游族网络:2018年年度报告摘要(英文版)

                                                 Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.




Securities Code: 002174       Securities Abbreviation: YOOZOO Games                Announcement Number: 2019-035



 Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


I. Important Tip

The summary of this annual report comes from the full text of the annual report. To fully understand the
Company’s operating results, financial situation and future development plan, investors should read the full text of
the annual report carefully in the media designated by the China Securities Regulatory Commission (CSRC).
Statement of Dissension by Directors, Supervisors and Senior Management
                 Name                                 Title                          Content and Reason
Statement
Other than the following directors, the other directors personally attended the Board of Directors meeting to review
the annual report
Name of director not present Title of director not present in Reasons for not attending the Name of authorized
        in person                         person                   meeting in person          representative
Non-standard Audit Opinion Prompt
□ Applicable √ Not applicable
Preplan for the distribution of common stock profits during the reporting period considered by the Board of
Directors or the preplan for the transfer of capital stock from the accumulation fund
√ Applicable □ Not applicable
Preplan for the transfer of capital stock from the accumulation fund
□ Applicable√ Not applicable
The profit distribution plan reviewed and approved by the Board of Directors of the Company is: With the base of
865,835,850, distribute cash dividend of RMB 0.00 (tax included) for every 10 shares and 0 shares (tax included)
of bonus share to all stockholders, and not use the accumulation fund to transfer the increased share capital.
Preplan for profit distribution of preferred stock in this reporting period adopted by the resolution of the Board of
Directors
□ Applicable √ Not applicable



II. Basic Information of the Company

1. Company profile

Stock abbreviation                          YOOZOO Games Stock code                        002174
Stock exchange                                                     Shenzhen Stock Exchange
Contact person and contact information           Secretary of the Board            Securities affairs representative
Name                                       Xu Bin                               Zhu Mengjing
                                           Building 2, Huaxin Business          Building 2, Huaxin Business Center,
Address                                    Center, 711 Yishan Rd., Xuhui        711 Yishan Rd., Xuhui District,
                                           District, Shanghai, China            Shanghai, China
Tel.                                       021-33671551                         021-33671551
E-mail                                     ir@yoozoo.com                        ir@yoozoo.com


2. Major business or product brief introduction during the reporting period

As the leading interactive entertainment provider in China, YOOZOO Games focuses on the development,
distribution and operation of mobile games and web games. The Company adheres to the strategy of “Fit-For-
Growth”, based on the three major directions of “Transmedia IP”, “Elite Products” and “Globalization”, adheres to
the corporate mission of “Share Simple Happiness”, and continues to provide high-quality game products and



                                                                                                                       1
                                               Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


services to global users, so as to enhance the player’s game experience.
During the reporting period, the Company continued to launch several high-quality games such as Era of
Celestials(天使纪元), The 36 Stratagems(三十六计), League of Angels II(女神联盟2), and continued to develop
the three major categories of the MMO, CARD, SLG, which maintained advantages. The Company made in-depth
differentiation of products to improve product quality and IP vitality, and at the same time sought for
breakthroughs to enter new markets such as Anime games, Casual games and H5. During the reporting period, the
Company set up the R&D center in Singapore and branches in India, Turkey, South Korea and Thailand. And the
Company continued to optimize its product matrix to accelerate the globalization and regionalization of the layout.
Based on the long-term operation of mobile games such as Legacy of Discord-Furious Wings(狂暴之翼) and web
games such as League of Angels II(女神联盟2), The company launched new games such as Era of Celestials(天使
纪元) and League of Angels III(女神联盟3), and integrated regional traffic through strategic cooperation and
large-scale exhibitions and other forms of campaigns to further expand the global game distribution network.
The year 2018 has witnessed the industrial environment stabilization and optimization reform. According to China
Game Industry Report in 2018 jointly released by GPC and CNG, the actual sales revenue of the Chinese game
market reached RMB 214.44 billion in 2018 with a year-on-year increase of 5.3%, in which, the actual sales
revenue of mobile games was RMB133.96 billion with a year-on-year increase of 15.4%. But as the approval of
game licenses returns to normal, the industry growth rate is expected to pick up. At the same time, the state pays
more and more attention to the game industry. The digital creative industries, including online games, has been
included in the national nine major strategic emerging industries for key development, establishing the status of
related industries and strengthening the supporting policies for industrial development, which is of milestone
significance. This is also the new historical orientation of the development of the game industry.
In 2018, a major breakthrough in the game industry was the overseas export of game. In 2018, the actual sales
revenue of China’s independent research and development on online overseas games market reached US$ 9.59
billion, a year-on-year increase of 15.8%. As an important part of the cultural industry, the game industry is not
only the digital link connecting tradition and future, but also the world language connecting China and the world in
the Internet era. The game industry is committed to creating cultural self-consciousness and cultural
self-confidence by game creation, better interpreting and expressing traditional Chinese culture through the form
of games, allowing users to experience, understands and even makes spiritual interactions with the traditional
cultural industry in the game, and truly achieves cultural output. The Company has been committed to the global
layout of the games, helping to promote the global spread of Chinese culture by enhancing the culture value of the
games., The Company was ranked 11th in the list of Chinese publishers’ overseas revenue in 2018 released by App
Annie, and was listed in the annual “Top 52 Publishers” list of global revenue for two consecutive years.

3. Major accounting data and financial indicators

(1) Major accounting data and financial indicators for the past three years

Whether the Company needs to retroactively adjust or restate previous accounting data
□ Yes √ No
                                                                                                        Unit: RMB
                                                                              Year-On-Year
                                       2018                 2017                                       2016
                                                                            Increase/Decrease
Operating income                  3,581,253,925.15      3,235,675,454.52               10.68%     2,530,114,414.00
Net profits attributable to the
                                   1,009,116,882.41      655,890,460.38                53.85%       587,879,910.68
listed company shareholders
Net profits attributable to
listed company shareholders
                                    736,716,882.60       598,722,981.56                23.05%       554,853,560.42
after deducting non-recurring
profits and losses
Net cash flows from operating
                                    273,338,494.93       741,508,830.90               -63.14%       561,385,099.68
activities
Basic earning per share
                                                1.15                 0.76              51.32%                  0.68
(yuan/share)
Diluted earning per share
                                                1.15                 0.76              51.32%                  0.68
(yuan/share)
Weighted average rate of
                                            23.62%               21.12%                 2.50%               24.12%
return on equity
                                                                              Year-On-Year
                                    End of 2018          End of 2017                               End of 2016
                                                                            Increase/Decrease
Total assets                      7,332,575,255.04      6,635,947,807.91               10.50%     4,703,862,967.83



                                                                                                                  2
                                                  Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


   Net assets attributable to listed
                                       4,509,617,206.26     4,051,162,418.38              11.32%     2,711,477,777.67
   company shareholders



   (2) Quarterly major accounting data

                                                                                                           Unit: RMB
                                            Q1                   Q2                  Q3                   Q4
    Operating income                867,815,132.91          918,972,177.79      836,170,910.12      958,295,704.33
    Net profits attributable to the
                                    222,082,812.69          270,903,226.04      189,815,519.09      326,315,324.59
    listed company shareholders
    Net profit attributable to
    listed company shareholders
                                    218,011,849.68          161,484,372.18      176,793,891.48      180,426,769.26
    after deducting non-recurring
    profits and losses
    Net cash flows from
                                      50,110,401.11         -36,389,561.17      106,120,038.01      153,497,616.98
    operating activities
   Whether the above financial indicators or their added total amount are significantly different   from the financial
   indicators related to the Company’s disclosed quarterly report and semi-annual report.
   □ Yes √ No

   4. Share capital and shareholders

   (1) Table of the number of common shareholders and preferred shareholders with restored
   voting rights and the shareholding situation of the top 10 shareholders

                                                                                                          Unit: share
                                                                                                 The total number of
                                       The total number of
                                                                                                 preferred shareholders
                                       common shareholders
The total number of                                                                              recovered from the
                                       at the end of the                  At the end of the
common shareholders at          32,015                           32,527                        0 voting rights at the end       0
                                       previous month before              report
the end of the report                                                                            of the previous month
                                       the disclosure of the
                                                                                                 before the disclosure of
                                       annual report
                                                                                                 the annual report
                                        Shareholding situation of the top 10 shareholders
                                                                               Number of shares Condition of pledge or freezing
     Name of             Nature of         Shareholding        Quantity of
                                                                               holding restricted Stock
   shareholders         shareholders           ratio          shareholding                                       Quantity
                                                                                sales conditions  status
                    Domestic natural
Lin Qi                                             34.84%        309,536,169      232,152,126 Pledge               302,805,807
                    person
Ningbo     Bonded
                   Domestic
Area       Yongxie
                   non-state-owned                  6.00%         53,308,072
International
                   legal person
Trade Co., Ltd.
                   Domestic natural
Wang Qingwei                                        3.98%         35,378,319                   Pledge                    4,650,000
                   person
Guosheng           Domestic
Securities    Co., non-state-owned                  3.90%         34,619,708
Ltd.               legal person
                   Domestic natural
Wang Qingyong                                       3.65%         32,438,319                   Pledge                    3,850,000
                   person
                   Domestic natural
Zhu Weisong                                         2.58%         22,893,191                   Pledge                21,291,490
                   person
                   Domestic natural
Ma Xinqi                                            1.99%         17,661,249
                   person
Shanghai
Yijidangxian
                   Domestic
Management
                   non-state-owned                  1.91%         17,000,000                   Pledge                17,000,000
Consulting
                   legal person
Partnership
(Limited



                                                                                                                     3
                                                   Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


Partnership)
YOOZOO Games
Co., Ltd. - the first Domestic
phase     of     the non-state-owned                1.80%       15,994,290
employee       stock legal person
ownership plan
                      Domestic natural
Zhang Yunlei                                        1.75%       15,515,903                   Pledge                 14,570,000
                      person
                                       Mr. Wang Qingyong and Mr. Wang Qingwei are brothers and they are persons acting
Explanation of the above-mentioned in concert. It is not known whether there is a relationship among the other
shareholder-related   relationship or shareholders mentioned above, or whether they belong to the co-actors specified in the
concerted action                       Measures for the Administration of Information Disclosure of Changes in
                                       Shareholders Shareholding in Listed Companies.
Note on shareholders participating in At the end of the period, the shareholder of the Company, Ma Xinqi, held 17,661,249
securities margin trading business (if shares, all of which were held through the Client Credit Trading Guarantee Securities
any)                                   Account of the securities company.


   (2) Table of the total number of preferred stock shareholders and the shareholding situation
   of the top 10 preferred stock shareholders of the Company

   □ Applicable √ Not applicable
   The Company does not have the the shareholding situation of preferred stock shareholder during the reporting
   period.

   (3) Disclosure of the property rights and control relationship between the Company and the
   actual controller in the form of a block diagram


                                                     Lin Qi


                                                             34.84%


                                         YOOZOO Games Co., Ltd.

   5. Corporation bonds

   Whether there is a company publicly issued and listed on the stock exchange, and the corporation bonds that have
   not expired or expired in full on the date of approval of the annual report
   No.

   (1) Basic information on corporation bonds

                                                                                 Bond balance
       Bond name       Bond abbreviation      Bond code         Due date                            Interest rate
                                                                                (RMB 10,000)


   (2) The latest corporation bond rating tracking and rating changes

   (3) Major accounting data and financial indicators of the Company for nearly 2 years as of
   the end of the report

                                                                                                Unit: RMB 10,000
               Item                      In 2018              In 2017             Synchronous rate of change




                                                                                                                    4
                                               Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.



III. Discussion and Analysis of Operation

1. Brief introduction to the operation during the reporting period
Whether the Company is required to comply with disclosure requirements for special industries
No
In recent years, China’s online game industry continuously optimized the allocation of resources and improved the
industry chain gradually. It has become one of the important driving forces for the vigorous development of
China’s information industry and an important part of China’s cultural and creative industry. After years of rapid
growth, the online game industry is maturing. With the continuous promotion of the supply side reform of the
game industry, the threshold for entry into the industry has become higher, the concentration of the industry has
been raised, the top products showed a trend of high quality.
During the reporting period, the Company continued to implement the “Fit-For-Growth” strategy, based on the
three major directions of “Transmedia IP, Elite Products, and Globalization”, consolidated its core business
advantages through the development and upgrading of games and fine operation, deepened the global layout.
During the reporting period, the Company realized gross revenue of RMB 3.581 billion, with a year-on-year
increase of 10.68%; among them, mobile game revenue of RMB 2.568 billion, with a year-on-year increase of
11.59%, accounting for 71.7% of total revenue; revenue from overseas reached RMB 1.844 billion, accounting for
51.49% of total revenue. Net profits attributable to the listed company shareholders reached RMB 1.009 billion, an
increase of 53.85% year-on-year. As of Dec. 31, 2018, the total assets of the Company was RMB 7.333 billion,
with a year-on-year increase of 10.50%, the net assets attributable to listed company shareholders was RMB 4.51
billion, an increase of 11.32% year-on-year.
During the reporting period, the Company launched a number of high-quality games, relying on its own research
and development for many years, and continued to develop the three major categories of MMO, CARD and SLG
that have been formed accumulation, and actively expand new markets such as Anime game and io game to meet
the needs of different users. According to China Game Industry Report in 2018, the total market share of ARPG,
turn-based RPG, CARD and SLG in the top 100 mobile games of 2018 revenue is more than 60%, which is
conducive to the further promotion of the Company’s market share. In 2018, the number of female users in
China’s game market was 290 million, increased by 11.5% year-on-year, much higher than that of online game
users. The actual sales revenue of Chinese Anime games mobile gaming market reached RMB 19.09 billion in
2018, up 19.5% year-on-year, accounting for 14.3% of China’s mobile gaming market. As the new increment of
the game market, the Anime game has become the main market of the Company’s new development.
1. During the reporting period, the Company used creation capacity on diversified products and multiple products,
continuously improve the quality of products, and continue to enrich the product matrix. With its excellent game
quality and years of stable operation, the transaction amount of the Company’s classic card mobile game Junior
Three Kingdom(少年三国志) overtook 5 billion in four years and the game won “Top 10 Most Popular Mobile
Games in 2018”. Another game Legacy of Discord-Furious Wings(狂暴之翼) gained “Top 10 Most Popular
Overseas Mobile Games in 2018” by virtue of its outstanding achievements in overseas markets.
During the reporting period, the 3D magical MMO Era of Celestials was in the forefront of the same product
category in terms of battle theme, game screen performance, combat experience, compliant operation, and perfect
sound effect. In the field of SLG, the Company launched The 36 Stratagems (三十六计) mobile game, confirmed
the deep user base and distribution strength on research and development in the field of SLG. League of Angels
II(女神联盟2), as a continuation of “League of Angel” IP series, with excellent game quality and picture quality
matched with that of the host game created by Lu Taiyou, lead artist in the GTA R & D team, won the praise of the
industry and players. In addition, boutique mobile game aim to the diversified preferences for young users with
wide-ranging themes and detailed division on users such as Game of Thrones Winter is Coming(权力的游戏凛冬
将至) and Shanhai Jinghua (山海镜花), which have been launched first beta test. Junior Three Kingdom II(少年
三国志2) will launch the first test soon.
2. While maintaining the advantages of the domestic market, the Company adheres to the layout of “Globalized
Market” with a “Localized Thinking”. With years of overseas distribution experience, the Company has expanded its
distribution to more than 200 countries and regions around the world and accumulated more than 1,000 partners,
including Ubisoft, Microsoft and Apple. The Company’s penetration rate and regional advantages in the overseas
market have been further enhanced by the upgrade from introduction, original to output.
During the reporting period, the Company appeared in Gamescom with the famous web game named Game of
Thrones Winter is Coming(权力的游戏凛冬将至) adapted from famous IP Game of Thrones and became the only
Chinese gaming company to take part in the core exhibition area. The Company in Gamescom showcased the high
revivification of the game to the IP scene, showed that the original creation of Chinese team to this
world-renowned IP, and opened pre-registration, attracting the attention of the global players.
On Mar. 26, 2019, the English version of real-time war strategy web game named Game of Thrones Winter is
Coming(权力的游戏凛冬将至) developed and distributed by the Company officially launched the abroad public
beta testing after the official authorization from Warner Bros. Entertainment, Inc. through the approval of HBO.
Through the creation of real details to restore the IP scene and micro-innovations on gameplay setting, the game
has been recommended worldwide by Facebook. In 2019, the Company will continue to explore overseas markets




                                                                                                                  5
                                                          Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


      with a variety of games such as Rangers of Oblivion(猎魂觉醒), Saint Seiya(圣斗士星矢) and Shendu Night(神都
      夜行录), and strive to become a Chinese game enterprise with a global awareness and strong international
      competitiveness.
      3. The Company improves the efficiency of its internal R&D operations by building a reliable platform and a strong
      foreground. Through the establishment of the platform, the Company strengthens the professional degree of
      technology, data, tool and other resources in the vertical field, aligns with industry standards and enhances its own
      ability. Forming modular, component-based resource packages to quickly match the resources and capabilities
      needed for the foreground. At the same time, this will enhance the efficiency of R&D and strengthen the quality
      control.

      2. Whether there is any significant change in the main business during the reporting period

      □ Yes √ No


      3. Products accounting for more than 10% of the Company’s main business revenue or main
      business profit

      √ Applicable □ Not applicable

                                                                                                                 Unit: RMB

                                                                              Year-On-Year     Year-On-Year     Year-On-Year
                      Operating                             Gross profit    Increase/Decreas Increase/Decreas Increase/Decreas
 Product name                          Operating profit
                       income                                 margin          e of operating   e of operating  e of gross profit
                                                                                 revenue            profit          margin

Web games            893,950,672.13     527,712,695.30             59.03%            -1.12%              0.24%              0.80%
Mobile games     2,567,697,322.91 1,428,557,177.57                 55.64%            11.59%             24.87%              5.92%



      4. Whether there are any seasonal or cyclical characteristics that require special attention

      □ Yes √ No


      5. Explanation of operating income, operating cost, total net profit attributable to common
      shareholders of listed companies during the reporting period or significant change
      compared with previous reporting period

      □ Applicable √ Not applicable

      6. Suspension and termination of listing

      □ Applicable √ Not applicable

      7. Matters relating to financial report

      (1) A statement of changes in accounting policies, accounting estimates and accounting
      methods compared with the previous year’s financial report

      √Applicable □ Not applicable
      1. In the light of the principle of prudent operation and effective prevention of the risk of asset loss, combining the
      customer characteristics of the Company and the structure, repayment and cancellation of receivables, as well as
      provision standard of the bad debts of receivables of other companies in the same industry, the Company has
      conducted an adequate assessment of the method of bad debt provision for receivables. In order to reflect the
      Company’s financial situation and operating results more objectively, truthfully and fairly, according to



                                                                                                                           6
                                                   Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


Accounting Standards for Enterprises and other relevant regulations, the Company makes changes to the
accounting estimates for the provision of bad debts for receivables. The matter has been approved at the 10th
meeting of the 5th Board of Directors and the 9th meeting of the 5th Supervisory Committee of the Company.
Please refer to Announcement No.2018-115 disclosed by the Company in the CNINF Information Network for
more details. The Company has conducted necessary and adequate communication with the audit institution
appointed by the Company at that time, Ruihua Certified Public Accountants (Special General Partner), about the
change of the accounting estimation. The change of the accounting estimation is in line with the Accounting
Standards for Business Enterprises and relevant provisions, and will not impact the financial situation and
operating results disclosed in previous periods.

2. The format of the general corporate financial statements was revised according to the Notice on Revising and
Issuing the Format of General Enterprise Financial Statements for 2018 released by the Ministry of Finance in
June 2018 (CK [2018] No.15).The financial statements of the Company for 2018 and beyond shall be prepared in
accordance with the regulations above. This change in accounting policy shall have an impact on the items listed in
financial statements of the Company and shall have no material impact on the profits and losses, total assets and
net assets of the Company.

(2) A description of the retrospective restatement of the correction of major accounting
errors during the reporting period

□ Applicable √ Not applicable
No major accounting errors during the reporting period need to be restated retrospectively.

(3) A description of the changes in the scope of the consolidated statements compared with
the previous year’s financial report

√Applicable □ Not applicable
1.     In March 2018, Yoozoo US Corp was set up by a subsidiary of the Company, Youzu Games Hong Kong
Limited, holding a stake of 100%, which has been included in the consolidated statements of the Company since
March 2018.

2.   In March 2018, Shanghai Youjin Enterprise Management Co., Ltd. was set up by a subsidiary of the
Company, Shanghai Youchuang Investment Management Co., Ltd., holding a stake of 100%, which has been
included in the consolidated statements of the Company since March 2018.

3.     In April 2018, YOOZOO GAMES KOREA CO. LTD was set up by a subsidiary of the Company, Youzu
Games HongKong Limited, holding a stake of 100%, which has been included in the consolidated statements of
the Company since April 2018.

4.   In April 2018, E4U Live Pte. Ltd. was set up by a subsidiary of the Company, Youzu (SINGAPORE)
PTE.LTD, holding a stake of 100%, which has been included in the consolidated statements of the Company since
April 2018.

5.     In May 2018, Shanghai Youfu Jiuzu Information Technology Co., Ltd. was set up by a subsidiary of the
Company, Shanghai Youzhong Information Technology Co., Ltd., holding a stake of 60%, which has been
included in the consolidated statements of the Company since May 2018.

6.   In June 2018, the Company and a subsidiary of the Company, Ningbo Meishan Bonded Area Youxin
Enterprise Consultation and Management Co., Ltd., transferred 76.92% and 0.01% of the shares held by Zexi
Equity Investment Partnership in Bonded Area of Ningbo Meishan for RMB 84 million and RMB 10,920.00
respectively to Ningbo Zejin Venture Capital Partnership (Limited Partnership) and Ningbo Zeshi Investment



                                                                                                                 7
                                                Summary of the 2018 Annual Report of YOOZOO Games Co., Ltd.


Management Co., Ltd., and agreed to transfer all the general partner shares held at the same time. From the same
month on, our company and its subsidiary would no longer have a significant impact on Ningbo Zexi.

7.     In July 2018, Youzu (SINGAPORE) PTE. LTD., a subsidiary of the Company, set up YOOZOO Co., Ltd.
(Janpan), holding a stake of 100%, which has been included in the consolidated statements of the Company since
July 2018.

8.     In July 2018, Yoozoo Games Gmbh was set up by a subsidiary of the Company, Youzu (SINGAPORE)
PTE. LTD, holding a stake of 100%, which has been included in the consolidated statements of the Company since
July 2018.

9.     In November 2018, YOUZU GAMES (THAILAND) CO., LTD. was set up by a subsidiary of the
Company, Youzu (SINGAPORE) PTE. LTD, held the total share capital of 300,000.00 shares, of which
153,000.00 shares are preferred stock and 147,000.00 shares are common stock. Youzu (SINGAPORE) PTE. LTD.
held 146,999.00 common shares of YOUZU GAMES (THAILAND) CO., LTD., accounting for 49% of shares.
According to the Articles of Association, the preferred stock holder is entitled to one vote for every six shares held
by him; common share holder is entitled to one vote for every one shares held by him. The voting proportion of the
Company has is 85.22%, so the Company has control over YOUZU GAMES (THAILAND) CO., LTD., which has
been included in the scope of consolidated statement of the Company since November 2018.

10.    In December 2018, Chengdu YOOZOO Information Technology Co., Ltd. was set up by a subsidiary of the
Company, Shanghai YOOZOO Information Technology Co., Ltd., holding a stake of 100%, which has been
included in the consolidated statements of the Company since December 2018.

11.    In December 2018, Horgos Chiyou Information Technology Co., Ltd., a subsidiary of the Company wrote
off and withdrew from the scope of consolidated statements from December 2018.

(4) Estimates of operating performance for January to March 2019

□ Applicable √ Not applicable




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