37 Interactive Entertainment Network
Technology Group Co., Ltd.
2022 Interim Report (Summary)
August 2022
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 37 Interactive Entertainment Network Technology GroupCo., Ltd. (hereinafter referred to as the “Company”) hereby guarantee the truthfulness, accuracyand completeness of the contents of this Report, and shall be jointly and severally liable for anymisrepresentations, 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.There is uncertainty with respect to the plans and other forward-looking statements in thisReport, which shall not be deemed as promises to investors. Investors and other stakeholdersshall be fully aware of the risk and understand the difference between plans, forecasts andpromises.Possible risks facing the Company and countermeasures have been detailed in “VII RisksFacing the Company and Countermeasures” under “Part III Management Discussion andAnalysis” herein, which investors are kindly reminded to pay attention to.The Board has approved an interim dividend plan as follows: based on 2,217,864,281 shares,a cash dividend of RMB 3.5 (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 ...... 7
Part III Management Discussion and Analysis ...... 10
Part IV Corporate Governance ...... 34
Part V Environmental and Social Responsibility ...... 38
Part VI Share Changes and Shareholder Information ...... 41
Part VII Financial Statements ...... 47
Documents Available for Reference
I The financial statements signed and stamped by the Company’s legal representative, and Chief Financial Officer; and
II The originals of the announcements and documents disclosed to the public by the Company on the newspaper designated by theCSRC for information disclosure during the Reporting Period.
The documents above are available at the Board Secretary’s Office of the Company.
Definitions
| Term | Definition |
| CSRC | China Securities Regulatory Commission |
| SZSE/the Stock Exchange | Shenzhen Stock Exchange |
| Company Law | Company Law of the People's Republic of China |
| Securities Law | Securities Law of the People's Republic of China |
| Guideline for Compliant Operation | Guideline No. 1 of the Shenzhen Stock Exchange for Self-regulation of Listed Companies—Compliant Operation of Main Board Listed Companies |
| 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./Articles of Association of 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 2022 to 30 June 2022 |
| Period-end/end of the Reporting Period | 30 June 2022 |
| 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 |
| 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 Network Technology Group Co., Ltd. |
| 37 Interactive Entertainment (Shanghai) | 37 Interactive Entertainment (Shanghai) Technology Co., Ltd. |
| Jiangsu Aurora/Aurora Network/Jiangsu Aurora Network | Jiangsu Aurora Network Technology Co., Ltd. |
| Zengame Technology | Zengame Technology Holding Limited and its business entities |
| X.D. | XD Inc. and its business entities |
| Resonance Phase I Fund | Qingdao Resonance Phase I Venture Capital Fund Partnership (Limited Partnership) |
| Goertek | Goertek Inc. |
| Generation Z | The new generation born during 1995-2009 |
| EyuGame | Shanghai Eyu Network Technology Co., Ltd. |
| Karma Game | Karma Game HK Limited and its subsidiaries |
| StarUnion Interactive Entertainment | ChengDu StarUnion Interactive Entertainment Technology Co., Ltd. |
| Flintwood Technology | Beijing Flintwood Technology Co., Ltd. |
| Zhenshuo Network | Wuhu Zhenshuo Network Technology Co., Ltd. |
| Lihoo Network | Guangzhou Lihoo Network Co., Ltd. |
| Jianguo Guangnian Technology | Chengdu Jianguo Guangnian Technology Co., Ltd. |
| Dobala | Shanghai Dobala Network Technology Co., Ltd. |
| ZX Future | Beijing ZX Future Technology Co., Ltd. |
| Longyou Game | Chengdu Longyou Tianxia Technology Co., Ltd. |
| Meng52 | Beijing Meng52 Network Technology Co., Ltd. |
| Woowii Games | Shanghai Woowii Network Technology Co., Ltd. |
| UEGAME | Beijing UE Interactive Software Co., Ltd. |
| Unknown Matrix | Guangzhou Unknown Matrix Network Co., Ltd. |
| Mercury Culture | Shanghai Mercury Culture Communication Co., Ltd. |
| RPG | Role playing game |
| ARPG | Action role playing game |
| SLG | Strategy game |
| MMORPG | Massive multiplayer online role-playing game |
| VR | The abbreviation of "Virtual Reality", which uses computers to simulate and produce a three-dimensional virtual space. It provides users with sensory experience such as realistic visual and auditory experience. |
| AR | The abbreviation of "Augmented Reality", which uses computer technology to apply virtual information to the real world, where the real environment and virtual objects exist simultaneously in one picture or space through superimposition in real time. |
| 5G | 5th generation mobile communication technology. |
| AI | Artificial Intelligence |
| Sensor Tower | A mobile application data analytical company that specializes in mobile application data analytics. It provides global mobile application economy with data at enterprise level. |
Part II Corporate Information and Key Financial InformationI Corporate Information
| Stock name | 37 Interactive Entertainment | Stock code | 002555 |
| Place of listing | Shenzhen Stock Exchange | ||
| Company name in Chinese | 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) | 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 | Room 7001, 7/F, Tower B1, Wanjiang Fortune Plaza, 88 Ruixiang Road, Wuhu City, Anhui Province | Room 7001, 7/F, Tower B1, Wanjiang Fortune Plaza, 88 Ruixiang Road, 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
| Registered address | Room 7001, 7/F, Tower B1, Wanjiang Fortune Plaza, 88 Ruixiang Road, Wuhu City, Anhui Province |
| Zip code | 241000 |
| Office address | Room 7001, 7/F, Tower B1, Wanjiang Fortune Plaza, 88 Ruixiang Road, Wuhu City, Anhui Province |
| Zip code | 241000 |
| Company website | http://www.37wan.net/ |
| Email address | ir@37.com |
2. Media for Information Disclosure and Place where this Report is Lodged
Indicate by tick mark whether any change occurred to the information disclosure media and the place for lodging the Company’s
periodic reports in the Reporting Period.
□ Applicable ? Not applicable
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing theCompany’s periodic reports and the place for lodging such reports did not change in the Reporting Period. The said informationcan be found in the 2021 Annual Report.
3. Other Information
Indicate by tick mark whether any change occurred to other information in the Reporting Period.
□ Applicable ? Not applicable
IV Key Financial InformationIndicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes ? No
| H1 2022 | H1 2021 | Change (%) | |
| Operating revenue (RMB) | 8,092,238,684.40 | 7,538,949,378.53 | 7.34% |
| Net profit attributable to the Listed Company’s shareholders (RMB) | 1,695,164,644.39 | 853,717,855.65 | 98.56% |
| Net profit attributable to the Listed Company’s shareholders after deducting non-recurring profits and losses (RMB) | 1,643,486,319.50 | 637,526,551.32 | 157.79% |
| Net cash flows from operating activities (RMB) | 1,804,079,584.54 | 1,253,919,152.46 | 43.88% |
| Basic earnings per share (RMB/share) | 0.77 | 0.39 | 97.44% |
| Diluted earnings per share (RMB/share) | 0.77 | 0.39 | 97.44% |
| Weighted average return on equity (%) | 14.72% | 10.15% | 4.57% |
| 30 June 2022 | 31 December 2021 | Change (%) | |
| Total assets (RMB) | 16,304,212,773.63 | 14,437,181,242.76 | 12.93% |
| Equity attributable to the Listed Company’s shareholders (RMB) | 11,721,459,112.09 | 10,773,716,314.49 | 8.80% |
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 | Amount | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | 328,439.88 | |
| Government grants through profit or loss (exclusive of government grants consistently given in the Company’s ordinary course of business at fixed quotas or amounts as per governmental policies or standards) | 17,214,562.12 | Mainly due to refund of value-added 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 financial assets and liabilities & income from disposal of trading financial assets and liabilities and available-for-sale financial assets (exclusive of the effective portion of hedges that arise in the Company’s ordinary course of business) | 36,659,086.36 | |
| Reversed portions of impairment allowances for receivables which are tested individually for impairment | 28,947.30 | |
| Non-operating income and expenses other than the above | 2,475,127.73 | |
| Less: Income tax effects | 4,983,678.44 | |
| Non-controlling interests effects (net of tax) | 44,160.06 | |
| Total | 51,678,324.89 |
Particulars about other gains and losses that meet the definition of non-recurring profits and losses:
□ Applicable ? Not applicable
No such cases for the Reporting Period.Explanation of why the Company reclassifies as recurrent a non-recurring profits and losses item listed in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Non-recurring Profits andLosses Items:
□ Applicable ? Not applicable
No such cases for the Reporting Period.
Part III Management Discussion and AnalysisI Principal Activity of the Company in the Reporting PeriodAs one of the top 20 global public game companies, key cultural export companies of China, companies nominated for “Top 30Cultural Enterprises of China”, civilized institutions in Guangdong Province, and Top 30 Cultural Enterprises of Guangzhou, 37Interactive Entertainment is an outstanding listed Chinese A-share company engaged in comprehensive cultural and entertainmentofferings.The Company focuses on cultural and creative businesses based on the development, publishing, and operation of onlinegames. Meanwhile, it continues to make extensive investments in segments such as Metaverse, film and television, music, artistagency, animation, social entertainment, e-sports, culture and health, and new consumption, with an aim to build a comprehensiveecosystem and drive mutual empowerment of business value and cultural value. It has been steadily advancing its developmentstrategy of “boutiqueization, diversification and globalization”. With “bringing joy to the world” as its mission, the Company isdedicated to becoming an excellent and sustainable entertainment enterprise.The Company has been operating in a steady and healthy manner. It adhered to the strategy of “integration of R&D andoperation”, continued to pursue its strategic objectives, as well as kept driving product diversification and global marketing. Duringthe Reporting Period, the Company recorded operating revenue of RMB 8.092 billion, with a year-over-year (YoY) increase of 7.34%;and a net profit attributable to the Listed Company’s shareholders of RMB 1.695 billion, up by 98.56% YoY. With the continualrollout of the Company’s “globalization” strategy, the overseas revenue amounted to RMB 3.033 billion during the first half of 2022,increasing by 48.33% YoY, a record high.As a public company, the Company focuses on corporate social responsibility and social welfare. During the Reporting Period,under the leadership of the Party Committee, the Company steadily carried on with its “social value co-creation plan”. It continuedto input resources to provide support in six areas—rural education, rural industrial development, industry-university-researchtalent training, functional game development, employee career development, and scientific and technological innovation, to helpachieve common prosperity around the country. Meanwhile, it actively mobilized internal and external resources to promote talentcultivation and charitable volunteer services, playing its part as a corporate citizen.
(I) Industry Overview for the Reporting Period
1. Changes in industry-related economic situation and their impacts on the CompanyAgainst the backdrop of a booming digital economy, China's game industry is also leveraging the advantages of resources andusers. It pushes the boundaries and accelerates the pace of industrial development through methods such as technology drivers,industrial integration and cultural innovation. The game industry has seriously implemented the requirements of the centralgovernment, maintained righteousness and innovation, forged ahead, strove to take up the cultural mission, continuouslystrengthened the content construction, continued to regulate the development of the industry and made efforts to expandoverseas markets. The industry's ecosystem has continued to be improved, the strength and competitiveness have beencontinuously enhanced, and the pace of high-quality development has become more determined. It insists on giving priority tosocial benefits, and actively assumes social responsibilities, which has increasingly become an industry consensus. The gameindustry has ushered in new development opportunities.
According to the China's Game Industry Report from January to June 2022 jointly released by Game Publishing Committee ofChina Audio-video and Digital Publishing Association (CADPA) and China Game Industry Research Institute, from January to June2022, the actual sales revenue of China's game market was RMB 147.789 billion, a YoY decrease of 1.80%, the first YoY decline inrecent years. The scale of Chinese game users dropped by 0.13% YoY. The decline in both the market revenue and user scale ismainly due to the reduction of user income, a decrease in consumption intention and the increasing operating costs of gamecompanies during the COVID-19 pandemic. The declining trend in user scale indicates that the game industry has basically lost its"demographic dividend" and may have entered an era of competition for existing users. At the same time, strengthening theglobal market layout has become a breakthrough strategy for China's original games to achieve sustainable development. FromJanuary to June 2022, the actual sales revenue of China's homegrown games in the overseas market rose by 6.16% YoY to USD
8.989 billion, marking steady growth for China’s games in "going global". From the average growth rate in the past five years, theshare of China's game export has shown a stable increase. Exported games have maintained better growth in the three aspects ofdownload, use length and payment of users.
On the whole, the threshold of game development and barriers to competition has been substantially raised in the currentgame industry. Top game companies embracing strengths in the R&D and publishing of quality products and operation are morelikely to benefit from the new situation. Against this backdrop, the Company adheres to the development strategy of“boutiqueization, diversification and globalization”. It takes the main business as its core and deepens the strategy of "integrationof R&D and operation" and "dual engines at home and abroad", with an aim to drive high-quality, sustainable development. Duringthe Reporting Period, the Company kept its leading role in R&D capabilities by strengthening the output of quality games.Moreover, it advanced the "diversification" strategy from the aspects of R&D and publishing, and reserved varied quality games ondifferent themes through independent development, investment in R&D-oriented companies, and enhanced cooperation withdevelopers capable of producing quality games. In addition, the Company, through independently developed AI systems,consolidated refined operation, increased operating efficiency, and prolonged the life cycle of quality games. The Company'soverseas business has grown rapidly and the pace of exporting has been accelerated. With the strategy of "tailored games", theCompany has explored the global market through diversified high-quality games, and the overseas business has become the newgrowth engine of the Company.
In addition, with the continuous upgrading of industry technology, the development efficiency and product experience ofgames have been constantly improved, and the business transformation has accelerated. The rise of "Metaverse" and otheremerging concepts have triggered extensive attention from many industries and investors. As one with a forward-lookingstrategic vision, the Company follows industry changes closely and focuses on exploring Metaverse and the related technologies.Based on its early investment layout, it continues to extend its investment to high-quality upstream and downstream enterprisesin the fields including optical modules, AR glasses, VR/AR content, cloud game and spatial intelligence technology, covering linkssuch as optics, display, whole machine, application and system. The Company has identified new business forms combined withits existing advantages and leading technologies to realize the collaboration of internal and external resources in the field oftechnology, promoting the benign complementation of its business and capital operation.
2. Changes in industrial policy environment and their impacts on the Company
(1) In May 2022, the Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy was issuedby the General Office of the CPC Central Committee and the State Council. The document elevated "cultural digitalization" to anational strategy, made a top-level design for cultural digitalization, and provided an important platform for cultural inheritanceand dissemination.
With the introduction of "new infrastructure" policies in cultural fields including information infrastructure, integrationinfrastructure and innovation infrastructure, the relevant artificial intelligence, 5G and data center construction have become thetechnological basis for driving the development of cultural industries. Meanwhile, the cultural consumption market is increasingly
diverse, personalized and experience-focused. The integration of culture and technology has infiltrated technology into allaspects, including production and consumption, of the digital culture segment, which is essential for promoting culturaldigitalization and empowering the real economy.The Company sticks to innovation promotion. It continuously improves its technological capabilities by relying on multipleinnovative technologies such as artificial intelligence, big data and block chain, and explores new digital culture experiencethrough diversified combination of digital technology and its business. On one hand, the Company closely follows thedevelopment trend of Metaverse technology and industry, creates the Metaverse Game Art Museum, integrates the brand withgame IPs, traditional culture and social interaction, and deepens the application scenarios of Metaverse. Additionally, theCompany continues to explore the new experience of immersive social interactions by launching a range of digital collections thatare developed based on self-developed game IPs, the corporate mascot "Onion" and national culture park IPs. On the other hand,the Company always values the guidance of positive energy. In the development of self-developed games and function games, itintegrates the excellent traditional Chinese culture, presents famous ancient paintings, non-legacy craftsmanship and traditionalcustoms in a digital way, and inherits the excellent traditional culture.
(2) On 6 June 2021, the Guidelines on Enhancing the Protection of Minors of the Steering Group of the Protection of Minors ofthe State Council (hereinafter referred to as the “Guidelines”) were officially issued. Revolving around the implementation of theCivil Code and the Law on the Protection of Minors, the Guidelines refined and specified the relevant articles of law, raising a totalof 25 tasks. Specifically, in terms of cyber protection, the Guidelines raised requirements such as improving the system ofregulations and policies, making more efforts to prevent minors from Internet addiction, and strengthening the online protection ofminors' personal information.On 30 August 2021, the National Press and Publication Administration issued the Notice on Further Imposing StrictAdministrative Measures to Prevent Minors from Becoming Addicted to Online Games (hereinafter referred to as the "Notice"),which addresses further strict management measures to resolutely prevent minors from being addicted to online games andeffectively protect their physical and mental health in terms of the problem of excessive use and even addiction to online games ofminors.On 14 March 2022, the Cyberspace Administration of China solicited public opinions again on the Regulations on theProtection of Minors Online (Draft for Comment). Public consultation was held again on issues including minors' poor awarenessand ability to use the Internet safely and properly, online illegal and bad information that affect minors' physical and mental health,abuse of minors' personal information and Internet addiction.As one of the first game enterprises to launch the real-name registration and anti-addiction system, the Company hasimplemented anti-addiction throughout the entire process of R&D and operation. The Company has completed the connection tothe national real-name authentication system and has, under the latest requirements, upgraded the anti-addiction system forminors in all its games since 1 September 2021. Up to now, all the Company's games have connected to the anti-addiction systemand launched the age suitability reminders. During the Reporting Period, facial recognition technology was also introduced tofurther prevent minors from using adult accounts fraudulently.
Additionally, the Company added contents applicable to children to its Privacy Policy in line with the user habits of juvenilesunder 14 years old and their guardians. It contributed to turning China's gaming industry more standardized by activelyparticipating in the compilation of group standards for the gaming industry led by the China Audio-video and Digital PublishingAssociation ("CADPA"), such as the Specifications on Age Ratings of Online Games, the Specifications on Parent MonitoringPlatforms, and Online Game Terminology.
In addition to various anti-addiction protection measures for minors, the Company has launched the "Guardianship Project ofOnline Games for Minors' Parents" many years ago, and connected parents to do a good job in supervising minors on the basis ofthe implementation of the new anti-addiction rules, allowing parents to limit or prohibit minor's game time in accordance with the
actual situation. The Company has set up the special process and the customer compliant specialists to deal with all kinds ofproblems related to minor players. The Company will further upgrade the guardianship project for parents in the future, furtherupgrade and improve the protection system for minors through the positive synergy of multiple dimensions, and build a green andhealthy game ecosystem to protect the healthy growth of minors.
(3) On 10 June 2021, the Data Security Law of the People's Republic of China (hereinafter referred to as the "Data SecurityLaw") was adopted at the 29th session of the Standing Committee of the 13th National People's Congress of the People's Republicof China. The Data Security Law is enacted for the purposes of regulating data processing activities, safeguarding data security,promoting data development and utilization, and protecting the legal rights and interests of individuals and organizations.In June 2022, the State Administration for Market Regulation and the Cyberspace Administration of China announced to carryout data security management certification, with the release of the Implementation Rules on Data Security ManagementCertification. Network operators are encouraged to standardize the processing and strengthen the security protection of networkdata through certification.In the process of management system construction for information security, the Company has identified and evaluatedinformation security risks of products and services around more than ten aspects such as information asset management, accesscontrol, password management, information security event management, information security management in business continuitymanagement, compliance management, etc., established information security policy, risk level evaluation and disposal measuresfor each sub-business module, improved system documents and management processes, and formed a complete informationsecurity management system.In terms of information security management and user privacy protection, based on strict management policies and processsystem, the Company adopts industry-leading technologies and benchmark them with international standards, strictly controlsinformation security risks, and guarantees data security to ensure the security of users' personal information to the maximumextent. In user privacy protection, for example, the Company implements the seven principles of legality, consistent authority andresponsibility, minimum sufficient information collection, individual consent, user participation, and ensuring security in themanagement of the whole life cycle of user data. Around the security of user private information, the Company has also adopted avariety of technical means to prevent illegal access to unauthorized information by personnel. Meanwhile, the Company alsoencrypts, anonymizes and de-identifies sensitive information assets to protect them from being illegal cracked. Such technologiesand measures strongly ensure the security of user privacy information. The Company ensures that it runs the business in strictcompliance with applicable laws and regulations throughout the world, and protects the users’ right to manage personalinformation. A response procedure has been stipulated to inform users of any possible cost and necessary actions needed to betaken. In 2021, the Company has obtained the international-standard ISO/IEC 27001 certification for information securitymanagement system issued by SGS, an internationally recognized inspection, testing and certification institution, which means thatthe Company's information security management has been recognized by a third-party impartial institution which is internationallyauthoritative.(II) Overview of the Company’s main businesses in the Reporting Period
1. Main businesses and business models of the Company
During the Reporting Period, the Company's main businesses included the development, publishing, and operation of onlinegames. The operating modes of the Company’s online games mainly include independent operation and third-party joint operation.
Under the independent operation mode, the Company obtains the licenses of games through independent R&D or being anoperator 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-time
feedback 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 along with gamedevelopers.
2. Overview of the Company’s main businesses and products
The Company specializes in the development and publishing of games for global players, with the world’s leading gamedevelopment brand “Three Seven Games”, as well as professional game publishing brands “37Mobile”, “37GAMES” and “37Online”.During the Reporting Period, the domestic game industry entered a period of high-quality development. Game players'requirements for the quality of online games have increased significantly, the effect of the boutique strategy has been obvious, andthe development of high-quality games has been certified. The Company precisely grasped the industry development trends, madecontinuous improvements in operation, and remained a top performer in the industry, while adhering to the "boutiqueization,diversification and globalization" strategy.
(I) Mobile game business
During the Reporting Period, the Company recorded operating revenue of RMB 7.739 billion,from mobile games, a YoYincrease of 9.51%. The mobile game offering has become more diversified, game quality sees considerable improvement, and themobile game business maintains the leading position in domestic and overseas markets. During the Reporting Period, multiplegames including The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), All for Glory (荣耀大天使), and The Soul Land: Wu HunJue Xing (斗罗大陆：武魂觉醒) performed well in the growth stage. Meanwhile, its overseas business accelerated again. Variousglobally published games, such as Puzzles & Survival, Song of the Castle in the Sky (云上城之歌), and The Road to BeShopkeeper (叫我大掌柜), made outstanding contributions, proving the Company's boutiqueization advantages in long-termgame operation and promoting business transformation and upgrade as well as steady development.
① Research and development of mobile games
The Company places high emphasis on R&D investments and R&D talent cultivation, and refines management to improvequality and efficiency. The Company's game development brand of “Three Seven Games” is mainly based in Guangzhou, while theCompany has also established R&D subsidiaries or R&D branches in Suzhou, Xiamen, Wuhan and Beijing to attract multi-categorytalents. A professional layout has been established in multiple market segments like SLG, MMORPG, card games and simulation,making the Company a benchmark for the R&D of innovative games in the industry.
The Company's R&D arm profoundly implemented the strategy of "boutiqueization, diversification, and globalization", and itsself-developed reserve product projects included game genres such as MMORPG, SLG, card games, and simulation games, while
37 Interactive EntertainmentThree Seven Games(game development)
| Three Seven Games (game development) | 37Mobile (publishing of mobile games) | 37GAMES (overseas publishing) | 37Online (publishing of mobile & browser games) |
the Company considered the plan of global publishing of products at the early stage of the projects. The Company carries on withthe "boutiqueization” strategy and keeps exploring and practicing cutting-edge technologies in R&D. For instance, the battlestrategy mobile card game The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), as a milestone of the Company’s self-developedproducts, ranked as high as the Top 4 of iOS grossing chart shortly after its launch, with the highest monthly gross billing exceedingRMB 700 million, which is a strong proof of the Company's R&D strength. The game is developed using the Next-Gen 3D engine andthe PBR (Physically Based Rendering) technology. Through technologies such as real-time seamless day-night switch and dynamicvolume-based ray tracing, it creates The Soul Land that meets the fantasies of each fan of The Soul Land with its multi-aspectgameplay design and construction of a friendly social system.
The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决) has unified the Company's R&D process and underlying logic in thefield of next-gen games, developed a set of systems that can be inherited and constantly iterated, effectively improved theefficiency of game R&D and broke the ceiling for idea creation, and laid a solid foundation for the Company's boutiqueizationstrategy.
On top of that, the Company continues to work on key areas including MMORPG, SLG, card games and simulation games. It hasnearly 10 self-developed products in the pipeline, including mobile games Ba Ye (霸业), Code Magic M (代号魔幻M), Code Gu Feng(代号古风), Code WTB 3D (代号3D版WTB), Code GOE (代号GOE), Code G2 (代号G2), Code D8 (代号D8) , Code Soul MMO (代号斗罗MMO), etc., covering genres and themes such as western magic, different-world fantasy, medieval history, history of the ThreeKingdoms, ancient style, female-oriented, and oriental fantasy. Global publishing planning was carried out at the early stage of allthese projects as part of the “boutiqueization, diversification and globalization” strategy.
In addition, on the basis of the self-development brand, the Company also strengthens its self-development capability byacquiring R&D teams, and cooperates with EyuGame, Karma Game, and other excellent game developers in a long-term and in-depth manner through its investments, forming a rich external R&D reserve and diversifying the presence on the product supplyside. With the strong advantage created by the implementation of the "integration of R&D and operation" strategy over the yearsand the expertise in market insights, user preference identification and analysis at the early stage of a project, the Company is ableto use its own numerical experience to polish the products together with the developers to ensure that the quality of the productsreaches a better level before launching. The Company also assists the R&D team in polishing and adjusting the products with thefeedback from the operation department, so as to improve the success rate of the products and prolong the product life cycle.
Meanwhile, the Company actively embraces technological innovation in R&D brought by digital technologies. It leveragesartificial intelligence, big data and other technologies to increase R&D efficiency through a series of technology platforms. Take“Zeus”, a self-developed middle platform for game development, as an example. Supported by one-stop service module, the Zeusplatform can provide service and coordination flexibly and freely. It can effectively realize the automation and standardizationacross the whole process of R&D, deployment and operation, and clear a path for interconnectivity between systems of differentdepartments, thus greatly automating systems and business processes. On top of that, the Company’s homegrown data analysissystem "Athena", monitoring and early warning system “Poseidon" and user profiling system "Ares" can help the research teamfind and solve problems in a quicker and more accurate way, substantially improve the quality of products, reduce developmentcosts, and provide assistance for the refined operation of games. Furthermore, the Company continues to explore deep applicationof the AI technology to games. It has created “Cupid”, an AI-powered R&D platform, with the help of which the research on "3D keypoint detection-based AI motion capture" has been carried out to conduct spatial modeling of videos, and use AI algorithms toachieve high-precision and high-performance motion capture, thus effectively reducing R&D cost and improving R&D efficiency.
The Company continues to explore diversification in product types, themes, gameplay, etc., studies and improves renderingtechnologies for engines such as Unity, and keeps improving art quality. It is dedicated to in-depth exploration and becoming a first-class game company that can provide global players with various gaming products, based on quality content, operation experiencein multiple types of products, and advantages in numerical value and gameplay.
② Publishing of mobile games
During the Reporting Period, the strategy of “boutiqueization, diversification and globalization” was continuously deepened,the advantage of “integration of R&D and operation” was strong, and the product matrix was of high quality and diversified. Thehighest monthly gross billing of the Company’s globally published mobile games exceeded RMB 2 billion,, with the total number ofnewly registered global users surpassing 130 million and the highest number of global MAUs of over 40 million. As many as 6existing games recorded more than RMB 100 million of monthly average gross billing across the world, of which the earliest onelaunched has been running for nearly four years. These long-period and diversified products underpin the Company’s healthyoperating performance, showcasing its long-term operation capability.
1) Domestic market
During the Reporting Period, the Company brought diversified experiences to players through high-quality independently-developed and agency games, and insisted on refined operation ideas. Also, it kept exploring innovative marketing with theyounger consumers, improving publishing efficiency through precise marketing methods such as interesting and sentimentalmarketing ideas and cross-sector collaboration between games and IPs. By doing so, its publishing and operation capabilities havebeen substantially improved for various games such as MMORPG, SLG, card games and simulation games. Remarkable results havebeen achieved. The Company is ranked among the top in terms of market share in China's mobile game publishing market.
For instance, The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决) is published in a manner that emphasizes both "branding+ sales effects", in which the Company aims to construct a publishing system focusing on underlying gameplays, game content, userexperience, and creation of community cultures with the game as the foundation. Highly loyal to the original novel and animation,the Company has consolidated the foundation of content-based publishing with excellent game quality. The publishing plan wasmade based on content. With the enormous momentum of the Dou Luo IP, the Company is able to constantly expand userboundaries and target audience by attracting potential game players.
The Company's Chinese style simulation game The Road to Be Shopkeeper (叫我大掌柜) is developed based on the coregameplay, theme and style of the game, establishing cross-sector collaboration with national tourist attractions, singers, bands,animation IPs, restaurant brands, etc. to find users' interest points, effectively broadening the breadth of brand communication,and promoting the brand's image shaping towards the young generation.
The different-world adventure theme MMORPG Song of the Castle in the Sky (云上城之歌), also breaks through the boundaryof the marketing circle by introducing "virtual idol + original music" and establishing collaboration with animation IP. Productivegame geeks-based marketing was also actively explored to expand the circle of users and drive the market of younger users.
The Company insisted on systematic digital marketing to accurately grasp user needs by delivering creative marketing plans.Through sophisticated operation of launched games, the Company provides players with meticulous and comprehensive long-termservice, with a purpose of improving player satisfaction, activity and retention rate to prolong the product life cycle. Multiple gameswitnessed a second phase of growth in gross billing during the Reporting Period. In terms of multi-channel marketing, the Companyhad formed a unique marketing approach featuring "branding + sales effects". On the one hand, by selecting spokespersons thatare consistent with the product’s connotation, the Company produced high-quality micro-film-style promotional materials forpromotion. By doing so, it can quickly "break the circle" and reach a wider user group; on the other hand, combinations were madewith the short video platform to provide rich material output and to meet the different cultural consumption needs of users indifferent angles, to further expand the scope of users, and then to enlarge brand value and influence.
In addition, the independently developed intelligent ad distribution and operation platform "Quantum-Destiny" providessupport for the Company’s three game publishing platforms of “37Online”, “37Mobile” and “37GAMES”. Connected to mainstreammedia platforms and channels at home and abroad, this system can help improve the three publishing platforms in terms of
intelligent and fine operation, thus increasing publishing efficiency. On the one hand, "Quantum" can connect with all mainstreamchannels to achieve rapid and automatic advertising. Meanwhile, the platform can be used together with multiple systems andconnect procedures in series to greatly reduce the time to create plans, perform standardized processing of plans in batches, andmaintain plans automatically and systematically. Moreover, the platform can improve promotion efficiency and effect through bigdata analysis and AI algorithms, achieving AI-supported automation of ad distribution and creation of ad contents. On the otherhand, "Destiny" is a comprehensive operational decision system for statistics, analysis and prediction of game data. The system canaccurately predict the life cycle of games through data analysis models, so as to improve user stickiness and stabilize product lifecycle.Currently, the "Quantum-Destiny" system has been connected to over 20 mainstream media platforms and channels acrossthe world, and is able to provide support for the launch of more than 300 games at the same time. Cumulatively, the system hascreated over 3,000 connected activities and more than 200,000 ad distribution plans. With this system, the time taken to distributea day’s ads on games has been shortened by five times from six hours to merely one hour, representing a remarkable improvementin efficiency.
2) Overseas market
The Company started to work on the overseas market in 2012. With years of overseas operations, the Company madesubstantial breakthroughs with respect to the strategic expansion of global footprint during the Reporting Period. Its overseasoperating revenue amounted to RMB 3.033 billion, up by 48.33% YoY. Its overseas brand, 37GAMES, covered many countries andregions, whose products included SLGs, MMORPG, simulation and card games.During the Reporting Period, the Company's overseas business has grown rapidly and the pace of exporting has beenaccelerated. According to data.ai, the Company saw strong expansion of multiple games in overseas markets. In 2022, the Companysoared to No. 25 among the global top 52 publishers released by data.ai, ranked second on the overseas grossing chart of the top 30Chinese game companies, and climbed to No. 2 on the overseas revenue chart of Chinese game companies in April 2022.Supported by years of accumulation of experience in publishing games overseas, the Company now adopts the strategy of"tailored games" to open up the global market with diversified high-quality games. On the one hand, the Company has formed aproduct matrix with MMORPG, SLG, card games and simulation games as the cornerstones in overseas market, and focuses onpublishing different genres of games in different regions according to the characteristics of the markets. On the other hand, theCompany has tailored its operation and promotion strategies to different markets in the publishing and promotion side, and madedifferentiation in game content and promotion materials in view of the characteristics of local users to better capture and retainlocal players. Using this strategy, during the Reporting Period, the Company's Puzzles & Survival, The Road to Be Shopkeeper (叫我大掌柜), Song of the Castle in the Sky (云上城之歌), The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决) and other productsachieved overseas revenue growth. The Company holds a solid position among the top in overseas revenue chart of Chinese gamepublishers, with overseas business becoming the second driver of the Company's steady development.For example, Puzzles & Survival, the Company's phenomenal overseas product that integrates the "match-3 + SLG" gameplay, isattractive and its gameplay is innovative, perfectly integrating the most popular match-3 gameplay in the European and Americanmarkets with the traditional heavy SLG gameplay, offering a unique audio-visual experience to users, while deeply implementing thestrategy of "tailored games". It achieves outstanding performance in Europe, the US, Japan, Korea and other countries and regions,and becomes a classic case of SLG fusion game that successfully gain new user groups. This game has won the “Best GameplayInnovation” award for Asia Pacific by Sensor Tower. As of the end of June 2022, Puzzles & Survival is booming around the world,with the cumulative grossing billing surpassing RMB 4.2 billion. According to Sensor Tower, during H1 2022, the game held a stableposition at Top 5 on the overseas grossing chart of Chinese mobile games.After the game Song of the Castle in the Sky (云上城之歌) was launched on the Korean market, it successfully entered the top
5 of the grossing charts in the Korean region and ranked as high as 11th on the overseas grossing chart of Chinese mobile gamesreleased by Sensor Tower. It is also the highest grossing Chinese mobile game on the Korean market during H1 2022. Meanwhile,the game became a real hit when it was launched on the Japanese market. It was ranked as high as fifth on the grossing growthchart of mobile games and 13th on the grossing chart on the Japanese market during H1 2022 according to Sensor Tower.In addition, the overseas layout of China's game industry shoulders the important task of cultural transmission. As the"window" of China's cultural exchange, games have become an important way of foreign exchange and dissemination of excellenttraditional Chinese culture with the advantage of natural landing and direct contact with people. In 2021, the Company was onceagain listed in the 2021-2022 national key export enterprises of culture by the Ministry of Commerce, the Central PropagandaDepartment, the Ministry of Finance, the Ministry of Culture and Tourism, and the General Administration of Radio, Film andTelevision. It tried to integrate excellent traditional Chinese culture into game themes, content and gameplay, and promotionmaterials, and constantly advanced foreign players to take interest in the Chinese Culture in their experience and exploration ofgames by promoting the deep integration of quality games and traditional Chinese culture.For example, The Road to Be Shopkeeper (叫我大掌柜), a globally published game of the Company, integrated historical andcultural elements in innovative ways, adding elements rich in Chinese history and culture such as the Maritime Silk Road, dragonboat racing and shadow play, so as to arouse the interest of global users to experience and explore traditional Chinese culture in theproduct. The product achieved good responses after it was published in countries such as South Korea, Japan, and Vietnam, and hasbeen ranking among the top in grossing charts in various regions.After the self-developed mobile card game The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决) was launched in 2021 inoverseas markets, it quickly topped the grossing charts and free-play charts of Apple and Google in multiple overseas regions,achieving outstanding performance. Self-developed products are increasingly recognized by overseas players. In the future, theCompany plans to publish the product in Japan, South Korea, the U.S., Europe and other regions continuously, and integrates IPculture with user content creation for cultural dissemination, allowing local players to feel the unique charm of China's high-qualitycultural IP.The Company deeply fostered category segments, gained insight into user needs and sought to "break the circle" by exploringthe integration of "unique themes + reasonable gameplay". Ant Legion, another SLG mobile game launched in 2022, whosedistinctive realistic theme of ants has been well received by European and American players, ranked 11th on the overseas revenuegrowth chart of Chinese mobile games for May 2022 according to Sensor Tower.
3) Game pipeline
During the Reporting Period, the Company's popular multi-category games performed well, including Song of the Castle in theSky (云上城之歌), Puzzles & Survival, The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), The Road to Be Shopkeeper (叫我大掌柜), The Soul Land H5 (斗罗大陆H5), Puzzle Continent (谜题大陆), All for Glory (荣耀大天使), and The Soul Land: Wu Hun JueXing (斗罗大陆：武魂觉醒).
In 2022, adhering to the strategy of product boutiqueization, diversification and market globalization, the Company deepenedthe cultivation of MMORPG, card games, SLG and simulation games, with the following self-developed game pipeline:
Ba Ye (霸业), an SLG mobile game with the theme of the Three Kingdoms, Code Gu Feng (代号古风), an MMORPG mobilegame with a beautiful ancient style, Code Magic M (代号魔幻M), a Western magic MMORPG mobile game, Code GOE (代号GOE),an SLG mobile game with the history of the medieval times, Code WTB 3D (代号3D版WTB), a Chibi 3D MMORPG mobile game withthe theme of different-world adventure, Code G2 (代号G2), a western SLG mobile game, Code D8 (代号D8), a fairy tale-themedmobile card game, and Code Soul MMO (代号斗罗MMO), an MMOARPG mobile game with theme of the Soul Land IP, among otherblockbuster self-developed games.
Additionally, through agency and customization, the Company reserved at home and abroad a product matrix covering diversegenres and themes, such as:
MMORPG: Code XXZ (代号XXZ), an innovative MMO IP mobile game, Shu Guang Ji Hua (曙光计划), an MMORPG mobile gamewith the theme of future technology, Code Magical K Project (代号魔幻K计划), a Western magic MMORPG mobile game, ImmortalAwakening (不朽觉醒), another Western magic MMORPG mobile game, and Dream of Voyager (梦想大航海), a voyage shooterMMORPG mobile game;
SLG: Underground Kingdom (小小蚁国), an SLG mobile game with the theme of realistic ants, Code Three Kingdoms CB (代号三国CB), an SLG mobile game with the theme of the Three Kingdoms, Code S (代号S), a Western magic SLG mobile game, and CodeDG (代号DG), an urban construction in the medieval times/casual match-3 SLG mobile game;
Card games: Kong Zhi Yao Sai: Qi Hang (空之要塞：启航), a steampunk style mobile card game, Light Adventure (光明冒险), adifferent-world adventure mobile game integrated with card gameplay, Tie Gan San Guo (铁杆三国), Heroes of Crown (上古王冠), ahigh-quality magic card mobile game, a mobile card game with the theme of the Three Kingdoms, Zui Hou De Yuan Shi Ren (最后的原始人), a turn-based idle mobile card game, and Code Er Ci Yuan ZQ (代号二次元ZQ), an anime mobile card game;
Simulation games: Code Partner (代号合伙人), a mobile simulation game with the theme of realistic business, Code Old Times
Game Pipeline of 37 Interactive EntertainmentTo bepublishedoverseas
To bepublishedoverseas
To bepublisheddomestically
To bepublisheddomestically
MMORPG: Code Magic M (代号魔幻M) (self-developed), Code Gu Feng (代号古风) (self-developed), Code WTB 3D (代号3D版WTB) (self-developed), Code Soul MMO (代号斗罗MMO) (self-developed), Code XXZ (代号XXZ), Code Magical K Project (代号魔幻K计划), and Immortal Awakening (不朽觉醒).
SLG: Ba Ye (霸业) (self-developed), Code GOE (代号GOE) (self-developed), Code G2 (代号G2) (self-developed), and Code S (代号S).
Card games: Kong Zhi Yao Sai: Qi Hang (空之要塞：启航), Heroes of Crown (上古王冠), and Tie Gan San Guo (铁杆三国).
SIM: Code Old Times (代号旧时光).
MMORPG: Code Magic M (代号魔幻M) (self-developed), Code Gu Feng (代号古风) (self-developed), Code WTB 3D (代号3D版WTB) (self-developed), Code Soul MMO (代号斗罗MMO) (self-developed), Code XXZ (代号XXZ), Code Magical K Project (代号魔幻K计划), and Immortal Awakening (不朽觉醒).
SLG: Ba Ye (霸业) (self-developed), Code GOE (代号GOE) (self-developed), Code G2 (代号G2) (self-developed), and Code S (代号S).
Card games: Kong Zhi Yao Sai: Qi Hang (空之要塞：启航), Heroes of Crown (上古王冠), and Tie Gan San Guo (铁杆三国).
SIM: Code Old Times (代号旧时光).
MMORPG: Code Magic M (代号魔幻M) (self-developed), Code Gu Feng (代号古风) (self-developed), Code WTB 3D (代号3D版WTB) (self-developed), Code Soul MMO (代号斗罗MMO) (self-developed), Code XXZ (代号XXZ), Shu Guang Ji Hua (曙光计划),Dream of Voyager (梦想大航海), and Code Magical K Project (代号魔幻K计划).
SLG: Ba Ye (霸业) (self-developed), Code GOE (代号GOE) (self-developed), Underground Kingdom (小小蚁国), Code ThreeKingdoms CB (代号三国CB), and Code DG (代号DG).
Card games: Code D8 (代号D8) (self-developed), Kong Zhi Yao Sai: Qi Hang (空之要塞：启航), Light Adventure (光明冒险), ZuiHou De Yuan Shi Ren (最后的原始人), and Code Er Ci Yuan ZQ (代号二次元ZQ).
SIM: Code Forest (代号森林), and Code Partner (代号合伙人).
(代号旧时光), a business-themed mobile simulation game, and Code Forest (代号森林), a mobile farm simulation game.
Note: Non-code products have obtained publication numbers.
(2) Browser games
During the Reporting Period, the Company’s browser game business achieved operating revenue of RMB 341 million, whichwas lower than that of the same period of last year. It was mainly affected by both the shift of users to mobile phones and thedecrease in the number of browser game products. During the Reporting Period, the Company strengthened partnership withdomestic top browser game developers through strategic investment and business cooperation on the one hand, on the other hand,the Company also refined the operation of its major quality games, improved user stickiness, stabilized the product life cycle, andfurther maintained its operating revenue.
3. Business investments
In terms of investment layout, on the one hand, the Company focuses on its main business of games, actively develops qualitygame R&D companies through strategic investments with a strategic focus on quality content, establishes long-term and in-depthcooperation, enriches the supply of high-quality products in MMORPG, SLG, card games, simulation games and other categories,forms a rich external R&D reserve, diversifies the layout on the product supply side, and makes a strategic layout for the long-termsustainable development of the Company.
High-quality game developers invested by the Company primarily include:
Various excellent developers in proficient tracks for years and with good reputations such as EyuGame, Karma Game,StarUnion, Zen-game Technology, X.D., Flintwood Technology, Zhenshuo Network, Lihoo Network, Jianguo Guangnian Technology,Dobala, ZX Future, Longyou Game, Meng52, Woowii Games, UEGAME, Unknown Matrix and Mercury Culture.
On the other hand, the Company has always adhered to the concept of long-term value investment, and continuously explores
around the main business of games, while focusing on the new trends of cultural entertainment consumption and technologydevelopment of the next generation, following the footsteps of the development of Metaverse era, selecting high-quality tracks forforward-looking layout, realizing the mutual achievement of internal resources, and feeding the Company's main business of games,which has now formed a closed loop of investment ecology covering virtual reality industry chain, film and television, music, artistagency, animation, social entertainment, e-sports, culture and health, social media, new consumption and other fields.Along with the rise of "Metaverse" and other emerging concepts, the curtain of technological change has been drawn. 37Interactive Entertainment, as an enterprise that insists on technological innovation and keeps up with the changes in the industry, isfirmly optimistic about the future development of the relevant fields.At present, the Company continues to extend on the basis of early investment in VR/AR content, enters fields involvingmulti-Metaverse infrastructure such as arithmetic, semiconductor, optics, display, whole machine, application and infrastructuretechnology, and invests in many high-quality enterprises in the fields including optical module, optical display, AR glasses, VRcontent, cloud game, spatial intelligence technology and semiconductor materials. In the future, the Company will continue tofocus on new-generation technologies such as artificial intelligence, rendering engine and interactive sensing. Throughinvestments in the field of technology, it will realize the collaboration of internal and external resources and grasp the forward-looking trend of the game industry.Furthermore, the Company carried out a capital increase of no more than RMB 50 million of its own funds to the ResonancePhase I Fund, cooperating with industry leaders such as Goertek and miHoYo to focus on AR/VR and other new businessopportunities. By doing so, the Company promoted the benign complementation of its business and capital operation and achievedcapital appreciation, thereby further enhancing its overall competitiveness.As of the date of this report, cultural & creative and technology enterprises funded or acquired by the Company included:
Metaverse: Archiact, WaveOptics, Raxium, Digilens, Deep Mirror, INMO Technology, Optiark Semiconductor, EnkrisSemiconductor, KP Cloud Games, Ximmerse Technology, and GravityXRFilm and television: Huace Film&TV, Youying Culture, Zhonghui Television, etc.Music: FenghuaQiushiArtist agency: Original Plan, and T EntertainmentAnimation: YHKT EntertainmentE-sports: AG E-Sports ClubSocial Entertainment: Wuli Planet and Wonderful PartyConsumption: Nowwa Coffee, LINLEE, Yangji Mountain, Savasana, Duokitty, Dong Eating, GuanZhan, Weeget, HomeRunTechnology, EZVALO
In the future, the Company will continue to expand its product matrix, improve the quality game supply capability, and offerquality, diverse gaming experience to players. Also, it will continuously keep pace with the times, embrace future changes, continueto tap the incremental market of Generation Z, explore the collaboration of resources within the cultural innovation ecosystem,and build a "young and diversified" cultural innovation brand trusted by the future Chinese young generation. Meanwhile, it willdrive startups with investment, participate in promoting social technology innovation, and collaborate with invested enterprises toachieve sustainable and high-quality growth.
II Core Competitiveness AnalysisDuring the Reporting Period, the Company steadily promoted the development strategy of "boutiqueization, diversificationand globalization" and formed the following core competitiveness:
1. Industry-leading R&D strength
The Company carries on with its strategy of “integration of R&D and operation”, as well as emphasizes R&D investments andtalent cultivation. After years of efforts in R&D, the Company is ranked among the top in terms of R&D strengths. The Company'sindependently developed products are characterized by high output, a high success rate and a long period, and center on"boutiqueization, diversification and globalization". With the support of cutting-edge technologies like Next-Gen 3D engine, AI, andbig data analysis platforms, the Company has established a professional layout in multiple market segments like MMORPG, cardgames, SLG, and simulation. With sophisticated efforts in gameplay, art quality, music and other details, as well as continuedinvestments in product iteration and user experience, the "boutiqueization” strategy is embedded into the entire life cycle of theCompany’s homegrown products, making it a benchmark for the R&D of quality games in the industry.Adhering to the long-term development idea, the Company opened up development channels for professionals, and embracedemployee diversity. Moreover, it encouraged innovation by employees and increased the proportion of senior R&D staff to build anexcellent team. The Company vigorously refined the mechanism for R&D project approval, shortened the evaluation cycle andestablished diversified indicators, so as to stimulate employees’ innovative vitality. At the same time, the Company adjusted theincentive mechanism for the R&D department, established a tiered incentive system for different categories of products, promotedthe incentive for new categories of products, and encouraged employees to be creative and step out of their comfort zone. TheCompany has also established a project lifecycle management process for game development, which run through many links, suchas idea creation, project approval, process and review, to achieve the risk control of the entire R&D process, greatly improve thesuccess rate of product R&D while effectively controlling the cost, and lay the foundation for creating diverse, high-quality games.Internal management continued to improve, with leaner and more scientific management in terms of game development. At thesame time, the way of selecting the track for R&D personnel allocation by the producer makes him or her focus more on thecategory segment he or she is good at, further concentrate resources, form a joint force and improve R&D efficiency.
2. Excellent publishing strength
During the Reporting Period, the Company maintained its leading position in mobile game and browser game publishingbusiness. 37 Interactive Entertainment enriched the product supply via independent R&D, investments, and cooperation withexcellent developers, improved the ability in publishing diverse, high-quality games and promoted the publishing strength to a newheight. Meanwhile, the Company has accumulated rich experience in overseas game publishing thanks to years of practice. With itsoverseas business covering over 200 countries and regions, the Company has substantially expanded its global presence. In H1 2022,the Company expanded its product matrix and offered diversified gaming experience to players by offering quality games indifferent types and on varied themes to the global market, including Song of the Castle in the Sky (云上城之歌), Puzzles & Survival,The Soul Land: Hun Shi Dui Jue (斗罗大陆：魂师对决), The Road to Be Shopkeeper (叫我大掌柜), The Soul Land H5 (斗罗大陆H5),Puzzle Continent (谜题大陆), All for Glory (荣耀大天使), The Soul Land: Wu Hun Jue Xing (斗罗大陆：武魂觉醒), and Ant Legion,all of which have recorded an excellent performance. Going forward, the Company will further play its existing advantages inoverseas markets, constantly expand the scale of overseas business based on its strong game R&D capacity and localized marketingcapabilities, and make new contributions to promoting the Chinese culture industry and boosting cultural confidence.The Company constantly sought innovative publishing approaches, and thus created a barrier to entry for competitors ingame publishing. First, the Company developed its own AI system to improve the ability of accurate ad placement. With this system,the Company has optimized placement methods, improved the quality of materials, took advantage of high-quality materials, andthereby effectively controlled the marketing cost. Second, the efficiency of publishing, including tool construction and data
algorithm to help form a real-time monitoring system and reduce cost waste. The Company puts forward the publishing idea of“branding + sales effects”, grasps the market changes to carry out high-quality publicity, and attracts target users for betterdistribution results. The Company possesses strong capabilities for operation and optimization in numerical management, processoptimization, event planning, etc. After the launch of games, the Company continues to improve the quality of games, attract usersthrough better content and prolong the product life cycle.
3. Advantage of the model of “integration of R&D and operation”
As the Company’s business mode of "integration of R&D and operation” becomes sophisticated, it is conducive to making fulluse of resources and creating quality products from a long-term perspective. On the one hand, the Company can ensure the stablesupply of quality products to support the operation development through strong R&D strengths. At the same time, the R&D teamcan utilize the feedback of the operation department to optimize products and extend the product life cycle. On the other hand, atthe early stage of product R&D, the operation team can provide advises and suggestions to the R&D team based on its years ofexperience and keen market insights.
4. Team strengths
The Company has been deeply involved in the field of cultural and creative industries for many years. Its core managementteam has long been on the front lines of the industry, and has forward-looking capabilities for strategic layout. During the ReportingPeriod, thanks to its outstanding performance in terms of the development speed and personnel training and development, theCompany won the title of "the Best Employer" of CNG. The Company has established a fully-fledged personnel training system. Ithas completed the personnel system reform, made new promotion mechanism, remuneration management system and incentivemechanism. The new promotion and remuneration management system does not only make the employee’s growth path clearer,more open and more transparent but also motivates their enthusiasm and creativity in a better way. The Company lays emphasison the sharing of development achievements and is committed to improving the career development level of employees. Duringthe Reporting Period, the Company steadily carried on with the value co-creation plan for a further investment of RMB500 millionin six directions, including the employee development plan before 2025, so as to encourage employees to better strive and createvalue and promote the long-term, sustainable and healthy development of the Company, realizing joint creation, responsibilitysharing, growth sharing and common prosperity between the Company and its employees. During the Reporting Period, theCompany launched a fourth employee stock ownership plan to further improve the benefit sharing mechanism between workersand company owners, as well as to boost employee cohesiveness and the Company’s core competitiveness. The Company hasalways adhered to the entrepreneurial spirit like marathoners and been clear about its goals. It aims to promote sustainabledevelopment, and progressively realize long-term goals rather than short-term ones.
III Core Business AnalysisOverviewSee contents under the heading “I Principal Activity of the Company in the Reporting Period”.Year-over-year changes in key financial data:
Unit: RMB
| H1 2022 | H1 2021 | Change (%) | Main reason for change | |
| Operating revenue | 8,092,238,684.40 | 7,538,949,378.53 | 7.34% | |
| Cost of sales | 1,260,101,099.90 | 1,120,509,771.85 | 12.46% | Increased cost of royalties as a result of increased revenue from agency games during the Reporting Period |
| Distribution and selling expenses | 4,340,050,646.56 | 4,785,388,947.28 | -9.31% | Decreased traffic cost for All for Glory (荣耀大天使), The Soul Land: Wu Hun Jue Xing (斗罗大陆：武魂觉醒) and other games that had been launched in the same period last year entered the growth stage during the Reporting Period |
| General and administrative expenses | 209,169,882.37 | 222,001,708.95 | -5.78% | |
| Financial expenses | -15,752,742.70 | -25,875,545.40 | 39.12% | Increased exchange losses during the Reporting Period compared with the same period last year |
| Income tax expenses | 176,029,935.00 | 162,728,946.02 | 8.17% | |
| Research and development investments | 496,920,352.58 | 673,649,742.25 | -26.23% | During the Reporting Period, the Company adjusted the personnel structure according to strategic game categories, increased investment in strategic products such as strategy games while reducing that in certain other non-strategic products |
| Net cash flows from operating activities | 1,804,079,584.54 | 1,253,919,152.46 | 43.88% | Increased cash received from the sales of goods or rendering services during the Reporting Period compared with the same period last year |
| Net cash flows used in/from investing activities | -1,200,993,676.79 | -835,664,111.30 | -43.72% | Increased net cash outflow in purchases and redemptions of wealth management instruments and term deposits during the Reporting Period compared with the same period last year |
| Net cash flows used in/from financing activities | -631,142,239.07 | 1,737,499,012.55 | -136.32% | The Company received cash from the private placement in the same period last year while there was no such cash inflow in the Reporting Period. |
| Net increase in cash and cash equivalents | -7,427,387.19 | 2,153,528,582.00 | -100.34% | Decreased net cash flows from financing activities during the Reporting Period compared with the same period last year |
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 2022 | H1 2021 | Change (%) | |||
| Amount | As % of operating revenue (%) | Amount | As % of operating revenue (%) | ||
| Total operating revenue | 8,092,238,684.40 | 100% | 7,538,949,378.53 | 100% | 7.34% |
| By operating division | |||||
| Online games | 8,092,238,684.40 | 100.00% | 7,538,949,378.53 | 100.00% | 7.34% |
| By product category | |||||
| Mobile games | 7,738,933,571.90 | 95.63% | 7,067,163,703.89 | 93.74% | 9.51% |
| Browser games | 340,738,772.48 | 4.21% | 460,286,420.34 | 6.11% | -25.97% |
| Others | 12,566,340.02 | 0.16% | 11,499,254.30 | 0.15% | 9.28% |
| By operating segment | |||||
| Domestic | 5,059,634,965.68 | 62.52% | 5,494,392,013.23 | 72.88% | -7.91% |
| Overseas | 3,032,603,718.72 | 37.48% | 2,044,557,365.30 | 27.12% | 48.33% |
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 | 8,092,238,684.40 | 1,260,101,099.90 | 84.43% | 7.34% | 12.46% | -0.71% |
| By product category | ||||||
| Mobile games | 7,738,933,571.90 | 1,152,883,265.74 | 85.10% | 9.51% | 17.91% | -1.07% |
| Browser games | 340,738,772.48 | 98,367,265.71 | 71.13% | -25.97% | -27.54% | 0.62% |
| By operating segment | ||||||
| Domestic | 5,059,634,965.68 | 732,864,738.48 | 85.52% | -7.91% | -14.69% | 1.15% |
| Overseas | 3,032,603,718.72 | 527,236,361.42 | 82.61% | 48.33% | 101.65% | -4.60% |
Core business data restated according to the changed methods of measurement that occurred in the Reporting Period:
□Applicable ? Not applicable
The Company is subject to the disclosure requirements for listed companies engaged in software and IT services as stated inGuideline No. 3 of the Shenzhen Stock Exchange for Self-regulation of Listed Companies—Industry-specific Information Disclosure.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 | 8,092,238,684.40 | 1,260,101,099.90 | 84.43% | 7.34% | 12.46% | -0.71% |
| By product category | ||||||
| Mobile games | 7,738,933,571.90 | 1,152,883,265.74 | 85.10% | 9.51% | 17.91% | -1.07% |
| Browser games | 340,738,772.48 | 98,367,265.71 | 71.13% | -25.97% | -27.54% | 0.62% |
| By operating segment | ||||||
| Domestic | 5,059,634,965.68 | 732,864,738.48 | 85.52% | -7.91% | -14.69% | 1.15% |
| Overseas | 3,032,603,718.72 | 527,236,361.42 | 82.61% | 48.33% | 101.65% | -4.60% |
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 2022 | H1 2021 | Change (%) | ||
| Amount | As % of cost of sales | Amount | As % of cost of sales | ||
| Royalties | 1,141,980,274.76 | 90.63% | 1,014,617,869.61 | 90.55% | 12.55% |
| Cost of servers | 94,340,256.68 | 7.49% | 83,168,344.41 | 7.42% | 13.43% |
| Amortization of copyright money | 13,850,699.29 | 1.10% | 15,326,627.17 | 1.37% | -9.63% |
| Other costs | 9,929,869.17 | 0.78% | 7,396,930.66 | 0.66% | 34.24% |
| Total | 1,260,101,099.90 | 100.00% | 1,120,509,771.85 | 100.00% | 12.46% |
Any over 30% YoY movements in the data above and why:
? Applicable □ Not applicable
1. Overseas revenue increased by 48.33% YoY, primarily driven by the increased gross billing of multiple well-performing gamesthat have been published globally, including Puzzles & Survival, The Road to Be Shopkeeper (叫我大掌柜), and Song of the Castlein the Sky (云上城之歌).
2. Overseas costs increased by 101.65% YoY, primarily driven by the increased cost of royalties as a result of increased revenuefrom overseas published agency games.
3. Other costs increased by 34.24% YoY, primarily driven by the increased cost of online training.
IV Analysis of Non-Core Businesses
? Applicable □ Not applicable
Unit: RMB
| Amount | As % of profit before income tax expenses | Reason/source | Recurrent or not | |
| Investment income | 52,339,291.74 | 2.82% | 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 | -34,650,521.66 | -1.87% | Mainly due to changes in fair value of equity investments | Not |
| Impairment loss on assets | -13,724,202.25 | -0.74% | Mainly due to impairment losses on long-term equity investments and credit | Impairment losses on long-term equity investments are not recurrent while impairment losses on credit risk are recurrent |
| Non-operating income | 5,246,517.14 | 0.28% | Mainly due to compensation income | Not |
| Non-operating expenses | 2,771,389.41 | 0.15% | Mainly due to donations and expenditures on retirement of fixed assets | Not |
| Other income | 60,426,373.93 | 3.26% | 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. |
V Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
| 30 June 2022 | 31 December 2021 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As % of total assets | Amount | As % of total assets | |||
| Monetary funds | 5,059,884,639.38 | 31.03% | 4,618,532,776.92 | 31.99% | -0.96% | No significant change |
| Accounts receivable | 1,493,792,623.54 | 9.16% | 1,264,319,473.08 | 8.76% | 0.40% | No significant change |
| Inventories | 34.50 | 0.00% | 0.00% | 0.00% | No significant change | |
| Long-term equity investments | 714,617,174.92 | 4.38% | 509,058,912.99 | 3.53% | 0.85% | No significant change occurred to this item as a percentage of total assets, while the closing balance was higher than the opening balance mainly due to new equity investments made during the Reporting Period. See “8. Long-term equity investments” under Note VII of “Part X Financial Statements” for further information. |
| Fixed assets | 871,573,384.28 | 5.35% | 892,006,774.60 | 6.18% | -0.83% | No significant change |
| Construction in progress | 134,045,030.85 | 0.82% | 77,637,189.70 | 0.54% | 0.28% | No significant change occurred to this item as a percentage of total assets, while the closing balance was higher than the opening balance mainly due to the investments in the Guangzhou Headquarters Building construction project during the Reporting Period. |
| Right-of-use assets | 47,116,082.01 | 0.29% | 59,925,125.24 | 0.42% | -0.13% | No significant change |
| Short-term loans | 607,450,000.00 | 3.73% | 445,635,500.00 | 3.09% | 0.64% | No significant change occurred to this item as a percentage of total assets, while the closing balance was higher than the opening balance mainly due to the increased bank loans during the Reporting Period. |
| Contract liabilities | 247,579,719.63 | 1.52% | 260,658,631.26 | 1.81% | -0.29% | No significant change |
| Long-term loans | 341,000,000.00 | 2.09% | 20,000,000.00 | 0.14% | 1.95% | The closing balance was higher than the opening balance mainly due to additional three-year bank loan during the Reporting Period |
| Lease liabilities | 27,270,304.28 | 0.17% | 39,641,414.25 | 0.27% | -0.10% | No significant change occurred to this item as a percentage of total assets, while the closing balance was lower than the opening balance mainly due to the decreased lease payables as a result of rental payments made during the Reporting Period. |
| Trading financial assets | 2,301,576,209.18 | 14.12% | 2,098,526,001.60 | 14.54% | -0.42% | No significant change |
| Prepayments | 989,143,622.79 | 6.07% | 1,055,295,139.07 | 7.31% | -1.24% | No significant change |
| Intangible assets | 1,069,748,653.80 | 6.56% | 1,088,487,381.04 | 7.54% | -0.98% | No significant change |
| Goodwill | 1,589,065,048.53 | 9.75% | 1,589,065,048.53 | 11.01% | -1.26% | No significant change |
| Accounts payable | 1,658,805,699.77 | 10.17% | 1,565,004,179.17 | 10.84% | -0.67% | No significant change |
2. Major Assets Overseas
? Applicable □ Not applicable
| Asset | Source | Asset value (RMB) | Location | Management model | Control measures to protect asset safety | Return generated (RMB) | As % of the Company’s equity | Material impairment risk or not |
| Monetary funds | Income from investments and operations | 773,881,975.50 | Hong Kong in China, the US, etc. | A sound business supervision mechanism and a sound risk control mechanism have been put in place | 6.60% | Not | ||
| Other equity assets | Investments in overseas companies | 356,999,146.88 | Hong Kong in China, Canada, etc. | A sound business supervision mechanism and a sound risk control mechanism have been put in place | -30,704,814.31 | 3.05% | Not |
3. 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 | 2,098,526,001.60 | -29,650,521.66 | 5,809,074,659.14 | 5,580,496,087.98 | 4,122,158.08 | 2,301,576,209.18 | ||
| derivative financial assets) | ||||||||
| 2. Other equity investments | 326,561,477.94 | -136,972,878.67 | 2,030,569.03 | 325,592,046.97 | ||||
| Other non-current financial assets | 561,680,630.03 | -5,000,000.00 | 91,711,400.00 | 13,422,800.00 | 3,869,258.59 | 638,838,488.62 | ||
| Total of the above | 2,986,768,109.57 | -34,650,521.66 | -136,972,878.67 | 5,900,786,059.14 | 5,593,918,887.98 | 10,021,985.70 | 3,266,006,744.77 | |
| Financial liabilities |
Contents of other changes:
Other changes were incurred by exchange rate fluctuations, etc.Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes ? No
4. Restricted Asset Rights as at the End of the Reporting Period
Unit: RMB
| Item | Ending carrying amount(RMB) | Reason for restriction |
| Monetary funds | 8,918,291.19 | Money frozen by bank and security deposits |
Fixed assets
| Fixed assets | 462,078,884.17 | As collateral for bank loan to the Company |
| Other current assets | 400,459,217.29 | Principals and interest of term deposits with a maturity within one year as pledges |
| Other non-current assets | 201,209,863.02 | Principals and interest of term deposits with a maturity of over one year as pledges |
| Total | 1,072,666,255.67 | -- |
VI Principal Subsidiaries and Joint Stock Companies? Applicable □ Not applicablePrincipal subsidiaries and joint stock companies with an over 10% effect on the Company’s net profit:
Unit: RMB
| Name | Relationship with the Company | Principal activity | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| 37 Interactive Entertainment (Shanghai) | Subsidiary | Publishing and operation of online games | 10,000,000.00 | 11,895,317,090.51 | 3,806,943,755.17 | 8,064,087,340.35 | 1,336,570,184.93 | 1,194,146,589.62 |
| Jiangsu Aurora | Subsidiary | Development of online games | 6,250,000.00 | 3,964,381,928.01 | 2,694,504,046.63 | 989,912,696.70 | 523,999,155.83 | 492,731,924.43 |
Subsidiaries obtained or disposed of in the Reporting Period:
□Applicable ? Not applicable
Other information on principal subsidiaries and joint stock companies:
N/A
VII Risks Facing the Company and Countermeasures
1. Changes in industry policies, risks of violation and countermeasures
In recent years, the authority in charge has attached great importance to the development of game industry, made aseries of major decisions and arrangements and issued a series of policies and measures to guide the industry to develop ina standardized and healthy way. For example, clear new standards and requirements have been put forward for protectionof minors and anti-addiction of online games. Further strict management measures have been taken to promotestandardized management of game industry. At the same time, information security and protection of users' privacy havedrawn much attention from the society. In the long term, the regulation of the online game industry is becoming more andmore standardized, which is conducive to the healthy development of the industry. The enterprises with standardizedoperation will benefit from it. However, in the future, if the Company fails to make corresponding adjustments timely inaccordance with changes in industry policies or has a deviation in understanding management regulations in its operation,there may be a risk that the Company will be punished by relevant departments or the works will not go online as planned,which will have a significant negative impact on the Company's business development and brand image. In this regard, 37Interactive Entertainment will strictly abide by various industry policies, rules and regulations, actively implement relevantrequirements for industry development, establish an internal sound quality management and control mechanism,strengthen industry policy risk management capability, and fully reduce and avoid the business risks caused by changes inindustry policies.
2. Market competition risks and countermeasures
The online game industry is facing increasingly fierce competition as it gradually matures. At the same time, onlinegame users are maturing with higher quality demand for game products. The industry is characteristic of fast producttransition, limited product life cycle and volatile player preferences, among others. Intense market competition willchallenge the Company’s development in terms of products and market channels.
In response, the Company will continue to implement the strategy of "boutiqueization, diversification andglobalization". On the one hand, it will strengthen its core competitiveness of its own business, pay continuous attention toself-research investment, carry out R&D and innovation in product creativity, gameplay, theme, art and technology, andkeep up with industry technology development trend; at the same time, it will maintain close cooperation with excellentdevelopers to guarantee the supply of quality products, and continue to expand game categories through independently-developed and agency games to deepen the competitive edge of "integration of R&D and operation". Meanwhile, theCompany will speed up the pace of exporting, give full play to the edges of it in overseas markets, face diversified operationsof overseas markets, deepen the cultivation of key markets, and broaden the categories of games and increase market share.In addition, the Company will dig deeper into operational data through independently developed AI systems, and timelyadjust operational and R&D strategies, to meet the core demands of users, further play the role of new ideas of digitalmarketing operation, deepen the business strategy of multi-channel marketing and long-term service, and continuouslyenhance core competitiveness in the market.
Facing the current industrial competition pattern, the top-performing enterprise has obvious edges in technology R&Dability, channel operation ability, product promotion ability, user scale and market share. The Company will continue toconsolidate and cement its competitive edges, actively respond to changes in the industry, reduce market competition risksand seize market opportunities.
3. Risks of core personnel turnover and countermeasures
A stable and high-quality talent team is an important guarantee for the Company to maintain its core competitiveadvantage. If the Company fails to effectively build a core talent team, give reasonable incentives and manages the corepersonnel, the employees’ enthusiasm and creativity will be affected, which will have an adverse impact on the Company’score competitiveness.In response, much attention has been attached to cultivation and acquisition of professional talents. The Companycreatively builds a platform-based talent management mechanism, according to which excellent game producers arerewarded with high project bonus, and given discretion of research and creation. In order to attract and retain outstandingmanagement talents and business elites, the Company has vigorously reformed the project mechanism, shortened thereview cycle and established diversified objectives, so as to stimulate the innovative vitality of employees. In terms ofemployee performance management, the Company has set up diversified KPIs based on employees' contribution and ability,as well as reasonable team objectives to encourage employees’ creativity. Through refining the remuneration system withdiversified incentives such as employee stock ownership plans, the Company increases the attractiveness to core staffs andR&D personnel. During the Reporting Period, the Company continuously promoted the reform of rank system, ability systemand development system, optimized talent structure, differentiated talent management and activated talents.In addition, the Company cares about the long-term development of employees. The Company has established “37Interactive Entertainment Learning and Development Center” to provide sufficient training and learning opportunities foremployees and help them grow rapidly. The Company actively carried out training for newcomers and professional abilitiessuch as "Marathon Leadership Training Camp", "Huangpu New Army", "X+ Plan" and "37TALK", explored seedlings of gameindustry, promoted talent upgrading to meet the needs of business upgrading, paid attention to internal sharing, establisheda team of internal professional lecturers among employees, spread culture of sharing, built a talent echelon and upgradedtalent development system.Centering on the cultural concept of "health, happiness and sustainability", the Company upgraded colorful welfaresystem, strengthened humanistic care and promoted retention of talents. The colorful welfare system encompassesinterest-free loan, love fund, commercial insurance and employee health management. In addition, seasonal activities onholidays, annual physical examination, singles' fellowship, "Family Day", "Boss Face-to-Face", "37 Battle Talk", "Carnival",“Healthy 37ers” and other thematic activities were regularly held. Inter-departments' team building promoted theconnection between employees and their friends, relatives and colleagues. In addition, the Company built employee clubswith interest activities such as e-sports, table games and dances, created cultural atmosphere that meets the characteristicsof Generation Z, strengthened employees' sense of belonging, balanced employees' work and life, and took care ofemployees' physical and mental health in various forms.
4. Technology iteration and innovation risk and countermeasures
The game industry has seen rapid technology iteration and faster changes in cutting-edge technologies, and demand fornew types of products has emerged among young users. Against this backdrop, if a game company fails to grasp the industrydevelopment trend in a forward-looking manner and promptly innovate its technology and products, its R&D and applicationof key technologies will be outdated, resulting in the risk of products falling behind the market.
In response, the Company continued to focus on changes in the industry's cutting-edge technologies. First, it closelyfollowed industry changes and probed into cutting-edge technologies through investment layout to maintain sensitive toleading technologies. Second, it intensified the incubation of internal technologies, valued investment in self-developedgames, improved self-development system, established an effective R&D system framework, and introduced diversifiedincentives to encourage employees to explore new technologies. By taking these actions, the Company has reservedproducts and technologies for the industry development trend.
For example, the Company built the "Yi Lan" game market intelligence system, which comprehensively and accuratelycollects and refines product and industry data. It also intelligently generates competitor and market analysis reports as wellas accurately refines report content based on business scenarios, including game project approval, operation and promotion.With the support of this system, all business lines of the Group can comprehensively, accurately and rapidly understandmarket changes and development trends, and can effectively grasp the industry development changes.
Part IV Corporate Governance
I Annual and Extraordinary General Meetings of Shareholders Convened during theReporting Period
1. General Meetings of Shareholders Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Date of the meeting | Date of disclosure | Resolutions of the meeting |
| The First Extraordinary General Meeting of Shareholders of 2022 | Extraordinary General Meeting of Shareholders | 49.62% | 24 March 2022 | 25 March 2022 | 1. The Proposal on the Re-election of Non-independent Directors for the Sixth Board of Directors was approved; 2. The Proposal on the Re-election of Independent Directors for the Sixth Board of Directors was approved; 3. The Proposal on the Allowance Plan for the Independent Directors of the Sixth Board of Directors was approved; 4. The Proposal on the Re-election of Shareholder Supervisor for the Sixth Supervisory Committee was approved; 5. The Proposal on the Change of the Company Name was approved; 6. The Proposal on the Change of the Registered Address was approved; 7. The Proposal on the Amendment of the Articles of Association and the Rules of Procedure for the General Meeting of Shareholders was approved; and 8. The Proposal on the Request to the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters in Relation to the Private Placement of Shares was approved. |
| The 2021 Annual General Meeting of Shareholders | Annual General Meeting of Shareholders | 50.88% | 17 May 2022 | 18 May 2022 | 1. The 2021 Work Report of the Board of Directors was approved; 2. The 2021 Work Report of the Supervisory Committee was approved; 3. The Chinese versions of the full 2021 Annual Report and its Summary, along with the English Summary, were approved; 4. The 2021 Final Account Report was approved; 5. The 2021 Final Dividend Plan was approved; 6. The Proposal on Appointment of Independent Auditor for Annual Financial Statements and Internal Control for 2022 was approved; 7. The Proposal on the Expected Guarantee Line for Subsidiaries in 2022 was approved; 8. The Proposal on the Fourth Employee Stock Ownership Plan (Draft) and Its Summary was |
approved;
9. The Proposal on the Methods for the
Administration of the Fourth Employee StockOwnership Plan was approved; and
10. The Proposal on the Request to the General
Meeting of Shareholders to Authorize the Boardof Directors to Handle Matters in Relation to theFourth Employee Stock Ownership Plan wasapproved.
2. Extraordinary General Meetings of Shareholders Convened at the Request of Preferred Shareholderswith Resumed Voting Rights
□ Applicable ? Not applicable
II Changes of Directors, Supervisors and Senior Management? Applicable □ Not applicable
| Name | Office title | Type of change | Date of change | Reason for change |
| Liu Jun | Director | Elected | 24 March 2022 | |
| Lu Rui | Independent Director | Elected | 24 March 2022 | |
| Tao Feng | Independent Director | Elected | 24 March 2022 | |
| Chen Jianlin | Independent Director | Resigned upon maturity of the tenure | 24 March 2022 | |
| Liu Guangqiang | Independent Director | Resigned upon maturity of the tenure | 24 March 2022 |
II Interim Dividend Plan? Applicable □ Not applicable
| Bonus issue from profit (share/10 shares) | 0 |
| Cash dividend/10 shares (RMB) (tax inclusive) | 3.5 |
| Share base (share) | 2,217,864,281 |
| Cash dividends (RMB) (tax inclusive) | 776,252,498.35 |
| Cash dividends in other forms (such as share repurchase) (RMB) | 0.00 |
| Total cash dividends (including those in other forms) (RMB) | 776,252,498.35 |
| Distributable profit (RMB) | 4,281,838,166.45 |
| Total cash dividends (including those in other forms) as % of total profit to be distributed | 100.00% |
| Applicable cash dividend policy | |
| If it is difficult to identify the development stage of the Company but it has a significant capital expenditure arrangement, when making profit distribution, cash dividends shall account for no less than 20% in the profit distribution. | |
| Details of the cash and/or stock dividend plan | |
| Upon approval by the Board of Directors, the Company’s 2022 interim dividend plan is as follows: Based on the total issued share capital on the date of record, a cash dividend of RMB 3.5 (tax inclusive) per 10 shares is planned to be distributed to all the shareholders of the Company, with the remaining undistributed profit carried forward to the next year; and there will be no bonus issue from either profit or capital reserves. The above interim dividend plan is consistent with the Company’s performance growth, and also in line with relevant provisions of the Company Law, the Securities Law, the Articles of Association and the Company’s shareholder return plan. Therefore, it is legal, valid and reasonable. | |
IV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees? Applicable □ Not applicable
1. Equity Incentives
N/A
2. Implementation of Employee Stock Ownership Plans
? Applicable □ Not applicableOutstanding employee stock ownership plans during the Reporting Period:
| Awardee coverage | Number of awardees | Total shares held | Change | As % of the total share capital | Funding source |
| The Third Employee Stock Ownership Plan: the leadership team of the Company (directors, supervisors and senior management); chief officers and deputy chief officers; key management and technological staff (mid-level employees); and other employees approved by the Company | 329 | They held 9,119,783 shares in total at the period-end. | N/A | 0.41% | Shares under the employee stock ownership plan were transferred from repurchased shares for no compensation. |
| The Fourth Employee Stock Ownership Plan: the directors (exclusive of independent directors), supervisors, senior management, key management and staff who have direct and substantial impact on and contribution to the Company’s future operations and growth | 574 | They held 16,301,534 shares in total at the period-end. | N/A | 0.74% | Shares under the employee stock ownership plan were transferred from repurchased shares for no compensation. |
Shares held by directors, supervisors and senior management under employee stock ownership plans during the ReportingPeriod:
| Name | Office title | Number of shares held at the period-begin | Number of shares held at the period-end | As % of the total share capital |
| Hu Yuhang, Yang Jun, Liu Jun, He Yang, Cheng Lin, Liu Fengyong, Ye Wei, and Zhu Huaimin | Directors, supervisors, and senior management | 1,212,000 | 2,697,000 | 0.12% |
Change of the asset management institution during the Reporting Period:
□ Applicable ? Not applicable
Share ownership changes due to share disposal by holders and other reasons during the Reporting Period:
□ Applicable ? Not applicable
3. Other Incentive Measures for Employees
□ Applicable ? Not applicable
Part V Environmental and Social ResponsibilityI Material Environmental IssuesIndicate whether the Company or any of its subsidiaries falls into major pollutant-discharge entities published byenvironmental protection authorities.
□ Yes ? No
Administrative punishments received during the Reporting Period due to environmental issues:
| Name of the Company or subsidiary | Reason for punishment | Regulation violated | Punishment | Impact on the Company | Rectification |
| N/A | N/A | N/A | N/A | N/A | N/A |
Other environmental information in relation to major pollutant-discharge entities:
N/AActions taken during the Reporting Period to reduce carbon emissions and the results:
? Applicable □ Not applicable37 Interactive Entertainment regards corporate carbon neutrality as a vital link in responding to the national call forgreen development and in promoting the Company's sustainable development. Through carbon inventory, climate changeopportunity and risk assessment, group-wide Environmental Protection Month and other campaigns, the Company managesits carbon emissions and encourages employees to develop green living habits.Reasons for the non-disclosure of other environmental information:
During the Reporting Period, the Company received no punishments due to violation of environmental protection lawsand regulations.II Corporate Social Responsibility (CSR)During the Reporting Period, under the leadership of the Party Committee, the Company steadily carried on with its“social value co-creation plan”. It continued to input resources to provide support in six areas—rural education, ruralindustrial development, industry-university-research talent training, functional game development, employee careerdevelopment, and scientific and technological innovation, to help achieve common prosperity around the country.Meanwhile, it actively mobilized internal and external resources to promote talent cultivation and charitable volunteerservices, playing its part as a corporate citizen.
1. Efforts in poverty alleviation and rural revitalization
(1) Focus on education revitalization to support rural talent empowerment
37 Interactive Entertainment takes active steps in rural revitalization, with a focus on rural education revitalization.Since its establishment of Guangdong Youxin Foundation in 2014, the Company has continued to invest to promote thebalanced development of education in less developed areas. The Company has been for years carrying out the "Youxin Peers"high school education assistance program, the county high school free reading program, the "Vocational Wisdom Calling"
career program, and the high school enrollment guarantee program for ethnic minority girls, providing high school studentswith financial, knowledge and intellectual support. In the first half of 2022, 37 Interactive Entertainment, throughGuangdong Youxin Foundation, invested RMB 2,410.8 thousand in education, supporting 2,322 outstanding high schoolstudents. Some of the sponsored students who took the college entrance examination were admitted to Xiamen Universityand other renowned "Double First-Class" Universities.In active response to the call for "Consolidating the Achievements of Poverty Alleviation and Helping RuralRevitalization", 37 Interactive Entertainment pledged a donation of more than RMB 1 million at the 2022 Guangdong PovertyAlleviation Day event. The Company will continue to support the rural education and help develop young talents in Qingyuan,Guangdong, and Bijie, Guizhou, among places Guangzhou offers partner assistance.
(2) Participate in rural assistance to promote characteristic industries
37 Interactive Entertainment, under the leadership of the authorities of Haizhu District, Guangzhou, further deepenedits support for the characteristic industries of Guiding County, Guizhou, following the Party and government's East-WestCooperation policies.The Company's project team conducted investigations in Yunwu Town, Guiding County, gaining an in-depthunderstanding of the whole process, including planting, picking, production and sales, of the local characteristic tea industry.To make product packaging more distinctive and broaden sales channels, the project team leveraged the Company'sresources to develop a special assistance plan. They carried out the cultural and creative design for "Yunwu Gong Cha",expanded sales and promotion channels, and linked cooperation opportunities with upstream and downstream companies.Moreover, the tea gift box "Cha Xiang Yun Gui", a product of rural revitalization under the cooperation between Guangdongand Guizhou, was successfully launched.
In the first half of 2022, 37 Interactive Entertainment invested RMB 416.7 thousand to support the tea industry withrural characteristics. In the future, the Company will continue to explore the industry assistance model of "productupgrading + supply chain building + market-oriented promotion", supporting local spring tea products to reach a widermarket and helping rural characteristic industries to improve quality and efficiency.
2. Fulfillment of other social responsibilities
(1) Deepen industry-university-research cooperation to expand channels for talent development
To enrich its talent pool, 37 Interactive Entertainment cooperated with the schools and departments of renowneddomestic universities to develop Industry-University-Research talents, carrying out a range of characteristic activities such assubject research, project training, and sustainable development and innovation challenges.
During the Reporting Period, the Company and Guangdong Youxin Foundation jointly sponsored the first "CollegeInnovation Challenge on Sustainable Development", which attracted 564 students from 48 universities at home and abroadto compete in teams. At the final site, 10 teams from Tsinghua University, Beijing Institute of Technology, China Academy ofArt and other well-known universities presented the professional judges the highlights of digital works in social responsibility,technical features and art style, among others, interpreting their innovative understanding of sustainable development.
The Company also launched the first round of review of the "Creating the Future—Sustainable Development UniversitySupport Program" through Guangdong Youxin Foundation. Efforts will be made in financial support, technology linkage andintellectual empowerment to support six social practice projects for college students, including "Promoting the Spirit of theSoviet Area and Inheriting Hakka Culture" and "Light Mind—A Multi-Polar Mind Community Platform". In cooperation with
the academic, public welfare and business communities, the Company will build an innovation action system for sustainabledevelopment and cultivate talents who care about society and shoulder missions.
(2) Advance digital empowerment to lead positive social values
In active response to policies including the Opinions on Promoting the Implementation of the National CulturalDigitalization Strategy, 37 Interactive Entertainment leveraged its digital technologies to participate in the digitalization ofcultural industries, delivering positive values to society.During the Reporting Period, the Company released the functional game Come to the Ice Games (来一场冰嬉运动会),digitally and well reproducing Ice Play, a painting by royal painters Zhang Weibang and Yao Wenhan at the will of the QingEmperor Qianlong, leading players to experience the grand occasion of ancient ice sports. Another functional game Star LifeParadise (星星生活乐园) was published to provide scene learning for children with autism. The Company launched a projectto popularize Chinese medicine culture through functional games in cooperation with Guangdong Provincial Hospital ofChinese Medicine. During Environmental Protection Month, the release of the functional game "My Small Goal of CarbonElimination" (我的消碳小目标) drove 3,000 pledges of reduction of personal carbon footprint.Exploration in digital collections was also intensified. The Company worked with China Culture and Creativity Tech., Co.,Ltd., a subsidiary of China Cultural Media Group, to create a series of digital collections of national culture parks, using digitalartworks to show the public China's national spirit reflected in the cultures of the Yangtze River, the Great Wall, the YellowRiver, the Grand Canal and the Long March. The first phase of 12,500 collections received enthusiastic responses, attractingthe public to enjoy the beauty of Chinese culture.
(3) Promote employee development and care for their physical and mental health
To better develop its talents, 37 Interactive Entertainment created a systematic training value system. It covers new staffguide, general career skills development, internal mentor training, leadership improvement and other fields, enablingemployees to learn and make progress at different stages of their career.
Guided by its corporate culture of "Happy Work and Healthy Life", the Company released the "Healthy 37ers" program inMarch 2022 to care for employees' physical and mental health. During the Reporting Period, the Company carried out 20health popularization and first-aid skills training sessions, providing basic health care and first-aid knowledge to 537employees. Routine activities were conducted across 11 clubs, including ultra-running groups, basketball, football and yoga,attracting 2,537 people to exercise regularly and develop a healthy lifestyle. The Company also launched a psychological careand consultation platform and emotion management courses to guide employees to handle difficulties in life and work witha positive attitude.
(4) Care for social development and engage in community voluntary services
To further support the incubation of young talents in clinical medicine and promote the overall development of medicaland health services as well as the development of Healthy China, 37 Interactive Entertainment plans to donate RMB 5 millionto the First Affiliated Hospital of Sun Yat-Sen University to further intensify its support for outstanding talent cultivation. Thefirst-phase donation of RMB 2 million was completed during the Reporting Period.
During the Reporting Period, the Party Committee of 37 Interactive Entertainment issued a call for "Voluntary Servicesunder the Leadership of Party Building". Following the call, 330 employee volunteers contributed 1,320 hours to communityCOVID-19 response, companionship for children with special needs, condolences to groups in difficulties, the realization ofcommunity residents' "little wishes", and other public welfare activities. Therefore, while enhancing employees' sense ofsocial responsibility, the Company delivered a positive social trend.
Part VI Share Changes and Shareholder InformationI 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 | 687,046,078 | 30.98% | -41,416,199 | -41,416,199 | 645,629,879 | 29.11% | |||
| 1.1 Shares held by the government | |||||||||
| 1.2 Shares held by state-owned corporations | |||||||||
| 1.3 Shares held by other domestic investors | 687,046,078 | 30.98% | -41,416,199 | -41,416,199 | 645,629,879 | 29.11% | |||
| Including: Shares held by domestic corporations | |||||||||
| Shares held by domestic natural persons | 687,046,078 | 30.98% | -41,416,199 | -41,416,199 | 645,629,879 | 29.11% | |||
| 1.4 Shares held by overseas investors | |||||||||
| Including: Shares held by overseas corporations | |||||||||
| Shares held by overseas natural persons | |||||||||
| 2. Un-restricted shares | 1,530,818,203 | 69.02% | 41,416,199 | 41,416,199 | 1,572,234,402 | 70.89% | |||
| 2.1 RMB-denominated common shares | 1,530,818,203 | 69.02% | 41,416,199 | 41,416,199 | 1,572,234,402 | 70.89% | |||
| 2.2 Domestically listed foreign shares | |||||||||
| 2.3 Overseas listed foreign shares | |||||||||
| 2.4 Others | |||||||||
| 3. Total shares | 2,217,864,281 | 100.00% | 0 | 0 | 2,217,864,281 | 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 | 271,059,764 | 29,475,000 | 0 | 241,584,764 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. |
| Zeng Kaitian | 184,008,280 | 0 | 0 | 184,008,280 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. |
| Hu Yuhang | 151,198,263 | 0 | 0 | 151,198,263 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. |
| Wu Weihong | 76,149,721 | 14,760,000 | 61,389,721 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. | |
| Yang Jun | 2,095,050 | 520,050 | 0 | 1,575,000 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. |
| Liu Jun | 0 | 0 | 3,972,601 | 3,972,601 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company |
| Law, etc. | ||||||
| Zhang Yun | 2,535,000 | 633,750 | 0 | 1,901,250 | Locked-up shares of senior management | Subject to regulations in respect of changes in shareholdings of directors, supervisors and senior management in the Company Law, etc. |
| Total | 687,046,078 | 45,388,800 | 3,972,601 | 645,629,879 | -- | -- |
II Shareholders and Their Holdings as at the Period-End
Unit: share
| Number of common shareholders | 125,221 | 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, marked or frozen status | |
| Status | Shares | |||||||
| Li Weiwei | Domestic natural person | 14.52% | 322,113,019 | 0 | 241,584,764 | 80,528,255 | ||
| Zeng Kaitian | Domestic natural person | 11.06% | 245,344,374 | 0 | 184,008,280 | 61,336,094 | Pledged | 13,500,000 |
| Hu Yuhang | Domestic natural person | 9.09% | 201,597,684 | 0 | 151,198,263 | 50,399,421 | Pledged | 18,100,000 |
| Hong Kong Securities Clearing Company Ltd. | Overseas corporation | 7.46% | 165,397,375 | 79,416,269 | 0 | 165,397,375 | ||
| Wu Weihong | Domestic natural person | 3.23% | 71,567,862 | -10,285,100 | 61,389,721 | 10,178,141 | ||
| Wu Weidong | Domestic natural person | 2.76% | 61,143,457 | -1,700,000 | 0 | 61,143,457 | ||
| Xu Zhigao | Domestic natural person | 1.64% | 36,453,903 | -399,200 | 0 | 36,453,903 | ||
| National Social Security Fund-Portfolio 112 | Other | 0.82% | 18,282,188 | 18,282,188 | 0 | 18,282,188 | ||
| 37 Interactive Entertainment Network | Other | 0.74% | 16,301,534 | 16,301,534 | 0 | 16,301,534 | ||
| Technology Group Co., Ltd.-The Fourth Employee Stock Ownership Plan | |||||||||
| Industrial and Commercial Bank of China Limited-GF China Securities Media Trading Open-ended Index Securities Investment Fund | Other | 0.64% | 14,241,330 | 3,775,329 | 0 | 14,241,330 | |||
| Strategic investor or general corporation becoming a top-10 common shareholder in a rights issue (if any) | Not applicable | ||||||||
| Related or acting-in-concert parties among the shareholders above | 1. Among the top 10 shareholders of the Company, Wu Weihong and Wu Weidong are siblings, 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. | ||||||||
| Explain if any of the shareholders above was involved in entrusting/being entrusted with voting rights or waiving voting rights | N/A | ||||||||
| Special account for share repurchases (if any) among the top 10 shareholders | N/A | ||||||||
| 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. | 165,397,375 | RMB-denominated common shares | 165,397,375 | ||||||
| Li Weiwei | 80,528,255 | RMB-denominated common shares | 80,528,255 | ||||||
| Zeng Kaitian | 61,336,094 | RMB-denominated common shares | 61,336,094 | ||||||
| Wu Weidong | 61,143,457 | RMB-denominated common shares | 61,143,457 | ||||||
| Hu Yuhang | 50,399,421 | RMB-denominated common shares | 50,399,421 | ||||||
| Xu Zhigao | 36,453,903 | RMB-denominated | 36,453,903 | ||||||
| common shares | |||
| National Social Security Fund-Portfolio 112 | 18,282,188 | RMB-denominated common shares | 18,282,188 |
| 37 Interactive Entertainment Network Technology Group Co., Ltd.-The Fourth Employee Stock Ownership Plan | 16,301,534 | RMB-denominated common shares | 16,301,534 |
| Industrial and Commercial Bank of China Limited-GF China Securities Media Trading Open-ended Index Securities Investment Fund | 14,241,330 | RMB-denominated common shares | 14,241,330 |
| China Construction Bank Corporation- Lombarda China Elderly-related Industry Mixed Securities Investment Fund | 14,104,508 | RMB-denominated common shares | 14,104,508 |
| 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 | The Company is not aware of whether there is, among the 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) | None | ||
Indicate whether any of the top 10 common shareholders or the top 10 un-restricted common shareholders of the Company conducted any promissory repo during the ReportingPeriod.
□ Yes ? No
No such cases in the Reporting Period.
IV Changes in the Shareholdings of Directors, Supervisors and Senior Management
□ Applicable ? Not applicable
No such changes in the Reporting Period. For the relevant information, see the 2021 Annual Report.
V Change of the Controlling Shareholder or Actual Controller
Change of the controlling shareholder in the Reporting Period:
□ Applicable ? Not applicable
No such cases in the Reporting Period.Change of the actual controller in the Reporting Period:
□ Applicable ? Not applicable
No such cases in the Reporting Period.
Part VII Financial StatementsI Independent Auditor’s Report
Are these interim financial statements audited by an independent auditor?
□ Yes ? No
They are unaudited by such an auditor.II Financial Statements
Currency unit for the financial statements and the notes thereto: RMB
1. Consolidated Balance Sheet
Prepared by 37 Interactive Entertainment Network Technology Group Co., Ltd.
30 June 2022
Unit: RMB
| Item | 30 June 2022 | 1 January 2022 |
| Current assets: | ||
| Monetary funds | 5,059,884,639.38 | 4,618,532,776.92 |
| Transaction settlement funds | ||
| Loans to other banks | ||
| Trading financial assets | 2,301,576,209.18 | 2,098,526,001.60 |
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 1,493,792,623.54 | 1,264,319,473.08 |
| Accounts receivable financing | ||
| Prepayments | 989,143,622.79 | 1,055,295,139.07 |
| Premiums receivable | ||
| Reinsurance receivables | ||
| Receivable reinsurance contract reserve | ||
| Other receivables | 80,538,595.69 | 89,898,027.86 |
| Including: Interest receivable | ||
| Dividends receivable | 14,481,435.97 | 14,481,435.97 |
| Redemptory monetary capital for sale | ||
| Inventories | 34.50 | |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 452,827,965.93 | 60,264,139.07 |
| Total current assets | 10,377,763,691.01 | 9,186,835,557.60 |
| Non-current assets: | ||
| Loans and advances to customers |
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 714,617,174.92 | 509,058,912.99 |
| Other equity investments | 325,592,046.97 | 326,561,477.94 |
| Other non-current financial assets | 638,838,488.62 | 561,680,630.03 |
| Investment properties | ||
| Fixed assets | 871,573,384.28 | 892,006,774.60 |
| Construction in progress | 134,045,030.85 | 77,637,189.70 |
| Productive living assets | ||
| Oil and gas assets | ||
| Right-of-use assets | 47,116,082.01 | 59,925,125.24 |
| Intangible assets | 1,069,748,653.80 | 1,088,487,381.04 |
| Development expenditure | ||
| Goodwill | 1,589,065,048.53 | 1,589,065,048.53 |
| Long-term deferred expenses | 127,820,789.36 | 97,947,759.66 |
| Deferred income tax assets | 19,319,251.93 | 17,700,526.83 |
| Other non-current assets | 388,713,131.35 | 30,274,858.60 |
| Total non-current assets | 5,926,449,082.62 | 5,250,345,685.16 |
| Total assets | 16,304,212,773.63 | 14,437,181,242.76 |
| Current liabilities: | ||
| Short-term loans | 607,450,000.00 | 445,635,500.00 |
| Loans from the central bank | ||
| Loans from other banks | ||
| Trading financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | 670,000,000.00 | 208,000,000.00 |
| Accounts payable | 1,658,805,699.77 | 1,565,004,179.17 |
| Advances from customers | ||
| Contract liabilities | 247,579,719.63 | 260,658,631.26 |
| 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 | 302,561,536.89 | 455,632,387.06 |
| Taxes payable | 191,448,447.16 | 188,987,667.45 |
| Other payables | 202,400,827.20 | 199,296,971.30 |
| Including: Interest payable | 676,058.29 | |
| Dividends payable | ||
| Handling charges and commissions payable | ||
| Reinsurance payables | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 40,078,024.93 | 23,773,918.12 |
| Other current liabilities | 39,350,831.92 | 52,341,276.62 |
| Total current liabilities | 3,959,675,087.50 | 3,399,330,530.98 |
| Non-current liabilities: | ||
| Insurance contract reserve | ||
| Long-term loans | 341,000,000.00 | 20,000,000.00 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 27,270,304.28 | 39,641,414.25 |
| Long-term payables | ||
| Long-term employee benefits payable | ||
| Provisions | ||
| Deferred income | ||
| Deferred income tax liabilities | 100,681,886.98 | 120,873,287.67 |
| Other non-current liabilities | ||
| Total non-current liabilities | 468,952,191.26 | 180,514,701.92 |
| Total liabilities | 4,428,627,278.76 | 3,579,845,232.90 |
| Shareholders' equity: | ||
| Share capital | 2,217,864,281.00 | 2,217,864,281.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 2,697,160,867.84 | 2,978,593,891.37 |
| Less: Treasury shares | 299,999,563.27 | |
| Other comprehensive income | -135,653,501.52 | -184,243,331.38 |
| Special reserves | ||
| Surplus reserves | 166,559,856.09 | 166,559,856.09 |
| General risk reserves | ||
| Retained earnings | 6,775,527,608.68 | 5,894,941,180.68 |
| Total equity attributable to shareholders of the Company | 11,721,459,112.09 | 10,773,716,314.49 |
| Non-controlling interests | 154,126,382.78 | 83,619,695.37 |
| Total shareholders' equity | 11,875,585,494.87 | 10,857,336,009.86 |
| Total liabilities and shareholders’ equity | 16,304,212,773.63 | 14,437,181,242.76 |
Legal representative: Li Weiwei Chief Financial Officer:
Ye WeiBoard Secretary: Ye Wei
2. Balance Sheet of the Company
Unit: RMB
| Item | 30 June 2022 | 1 January 2022 |
| Current assets: | ||
| Monetary funds | 1,613,307,098.52 | 998,498,059.53 |
| Trading financial assets | 390,320,547.95 | 753,493,150.68 |
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | ||
| Accounts receivable financing | ||
| Prepayments | 1,954,949.00 | |
| Other receivables | 2,484,316,316.85 | 1,180,095,000.00 |
| Including: Interest receivable | ||
| Dividends receivable | ||
| Inventories | ||
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 6,814,021.96 | 5,345,366.16 |
| Total current assets | 4,496,712,934.28 | 2,937,431,576.37 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 9,536,455,641.04 | 9,516,402,451.17 |
| Other equity investments | ||
| Other non-current financial assets | 29,040,909.54 | 29,040,909.54 |
| Investment properties | ||
| Fixed assets | ||
| Construction in progress | ||
| Productive living assets | ||
| Oil and gas assets | ||
| Right-of-use assets | 7,793,228.41 | 8,855,941.39 |
| Intangible assets | ||
| Development expenditure | ||
| Goodwill | ||
| Long-term deferred expenses | ||
| Deferred income tax assets | ||
| Other non-current assets | ||
| Total non-current assets | 9,573,289,778.99 | 9,554,299,302.10 |
| Total assets | 14,070,002,713.27 | 12,491,730,878.47 |
| Current liabilities: | ||
| Short-term loans | 300,000,000.00 | 350,000,000.00 |
| Trading financial liabilities | ||
| Derivative financial liabilities | ||
| Notes payable | ||
| Accounts payable | ||
| Advances from customers | ||
| Contract liabilities | ||
| Employee benefits payable | 501,985.00 | 2,653,397.00 |
| Taxes payable | 4,757,163.19 | 8,909,954.92 |
| Other payables | 7,047,494.45 | 1,122,108,240.45 |
| Including: Interest payable | 403,784.73 | |
| Dividends payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 20,759,782.76 | 2,205,420.44 |
| Other current liabilities | ||
| Total current liabilities | 333,066,425.40 | 1,485,877,012.81 |
| Non-current liabilities: | ||
| Long-term loans | 341,000,000.00 | 20,000,000.00 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 4,863,526.88 | 7,298,895.06 |
| Long-term payables | ||
| Long-term employee benefits payable | ||
| Provisions | ||
| Deferred income | ||
| Deferred income tax liabilities | 399,760.27 | 873,287.67 |
| Other non-current liabilities | ||
| Total non-current liabilities | 346,263,287.15 | 28,172,182.73 |
| Total liabilities | 679,329,712.55 | 1,514,049,195.54 |
| Shareholders' equity: | ||
| Share capital | 2,217,864,281.00 | 2,217,864,281.00 |
| Other equity instruments |
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserves | 6,342,348,497.01 | 6,622,294,870.41 |
| Less: Treasury shares | 299,999,563.27 | |
| Other comprehensive income | -60,000,000.00 | -60,000,000.00 |
| Special reserves | ||
| Surplus reserves | 608,622,056.26 | 608,622,056.26 |
| Retained earnings | 4,281,838,166.45 | 1,888,900,038.53 |
| Total shareholders' equity | 13,390,673,000.72 | 10,977,681,682.93 |
| Total liabilities and shareholders’ equity | 14,070,002,713.27 | 12,491,730,878.47 |
3. Consolidated Income Statement
Unit: RMB
| Item | H1 2022 | H1 2021 |
| 1. Total operating revenue | 8,092,238,684.40 | 7,538,949,378.53 |
| Including: Operating revenue | 8,092,238,684.40 | 7,538,949,378.53 |
| Interest income | ||
| Premium income | ||
| Handling charge and commission income | ||
| 2. Total operating costs and expenses | 6,306,032,404.23 | 6,792,689,615.37 |
| Including: Cost of sales | 1,260,101,099.90 | 1,120,509,771.85 |
| Interest expense | ||
| Handling charge and commission expenses | ||
| Surrenders | ||
| Net claims paid | ||
| Net amount provided as policy reserve | ||
| Expenditure on policy dividends | ||
| Reinsurance premium expenses | ||
| Taxes and surcharges | 15,543,165.52 | 17,014,990.44 |
| Distribution and selling expenses | 4,340,050,646.56 | 4,785,388,947.28 |
| General and administrative expenses | 209,169,882.37 | 222,001,708.95 |
| Research and development expenses | 496,920,352.58 | 673,649,742.25 |
| Financial expenses | -15,752,742.70 | -25,875,545.40 |
| Including: Interest expense | 14,221,315.74 | 11,764,539.22 |
| Interest income | 54,966,479.25 | 30,785,993.18 |
| Add: Other income | 60,426,373.93 | 76,652,164.24 |
| Investment income (“-” for loss) | 52,339,291.74 | 73,957,894.70 |
| Including: Share of profits and losses of joint ventures and associates | -23,711,051.21 | -7,279,101.80 |
| 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) | -34,650,521.66 | 106,592,018.27 |
| Impairment loss on credit (“-” for loss) | -2,933,013.92 | 1,130,937.77 |
| Impairment loss on assets (“-” for loss) | -10,791,188.33 | |
| Gain on disposal of assets (“-” for loss) | 328,439.88 | 254,206.01 |
| 3. Operating profit (“-” for loss) | 1,850,925,661.81 | 1,004,846,984.15 |
| Add: Non-operating income | 5,246,517.14 | 2,204,522.71 |
| Less: Non-operating expenses | 2,771,389.41 | 713,926.50 |
| 4. Profit before income tax expenses (“-” for loss) | 1,853,400,789.54 | 1,006,337,580.36 |
| Less: Income tax expenses | 176,029,935.00 | 162,728,946.02 |
| 5. Net profit (“-” for net loss) | 1,677,370,854.54 | 843,608,634.34 |
| 5.1 Classified by continuity of operations | ||
| 5.1.1 Net profit from continuing operations (“-” for net loss) | 1,677,370,854.54 | 843,608,634.34 |
| 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 | 1,695,164,644.39 | 853,717,855.65 |
| 5.2.2 Net profit attributable to non-controlling interests | -17,793,789.85 | -10,109,221.31 |
| 6. Other comprehensive income, net of tax | 48,589,829.86 | -11,218,110.68 |
| Other comprehensive income attributable to shareholders of the Company, net of tax | 48,589,829.86 | -11,218,110.68 |
| 6.1 Other comprehensive income that will not be reclassified subsequently to profit or loss | -3,000,000.00 | -2,500,000.00 |
| 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 | -3,000,000.00 | -2,500,000.00 |
| 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 | 51,589,829.86 | -8,718,110.68 |
| 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 | 296,531.34 | |
| 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 | 51,293,298.52 | -8,718,110.68 |
| 6.2.7 Others | ||
| Other comprehensive income attributable to non-controlling interests, net of tax | ||
| 7. Total comprehensive income | 1,725,960,684.40 | 832,390,523.66 |
| Total comprehensive income attributable to shareholders of the Company | 1,743,754,474.25 | 842,499,744.97 |
| Total comprehensive income attributable to non-controlling interests | -17,793,789.85 | -10,109,221.31 |
| 8. Earnings per share: | ||
| 8.1 Basic earnings per share | 0.77 | 0.39 |
| 8.2 Diluted earnings per share | 0.77 | 0.39 |
Where business combinations under common control occurred in the current period, the net profit achieved by theacquirees before the combinations was RMB 0.00 with the amount for the same period of last year being RMB 0.00.Legal representative: Li Weiwei Chief Financial Officer:
Ye WeiBoard Secretary: Ye Wei
4. Income Statement of the Company
Unit: RMB
| Item | H1 2022 | H1 2021 |
| 1. Operating revenue | 0.00 | 0.00 |
| Less: Cost of sales | 0.00 | 0.00 |
| Taxes and surcharges | 21,018.70 | 30,644.49 |
| Distribution and selling expenses | ||
| General and administrative expenses | 4,287,012.24 | 6,139,344.71 |
| Research and development expenses | ||
| Financial expenses | -9,337,655.96 | -4,741,019.01 |
| Including: Interest expense | 3,935,106.31 | 2,429,147.82 |
| Interest income | 13,798,152.46 | 7,162,870.38 |
| Add: Other income | 1,896,774.41 | 4,634,292.84 |
| Investments income (“-” for loss) | 3,199,148,357.25 | 43,717,534.24 |
| Including: Share of profits and losses of joint ventures and associates | ||
| Gain on derecognition of financial assets measured at amortised cost (“-” for |
| loss) | ||
| Net gain on exposure hedges (“-” for loss) | ||
| Gain on changes in fair value (“-” for loss) | 5,867,726.04 | 1,752,876.71 |
| Impairment loss on credit (“-” for loss) | -5,000.00 | 10,000.00 |
| Impairment loss on assets (“-” for loss) | ||
| Gain on disposal of assets (“-” for loss) | ||
| 2. Operating profit (“-” for loss) | 3,211,937,482.72 | 48,685,733.60 |
| Add: Non-operating income | 2.59 | |
| Less: Non-operating expenses | 31,234.89 | |
| 3. Profit before income tax expenses (“-” for loss) | 3,211,906,250.42 | 48,685,733.60 |
| Less: Income tax expenses | 4,389,906.11 | |
| 4. Net profit (“-” for net loss) | 3,207,516,344.31 | 48,685,733.60 |
| 4.1 Net profit from continuing operations (“-” for net loss) | 3,207,516,344.31 | 48,685,733.60 |
| 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 |
| 6. Total comprehensive income | 3,207,516,344.31 | 48,685,733.60 |
| 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 2022 | H1 2021 |
| 1. Cash flows from operating activities: | ||
| Cash received from the sales of goods or rendering services | 8,191,423,031.24 | 7,676,444,468.63 |
| 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 | 13,071,839.40 | 6,041,391.30 |
| Cash received relating to other operating activities | 102,190,719.08 | 96,901,049.99 |
| Sub-total of cash inflows from operating activities | 8,306,685,589.72 | 7,779,386,909.92 |
| Cash paid for purchases of goods and services | 1,248,044,739.23 | 1,263,433,673.37 |
| 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 | 952,696,588.30 | 930,199,318.50 |
| Payments of taxes and levies | 245,557,026.85 | 176,556,465.72 |
| Cash paid relating to other operating activities | 4,056,307,650.80 | 4,155,278,299.87 |
| Sub-total of cash outflows used in operating activities | 6,502,606,005.18 | 6,525,467,757.46 |
| Net cash flows from operating activities | 1,804,079,584.54 | 1,253,919,152.46 |
| 2. Cash flows from investing activities: |
| Cash received from disposal of investments | 174,210,882.65 | 258,995,260.75 |
| Cash received from investment income | 36,747,137.98 | 53,461,764.70 |
| Cash received from disposal of fixed assets, intangible assets and other long-term assets | 515,224.24 | 691,899.95 |
| Net cash received from disposal of subsidiaries and other business units | ||
| Cash received relating to other investing activities | 5,576,074,659.14 | 2,157,163,728.00 |
| Sub-total of cash inflows from investing activities | 5,787,547,904.01 | 2,470,312,653.40 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | 55,905,510.45 | 148,350,121.61 |
| Cash paid to acquire investments | 163,561,411.21 | 361,478,743.09 |
| Net increase in pledged loans granted | ||
| Net cash paid for the acquisition of subsidiaries and other business units | 4,650,000.00 | |
| Cash paid relating to other investing activities | 6,769,074,659.14 | 2,791,497,900.00 |
| Sub-total of cash outflows used in investing activities | 6,988,541,580.80 | 3,305,976,764.70 |
| Net cash flows from/used in investing activities | -1,200,993,676.79 | -835,664,111.30 |
| 3. Cash flows from financing activities: | ||
| Cash received from capital contributions | 92,000,000.00 | 2,980,232,843.10 |
| Including: Cash received from capital contributions by non-controlling interests of subsidiaries | 92,000,000.00 | 76,700,000.00 |
| Cash received from borrowings | 947,450,000.00 | 247,468,500.00 |
| Cash received relating to other financing activities | ||
| Sub-total of cash inflows from financing activities | 1,039,450,000.00 | 3,227,701,343.10 |
| Cash repayments of borrowings | 448,653,250.00 | 889,324,326.07 |
| Cash paid for interest and dividends | 827,115,684.90 | 9,562,304.72 |
| Including: Dividends paid by subsidiaries to non-controlling interests | 405,402.09 | |
| Cash paid relating to other financing activities | 394,823,304.17 | 591,315,699.76 |
| Sub-total of cash outflows used in financing activities | 1,670,592,239.07 | 1,490,202,330.55 |
| Net cash flows from/used in financing activities | -631,142,239.07 | 1,737,499,012.55 |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | 20,628,944.13 | -2,225,471.71 |
| 5. Net increase/decrease in cash and cash equivalents | -7,427,387.19 | 2,153,528,582.00 |
| Add: Cash and cash equivalents at beginning of the period | 4,618,393,735.38 | 1,774,081,508.55 |
| 6. Cash and cash equivalents at end of the period | 4,610,966,348.19 | 3,927,610,090.55 |
6. Cash Flow Statement of the Company
Unit: RMB
| Item | H1 2022 | H1 2021 |
| 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 | 1,218,682,414.28 | 599,338,422.69 |
| Sub-total of cash inflows from operating activities | 1,218,682,414.28 | 599,338,422.69 |
| Cash paid for purchases of goods and services | ||
| Cash paid to and on behalf of employees | 3,493,659.49 | 961,537.33 |
| Payments of taxes and levies | 3,399,378.83 | 2,178,758.00 |
| Cash paid relating to other operating activities | 3,633,945,952.16 | 2,370,904,582.14 |
| Sub-total of cash outflows used in operating activities | 3,640,838,990.48 | 2,374,044,877.47 |
| Net cash flows from/used in operating activities | -2,422,156,576.20 | -1,774,706,454.78 |
| 2. Cash flows from investing activities: | ||
| Cash received from disposal of investments | ||
| Cash received from investment income | 3,208,188,686.02 | 1,043,717,534.24 |
| Cash received from disposal of fixed assets, intangible assets and other long-term assets | ||
| Net cash received from disposal of subsidiaries and other business units | ||
| Cash received relating to other investing activities | 2,750,000,000.00 | 550,000,000.00 |
| Sub-total of cash inflows from investing activities | 5,958,188,686.02 | 1,593,717,534.24 |
| Cash paid for acquisition of fixed assets, intangible assets and other long-term assets | ||
| Cash paid to acquire investments | 568,434,240.00 | |
| Net cash paid for the acquisition of subsidiaries and other business units | ||
| Cash paid relating to other investing activities | 2,690,000,000.00 | 1,300,000,000.00 |
| Sub-total of cash outflows used in investing activities | 2,690,000,000.00 | 1,868,434,240.00 |
| Net cash flows from/used in investing activities | 3,268,188,686.02 | -274,716,705.76 |
| 3. Cash flows from financing activities: | ||
| Cash received from capital contributions | 2,903,532,843.10 | |
| Cash received from borrowings | 640,000,000.00 | 150,000,000.00 |
| Cash received relating to other financing activities | ||
| Sub-total of cash inflows from financing activities | 640,000,000.00 | 3,053,532,843.10 |
| Cash repayments of borrowings | 350,500,000.00 |
| Cash paid for interest and dividends | 817,906,910.83 | 2,311,666.67 |
| Cash paid relating to other financing activities | 2,816,160.00 | |
| Sub-total of cash outflows used in financing activities | 1,171,223,070.83 | 2,311,666.67 |
| Net cash flows from/used in financing activities | -531,223,070.83 | 3,051,221,176.43 |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | ||
| 5. Net increase/decrease in cash and cash equivalents | 314,809,038.99 | 1,001,798,015.89 |
| Add: Cash and cash equivalents at beginning of the period | 998,498,059.53 | 274,246.17 |
| 6. Cash and cash equivalents at end of the period | 1,313,307,098.52 | 1,002,072,262.06 |
7. Consolidated Statement of Changes in Shareholders’ Equity
H1 2022
Unit: RMB
| Item | H1 2022 | ||||||||||||||
| 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 | 2,217,864,281.00 | 2,978,593,891.37 | 299,999,563.27 | -184,243,331.38 | 166,559,856.09 | 5,894,941,180.68 | 10,773,716,314.49 | 83,619,695.37 | 10,857,336,009.86 | ||||||
| Add: Adjustments for changed accounting policies | |||||||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
| Adjustments for business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Balance as at beginning of year | 2,217,864,281.00 | 2,978,593,891.37 | 299,999,563.27 | -184,243,331.38 | 166,559,856.09 | 5,894,941,180.68 | 10,773,716,314.49 | 83,619,695.37 | 10,857,336,009.86 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | -281,433,023.53 | -299,999,563.27 | 48,589,829.86 | 880,586,428.00 | 947,742,797.60 | 70,506,687.41 | 1,018,249,485.01 | ||||||||
| 3.1 Total comprehensive income | 48,589,829.86 | 1,695,164,644.39 | 1,743,754,474.25 | -17,793,789.85 | 1,725,960,684.40 | ||||||||||
| 3.2 Capital contribution and withdrawal by | 20,053,189.87 | 20,053,189.87 | 88,705,879.35 | 108,759,069.22 | |||||||||||
| shareholders | |||||||||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | 88,705,879.35 | 88,705,879.35 | |||||||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | |||||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 20,053,189.87 | 20,053,189.87 | 20,053,189.87 | ||||||||||||
| 3.2.4 Others | |||||||||||||||
| 3.3 Profit distribution | -814,578,216.39 | -814,578,216.39 | -405,402.09 | -814,983,618.48 | |||||||||||
| 3.3.1 Appropriation to surplus reserves | |||||||||||||||
| 3.3.2 Appropriation to general risk reserves | |||||||||||||||
| 3.3.3 Distribution to shareholders | -814,578,216.39 | -814,578,216.39 | -405,402.09 | -814,983,618.48 | |||||||||||
| 3.3.4 Others | |||||||||||||||
| 3.4 Internal transfers within shareholders’ equity | -299,999,563.27 | -299,999,563.27 | |||||||||||||
| 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 | -299,999,563.27 | -299,999,563.27 | |||||||||||||
| 3.5 Special reserves | |||||||||||||||
| 3.5.1 Increase in the period | |||||||||||||||
| 3.5.2 Used in the period | |||||||||||||||
| 3.6 Others | -1,486,650.13 | -1,486,650.13 | -1,486,650.13 | ||||||||||||
| 4. Balance as at the end of the period | 2,217,864,281.00 | 2,697,160,867.84 | -135,653,501.52 | 166,559,856.09 | 6,775,527,608.68 | 11,721,459,112.09 | 154,126,382.78 | 11,875,585,494.87 |
H1 2021
Unit: RMB
| Item | H1 2021 | ||||||||||||||
| 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 | 114,693,519.91 | -149,074,272.37 | 3,959,512,681.41 | 6,037,383,625.95 | 28,068,077.78 | 6,065,451,703.73 | ||||||||
| Add: Adjustments for changed accounting policies | -3,040,560.81 | -3,040,560.81 | -2,224.58 | -3,042,785.39 | |||||||||||
| Adjustments for corrections of previous errors | |||||||||||||||
| Adjustments for business combinations under common control | |||||||||||||||
| Others | |||||||||||||||
| 2. Balance as at beginning of year | 2,112,251,697.00 | 114,693,519.91 | -149,074,272.37 | 3,956,472,120.60 | 6,034,343,065.14 | 28,065,853.20 | 6,062,408,918.34 | ||||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 105,612,584.00 | 2,838,552,124.46 | -11,218,110.68 | 4,868,573.36 | 405,276,426.09 | 3,343,091,597.23 | 66,590,778.69 | 3,409,682,375.92 | |||||||
| 3.1 Total comprehensive income | -11,218,110.68 | 853,717,855.65 | 842,499,744.97 | -10,109,221.31 | 832,390,523.66 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | 105,612,584.00 | 2,838,552,124.46 | 2,944,164,708.46 | 76,700,000.00 | 3,020,864,708.46 | ||||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | 105,612,584.00 | 2,795,939,095.73 | 2,901,551,679.73 | 76,700,000.00 | 2,978,251,679.73 | ||||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | |||||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 42,613,028.73 | 42,613,028.73 | 42,613,028.73 | ||||||||||||
| 3.2.4 Others | |||||||||||||||
| 3.3 Profit distribution | 4,868,573.36 | -448,441,429.56 | -443,572,856.20 | -443,572,856.20 | |||||||||||
| 3.3.1 Appropriation to surplus reserves | 4,868,573.36 | 4,868,573.36 | 4,868,573.36 | ||||||||||||
| 3.3.2 Appropriation to general risk reserves | |||||||||||||||
| 3.3.3 Distribution to shareholders | -448,441,429.56 | -448,441,429.56 | -448,441,429.56 |
| 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 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 | 2,217,864,281.00 | 2,953,245,644.37 | -160,292,383.05 | 4,868,573.36 | 4,361,748,546.69 | 9,377,434,662.37 | 94,656,631.89 | 9,472,091,294.26 |
8. Statement of Changes in Shareholders’ Equity of the Company
H1 2022
Unit: RMB
| Item | H1 2022 |
| 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 | 2,217,864,281.00 | 6,622,294,870.41 | 299,999,563.27 | -60,000,000.00 | 608,622,056.26 | 1,888,900,038.53 | 10,977,681,682.93 | |||||
| Add: Adjustments for changed accounting policies | ||||||||||||
| Adjustments for corrections of previous errors | ||||||||||||
| Others | ||||||||||||
| 2. Balance as at beginning of year | 2,217,864,281.00 | 6,622,294,870.41 | 299,999,563.27 | -60,000,000.00 | 608,622,056.26 | 1,888,900,038.53 | 10,977,681,682.93 | |||||
| 3. Increase/ decrease in the period (“-” for decrease) | -279,946,373.40 | -299,999,563.27 | 2,392,938,127.92 | 2,412,991,317.79 | ||||||||
| 3.1 Total comprehensive income | 3,207,516,344.31 | 3,207,516,344.31 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | 20,053,189.87 | 20,053,189.87 | ||||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | ||||||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | ||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 20,053,189.87 | 20,053,189.87 | ||||||||||
| 3.2.4 Others | ||||||||||||
| 3.3 Profit distribution | -814,578,216.39 | -814,578,216.39 | ||||||||||
| 3.3.1 Appropriation to surplus reserves | ||||||||||||
| 3.3.2 Distribution to shareholders | -814,578,216.39 | -814,578,216.39 | ||||||||||
| 3.3.3 Others | ||||||||||||
| 3.4 Internal transfers within shareholders’ equity | -299,999,563.27 | -299,999,563.27 | ||||||||||
| 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 | -299,999,563.27 | -299,999,563.27 | ||||||||||
| 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 | 2,217,864,281.00 | 6,342,348,497.01 | -60,000,000.00 | 608,622,056.26 | 4,281,838,166.45 | 13,390,673,000.72 |
H1 2021
Unit: RMB
| Item | H1 2021 | |||||||||||
| 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 | 3,759,929,582.87 | -60,000,000.00 | 442,062,200.17 | 1,160,408,295.15 | 7,414,651,775.19 | ||||||
| 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 | 3,759,929,582.87 | -60,000,000.00 | 442,062,200.17 | 1,160,408,295.15 | 7,414,651,775.19 | ||||||
| 3. Increase/ decrease in the period (“-” for decrease) | 105,612,584.00 | 2,838,552,124.46 | 4,868,573.36 | -399,755,695.96 | 2,549,277,585.86 | |||||||
| 3.1 Total comprehensive income | 48,685,733.60 | 48,685,733.60 | ||||||||||
| 3.2 Capital contribution and withdrawal by shareholders | 105,612,584.00 | 2,838,552,124.46 | 2,944,164,708.46 | |||||||||
| 3.2.1 Common shares contribution and withdrawal by shareholders | 105,612,584.00 | 2,795,939,095.73 | 2,901,551,679.73 | |||||||||
| 3.2.2 Capital contribution and withdrawal by holders of other equity instruments | ||||||||||||
| 3.2.3 Share-based payments included in shareholders’ equity | 42,613,028.73 | 42,613,028.73 | ||||||||||
| 3.2.4 Others | ||||||||||||
| 3.3 Profit distribution | 4,868,573.36 | -448,441,429.56 | -443,572,856.20 | |||||||||
| 3.3.1 Appropriation to surplus reserves | 4,868,573.36 | -4,868,573.36 | ||||||||||
| 3.3.2 Distribution to shareholders | -443,572,856.20 | -443,572,856.20 | ||||||||||
| 3.3.3 Others | ||||||||||||
| 3.4 Internal transfers within shareholders’ equity | ||||||||||||
| 3.4.1 Capital reserves transferred into |
| capital (or share capital) | ||||||||||||
| 3.4.2 Surplus reserves transferred into capital (or share capital) | ||||||||||||
| 3.4.3 Surplus reserves for making up losses | ||||||||||||
| 3.4.4 Changes in defined benefit pension schemes transferred into retained earnings | ||||||||||||
| 3.4.5 Other comprehensive income transferred into retained earnings | ||||||||||||
| 3.4.6 Others | ||||||||||||
| 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 | 2,217,864,281.00 | 6,598,481,707.33 | -60,000,000.00 | 446,930,773.53 | 760,652,599.19 | 9,963,929,361.05 |