As of the date of this report, the IPs of theCompany's reserves covered different segments, including games, anime, literature, film, and television. Meanwhile, the Companywill gradually develop its own IPs to create higher value. Relying on its excellent IP strategy, the Company will continue to build itscultural and creative strategy system, satisfy the diversified demands of users for entertainment, and exploit the opportunities of IPvalue in film and television, music, anime, VR, cultural health industry, e-learning for children and social entertainment.II Core Business AnalysisOverview:
See “I Overview” above.Year-over-year changes in key financial data:
Unit: RMB
| H1 2020 | H1 2019 | Change (%) | Main reason for change | |
| Operating revenue | 7,988,675,195.57 | 6,070,957,503.06 | 31.59% | Significant increase in revenue as a result of good business results for mobile games |
| Cost of sales | 863,666,663.98 | 838,986,561.51 | 2.94% | No significant change |
| Distribution and selling expenses | 4,549,628,282.98 | 3,632,067,521.84 | 25.26% | Increase in Internet traffic fee charges for games |
| General and administrative expenses | 166,919,490.05 | 88,053,838.68 | 89.57% | Increase in depreciation of office building transferred to fixed assets, and increase in the remuneration and equity incentives for employees as a result of a larger scale of operating and better operating results of the Company in the Reporting Period |
| Financial expenses | 9,827,281.57 | 4,333,541.72 | 126.77% | Increase in interest expense |
| Income tax expenses | 110,659,828.94 | 131,634,742.44 | -15.93% | No significant change |
| Research and development investments | 644,896,512.00 | 318,493,874.16 | 102.48% | Increase in employee remuneration and design expenses in research and development projects as a result of greater investments in this respect in the Reporting Period |
| Net cash flows from operating activities | 2,450,226,546.90 | 616,354,936.37 | 297.53% | Net cash flows from operating activities increased significantly year-over-year, primarily driven by increase in cash received from the sales of goods or rendering services as a result of higher operating revenue compared to the same period of last year |
| Net cash flows used in/from investing activities | -952,419,788.81 | 476,138,307.69 | -300.03% | Payment for the acquisition of land use rights in the Reporting Period |
| Net cash flows used in financing activities | -180,181,077.21 | -823,976,503.10 | -78.13% | New discounted notes in the Reporting Period |
| Net increase in cash and cash equivalents | 1,328,403,368.73 | 268,388,648.05 | 394.96% | Significant increase in net cash flows from operating activities, as well as decrease in net cash flows used in investing and financing 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
| H1 2020 | H1 2019 | Change (%) | |||
| Amount | As % of operating revenue (%) | Amount | As % of operating revenue (%) | ||
| Total operating revenue | 7,988,675,195.57 | 100% | 6,070,957,503.06 | 100% | 31.59% |
| By operating division | |||||
| Online games | 7,988,675,195.57 | 100.00% | 6,070,957,503.06 | 100.00% | 31.59% |
| By product category | |||||
| Mobile games | 7,412,153,082.93 | 92.78% | 5,426,572,514.55 | 89.39% | 36.59% |
| Browser games | 564,975,213.48 | 7.07% | 644,384,988.51 | 10.61% | -12.32% |
| Others | 11,546,899.16 | 0.14% | 100.00% | ||
| By operating segment | |||||
| Domestic | 7,019,815,819.74 | 87.87% | 5,573,514,047.04 | 91.81% | 25.95% |
| Overseas | 968,859,375.83 | 12.13% | 497,443,456.02 | 8.19% | 94.77% |
Operating division, product category or operating segment contributing over 10% of operating revenue or operating profit:
√ Applicable □ Not applicable
Unit: RMB
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division | ||||||
| Online games | 7,988,675,195.57 | 863,666,663.98 | 89.19% | 31.59% | 2.94% | 3.01% |
| By product category | ||||||
| Mobile games | 7,412,153,082.93 | 729,296,931.11 | 90.16% | 36.59% | 7.95% | 2.61% |
| Browser games | 564,975,213.48 | 128,538,647.98 | 77.25% | -12.32% | -21.32% | 2.75% |
| By operating segment | ||||||
| Domestic | 7,019,815,819.74 | 716,853,000.99 | 89.79% | 25.95% | 6.76% | 1.84% |
| Overseas | 968,859,375.83 | 146,813,662.99 | 84.85% | 94.77% | -12.35% | 18.52% |
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
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division of customers | ||||||
| Online games | 7,988,675,195.57 | 863,666,663.98 | 89.19% | 31.59% | 2.94% | 3.01% |
| By product category | ||||||
| Mobile games | 7,412,153,082.93 | 729,296,931.11 | 90.16% | 36.59% | 7.95% | 2.61% |
| Browser games | 564,975,213.48 | 128,538,647.98 | 77.25% | -12.32% | -21.32% | 2.75% |
| By operating segment | ||||||
| Domestic | 7,019,815,819.74 | 716,853,000.99 | 89.79% | 25.95% | 6.76% | 1.84% |
| Overseas | 968,859,375.83 | 146,813,662.99 | 84.85% | 94.77% | -12.35% | 18.52% |
Ongoing sales contracts with a single contract amount that is over RMB50 million and accounts for over 30% of the Company’saudited operating revenue in the most recent accounting year:
□Applicable √ Not applicable
Breakdown of the cost of sales for the core business:
Unit: RMB
| Breakdown of cost | H1 2020 | H1 2019 | Change (%) | ||
| Amount | As % of cost of sales | Amount | As % of cost of sales | ||
| Royalties | 756,529,181.79 | 87.60% | 713,853,625.84 | 85.09% | 5.98% |
| Cost of servers | 77,914,092.53 | 9.02% | 52,216,599.22 | 6.22% | 49.21% |
| Amortization of copyright money | 22,029,060.95 | 2.55% | 72,014,090.09 | 8.58% | -69.41% |
| Other costs | 7,194,328.71 | 0.83% | 902,246.36 | 0.11% | 697.38% |
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
1. The online and mobile games divisions recorded a year-over-year increase of 31.59% and 36.59% respectively in operatingrevenue, primarily because the Company’s mobile game development and launch business continued to grow in the ReportingPeriod, resulting in a significant increase in operating revenue.
2. Overseas operating revenue increased 94.77% year-over-year, primarily because the Company launched a number of new gamesoverseas in the Reporting Period.III Analysis of Non-Core Businesses
√ Applicable □ Not applicable
| Amount | As % of profit before | Reason/source | Recurrent or not |
income tax expenses
| income tax expenses | ||||
| Investment income | 108,093,257.02 | 5.42% | Mainly due to gains on investments from disposal of equity investments, dividends during the period of holding equity investments, and wealth management products | Not |
| Gain/loss on changes in fair value | 115,130,432.61 | 5.78% | Mainly due to changes in fair value of equity investments | Not |
| Impairment loss on assets | 51,573,042.74 | 2.59% | Mainly due to impairment loss on accounts and other receivables and long-term equity investments | Loss on doubtful accounts is recurrent while impairment loss on long-term equity investments is not. |
| Non-operating income | 2,297,869.41 | 0.12% | Mainly due to compensation income | Not |
| Non-operating expenses | 7,429,745.23 | 0.37% | Mainly due to donations for governments and medical institutions in the fight against the COVID-19 pandemic | Not |
| Other income | 95,213,596.55 | 4.78% | Mainly due to refund of VAT and other government grants given in the Company’s ordinary course of business | Refund VAT is recurrent while other government grants are not. |
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
| 30 June 2020 | 31 December 2019 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As % of total assets | Amount | As % of total assets | |||
| Monetary funds | 3,476,651,621.54 | 27.88% | 1,788,431,889.15 | 20.40% | 7.48% | Year-over-year increase of RMB1,834 million in net cash flows from operating activities as a result of increasing revenue, as well as decrease in net cash flows used in investing and financing activities |
| Accounts receivable | 1,275,085,408.62 | 10.22% | 1,717,575,938.59 | 19.59% | -9.37% | Stepped-up efforts in the collection of accounts receivable |
Long-term equityinvestments
| Long-term equity investments | 466,187,441.61 | 3.74% | 514,224,823.77 | 5.87% | -2.13% | |
| Fixed assets | 920,231,133.44 | 7.38% | 36,385,942.05 | 0.42% | 6.96% | Transfer of office building from construction in progress to fixed assets in the Reporting Period |
| Construction in progress | 0.00% | 751,293,007.77 | 8.57% | -8.57% | Transfer of office building from construction in progress to fixed assets in the Reporting Period | |
| Short-term loans | 889,324,326.07 | 7.13% | 0.00 | 0.00% | 7.13% | New undue discounted bank acceptance bills in the Reporting Period |
| Long-term loans | 0.00 | 0.00% | 265,883,241.55 | 3.03% | -3.03% | Repayment of mortgage loan for office building purchase in the Reporting Period |
| Other non-current assets | 1,107,475,299.02 | 8.88% | 58,269,048.52 | 0.66% | 8.22% | Payment made in the Reporting Period for acquisition of land use rights together with the relevant tax and fees |
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
| Item | Beginning amount | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes through equity | Impairment allowance made in the Reporting Period | Purchased in the Reporting Period | Sold in the Reporting Period | Other changes | Ending amount |
| Financial assets | ||||||||
| 1. Trading financial assets (exclusive of derivative financial assets) | 2,042,903,416.32 | 7,062,542.62 | 4,754,790,000.00 | -4,726,866,364.36 | 286,785.89 | 2,078,176,380.47 | ||
| 4. Other equity investments | 119,521,347.60 | -125,795,926.21 | 5,717,169.50 | 573,436.28 | 125,811,953.38 | |||
| Other non-current financial assets | 389,489,978.68 | 108,067,889.99 | 32,615,650.00 | -102,136,150.48 | 2,314,604.97 | 430,351,973.16 | ||
Total of the above
| Total of the above | 2,551,914,742.60 | 115,130,432.61 | -125,795,926.21 | 0.00 | 4,793,122,819.50 | -4,829,002,514.84 | 3,174,827.14 | 2,634,340,307.01 |
| Financial liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Contents of other changes:
Other changes were incurred by exchange rate fluctuations during the shareholding period.Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes √ No
3. Restricted Asset Rights as at the End of the Reporting Period
| Item | Ending carrying amount(RMB) | Reason for restriction |
| Monetary funds | 12,989,136.84 | Money frozen by bank and security deposits |
| Trading financial assets | 1,401,658,473.29 | Security deposits for notes |
| Total | 1,414,647,610.13 | -- |
V Investments Made
1. Total Investment Amount
√ Applicable □ Not applicable
| Total investment amount in H1 2020 (RMB) | Total investment amount in H1 2019 (RMB) | Change (%) |
| 5,787,414,868.16 | 2,518,507,340.85 | 129.80% |
2. Major Equity Investments Made in the Reporting Period
√ Applicable □ Not applicable
Unit: RMB
Investee
| Investee | Principal activity | Way of investment | Amount of investment | The Company’s interest | Funding source | Co-investor | Term of investment | Type of the investee’s products | Investment progress as of the balance sheet date | Anticipated income | Investment income in the Reporting Period | Any legal matter involved or not | Date (if any) of disclosure | Index (if any) to disclosed information |
| Beijing Meng52 Network Technology Co., Ltd. | Technology development; basic software services; application software services; computer system services; computer technology training (not for national enrollment); data processing (except for bank card centers that are processing data and cloud computing data centers with a PUE value of 1.5 or more); organization of cultural and artistic exchange activities; conference services; exhibition activities; product design; packaging and decoration design; computer animation design; design, production, agency, and release of ads; sales of computers, software, and auxiliary equipment; and Internet-based cultural activities. | Capital increase | 28,600,000.00 | 22.00% | Self-funded | None | Permanent | Game development | Ownership change completed with the industrial and commercial administration | 13,398,234.25 | Not | |||
| Shanghai Dobala Network Technology Co., Ltd. | Technology development, transfer, and consultancy and services of network and computer technologies, design, production, and agency of ads, publication of ads through self-owned media, planning of cultural and artistic exchanges, organization and planning of public relation activities, conference services, exhibition services, creative services, and sales of computers, software, and auxiliary equipment. | Capital increase | 5,000,000.00 | 10.00% | Self-funded | None | Permanent | Game development | Ownership change completed with the industrial and commercial administration | Not |
Guangzhou KaparkNetworkTechnology Co., Ltd.
| Guangzhou Kapark Network Technology Co., Ltd. | Operations of parking lots; property management; engineering and technical research and experimental development; R&D of electronic, communication, and automatic control technologies; software development; information system integration services; information technology consultancy services; electromechanical equipment installation services; special equipment installation (except for elevators and boilers); electronic equipment installation services; general equipment repair; special equipment repair; electrical equipment repairs; sales of general mechanical equipment; professional contracting of electromechanical equipment installation projects; R&D, installation, and maintenance of parking berths with automatic are collection function; motor vehicle agency management business; battery charging services for electric vehicles; car rental; sales of auto parts; car rescue services; motor vehicle performance inspection services; network information technology promotion services; advertising services; installation and construction of street nameplates, road signs, and advertising board; designated driver services; computer network system engineering services; intelligent installation services; site leasing (excluding warehouses); car sales; car cleaning services; and car repair and maintenance. | Capital increase | 15,000,000.00 | 12.00% | Self-funded | None | Permanent | Internet-based car parking | Ownership change completed with the industrial and commercial administration | Not | ||||
| Shanghai Lixing Technology Co., Ltd. | Licensed items: Food. General items: Technical development, transfer, consultancy, and services of information technology, computer hardware, and network technology; sales of furniture, kitchen equipment, household appliances, | Capital increase | 7,000,000.00 | 11.67% | Self-funded | None | Permanent | Operation of a coffee brand | Ownership change completed with the | Not |
hotel equipment, instruments andapparatus, building materials, metalmaterials, hardware and electricalequipment, mechanical equipment,automobile and motorcycle accessories,household supplies, kitchenware, feedstuff,flowers, jewelry, handicrafts (except forivory and its products), automobilesupplies, road traffic safety equipment,automobiles, chemical raw materials andproducts (except for hazardous chemicals,monitored chemicals, fireworks andfirecrackers, civil explosives, and precursorchemicals), advertising equipment, printingmaterials, packaging materials, mineralproducts, electronic products, elevators,mechanical equipment, molds, andlubricants (including online retail). Thefollowing items are exclusive to branchoffices: catering services.
| hotel equipment, instruments and apparatus, building materials, metal materials, hardware and electrical equipment, mechanical equipment, automobile and motorcycle accessories, household supplies, kitchenware, feedstuff, flowers, jewelry, handicrafts (except for ivory and its products), automobile supplies, road traffic safety equipment, automobiles, chemical raw materials and products (except for hazardous chemicals, monitored chemicals, fireworks and firecrackers, civil explosives, and precursor chemicals), advertising equipment, printing materials, packaging materials, mineral products, electronic products, elevators, mechanical equipment, molds, and lubricants (including online retail). The following items are exclusive to branch offices: catering services. | industrial and commercial administration | |||||||||||||
| GUGI INC. | Network consultancy and information security management consultancy; technology development, technology promotion, and technical services: Information technology, computer technology, and computer software and hardware; design and development: toys and anime; network sales: computer software and hardware, toys, and anime; telecommunications value-added services; and operating Internet cultural services. | Capital increase | 10,615,650.00 | 5.46% | Self-funded | None | Permanent | Game-based social software | Ownership change completed with the industrial and commercial administration | Not | ||||
| Total | -- | -- | 66,215,650.00 | -- | -- | -- | -- | -- | -- | 0.00 | 13,398,234.25 | -- | -- | -- |
3. Major Non-Equity Investments Ongoing in the Reporting Period
√ Applicable □ Not applicable
Unit: RMB
Name of project
| Name of project | Way of investment | Investment in fixed assets or not | Industry of investment | Investment in the Reporting Period | Cumulative investment as of the period-end | Funding source | Project progress | Anticipated income | Cumulative income as of the period-end | Reason for failing to reach the scheduled progress and anticipated income | Date (if any) of disclosure | Index (if any) to disclosed information |
| Land Lot AH040124 in Pazhou West Zone, Haizhu District, Guangzhou | Other | Yes | Commercial property | 890,579,700.00 | 1,105,179,700.00 | Self-funded | 0.00 | 0.00 | N/A | 7 January 2020 | Announcement No. 2020-003 on a Wholly-Owned Subsidiary Bidding for the Use Rights of State-Owned Land | |
| Office space on 12/F, 14/F and 17/F to 23/F, as well as parking space on -3/F and -4/F of Zhongrong Plaza, 666 Huangbu Road Central, Tianhe District, Guangzhou | Other | Yes | Commercial property | 75,112,348.66 | 957,843,541.68 | Self-funded and mortgage loan-funded | 0.00 | 0.00 | N/A | 26 April 2017 | Announcement No. 2017-034 on a Subsidiary Intending to Purchase Office and Parking Space | |
| Total | -- | -- | -- | 965,692,048.66 | 2,063,023,241.68 | -- | -- | 0.00 | 0.00 | -- | -- | -- |
4. Financial Assets at Fair Value
√ Applicable □ Not applicable
Unit: RMB
Type ofassets
| Type of assets | Initial investment cost | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes through equity | Purchased in the Reporting Period | Sold in the Reporting Period | Cumulative income | Ending amount | Funding source |
| Stock | 278,899,199.76 | 101,862,285.85 | -52,759,111.69 | 101,486,150.48 | 24,362,105.75 | 184,632,631.62 | Self-funded | |
| Other | 2,647,448,274.12 | 13,268,146.76 | -73,036,814.52 | 4,793,122,819.50 | 4,727,516,364.36 | 70,599,981.21 | 2,449,707,675.39 | Self-funded |
| Total | 2,926,347,473.88 | 115,130,432.61 | -125,795,926.21 | 4,793,122,819.50 | 4,829,002,514.84 | 94,962,086.96 | 2,634,340,307.01 | -- |
5. Financial Investments
(1) Securities Investments
√ Applicable □ Not applicable
| Variety of securities | Code of securities | Name of securities | Initial investment cost | Accounting measurement method | Beginning carrying amount | Gain/loss on fair-value changes in the Reporting Period | Cumulative fair-value changes through equity | Purchased in the Reporting Period | Sold in the Reporting Period | Gain/loss in the Reporting Period | Ending carrying amount | Accounting title | Funding source |
| Domestic/foreign stock | 002445-SZSE | ZNHI | 21,743,091.99 | Fair value method | 2,725,492.78 | 557,035.08 | 3,282,527.86 | Trading financial assets | Self-funded | ||||
| Domestic/foreign stock | 02660-HKEX | ZENGAME | 18,000,000.00 | Fair value method | 14,301,324.38 | 7,683,996.94 | 22,231,519.71 | Other non-current financial assets | Self-funded | ||||
| Domestic/foreign stock | 960180-KRX | SNK | 1,036.35 | Fair value method | 23,021,920.43 | -3,861,552.17 | 19,447,154.15 | Trading financial assets | Self-funded |
Domestic/foreignstock
| Domestic/foreign stock | 02400-HKEX | XD INC | 100,055,903.60 | Fair value method | 103,133,292.11 | 100,422,951.19 | 88,989,266.99 | 20,640,508.22 | 116,646,208.80 | Other non-current financial assets | Self-funded | ||
| Domestic/foreign stock | 00302-HKEX | CMGE Technology Group Limited | 14,101,880.71 | Fair value method | 15,438,704.59 | -2,940,145.19 | 12,496,883.49 | 3,721,597.53 | Other non-current financial assets | Self-funded | |||
| Domestic/foreign stock | 833604-NEEQ | Southern Pictures | 64,997,287.11 | Fair value method | 15,784,332.79 | 15,784,332.79 | Other non-current financial assets | Self-funded | |||||
| Domestic/foreign stock | 835067-NEEQ | Mokylin | 60,000,000.00 | Fair value method | 7,240,888.31 | -52,759,111.69 | 7,240,888.31 | Other equity investments | Self-funded | ||||
| Total | 278,899,199.76 | -- | 181,645,955.39 | 101,862,285.85 | -52,759,111.69 | 0.00 | 101,486,150.48 | 24,362,105.75 | 184,632,631.62 | -- | -- | ||
| Disclosure date of the announcement on the board’s approval of the securities investments | 6 December 2019 | ||||||||||||
| Disclosure date of the announcement on the general meeting of shareholders’ approval of the securities investment (if any) | 25 December 2019 | ||||||||||||
(2) Investments in Derivative Financial Instruments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
6. Use of Raised Funds
□ Applicable √ Not applicable
No such cases in the Reporting Period.
7. Significant Projects Invested with Non-Raised Funds
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VI Sale of Major Assets and Equity Investments
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Investments
□ Applicable √ Not applicable
VII 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
Name
| Name | Relationship with the Company | Principal activity | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Jiangsu Aurora | Subsidiary | Development of mobile and browser games | 6,250,000.00 | 4,931,895,434.41 | 3,389,070,354.63 | 1,212,422,839.46 | 600,800,831.35 | 629,776,283.93 |
| Guangzhou 37 | Subsidiary | Launch and operation of mobile games | 11,764,706.00 | 7,328,807,906.38 | 1,495,082,563.16 | 5,121,786,020.32 | 1,033,382,969.23 | 918,920,434.10 |
Subsidiaries obtained or disposed of in the Reporting Period:
□ Applicable √ Not applicable
Other information on principal subsidiaries and joint stock companies:
VIII Structured Bodies Controlled by the Company
□ Applicable √ Not applicable
IX Operating Performance Forecast for January-September 2020Warning of a forecast negative net profit for the January-September period of the current year or a considerable YoY change therein,as well as the reasons:
□ Applicable √ Not applicable
X Risks Facing the Company and Countermeasures
1. Market competition risks and countermeasures
The online gaming industry is facing increasingly fierce competition as it gradually matures. Meanwhile, the development ofvarious Internet-based cultural creative segments other than online games is further exacerbating external competition. At thesame time, online game users are also becoming more sophisticated, and online game users have increasingly higher qualityrequirement for game products. Intense market competition will challenge the Company’s development in terms of products andmarket 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 in play the role ofnew ideas in traffic operation, deepen the business strategy of multi-channel marketing, targeted advertising and long-termservices, and continuously enhance its core market competitiveness.
2. Business risks and countermeasures
The online gaming industry is characterized by fast product update, limited life cycle and fast change of user preference. Gameenterprises need to increase their investment in technology development and closely keep in pace with trend of the industrialtechnologies. If the technology, products and other aspects of the game undergo major changes, and game enterprises fail to keepup with the development of industry technology, their products will fail to meet the market demands. At the same time,information security and user privacy protection arouse great public concerns. If the Company leaks users’ information due tonegligence, there will be a significant damage to the user experience and brand image. Consequently, its operation performancewill be impaired.
In response, increasing R&D investments are needed to maintain continuous product innovation. The Company also needs todig deeper into operational data through independently developed AI systems, continuously update the understanding of changesin target users' preferences, and timely adjust operational and R&D strategies, to meet the core demands of users.
A strict internal control system for information security management and user privacy protection has been set up to ensurethe security of users’ information to the maximum extent. In terms of information security, the Company has developed a series ofinternal control systems to define and classify security incidents and to respond to possible data security problems. Informationsecurity 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’ personalinformation and sets forth the reasonable and feasible security measures adopted for protection of users’ personal information. Inthis way the Company will make sure with greatest efforts that all users’ personal information are protected at the highest level.
The Company ensures that it runs the business in compliance with applicable laws and regulations throughout the world, andprotects the users’ right to manage personal information. A response procedure has been stipulated to inform users of any possiblecost and necessary actions needed to be taken.
3. 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 theCompany to maintain its core competitive advantage. If the Company fails to effectively build a core talent team, give reasonableincentives and manages the core personnel, the employees’ enthusiasm and creativity will be affected, which will have an adverseimpact on the Company’s core competitiveness.
In response, much attention has been attached to cultivation and acquisition of professional talents. The Company creativelybuilds a platform-based talent management mechanism, according to which excellent game producers are rewarded with highproject bonus, and given discretion of research and creation. In order to flexibly attract and retain quality management andbusiness talents, taking into account the Company’s long-term and recent interests and the Company’s long-term, sustainable andsound development, the Company implemented the employee stock ownership plan during the Reporting Period to establish andimprove the benefit sharing mechanism between workers and owners, further improve the corporate governance structure of theCompany and effectively mobilize the enthusiasm of workers and employees. The Company maintains the stability of coretechnology and management personnel by signing agreements with core personnel, creating a favorable working environment andbuilding a great corporate culture. Meanwhile, the Company helps employees to realize their potential through a well-trainedemployee training system, and rationally manages the team by using a clear rule of survival of the fittest to reinforce the team’sdynamics.
Part V Significant EventsI Annual and Extraordinary General Meetings of Shareholders Convened during the ReportingPeriod
1. General Meetings of Shareholders Convened during the Reporting Period
Meeting
| Meeting | Type | Investor participation ratio | Date of the meeting | Date of disclosure | Index to disclosed information |
| The 2019 Annual General Meeting of Shareholders | Annual General Meeting of Shareholders | 44.13% | 22 April 2020 | 23 April 2020 | http://www.cninfo.com.cn |
| The First Extraordinary General Meeting of Shareholders of 2020 | Extraordinary General Meeting of Shareholders | 42.78% | 15 May 2020 | 16 May 2020 | http://www.cninfo.com.cn |
2. Extraordinary General Meetings of Shareholders Convened at the Request of Preferred Shareholders withResumed Voting Rights
□ Applicable √ Not applicable
II Interim Dividend Plan
√ Applicable □ Not applicable
| Bonus issue from profit (share/10 shares) | 0 |
| Cash dividend/10 shares (RMB) (tax inclusive) | 3 |
| Bonus issue from capital reserves (share/10 shares) | 0 |
| Share base (share) | 2,112,251,697 |
| Cash dividends (RMB) (tax inclusive) | 633,675,509.10 |
| Cash dividends in other forms (such as share repurchase) (RMB) | 0.00 |
| Total cash dividends (including those in other forms) (RMB) | 633,675,509.10 |
| Distributable profit (RMB) | 873,232,208.83 |
| Total cash dividends (including those in other forms) as % of total profit to be distributed | 100% |
| Applicable cash dividend policy | |
| If the Company is in the growth stage and has a significant capital expenditure arrangement, when making profit distribution, | |
cash dividends shall account for no less than 20% in the profit distribution.
| cash dividends shall account for no less than 20% in the profit distribution. |
| Details of the cash and/or stock dividend plan |
| In view of the Company’s sustained and solid profitability and good financial position, as well as the expectations and confidence for the Company’s future development, and fully considering the interests and reasonable demands of investors, the Company’s Board of Directors proposed a 2020 interim dividend plan in accordance with the No. 3 Listed Companies Regulatory Guidelines, the Company Law, the Articles of Association and the Company’s shareholder return plan, under the principle of profit distribution and the premise of ensuring the normal operation and long-term development of the Company. Upon approval by the Board of Directors, the Company’s 2020 interim dividend plan is as follows: Based on the total issued share capital on the date of record, a cash dividend of RMB3 (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 forEmployees
√ Applicable □ Not applicable
The Proposal on the Third Employee Stock Ownership Plan (Draft) and Its Summary, along with related proposals, wasapproved at the Fourth Meeting of the Fifth Board of Directors and the Fourth Extraordinary General Meeting of Shareholders of2019 of the Company. The company performance requirement for this employee stock ownership plan is a net profit (based on netprofit attributable to shareholders of the Company and exclusive of share-based payments under this employee stock ownershipplan) not lower than RMB1.5 billion for 2019.
According to the Independent Auditor’s Report Hua Xing Suo (2020) Shen Zi GD—No. 026 issued by Huaxing Certified PublicAccountants LLP, the net profit attributable to shareholders of the Company for 2019 was RMB2.115 billion (RMB2.185 billion afterexcluding the share-based payments under this employee stock ownership plan in 2019). As such, the company performancerequirement for this employee stock ownership plan was fulfilled. Therefore, 30% shares under this employee stock ownership planwould be unlocked for the 12 months commencing from 27 July 2019 (the date when the Company announced that the final batchof target shares were transferred to this employee stock ownership plan). For further information, please visithttp://www.cninfo.com.cn.
The lock-up period for the first batch of shares (6,704,261 shares) under the third employee stock ownership plan expired on26 July 2020. For further information, please refer to the Reminder of the Expiry of the Lock-up Period of the First Batch of Sharesunder the Third Employee Stock Ownership Plan disclosed by the Company on http://www.cninfo.com.cn dated 23 July 2020.IV Other Significant Events
√ Applicable □ Not applicable
The Proposal on the 2020 Private Placement Plan, along with related proposals, was approved at the Eleventh Meeting of theFifth Board of Directors and the 2019 Annual General Meeting of Shareholders of the Company. According to the Plan, the Companyintended to raise funds not exceeding RMB4.5 billion (inclusive) by offering shares of no more than 5% of the total pre-offeringshare capital. The raised funds after deducting the issuance expenses would be invested in the online games development andoperation project (RMB1.6 billion), the 5G-based cloud gaming platform project (RMB1.65 billion) and the Guangzhou headquarters
building project (RMB1.25 billion). On 27 April 2020, the Company received the Acceptance of Application for AdministrativePermission (acceptance No.: 200844) issued by the China Securities Regulatory Commission (hereinafter, the “CSRC”) on 26 April2020. Upon preliminary examination of the Application for Private Placement by Listed Company submitted by the Company,together with related materials, the CSRC decided to accept the application for further review on the ground that the applicationmaterials were in compliance with the prescribed form.On 1 June 2020, the Company received the First Feedback Concerning Application for Administration Permission (No. 200844)issued by the CSRC on 29 May 2020. Upon the receipt of the Feedback, the Company, together with the relevant intermediaryagencies, carefully analyzed and discussed the issues raised in the Feedback, and made a corresponding reply, upon relevant checks,as required by the Feedback. The reply has been disclosed to the public. Please refer to the Reply of Wuhu 37 InteractiveEntertainment Network Technology Group Co., Ltd. Concerning the Feedback to Its Private Placement Application Documentsdisclosed by the Company on http://www.cninfo.com.cn dated 24 June 2020.The Proposal on Reducing the Total Funds to Be Raised in the 2020 Private Placement, along with related proposals, wasapproved at the Thirteenth Meeting of the Fifth Board of Directors of the Company. As such, the total funds to be raised was agreedto be reduced to an amount not exceeding RMB4.463 billion. The raised funds after deducting the issuance expenses would beinvested in the online games development and operation project (RMB1.6 billion), the 5G-based cloud gaming platform project(RMB1.65 billion) and the Guangzhou headquarters building project (RMB1.213 billion).On 9 July 2020, the Company received the Letter on Preparations for the Issuance Appraisal Committee Meeting on theApplication of 37 Interactive Entertainment for Private Placement (hereinafter, the “Letter”) issued by the CSRC. The Company,together with Orient Securities Investment Banking Co., Ltd. and other relevant intermediary agencies, carried out careful checks inrespect of the issues raised in the Letter, and made a corresponding reply as required. For further information, please refer to theReply of Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd. and Orient Securities Investment Banking Co., Ltd.on the Letter on Preparations for the Issuance Appraisal Committee Meeting on the Application of 37 Interactive Entertainment forPrivate Placement disclosed by the Company on http://www.cninfo.com.cn dated 18 July 2020.
Part VI Share Changes and Shareholder Information
I Share Changes
1. Share Changes
Unit: share
| Before | Increase/decrease in the Reporting Period (+/-) | After | |||||||
| Number | Percentage (%) | New issues | Shares as dividend converted from profit | Shares as dividend converted from capital reserves | Other | Subtotal | Number | Percentage (%) | |
| 1. Restricted shares | 794,755,467 | 37.63% | -84,000,441 | -84,000,441 | 710,755,026 | 33.65% | |||
| 1.1 Shares held by other domestic investors | 794,755,467 | 37.63% | -84,000,441 | -84,000,441 | 710,755,026 | 33.65% | |||
| Shares held by domestic natural persons | 794,755,467 | 37.63% | -84,000,441 | -84,000,441 | 710,755,026 | 33.65% | |||
| 2. Un-restricted shares | 1,317,496,230 | 62.37% | 84,000,441 | 84,000,441 | 1,401,496,671 | 66.35% | |||
| 2.1 RMB-denominated common shares | 1,317,496,230 | 62.37% | 84,000,441 | 84,000,441 | 1,401,496,671 | 66.35% | |||
| 3. Total shares | 2,112,251,697 | 100.00% | 0 | 0 | 2,112,251,697 | 100.00% | |||
2. Changes in Restricted Shares
√ Applicable □ Not applicable
Unit: share
| Name of shareholder | Beginning restricted shares | Shares with restriction lifted in the Reporting Period | Increase in restricted shares in the Reporting Period | Ending restricted shares | Reason for restriction | Lifting date |
| Li Weiwei | 302,743,539 | 0 | 0 | 302,743,539 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
Zeng Kaitian
| Zeng Kaitian | 276,978,130 | -31,633,800 | 0 | 245,344,330 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
| Wu Weihong | 112,002,562 | -28,000,641 | 0 | 84,001,921 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
| Hu Yuhang | 4,315,518 | 0 | 0 | 4,315,518 | Post-offering restricted shares | 17 July 2020 |
| Wu Weidong | 98,195,668 | -24,375,000 | 0 | 73,820,668 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
| Yang Jun | 520,050 | 0 | 0 | 520,050 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
| Qi Jifeng | 0 | 0 | 9,000 | 9,000 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management |
| Total | 794,755,467 | -84,009,441 | 9,000 | 710,755,026 | -- | -- |
II Issuance and Listing of Securities
□ Applicable √ Not applicable
III Shareholders and Their Holdings as at the Period-End
Unit: share
| Number of common shareholders | 55,993 | Number of preferred shareholders with resumed voting rights (if any) (see note 8) | 0 | |||||||
| 5% or greater common shareholders or the top 10 common shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Common shares held | Increase/decrease in the Reporting Period | Restricted common shares held | Un-restricted common shares held | Pledged or frozen status | |||
| Status | Shares | |||||||||
| Li Weiwei | Domestic natural person | 19.11% | 403,658,052 | 0 | 302,743,539 | 100,914,513 | Pledged | 29,000,000 | ||
| Zeng Kaitian | Domestic natural person | 11.62% | 245,344,374 | -81,781,400 | 245,344,330 | 44 | Pledged | 9,810,000 | ||
| Hong Kong Securities | Overseas | 6.98% | 147,487,787 | 73,694,639 | 0 | 147,487,787 | ||||
Clearing Company Ltd.
| Clearing Company Ltd. | corporation | ||||||||||
| Wu Weihong | Domestic natural person | 5.30% | 112,002,562 | 0 | 84,001,921 | 28,000,641 | |||||
| Hu Yuhang | Domestic natural person | 5.00% | 105,612,651 | 31,975,100 | 4,315,518 | 101,297,133 | Pledged | 5,050,000 | |||
| Wu Weidong | Domestic natural person | 4.66% | 98,427,557 | 0 | 73,820,668 | 24,606,889 | |||||
| Wu Xushun | Domestic natural person | 3.50% | 73,937,782 | 0 | 0 | 73,937,782 | |||||
| National Social Security Fund—Portfolio 111 | Other | 1.21% | 25,503,030 | 25,503,030 | 0 | 25,503,030 | |||||
| Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd.—third employee stock ownership plan | Other | 1.06% | 22,347,537 | 0 | 0 | 22,347,537 | |||||
| China Universal Asset Management (CUAM) - Bank of Ningbo—Zhuhai Rongxi Equity Investment Partnership (Limited Partnership) | Other | 0.95% | 20,089,263 | -17,839,168 | 0 | 20,089,263 | |||||
| Strategic investor or general corporation becoming a top-10 common shareholder in a rights issue (if any) (see note 3) | Not applicable | ||||||||||
| Related or acting-in-concert parties among the shareholders above | 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. 2. The Company is not aware of whether there is, among the other top 10 shareholders, any related parties or acting-in-concert parties as defined in the Measures on the Administration of Acquisition of Listed Companies. | ||||||||||
| Top 10 un-restricted common shareholders | |||||||||||
| Name of shareholder | Un-restricted common shares held | Shares by class | |||||||||
| Class | Shares | ||||||||||
| Hong Kong Securities Clearing Company Ltd. | 147,487,787 | RMB-denominated common shares | 147,487,787 | ||||||||
| Hu Yuhang | 101,297,133 | RMB-denominated common shares | 101,297,133 | ||||||||
| Li Weiwei | 100,914,513 | RMB-denominated common shares | 100,914,513 | ||||||||
| Wu Xushun | 73,937,782 | RMB-denominated common shares | 73,937,782 | ||||||||
Wu Weihong
| Wu Weihong | 28,000,641 | RMB-denominated common shares | 28,000,641 |
| National Social Security Fund—Portfolio 111 | 25,503,030 | RMB-denominated common shares | 25,503,030 |
| Wu Weidong | 24,606,889 | RMB-denominated common shares | 24,606,889 |
| Wuhu 37 Interactive Entertainment Network Technology Group Co., Ltd.—third employee stock ownership plan | 22,347,537 | RMB-denominated common shares | 22,347,537 |
| China Universal Asset Management (CUAM) - Bank of Ningbo—Zhuhai Rongxi Equity Investment Partnership (Limited Partnership) | 20,089,263 | RMB-denominated common shares | 20,089,263 |
| National Social Security Fund—Portfolio 416 | 15,831,558 | RMB-denominated common shares | 15,831,558 |
| Related or acting-in-concert parties among the top 10 un-restricted common shareholders, as well as between the top 10 un-restricted common shareholders and the top 10 common shareholders | 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. 2. The Company is not aware of whether there is, among the other top 10 shareholders, any related parties or acting-in-concert parties as defined in the Measures on the Administration of Acquisition of Listed Companies. | ||
| Top 10 common shareholders engaged in securities margin trading (if any) (see note 4) | None | ||
Indicate by tick mark whether any of the top 10 common shareholders or the top 10 un-restricted common shareholders of theCompany conducted any promissory repo during the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
Part VII Financial StatementsI Independent Auditor’s ReportAre 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 2020
Unit: RMB
Item
| Item | 30 June 2020 | 31 December 2019 |
| Current assets: | ||
| Monetary funds | 3,476,651,621.54 | 2,152,508,643.76 |
| Transaction settlement funds | ||
| Loans to other banks | ||
| Trading financial assets | 2,078,176,380.47 | 2,042,903,416.32 |
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 1,275,085,408.62 | 1,287,915,082.56 |
| Accounts receivable financing | ||
| Prepayments | 648,900,877.82 | 661,089,054.70 |
| Premiums receivable | ||
| Reinsurance receivables | ||
| Receivable reinsurance contract reserve | ||
| Other receivables | 80,200,345.60 | 84,842,613.18 |
| Including: Interest receivable | ||
| Dividends receivable | 10,400,000.00 | 10,400,000.00 |
| Redemptory monetary capital for sale | ||
| Inventories | ||
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 171,339,570.64 | 125,885,754.42 |
| Total current assets | 7,730,354,204.69 | 6,355,144,564.94 |
| Non-current assets: | ||
| Loans and advances to customers | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 466,187,441.61 | 468,792,240.20 |
Other equity investments
| Other equity investments | 125,811,953.38 | 119,521,347.60 |
| Other non-current financial assets | 430,351,973.16 | 389,489,978.68 |
| Investment properties | ||
| Fixed assets | 920,231,133.44 | 47,102,974.14 |
| Construction in progress | 797,245,599.78 | |
| Productive living assets | ||
| Oil and gas assets | ||
| Right-of-use assets | ||
| Intangible assets | 16,210,163.97 | 16,997,408.09 |
| Development expenditure | ||
| Goodwill | 1,614,909,880.35 | 1,614,909,880.35 |
| Long-term deferred expenses | 32,136,689.41 | 38,593,956.25 |
| Deferred income tax assets | 26,766,154.05 | 26,566,306.68 |
| Other non-current assets | 1,107,475,299.02 | 270,895,599.02 |
| Total non-current assets | 4,740,080,688.39 | 3,790,115,290.79 |
| Total assets | 12,470,434,893.08 | 10,145,259,855.73 |
| Current liabilities: | ||
| Short-term loans | 889,324,326.07 | |
| Loans from the central bank | ||
| Loans from other banks | ||
| Trading financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | 540,000,000.00 | 300,000,000.00 |
| Accounts payable | 1,492,117,378.94 | 1,418,946,404.24 |
| Advances from customers | 196,924,263.69 | |
| Contract liabilities | 236,490,124.28 | |
| 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 | 399,363,683.28 | 278,936,676.53 |
| Taxes payable | 178,142,122.00 | 161,110,700.51 |
| Other payables | 156,831,656.54 | 141,387,120.09 |
Including: Interest payable
| Including: Interest payable | ||
| Dividends payable | ||
| Handling charges and commissions payable | ||
| Reinsurance payables | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 31,158,472.31 | |
| Other current liabilities | 56,387,620.73 | 71,925,723.44 |
| Total current liabilities | 3,948,656,911.84 | 2,600,389,360.81 |
| Non-current liabilities: | ||
| Insurance contract reserve | ||
| Long-term loans | 250,017,634.02 | |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | ||
| Long-term payables | ||
| Long-term employee benefits payable | ||
| Provisions | ||
| Deferred income | 721,630.66 | |
| Deferred income tax liabilities | 1,102,695.20 | 422,626.71 |
| Other non-current liabilities | ||
| Total non-current liabilities | 1,102,695.20 | 251,161,891.39 |
| Total liabilities | 3,949,759,607.04 | 2,851,551,252.20 |
| Shareholders' equity: | ||
| Share capital | 2,112,251,697.00 | 2,112,251,697.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 156,939,080.75 | 73,153,800.49 |
| Less: Treasury shares | ||
| Other comprehensive income | -84,201,739.17 | -94,582,500.13 |
| Special reserves | ||
| Surplus reserves | 227,390,965.90 | 227,390,965.90 |
| General risk reserves |
Retained earnings
| Retained earnings | 5,777,154,510.18 | 4,711,093,895.82 |
| Total equity attributable to shareholders of the Company | 8,189,534,514.66 | 7,029,307,859.08 |
| Non-controlling interests | 331,140,771.38 | 264,400,744.45 |
| Total shareholders' equity | 8,520,675,286.04 | 7,293,708,603.53 |
| Total liabilities and shareholders’ equity | 12,470,434,893.08 | 10,145,259,855.73 |
Legal representative: Li Weiwei Chief Financial Officer: Ye WeiBoard Secretary: Ye Wei
2. Balance Sheet of the Company
Unit: RMB
| Item | 30 June 2020 | 31 December 2019 |
| Current assets: | ||
| Monetary funds | 324,975.12 | 765,545.81 |
| Trading financial assets | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | ||
| Accounts receivable financing | ||
| Prepayments | 5,000.00 | |
| Other receivables | 375,998,167.92 | 1,010,549,806.19 |
| Including: Interest receivable | ||
| Dividends receivable | 1,000,000,000.00 | |
| Inventories | ||
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 3,066,714.15 | 2,895,886.32 |
| Total current assets | 379,389,857.19 | 1,014,216,238.32 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables |
Long-term equity investments
| Long-term equity investments | 6,574,316,138.89 | 6,487,297,853.18 |
| Other equity investments | 7,240,888.31 | 7,240,888.31 |
| Other non-current financial assets | 31,706,772.79 | 31,706,772.79 |
| Investment properties | ||
| Fixed assets | ||
| Construction in progress | ||
| Productive living assets | ||
| Oil and gas assets | ||
| Right-of-use assets | ||
| Intangible assets | ||
| Development expenditure | ||
| Goodwill | ||
| Long-term deferred expenses | ||
| Deferred income tax assets | ||
| Other non-current assets | ||
| Total non-current assets | 6,613,263,799.99 | 6,526,245,514.28 |
| Total assets | 6,992,653,657.18 | 7,540,461,752.60 |
| Current liabilities: | ||
| Short-term loans | ||
| Trading financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | 122,179.29 | 14,203.83 |
| Advances from customers | ||
| Contract liabilities | ||
| Employee benefits payable | 136,748.20 | 120,059.83 |
| Taxes payable | 3,740,774.87 | 1,958,201.03 |
| Other payables | 6,051,829.21 | 6,806,054.20 |
| Including: Interest payable | ||
| Dividends payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | ||
| Other current liabilities | ||
| Total current liabilities | 10,051,531.57 | 8,898,518.89 |
Non-current liabilities:
| Non-current liabilities: | ||
| Long-term loans | ||
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | ||
| Long-term payables | ||
| Long-term employee benefits payable | ||
| Provisions | ||
| Deferred income | ||
| Deferred income tax liabilities | ||
| Other non-current liabilities | ||
| Total non-current liabilities | ||
| Total liabilities | 10,051,531.57 | 8,898,518.89 |
| Shareholders' equity: | ||
| Share capital | 2,112,251,697.00 | 2,112,251,697.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 3,709,796,608.05 | 3,622,063,902.37 |
| Less: Treasury shares | ||
| Other comprehensive income | -52,759,111.69 | -52,759,111.69 |
| Special reserves | ||
| Surplus reserves | 340,080,723.42 | 340,080,723.42 |
| Retained earnings | 873,232,208.83 | 1,509,926,022.61 |
| Total shareholders' equity | 6,982,602,125.61 | 7,531,563,233.71 |
| Total liabilities and shareholders’ equity | 6,992,653,657.18 | 7,540,461,752.60 |
3. Consolidated Income Statement
Unit: RMB
| Item | H1 2020 | H1 2019 |
| 1. Total operating revenue | 7,988,675,195.57 | 6,070,957,503.06 |
| Including: Operating revenue | 7,988,675,195.57 | 6,070,957,503.06 |
| Interest income |
Premium income
| Premium income | ||
| Handling charge and commission income | ||
| 2. Total operating costs and expenses | 6,257,275,520.69 | 4,908,533,506.03 |
| Including: Cost of sales | 863,666,663.98 | 838,986,561.51 |
| 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 | 22,337,290.11 | 20,392,371.96 |
| Distribution and selling expenses | 4,549,628,282.98 | 3,632,067,521.84 |
| General and administrative expenses | 166,919,490.05 | 88,053,838.68 |
| Research and development expenses | 644,896,512.00 | 324,699,670.32 |
| Financial expenses | 9,827,281.57 | 4,333,541.72 |
| Including: Interest expense | 34,655,637.60 | 18,926,518.37 |
| Interest income | 23,176,748.76 | 8,475,803.74 |
| Add: Other income | 95,213,596.55 | 49,294,108.11 |
| Investment income (“-” for loss) | 108,093,257.02 | 18,932,969.82 |
| Including: Share of profits and losses of joint ventures and associates | 13,131,170.06 | -6,172,892.49 |
| 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) | 115,130,432.61 | 41,603,452.48 |
| Impairment loss on credit (“-” for loss) | -7,237,074.09 | 33,094,388.44 |
| Impairment loss on assets (“-” for loss) | -44,335,968.65 | -14,789,077.01 |
| Gain on disposal of assets (“-” for loss) | 75,379.94 | -77,711.53 |
| 3. Operating profit (“-” for loss) | 1,998,339,298.26 | 1,290,482,127.34 |
| Add: Non-operating income | 2,297,869.41 | 3,082,997.15 |
| Less: Non-operating expenses | 7,429,745.23 | 2,674,771.67 |
| 4. Profit before income tax expenses (“-” for loss) | 1,993,207,422.44 | 1,290,890,352.82 |
Less: Income tax expenses
| Less: Income tax expenses | 110,659,828.94 | 131,634,742.44 |
| 5. Net profit (“-” for net loss) | 1,882,547,593.50 | 1,159,255,610.38 |
| 5.1 Classified by continuity of operations | ||
| 5.1.1 Net profit from continuing operations (“-” for net loss) | 1,882,547,593.50 | 1,159,255,610.38 |
| 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 Company | 1,699,736,123.46 | 1,033,074,405.38 |
| 5.2.2 Net profit attributable to non-controlling interests | 182,811,470.04 | 126,181,205.00 |
| 6. Other comprehensive income, net of tax | 10,361,892.43 | -25,288.71 |
| Other comprehensive income attributable to shareholders of the Company, net of tax | 10,380,760.96 | -25,288.71 |
| 6.1 Other comprehensive income that will not be 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 investments | ||
| 6.1.4 Changes in the fair value of the company's own credit risk | ||
| 6.1.5 Others | ||
| 6.2 Other comprehensive income that will be reclassified subsequently to profit or loss | 10,380,760.96 | -25,288.71 |
| 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 foreign currency financial statements | 10,380,760.96 | -25,288.71 |
| 6.2.7 Others | ||
| Other comprehensive income attributable to non-controlling | -18,868.53 |
interests, net of tax
| interests, net of tax | ||
| 7. Total comprehensive income | 1,892,909,485.93 | 1,159,230,321.67 |
| Total comprehensive income attributable to shareholders of the Company | 1,710,116,884.42 | 1,033,049,116.67 |
| Total comprehensive income attributable to non-controlling interests | 182,792,601.51 | 126,181,205.00 |
| 8. Earnings per share: | ||
| 8.1 Basic earnings per share | 0.80 | 0.49 |
| 8.2 Diluted earnings per share | 0.80 | 0.49 |
Where business combinations under common control occurred in the current period, the net profit achieved by the acquireesbefore 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 WeiBoard Secretary: Ye Wei
4. Income Statement of the Company
Unit: RMB
| Item | H1 2020 | H1 2019 |
| 1. Operating revenue | 0.00 | 0.00 |
| Less: Cost of sales | 0.00 | 0.00 |
| Taxes and surcharges | 21,933.20 | 8,651.83 |
| Distribution and selling expenses | ||
| General and administrative expenses | 2,375,644.75 | 664,215.31 |
| Research and development expenses | ||
| Financial expenses | 389,882.06 | 5,026,558.14 |
| Including: Interest expense | 8,467,829.41 | |
| Interest income | 810.35 | 3,444,301.05 |
| Add: Other income | 439,106.01 | 25,780.49 |
| Investments income (“-” for loss) | -714,419.97 | 789,008,294.71 |
| Including: Share of profits and losses of joint ventures and associates | -714,419.97 | -979,081.27 |
| 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) |
Impairment loss on credit (“-” for loss)
| Impairment loss on credit (“-” for loss) | 44,468.66 | -2,270.00 |
| Impairment loss on assets (“-” for loss) | ||
| Gain on disposal of assets (“-” for loss) | ||
| 2. Operating profit (“-” for loss) | -3,018,305.31 | 783,332,379.92 |
| Add: Non-operating income | 0.63 | |
| Less: Non-operating expenses | ||
| 3. Profit before income tax expenses (“-” for loss) | -3,018,304.68 | 783,332,379.92 |
| Less: Income tax expenses | -567.49 | |
| 4. Net profit (“-” for net loss) | -3,018,304.68 | 783,332,947.41 |
| 4.1 Net profit from continuing operations (“-” for net loss) | -3,018,304.68 | 783,332,947.41 |
| 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 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
| 5.2.7 Others | ||
| 6. Total comprehensive income | -3,018,304.68 | 783,332,947.41 |
| 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 2020 | H1 2019 |
| 1. Cash flows from operating activities: | ||
| Cash received from the sales of goods or rendering services | 8,468,127,558.75 | 5,978,803,476.57 |
| 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 | ||
| 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 | 6,317,294.49 | 18,148,222.30 |
| Cash received relating to other operating activities | 106,875,881.05 | 53,303,204.02 |
| Sub-total of cash inflows from operating activities | 8,581,320,734.29 | 6,050,254,902.89 |
| Cash paid for purchases of goods and services | 1,036,250,684.73 | 663,495,847.03 |
| 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 | 580,145,971.94 | 384,362,339.55 |
| Payments of taxes and levies | 196,576,891.94 | 234,010,246.88 |
Cash paid relating to other operating activities
| Cash paid relating to other operating activities | 4,318,120,638.78 | 4,152,031,533.06 |
| Sub-total of cash outflows used in operating activities | 6,131,094,187.39 | 5,433,899,966.52 |
| Net cash flows from operating activities | 2,450,226,546.90 | 616,354,936.37 |
| 2. Cash flows from investing activities: | ||
| Cash received from disposal of investments | 224,285,017.49 | 105,816,280.71 |
| Cash received from investment income | 53,388,661.32 | 16,060,855.44 |
| Cash received from disposal of fixed assets, intangible assets and other long-term assets | 614,635.00 | 204,690.00 |
| Net cash received from disposal of subsidiaries and other business units | 433,449,673.50 | |
| Cash received relating to other investing activities | 4,678,500,000.00 | 2,488,320,540.52 |
| Sub-total of cash inflows from investing activities | 4,956,788,313.81 | 3,043,852,040.17 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 968,397,533.12 | 59,645,209.49 |
| Cash paid to acquire investments | 86,020,569.50 | 78,068,522.99 |
| Net increase in pledged loans granted | ||
| Net cash paid for the acquisition of subsidiaries and other business units | ||
| Cash paid relating to other investing activities | 4,854,790,000.00 | 2,430,000,000.00 |
| Sub-total of cash outflows used in investing activities | 5,909,208,102.62 | 2,567,713,732.48 |
| Net cash flows from/used in investing activities | -952,419,788.81 | 476,138,307.69 |
| 3. Cash flows from financing activities: | ||
| Cash received from capital contributions | ||
| Including: Cash received from capital contributions by non-controlling interests of subsidiaries | ||
| Cash received from borrowings | ||
| Cash received relating to other financing activities | 889,324,326.07 | |
| Sub-total of cash inflows from financing activities | 889,324,326.07 | |
| Cash repayments of borrowings | 281,176,106.33 | 383,609,640.58 |
| Cash paid for interest and dividends | 788,329,296.95 | 138,359,549.65 |
| Including: Dividends paid by subsidiaries to non-controlling interests | 120,000,000.00 | 122,000,000.00 |
| Cash paid relating to other financing activities | 302,007,312.87 | |
| Sub-total of cash outflows used in financing activities | 1,069,505,403.28 | 823,976,503.10 |
| Net cash flows used in financing activities | -180,181,077.21 | -823,976,503.10 |
4. Effect of foreign exchange rate changes on cash and cash equivalents
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | 10,777,687.85 | -128,092.91 |
| 5. Net increase in cash and cash equivalents | 1,328,403,368.73 | 268,388,648.05 |
| Add: Cash and cash equivalents at beginning of the period | 2,135,260,406.77 | 1,515,740,344.79 |
| 6. Cash and cash equivalents at end of the period | 3,463,663,775.50 | 1,784,128,992.84 |
6. Cash Flow Statement of the Company
Unit: RMB
| Item | H1 2020 | H1 2019 |
| 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 | 650,095,006.21 | 1,355,608,209.24 |
| Sub-total of cash inflows from operating activities | 650,095,006.21 | 1,355,608,209.24 |
| Cash paid for purchases of goods and services | ||
| Cash paid to and on behalf of employees | 545,424.75 | 360,009.16 |
| Payments of taxes and levies | 21,933.20 | 1,736,261.21 |
| Cash paid relating to other operating activities | 1,016,292,709.85 | 2,256,700,554.73 |
| Sub-total of cash outflows used in operating activities | 1,016,860,067.80 | 2,258,796,825.10 |
| Net cash flows used in operating activities | -366,765,061.59 | -903,188,615.86 |
| 2. Cash flows from investing activities: | ||
| Cash received from disposal of investments | 4,999,610.00 | |
| Cash received from investment income | 1,000,000,000.00 | 1,289,987,375.98 |
| 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 | 404,709,910.00 | |
| Cash received relating to other investing activities | ||
| Sub-total of cash inflows from investing activities | 1,000,000,000.00 | 1,699,696,895.98 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | ||
| Cash paid to acquire investments | 8,000,000.00 | |
| Net cash paid for the acquisition of subsidiaries and other business units | ||
| Cash paid relating to other investing activities | ||
| Sub-total of cash outflows used in investing activities | 8,000,000.00 |
Net cash flows from investing activities
| Net cash flows from investing activities | 1,000,000,000.00 | 1,691,696,895.98 |
| 3. Cash flows from financing activities: | ||
| Cash received from capital contributions | ||
| Cash received from borrowings | ||
| Cash received relating to other financing activities | ||
| Sub-total of cash inflows from financing activities | ||
| Cash repayments of borrowings | 369,000,000.00 | |
| Cash paid for interest and dividends | 633,675,509.10 | 8,520,671.25 |
| Cash paid relating to other financing activities | 302,007,312.87 | |
| Sub-total of cash outflows used in financing activities | 633,675,509.10 | 679,527,984.12 |
| Net cash flows used in financing activities | -633,675,509.10 | -679,527,984.12 |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | ||
| 5. Net decrease/increase in cash and cash equivalents | -440,570.69 | 108,980,296.00 |
| Add: Cash and cash equivalents at beginning of the period | 765,545.81 | 4,325,959.18 |
| 6. Cash and cash equivalents at end of the period | 324,975.12 | 113,306,255.18 |
7. Consolidated Statement of Changes in Shareholders’ Equity
H1 2020
Unit: RMB
Item
| Item | H1 2020 | ||||||||||||||
| Equity attributable to shareholders of the Company | Non-controlling interests | Total shareholders' equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | General risk reserves | Retained earnings | Others | Sub-total | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| 1. Balance as at the end of prior year | 2,112,251,697.00 | 73,153,800.49 | -94,582,500.13 | 227,390,965.90 | 4,711,093,895.82 | 7,029,307,859.08 | 264,400,744.45 | 7,293,708,603.53 | |||||||
| Add: Adjustments for changed accounting policies | |||||||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
Adjustmentsfor businesscombinationsundercommoncontrol
| Adjustments for business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Balance as at beginning of year | 2,112,251,697.00 | 73,153,800.49 | -94,582,500.13 | 227,390,965.90 | 4,711,093,895.82 | 7,029,307,859.08 | 264,400,744.45 | 7,293,708,603.53 | |||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 83,785,280.26 | 10,380,760.96 | 1,066,060,614.36 | 1,160,226,655.58 | 66,740,026.93 | 1,226,966,682.51 | |||||||||
| 3.1 Total comprehensive income | 10,380,760.96 | 1,699,736,123.46 | 1,710,116,884.42 | 182,792,601.51 | 1,892,909,485.93 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | 83,785,280.26 | 83,785,280.26 | 3,947,425.42 | 87,732,705.68 | |||||||||||
| 3.2.1 Common shares contribution |
andwithdrawal byshareholders
| and withdrawal by shareholders | |||||||||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | |||||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 83,785,280.26 | 83,785,280.26 | 3,947,425.42 | 87,732,705.68 | |||||||||||
| 3.2.4 Others | |||||||||||||||
| 3.3 Profit distribution | -633,675,509.10 | -633,675,509.10 | -120,000,000.00 | -753,675,509.10 | |||||||||||
| 3.3.1 Appropriation to surplus reserves | |||||||||||||||
| 3.3.2 Appropriation to general risk reserves |
3.3.3
Distribution toshareholders
| 3.3.3 Distribution to shareholders | -633,675,509.10 | -633,675,509.10 | -120,000,000.00 | -753,675,509.10 | |||||||||||
| 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 capital) | |||||||||||||||
| 3.4.3 Surplus reserves for making up losses | |||||||||||||||
| 3.4.4 Changes in defined benefit pension |
schemestransferredinto retainedearnings
| 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 end of the period | 2,112,251,697.00 | 156,939,080.75 | -84,201,739.17 | 227,390,965.90 | 5,777,154,510.18 | 8,189,534,514.66 | 331,140,771.38 | 8,520,675,286.04 |
H1 2019
Unit: RMB
| Item | H1 2019 | ||||||||||||
| Equity attributable to shareholders of the Company | Non-controlling interests | Total shareholders' | |||||||||||
| Share capital | Other equity | Capital | Less: Treasury | Other | Spe | Surplus | Genera | Retained | Oth | Sub-total | |||
instruments
| instruments | reserves | shares | comprehensive income | cial reserves | reserves | l risk reserves | earnings | ers | equity | ||||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| 1. Balance as at the end of prior year | 2,124,870,253.00 | 298,739,967.21 | 46,376,346.58 | 170,477,835.88 | 3,332,211,003.19 | 5,972,675,405.86 | 141,026,934.06 | 6,113,702,339.92 | |||||||
| Add: Adjustments for changed accounting policies | -26,836,801.80 | 26,836,801.80 | |||||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
| Adjustments for business combinations under common control | |||||||||||||||
Others
| Others | |||||||||||||||
| 2. Balance as at beginning of year | 2,124,870,253.00 | 298,739,967.21 | 19,539,544.78 | 170,477,835.88 | 3,359,047,804.99 | 5,972,675,405.86 | 141,026,934.06 | 6,113,702,339.92 | |||||||
| 3. Increase/ decrease in the period (“-” for decrease) | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | -25,288.71 | 615,093,573.38 | 193,941,803.16 | 11,692,555.24 | 205,634,358.40 | |||||||
| 3.1 Total comprehensive income | -25,288.71 | 1,033,074,405.38 | 1,033,049,116.67 | 126,181,205.00 | 1,159,230,321.67 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | -421,126,481.51 | 7,511,350.24 | -413,615,131.27 | |||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | -421,126,481.51 | -421,126,481.51 |
3.2.2 Capital
contributionandwithdrawalby holders ofother equityinstruments
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | |||||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | |||||||||||||||
| 3.2.4 Others | 7,511,350.24 | 7,511,350.24 | |||||||||||||
| 3.3 Profit distribution | -417,980,832.00 | -417,980,832.00 | -122,000,000.00 | -539,980,832.00 | |||||||||||
| 3.3.1 Appropriation to surplus reserves | |||||||||||||||
| 3.3.2 Appropriation to general risk reserves | |||||||||||||||
| 3.3.3 Distribution to | -417,980,832.00 | -417,980,832.00 | -122,000,000.00 | -539,980,832.00 |
shareholders
| 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 share capital) | |||||||||||||||
| 3.4.3 Surplus reserves for making up losses | |||||||||||||||
| 3.4.4 Changes in defined benefit |
pensionschemestransferredinto retainedearnings
| 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 end of the period | 2,112,251,697.00 | 192,239,353.57 | 302,007,311.87 | 19,514,256.07 | 170,477,835.88 | 3,974,141,378.37 | 6,166,617,209.02 | 152,719,489.30 | 6,319,336,698.32 |
8. Statement of Changes in Shareholders’ Equity of the Company
H1 2020
Unit: RMB
Item
| Item | H1 2020 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Others | Total shareholders' equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| 1. Balance as at the end of prior year | 2,112,251,697.00 | 3,622,063,902.37 | -52,759,111.69 | 340,080,723.42 | 1,509,926,022.61 | 7,531,563,233.71 | ||||||
| Add: Adjustments for changed accounting policies | ||||||||||||
| Adjustments for corrections of previous errors | ||||||||||||
| Others | ||||||||||||
| 2. Balance as at beginning of year | 2,112,251,697.00 | 3,622,063,902.37 | -52,759,111.69 | 340,080,723.42 | 1,509,926,022.61 | 7,531,563,233.71 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 87,732,705.68 | -636,693,813.78 | -548,961,108.10 | |||||||||
| 3.1 Total comprehensive income | -3,018,304.68 | -3,018,304.68 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | 87,732,705.68 | 87,732,705.68 | ||||||||||
| 3.2.1 Common shares contribution and | ||||||||||||
withdrawal byshareholders
| withdrawal by shareholders | ||||||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | ||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 87,732,705.68 | 87,732,705.68 | ||||||||||
| 3.2.4 Others | ||||||||||||
| 3.3 Profit distribution | -633,675,509.10 | -633,675,509.10 | ||||||||||
| 3.3.1 Appropriation to surplus reserves | ||||||||||||
| 3.3.2 Distribution to shareholders | -633,675,509.10 | -633,675,509.10 | ||||||||||
| 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
| 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. Balance as at the end of the period | 2,112,251,697.00 | 3,709,796,608.05 | -52,759,111.69 | 340,080,723.42 | 873,232,208.83 | 6,982,602,125.61 |
H1 2019
Unit: RMB
| Item | H1 2019 | |||||||||||
| Share capital | Other equity instruments | Capital reserves | Less: Treasury shares | Other comprehensive income | Special reserves | Surplus reserves | Retained earnings | Others | Total shareholders' equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| 1. Balance as at the end of prior | 2,124,870,253.00 | 3,952,461,239.82 | 170,477,835.88 | 612,706,036.45 | 6,860,515,365.15 | |||||||
year
| year | ||||||||||||
| Add: Adjustments for changed accounting policies | ||||||||||||
| Adjustments for corrections of previous errors | ||||||||||||
| Others | ||||||||||||
| 2. Balance as at beginning of year | 2,124,870,253.00 | 3,952,461,239.82 | 170,477,835.88 | 612,706,036.45 | 6,860,515,365.15 | |||||||
| 3. Increase/ decrease in the period (“-” for decrease) | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | 365,352,115.41 | -55,774,366.10 | |||||||
| 3.1 Total comprehensive income | 783,332,947.41 | 783,332,947.41 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | -421,126,481.51 | ||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | -12,618,556.00 | -106,500,613.64 | 302,007,311.87 | -421,126,481.51 | ||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | ||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | ||||||||||||
| 3.2.4 Others | ||||||||||||
| 3.3 Profit distribution | -417,980,832.00 | -417,980,832.00 | ||||||||||
| 3.3.1 Appropriation to surplus reserves | ||||||||||||
| 3.3.2 Distribution to shareholders | -417,980,832.00 | -417,980,832.00 | ||||||||||
| 3.3.3 Others |
3.4 Internal transfers within
shareholders’ equity
| 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 | ||||||||||||
| 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 end of the period | 2,112,251,697.00 | 3,845,960,626.18 | 302,007,311.87 | 170,477,835.88 | 978,058,151.86 | 6,804,740,999.05 |
(The End)