[中报]三七互娱(002555):2023年半年度报告摘要（英文版）
原标题:三七互娱:2023年半年度报告摘要（英文版） TechnologyGroupCo.,Ltd. 2023InterimReport August2023 PartIImportantNotes,TableofContentsandDefinitions TheBoardofDirectors(orthe“Board”),theSupervisoryCommitteeaswellasthedirectors,supervisorsandseniormanagementof37InteractiveEntertainmentNetworkTechnologyGroupCo.,Ltd.(hereinafterreferredtoasthe“Company”)herebyguaranteethetruthfulness,accuracyandcompletenessofthecontentsofthisReport,andshallbejointlyandseverallyliableforanymisrepresentations,misleadingstatementsormaterialomissionstherein.XuZhigao,theCompany’slegalrepresentative,andYeWei,theCompany’sChiefFinancialOfficer&BoardSecretary,herebyguaranteethatthefinancialstatementscarriedinthisReportaretruthful,accurateandcomplete. AlltheCompany’sdirectorshaveattendedtheBoardmeetingforthereviewofthisReport.Any plans, development strategies and other forward-looking statements in this Reportshall not be deemed as earnings forecasts or promises to investors. Investors and otherstakeholders shall be fully aware of the risk and understand the difference between plans,forecastsandpromises. Possible risks facing the Company and countermeasures have been detailed in “VII RisksFacingtheCompanyandCountermeasures”under“PartIIIManagementDiscussionandAnalysis”herein,whichinvestorsarekindlyremindedtopayattentionto. The Company is subject to the disclosure requirements for listed companies engaged insoftwareandITservices. The Board has approved an interim dividend plan as follows: based on the total issuedsharecapital(exclusiveofsharesintheCompany’saccountforrepurchasedshares)onthedateofrecord,acashdividendofRMB4.5(taxinclusive)per10sharesisplannedtobedistributedtoalltheshareholdersoftheCompany,withnobonusissuefromeitherprofitorcapitalreserves.TableofContents PartIImportantNotes,TableofContentsandDefinitions................................................................................................2 PartIICorporateInformationandKeyFinancialInformation............................................................................................5 PartIIIManagementDiscussionandAnalysis....................................................................................................................8 PartIVCorporateGovernance...........................................................................................................................................26 PartVEnvironmentalandSocialResponsibility...............................................................................................................29 PartVIShareChangesandShareholderInformation.......................................................................................................32 PartVIIFinancialStatements............................................................................................................................................37 Definitions
ICorporateInformation
Indicatebytickmarkwhetherthereisanyretrospectivelyrestateddatuminthetablebelow.?Yes□No Reasonsfortheretrospectiverestatement: Changetotheaccountingpolicies
31)on30 November 2022, whichstipulates the “accounting treatmentsfor deferredincometaxesassociated withassets and liabilitiesarisingfromasingletransactiontowhichtheinitialrecognitionexemptiondoesnotapply”.Forasingletransactionthat isnotabusinesscombinationanddoesnotaffecteitheraccountingprofitortaxableincome(ordeductiblelosses)atthetime the transaction occurs, and where the initial recognition of assets and liabilities results in taxable temporary differences and deductible temporary differences in equal amounts (including lease transactions where the lessee initially recognises a lease liability on the commencement date of the lease term and records it in the right-of-use assets, and transactions where a provisionisrecognisedandrecordedinthecostoftherelevantassetsbecauseoftheexistenceofadisposalobligationforafixed asset, etc., hereinafter referred to as a “single transaction to which this Interpretation applies”), the provisions pertaining to exemption from the initial recognition of deferred income tax liabilities and assets as stipulated in Articles 11.2 and 13 of AccountingStandardNo.18forBusinessEnterprises-IncomeTaxshallnotapply.Anenterpriseshallrecognisethecorresponding deferred income tax liabilities and deferred income tax assets at the time of the transaction in accordance with the relevant provisions of Accounting Standard No. 18 for Business Enterprises - Income Tax and other relevant regulations for taxable temporarydifferencesanddeductibletemporarydifferencesarisingfromtheinitialrecognitionofassetsandliabilitiesinrespect ofthetransaction. TheCompanyhasimplementedthesaidaccountingpolicysince1January2023,andhasadjustedthecumulativeeffectto theopeningretainedearningsandotherrelatedfinancialstatementitems,withoutadjustingtheinformationinthecomparable period. For details of the adjusted items and amounts, please refer to “36. Changes to Significant Accounting Policies and AccountingEstimates”underItemVofPartXherein. IV AccountingData Differences under China’s AccountingStandards forBusiness Enterprises(CAS)andInternationalFinancialReportingStandards(IFRS)andForeignAccountingStandards1.NetProfitandEquityunderCASandIFRS □Applicable?Notapplicable NodifferencefortheReportingPeriod. 2.NetProfitandEquityunderCASandForeignAccountingStandards □Applicable?Notapplicable NodifferencefortheReportingPeriod. VNon-recurringprofitsandlosses ?Applicable□Notapplicable Unit:RMB
NosuchcasesfortheReportingPeriod. Explanation of why the Company reclassifies as recurrent a non-recurring profits and losses item listed in the Explanatory AnnouncementNo.1onInformationDisclosureforCompaniesOfferingTheirSecuritiestothePublic—Non-recurringProfitsand LossesItems: □Applicable?Notapplicable NosuchcasesfortheReportingPeriod. PartIIIManagementDiscussionandAnalysis IPrincipalOperationsoftheCompanyintheReportingPeriod Focusing on cultural and creative operations based on the development, publishing, and operation ofonline games, the Company has been steadily advancing with the development strategy of “boutiqueization, diversification and globalization”, adheringtothestrategyof“integrationofR&Dandoperation”,aswellasdrivinghigh-qualitydevelopmentandboutiqueization. (I)Industryreview In2023,theindustryactivelyrespondedtopolicycalls,implementedmanagementrequirements,andcontinuedtodevelop towardshigh-qualityandpremiumgames.AccordingtotheChina'sGameIndustryReportfromJanuarytoJune2023(hereinafter referred to as the "Report") jointly released by Game Publishing Committee of China Audio-video and Digital Publishing Association(CADPA)andChinaGameIndustryResearchInstitute,thedomesticgamemarketshowedsignsofrecoverywithuser growthreachinganewhighinthefirsthalfofthisyear.FromJanuarytoJune 2023,theactualsalesrevenueofChina'sgame marketwasRMB144.263billion,ayear-over-year(YoY)decreaseof2.39%andanincreaseof22.2%comparedwiththepriorhalf year, indicating an obvious recovery trend. During the same period, there were 668 million game users in China, with a YoY increaseof0.35%,hittinganewrecordhigh. In overseas markets, from January to June 2023, the actual sales revenue of China's self-developed games in overseas marketswasUSD8.206billion,down8.72%YoY.TheUS,JapanandSouthKorearemainedthemajoroverseasmarketsforChina's mobile games, accounting for 31.77%, 19.65% and 8.50%, respectively. The combined share of Germany, the UK and France markets also approached 10%. Emerging markets in the Middle East, Latin America and Southeast Asia continued to show upwardmomentum.Againstthe backdropofoverallstagnationin the globalgame market,China'sgame industryis gradually emergingfromitslowpointandshowinganupwardtrend. Ontheotherhand,China'sgameindustrythoroughlyimplementedtheguidingprinciplesofthe20thCPCNationalCongress, andactivelyengagedinthehigh-qualitydevelopmentoftheindustry,achievingoutstandingresultsinmanyaspects,including minor protection, user information security, technological innovation and application, traditional culture communication, and overseasmarketexpansion. Againstthisbackdrop,theCompanyfocusedonitscorebusinessandcontinuedtoenhanceitspremiumgamedevelopment capabilityandexpanditscoreoverseasadvantages,steadilypromotinghigh-qualityandsustainablebusinessgrowthtoprovide premiumculturalcontenttothepublic. Inminorprotection,theCompanyhasalwaystakenaproactiveanddiligentattitudetosteadilyadvancevariousworkson the protectionofminorsonline, paying attentiontoeveryaspect throughoutthe gameR&Dand operation process.Fromthe perspectives ofpreventing online addiction and improving online literacy,the Company strives to create a bright and healthy onlineenvironmentforminors.TheCompanytookaleadingroleindraftingandissuingthegroupstandardManagementSystem onMinorsOnlineProtectionforInternetCompanies,andcollaboratedwithindustryassociationstoformulategroupstandards including the Social Responsibility Management System of Video Game Industry Companies and the Guidelines for Ecological Governance of Network Information Content. Meanwhile, the Company participated in the development of group standards includingtheEvaluationCriteriaforPremiumGames,GameInnovationMetrics,Online-gameClassification,andNormsforGame Distribution and Promotion, providing guidance for corporate social responsibilities. In addition, the new version of the Company'sfunctionalgameStarLifeParadise(星星生活乐园)fortrainingchildrenwithautismwasofficiallylaunchedduringthe ReportingPeriod,breakinggeographicalandspatiallimitationswithgamesandprovidingassistancetoautisticgroupsnationwide onalargerscale. In terms of user information security, the Company continuously improved and optimised its systems related to entity responsibility, data security, and the registration of new technologies and applications, and established relevant systems for account management, network content security, and data security, along with ongoing enhancements and investments in compliance.Intermsofinformationsecuritymanagementanduserprivacyprotection,basedonstrictmanagementpoliciesand processsystem,theCompanyadoptsindustry-leadingtechnologiesandbenchmarkthemagainstinternationalstandards,strictly controls information security risks, and guarantees data security to ensure the security of users' personal information to the maximumextent. Intermsoftechnologicalinnovationandapplication,theCompanyadherestotechnology-driveninnovation,closelyfollows thelatesttrendsin scientificandtechnologicalinnovation,activelyembracescutting-edge technologies likegenerativeAI,and explores the potentialfor deep integration ofAI and other emerging technologies with the Company'sbusiness, continuously improvingcreativeefficiency.Atthesametime,focusingonpromotingthecross-industryintegrationofgametechnologies,the Company launched a series of popular science games with rich themes covering medicine, traditional Chinese medicine, aerospace, intangible cultural heritage, and more to maximise the positive social impact of games by leveraging the unique interactivity and vividness of games. Furthermore, the Company also ventures into the fields of computing power, artificial intelligence, optical displays, XR integrated devices, entertainment content, semiconductors and materials, space computing engines,andtheAIGCgamingandsocialplatform,amongotherentertainmenttechnologydomains.Bystrategicallyembracing "hardtechnology"investmentsandintegrating ecologicalresources, theCompanyseizesopportunities forbusinessinnovation broughtbycutting-edgetechnology,therebyfurtherpropellingthehigh-qualitydevelopmentofitscorporateecosystem. In terms of promoting traditional culture, the Company focuses on youth-oriented expression, continuously excavating historical and cultural resources, hoping to showcase the beauty of Chinese traditional culture in an integrated way through "Games+".Forexample,theCompanyincorporatedPekingoperafacialmakeup,Cantoneseculture,andtheancientMaritimeSilk Road into its globally published game The Road to Be Shopkeeper (叫我大掌柜), helping overseas players gain a deeper understanding of Chinese culture; the Company also built a metaverse space integrating intangible cultural heritage displays, digitalexperiences,andinteractivecheck-insusingtechniqueslikedigitalmodellingandtheUnityengine,promotingthedigital communicationandinheritanceoftraditionalcultureinthenewera.Byharnessingthepowerofdigitaltechnology,theCompany enables the realisation of cultural resonance and a more vibrant and multidimensional depiction of China's stories through variousmeanssuchasproducinghigh-qualitycontent,developingfunctionalgameswithculturalelements,andintegratingnew technologies. As a socially responsible public company, 37 Interactive Entertainment thoroughly implements the spirit ofthe 20th CPC NationalCongress,activelypracticingsocialistcorevalues,andpersistsinusingPartybuildingtoguidecorporatedevelopment. Wefulfilcorporatesocialresponsibilitiesbyassistingwithruraltalentrevitalisation,promotingcollaborativeindustrialpoverty alleviation, enabling positive value dissemination through digital empowerment, nurturing young talent through industry- academiacollaboration,andparticipatingincharitytobuildabettersocietytogether.(II)TheCompany’sprincipaloperationsandproducts The Company specializes in the development and publishing of games for global players, with the excellent game development brand “Three Seven Games”, as well as professional game publishing brands “37Mobile”, “37GAMES” and “37Online”.TheCompanypreciselygraspedtheindustrydevelopmenttrends,madecontinuousimprovementsinoperation,and remainedatopperformerintheindustry,whileadheringtothe"boutiqueization,diversificationandglobalization"strategy. 1.Mobilegamebusiness DuringtheReportingPeriod,theCompany'srobustdevelopmentwassolidifiedbyaportfoliooflong-periodgamesincluding TheSoulLand:HunShiDuiJue(斗罗大陆：魂师对决),Puzzles&Survival,SongoftheCastleintheSky(云上城之歌),TheRoad toBeShopkeeper(叫我大掌柜),UndergroundKingdom(小小蚁国),PeerlessKing(绝世仙王),amongothers.Newlylaunched gamessuchasFanRenXiuXianZhuan:RenJiePian(凡人修仙传：人界篇)andZuiHouDeYuanShiRen(最后的原始人)performedwell,sustainingastronglong-termoperationaladvantageandpropellingtheCompany'sbusinesstransformationand upgrade. (1)DeeperintegrationofR&Dandoperation,aswellasenhancedqualityandefficiencythroughAIempowermentDuringthe ReportingPeriod,theCompany'sadvantageof"integrationofR&Dand operation"remained steadfast,witha diverserangeofhigh-qualityproductsinitsportfolioandacontinuousenhancementoflong-termoperationalcapabilities.Ona globalbasis,thehighestmonthlygrossbillingoftheCompany’smobilegamesexceededRMB2billion,thetotalnumberofnewly registereduserssurpassed198million,andthehighestnumberofmonthlyactiveusers(MAU)wasover49million.Asmanyas7 existing games recorded more than RMB100 million of monthly average gross billing worldwide, and long-period product categoriesaccountedforover50%oftotalrevenue. AsabenchmarkfortheR&Dofinnovativegamesintheindustry,theCompany'sgamedevelopmentbrandof“ThreeSevenGames”establishedanetworkofR&Dtalentspanningmultipleregions.Aprofessionallayouthasbeenestablishedinmultiple marketsegmentslikeSLG,MMORPG,and cardgames, formingacontinuously evolvingnext-gen productdevelopmentsystem thatisinheritableanditerative. Ononehand,theCompany'sR&Dteamavoidsstayingwithincomfortzonesandactivelyexpandsintovariouscategories, developingproductswithaglobalperspective.TheCompanycarefullyworkedoutdetailsregardinggameplaydesign,artquality, music effects, etc., and continued to invest in product iteration, user experience and other aspects, remaining “Dedicated to MakingPremiumGames”. Ontheotherhand,theCompanyconsistentlyexploresthedeepapplicationofinnovativetechnologiesingames,translating advanceddigitaltechnologieslikebigdataandAIintoproductivity,allowingdeveloperstofocusoninnovativegameplaywhile refininggamedevelopmentmanagementtobemorepreciseandscientific.TheCompanyhasconductedaseriesoftechnological research and applications, including AI balance testing, art material translation, AI imitation learning, game Q&A bots, NLP sentiment analysis, anddatatrend forecasting, enhancing bothefficiencyandqualityinR&D.Forinstance,the self-developed mobilecardgameTheSoulLand:HunShiDuiJue(斗罗大陆：魂师对决)effectivelyutilisedAInumericalbalancetestingto improveplayerexperiencesandprolongthegame'slifecycle. Against this backdrop, the company's R&D capabilities continued to strengthen, delving deeper into advantageous tracks andconsistentlyexpandingtheboundariesofself-developmentcapabilities.Ithasbuiltaself-developedproductportfoliothat (扶摇一梦),KongZhiYongZhe(空之勇者),DragonandAlice(龙与爱丽丝)andShiLuoZhiMen:XuZhang(失落之门：序章), drivingfurthertransformationintheCompany'sproductstructure. Inadditiontoitshomegrownbrands,theCompanyalsostrengthensitsself-developmentcapabilitywiththehelpofexternal R&D teams, and cooperates with 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 supply side. With the strong advantages created by the implementation of the "integration of R&D and operation" strategy over the years, the Company is able to capitalize on its own experience to refine products together with other game developers. Meanwhile, feedback from the operation department can be used to assist the R&D team in improving and refining products, so as to further improve the successrate. Furthermore, the Company actively embraces the technological innovation brought about by digital technology, continuouslyiteratingandoptimizingtechnologiesthroughdecision-basedAIandgenerativeAIinrecentyears.Ithascreateda comprehensive product portfolio embedded with AI and big data technologies, spanning the entire research and operation process.Thishasledtothecreationofamatureandcompletegameindustrialisationpipeline,enablingtheCompanytoachieve optimal resource allocation during the game research and operation process, enhance game quality, and improve user experience. Forexample,theCompanyactivelyexplorestheapplicationofindustrialisedAIingaming,integratingAIGCtechnologyinto itsself-developedartdesignplatformcalled"Turing".Thisempowersthegeneration,storage,andmanagementofdesignassets such as text, images, audio, and video. Leveraging this system, artists can conveniently explore stylistic creativity and utilise various accumulated art assets to train art models tailored to project needs. This approach gradually finds its way into the production of multiple art scenes, including characters, scenes, UI, and promotional materials, enhancing overall asset reuse efficiencyandcollaborativedesignproduction.(2)Accelerateddiversification,andenhancedlong-termoperationalcapabilitiesDuringtheReportingPeriod,theCompanybroughtdiversifiedexperiencestoplayersthroughhigh-qualityindependently- developed and agency games. Also, it explored innovative marketing with the younger consumers, improving publishing efficiency through precise marketing methods such as interesting and sentimental marketing ideas and cross-sector collaborationbetweengamesandIPs.FanRenXiuXianZhuan:RenJiePian(凡人修仙传：人界篇),BaYe(霸业),ZuiHouDe Yuan Shi Ren (最后的原始人), and other premium games werelaunched, delivering differentiated and fresh experiences to players,andacceleratingtheCompany'sdiversification. Adaptedfromanovelofthesamename,theblockbusterMMORPGmobilegameFanRenXiuXianZhuan:RenJiePian(凡人修仙传：人界篇), which is developed by EyuGame under the Company and published by the Company, has garnered attentioninthemarket.Itsrespectfortheoriginal plot,creative andentertaininggameplay, andrichartistic expressionhave resonatedwithplayers,makingitamarkethit.Additionally,theCompanymaximisesitspublishingandoperationaladvantages, strategically spreading the game's unique features and content highlights through targeted promotion and branding efforts. With a combination of high-quality production, innovative gameplay, and comprehensive marketing strategies, the product provedasuccessintheMMOtrackandwontheheartsofmanyplayers. BaYe (霸业), a self-developed Three Kingdoms-themed strategy mobile game showcasing top-notchartistic quality, has exhibitedsteadyperformancesinceitsJunelaunch.DistinguishedfromotherThreeKingdomsSLGmobilegamesintheindustry, it emphasises the true battle scenarios between the ancient Chinese kingdoms of Wei, Shu, and Wu, creating a vivid "Three Kingdomsworld"forplayers.Theprehistoriccivilisation-themedcardgameZuiHouDeYuanShiRen(最后的原始人)standsout withitsdistinctiveandengaginggameplay,captivatingstoryline,andentertainingpetcollectionandnurturingsystem.Itoffers playersathrillingandchallengingadventureinaprimitivesurvivalsetting,immersingthemintheuniquecharmoftheprimitive world. TheCompanyconsistentlyadherestolong-termoperation,providingplayerswithmeticulousandcomprehensivelong-term services.Itdeeplyintegratesthehighlightsofitsintellectualproperty(IP)tocontinuouslyinnovateintermsofreflowmethods andactivities,consistentlyprolongingtheproductlifecycle.Itsexistingproducts,includingPuzzles&Survival,TheRoadtoBe Shopkeeper(叫我大掌柜),TheSoulLand:HunShiDuiJue(斗罗大陆：魂师对决),PeerlessKing(绝世仙王),SongoftheCastle intheSky(云上城之歌),UndergroundKingdom(小小蚁国),andKongZhiYaoSai:QiHang(空之要塞：启航),continueto exhibitstrongvitalityandpotential.DuringtheReportingPeriod,theyhavecontributedstableperformancetotheCompany's businessdevelopment. Moreover,inresponsetoindustrydevelopment,theCompanyactivelyexploresthesmallgamechannel,strivingtobreak thecircleandmatchuserpreferenceswithinnovativegameplayandthemes.TheCompanyrefinesitsexistingprojects,adhering to a multi-channel marketing approach of “branding + sales effects”. This approach helps expand user groups, tap into new marketpotential,andcultivatenewgrowthdrivers. (3) With a global vision, the Company effectively explored markets and disseminated the essence of the traditional Chineseculture. AccordingtoChina'sGameIndustryReportfromJanuarytoJune2023,theactualsalesrevenueofChina'sself-developed gamesinoverseasmarketswasUSD8.206billion,down8.72%YoY.Themainreasonsarethattheconsumptionwillingnessand capacityofusersinmajoroverseasmarketshavebeenadverselyaffectedbyeconomicdownturn,andthemarketcompetition hasbecomeincreasinglyfierce,leadingtohigheroverseasmarketmarketingcosts.Against this backdrop, the Company firmly stands among the top tier of Chinese game companies expanding overseas, maintainingarobusttrend initsoverseasoperations.DuringtheReportingPeriod,theCompanyachievedoverseasoperating revenueofRMB3.027billion.Intheglobalmarket,ithasestablishedaproductportfolioanchoredinMMORPG,SLG,cardgames, andsimulationgames.MultiplebenchmarkproductsforoverseasexpansionsuchasPuzzles&Survival,SongoftheCastleinthe Sky(云上城之歌),TheRoadtoBeShopkeeper(叫我大掌柜),PeerlessKing(??M)(绝世仙王(??M)),andAntLegionhaveshownsteadyperformance. "tailored games" to open up the globalmarket, and deeply integrates the gameplay themes and promotional materials ofits productswithexcellenttraditionalChineseculture.Thisapproachcreatesacommunicationmethodthatresonateswithdiverse regional,national,andaudiencegroups,promotingtheglobalexpressionofChinesestories.ThedomesticallythemedsimulationgameTheRoadtoBeShopkeeper(叫我大掌柜),launchedbytheCompanyin2020,adopted a localised distribution strategy in various regions worldwide. The Company collaborated with official cultural institutionsinGuangzhoutopromoteCantoneseculture,authenticallyrepresentingtheprosperityoftheancientMaritimeSilk Road.ByincorporatingelementsoftraditionalChineseculturesuchastheliondance,traditionalfestivals,DunhuangCaves,and Peking Opera, players vividly experience thecharm ofancient Chinese trade and culture, allowing overseas users to immerse themselves in the beauty of Chinese culture and achieving a historic breakthrough for historical simulation games in the EuropeanandAmericanregions. TheCompany'sphenomenaloverseasproduct,Puzzles&Survival,deeplyimplementsthestrategyof"tailoredgames".By continuouslyexploringlocalchannels,refiningcreativeelements,upgradingadvertisingcreativity,andexpandingtheuserbase, theproduct’sbrandinfluencehasgrown.ItbecomesaclassiccaseofSLGfusiongamethatsuccessfullygainsnewusergroups. Thisgamehaswonthe"BestGameplayInnovation"awardforAsiaPacificbySensorTower,maintainingstrongvitalitysinceits launch in 2020.Fromits launch to the end ofthe Reporting Period, Puzzles &Survival has accumulated approximately RMB8 billion in gross billing, achieving an innovative fusion of gaming categories and the integration of game themes and regional cultures. Thedifferent-worldadventurethemeMMORPGSongoftheCastleintheSky(云上城之歌)achievedremarkableresultsin theKoreanandJapanesemarketsthroughitscombinedmarketingandoperationalstrategyofbranding+saleseffects.Itwas awardedthe"APACAwardsBestLocalizationMobileGameinKorea"bySensorTowerin2022,becomingthehighestgrossing overseasgameintheKoreanmarketin2022andranking3rdinSensorTower's2022GrossingChartofChinaMobileGameson theJapaneseMarket.PeerlessKing(??M)(绝世仙王(??M))stoodoutinthefiercelycompetitiveMMORPGgamemarketinKoreaduetoitsdistinctivepromotionalstrategiesanddifferentiatedgamingexperience,gainingpopularityamongusers. (4)Collaboratingwithpartnersformutualgrowth,aswellascreatingadiverseandrichproductpipelineTheCompanyfocusesonitscoregamingbusiness,continuouslyexpandingtheboundariesofself-developmentcapabilities, and delving into core genre tracks, with a rich pipeline of self-developed quality mobile games. Furthermore, the Company consistently prioritises high-quality content as its strategic direction. Through multi-dimensional approaches such as financial support, business assistance, and post-investment empowerment, the Company empowers numerous game developers with strongproductreputation.Thisincludesin-depthcollaborationswithreputablegamedeveloperssuchasEyuGame,StarUnion, YanquNetwork,KarmaGame,ZhenshuoNetwork,LihooNetwork,Dobala,Meng52,WoowiiGames,UEGAME,ChumenNetwork,UnknownMatrix,91Act,andothers.ThesecollaborationsinvolveagencyandcustomisationtoenrichtheCompany'ssupplyof high-qualityproductsanddeepenthediversificationofitsproductportfolio.PartoftheCompany'sgamepipelineisasfollows: Intendedpublishing Developer Nameofgame Gamecategory,themeandstyle area Self- FuyaoDream(扶摇一梦) AncientstyleMMORPG Global developed Self- ShiLuoZhiMen:XuZhang(失落之门：序章) WesternmagicMMORPG Globaldeveloped Self- Different-worldadventure(Chibi KongZhiYongZhe(空之勇者) Global developed 3D)MMORPG Self- Chinesecomicorientalfantasy CodeSoulMMO(代号斗罗MMO) Global developed MMORPG Self- CodeBattleSongM(代号战歌M) WesternmagicMMORPG Global developed Intendedpublishing Developer Nameofgame Gamecategory,themeandstyle area developed Self- CodeXiuXian(代号休闲SLG) ChibiwarSLG Global developed Self- CodeG2N(代号G2N) RealisticEuropeanMedievalSLG Global developed Self- DragonandAlice(龙与爱丽丝) Mythcardgame Global developed Self- CodeRR(代号RR) Chibiwesternmagic Global developed Self- CodeLittleGameA(代号小游戏A) Chibiorientalfantasy Global developed Self- CodeLittleGameB(代号小游戏B) Chibiorientalfantasy Global developed Self- CodeLittleGameC(代号小游戏C) Realisticwesternmagic Global developed Agency ShuGuangJiHua(曙光计划) FuturetechnologiesMMORPG GlobalZhuShenHuangHun:ZhengFu( 诸神黄昏： Agency WesternmagicMMORPG Global 征服) Agency CodeDragonKnight(代号龙骑士) Japanese-styleChibiMMORPG DomesticAgency HongHuangYiShouLu(洪荒异兽录) ImmortalitycultivationMMORPG DomesticAgency PingXingGuiJi(平行轨迹) FuturecityMMORPG Global Agency LiHuoZhiJing(离火之境) OrientalfantasyMMORPG DomesticAgency Puzzles&Chaos WesternmagicSLG Overseas Agency MechaDomination GiantbeastSLG Overseas YuanYeChuanShuo:ShiQianWanNian Agency PrehistoriccivilisationSLG Global (原野传说：史前万年) Agency WanShengZhiGuo(万乘之国) Multi-civilisationSLG DomesticAgency CodeThreeKingdoms(代号三国CB) TheThreeKingdomsSLG DomesticAgency Bugtopia InsectsSLG Overseas Agency HomelandandNewWorld( ) MagicchibiSLG Domestic 故土与新世界 Agency CodeErCiYuanZQ(代号二次元ZQ) Orientalfantasycardgame DomesticAgency KongZhiYaoSai:QiHang(空之要塞：启航) Steampunkcardgame OverseasAgency LostStarRing( ) Interstellarcardgame Global 失落星环 Agency DreamweaverForest(织梦森林) Farmingsimulationgame GlobalAgency GoldMedalPartner(金牌合伙人) Businessrunningsimulationgame DomesticAgency YesYourHighness Medievalsimulationgame Overseas Agency CodeLiuLi(代号琉璃) Ancientstylesimulationgame OverseasAgency CodeLeisure(代号休闲) Modernresortleisuregame Overseas2.Browsergamebusiness AccordingtoChina'sGameIndustryReportfromJanuarytoJune2023,theactualsalesrevenueofbrowsergamesinChina decreased by 11.87%YoYtoRMB2.385billionduring the periodfromJanuary toJune 2023, continuing the downwardtrend. DuringtheReportingPeriod,theCompany’sbrowsergamebusinessachievedoperatingrevenueofRMB253million,accounting formorethan10%ofthetotalrevenueindustry-wide,showingstableperformanceandaligningwiththeindustry'soveralltrend. (III)TheCompany’sprincipaloperationsandbusinessmodels TheCompanyisprincipallyengagedinthedevelopment,publishing,andoperationofonlinegames.Thebusinessmodelsof theCompany’sonlinegamesmainlyincludeindependentoperationandthird-partyjointoperation.Undertheindependentoperationmode,theCompanyobtainsthelicensesofgamesthroughindependentR&Dorbeinganoperatorofothergames,andpublishesandoperatestheseproductsthroughitsownorthird-partychannels.TheCompanyisfully responsible for the operation, promotion and maintenance of the games; providing unified management services for online promotion,onlinecustomerserviceandtop-uppayment;andupdatinggamesalongwithgamedevelopersbasedonthereal-time feedbackofusersandgames. Underthethird-partyjointoperationmode,theCompanycooperateswithoneormoregameoperatorsorgameapplication platformstojointlyoperategames.Andtheaforesaidpartiesareresponsibleforthemanagementoftheirownchannels,including operation, promotion,therechargeandchargesystem,whiletheCompanyprovidestechnicalsupportservices alongwithgame developers. (IV)TheCompany’spresenceonthemarketandprimarygrowthdrivers Focusing on cultural and creative businesses based on the development, publishing, and operation of online games, the CompanyisanexcellentcomprehensiveentertainmentproviderinChina’sA-stockmarket.Itisoneofthetop20globalpublic game companies, key cultural export companies of China, companies nominated for “Top 30 Cultural Enterprises of China”, civilizedinstitutionsinGuangdongProvince,andTop30CulturalEnterprisesofGuangzhou,andMSCIESGA-ratedCompanies, among others. With “bringing joy to the world” as its mission, the Company is dedicated to becoming an excellent and sustainableentertainmentprovider. During the Reporting Period, the Company steadily advanced with the development strategy of “boutiqueization, diversification and globalization”, adhered to the strategy of "dual engines at home and abroad", as well as continuously promotedhigh-qualityandsustainabledevelopment,withnosignificantchangestoitsprimarygrowthdrivers.IICoreCompetitivenessAnalysis TheCompany’scorecompetitivenessremainedlargelythesameduringtheReportingPeriod.1.Strongandefficientpublishingcapability——globalvisionandlong-termdevelopmentstrategyThe Company keeps exploring innovative ways of publishing, building a solid foundation in terms of publishing, and fully empoweringitspartnerstogrowtogether.DuringtheReportingPeriod,theCompanyremainedinthetopfiveoftheglobalrevenue ranking of China's mobile game publishers (according to Sensor Tower), with a strong publishing capability. The Company puts forwardthepublishingideaof“branding+saleseffects”,graspsthemarketchangestocarryouthigh-qualitypublicity,andattracts targetusersforbetterdistributionresults.Itpossessesstrongcapabilitiesforoperationandoptimizationinnumericalmanagement, process optimization, event planning, etc. By continuously improving the quality of games and attracting players with better content,theCompanyisabletoprolongtheproductlifecycleeffectively.Inaddition,varioustools,dataandalgorithmsareusedto optimisethedistributionapproaches.Withintelligentandautomateddistribution,aswellashigh-qualitycontent,theCompanyis abletoeffectivelycontrolthemarketingcostsandimprovetheabilityofprecisedistribution.Meanwhile,basedonoverseasmarketinsightsandyearsofrichpublishingexperience,theCompanyhasadoptedastrategyof "tailoredgames"toopenuptheglobalmarketandbringplayersdiversifiedgamingexperience.Movingforward,theCompanywill further leverage its first-mover advantage in overseas markets and continuously expand its overseas business to make new contributionstopromotingthedevelopmentofChina'sculturalindustryandboostingculturalconfidence.2.ExcellentindustrywideiconforR&D——strongfoundationbuiltthroughhardworkTheCompanycarriesonwithitsstrategyof“integrationofR&Dandoperation”,adherestothestrategyof“boutiqueization, diversification and globalization”, as well as emphasizes R&Dinvestments and talent cultivation. Its independently developed productsarecharacterizedbyhighoutput,ahighsuccessrateandalongperiod,withaprofessionallayoutinmultiplemarket activelyworkingondiversifiedcategoriesanddevelopingproductswithaglobalvision.Withsophisticatedeffortsingameplay, art quality, music and other details, as well as continued investments in product iteration and user experience, the Company remains“DedicatedtoMakingPremiumGames”,makingitaniconfortheR&Dofqualitygamesintheindustry.Upholdingthephilosophyoflong-termdevelopment,theCompanyhasputinplaceadiversifiedtalentsystemthroughinternal trainingandexternalrecruitment,focusesonemployeediversity,andopensupdevelopmentchannelsforprofessionals.Moreover, it focuses on the development of talent in innovation to achieve effective results and build an excellent team. The Company vigorouslyrefinesthemechanismforR&Dprojectapproval,shortenstheevaluationcycleandestablishesdiversifiedindicators,so as to stimulate employees’ innovative vitality. At the same time, the Company has established a tiered incentive system with diverseincentivesfordifferentcategoriesofproductstoencourageemployeestobecreativeandstepoutoftheircomfortzone. TheCompanyhasalsoestablishedaprojectlifecyclemanagementprocessforgamedevelopment,whichrunsthroughmanylinks,（未完）  |