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Annual Report 2020 (Incorporated in the Cayman Islands with Limited Liability)

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Annual Report 2020 (Incorporated in the Cayman Islands with Limited Liability) ANNUAL REPORT 2020 (Incorporated in the Cayman Islands with limited liability) Stock Code: 772 China Literature Limited CONTENTS 2 Corporate Information 4 Financial Performance Highlights 5 Chairman’s Statement 8 Management Discussion and Analysis 21 Directors and Senior Management 27 Report of Directors 62 Corporate Governance Report 85 Environmental, Social and Governance Report 105 Independent Auditor’s Report 115 Consolidated Statement of Comprehensive (Loss)/Income 116 Consolidated Statement of Financial Position 118 Consolidated Statement of Changes in Equity 120 Consolidated Statement of Cash Flows 122 Notes to the Consolidated Financial Statements 235 Definitions Annual Report 2020 China Literature Limited CORPORATE INFORMATION Board of Directors Strategy and Investment Committee Mr. Cheng Wu (Chairman) Executive Directors (appointed on April 27, 2020) Mr. Cheng Wu (Chief Executive Officer) Mr. James Gordon Mitchell (appointed on April 27, 2020) Mr. Hou Xiaonan (appointed on April 27, 2020) Mr. Hou Xiaonan (President) Mr. Wu Wenhui (re-designated on April 27, 2020) (appointed on April 27, 2020) Mr. Liang Xiaodong (resigned on April 27, 2020) Mr. Liang Xiaodong (Co-Chief Executive Officer) Ms. Chen Fei (resigned on April 27, 2020) (resigned on April 27, 2020) Authorized Representatives Non-Executive Directors Mr. Cheng Wu (appointed on April 27, 2020) Mr. James Gordon Mitchell (Chairman) Ms. Cheng Pui Yan (appointed on December 9, 2020) Mr. Wu Wenhui (Vice-Chairman) Mr. Liang Xiaodong (resigned on April 27, 2020) (re-designated on April 27, 2020) Ms. Lai Siu Kuen (resigned on December 9, 2020) Mr. Cao Huayi Mr. Cheng Yun Ming Matthew Joint Company Secretaries Ms. Chen Fei (resigned on April 27, 2020) Ms. Xu Lan (appointed on December 9, 2020) Ms. Cheng Pui Yan (appointed on December 9, 2020) Independent Non-Executive Directors Mr. Zhao Jincheng (retired on November 7, 2020) Ms. Yu Chor Woon Carol Ms. Lai Siu Kuen (resigned on December 9, 2020) Ms. Leung Sau Ting Miranda Mr. Liu Junmin Legal Advisors As to Hong Kong laws: Audit Committee Clifford Chance Ms. Yu Chor Woon Carol (Chairman) 27/F, Jardine House Ms. Leung Sau Ting Miranda One Connaught Place Mr. Cheng Yun Ming Matthew Hong Kong Remuneration Committee As to Cayman Islands laws: Ms. Leung Sau Ting Miranda (Chairman) Maples and Calder (Hong Kong) LLP Ms. Yu Chor Woon Carol 26th Floor, Central Plaza Mr. Cheng Wu (appointed on April 27, 2020) 18 Harbour Road Mr. Wu Wenhui (resigned on April 27, 2020) Wanchai Hong Kong Nomination Committee Mr. James Gordon Mitchell (Chairman) Auditor Ms. Yu Chor Woon Carol PricewaterhouseCoopers Mr. Liu Junmin Certified Public Accountants 22/F, Prince’s Building Central Hong Kong Annual Report 2020 China Literature Limited CORPORATE INFORMATION Registered Office Principal Banker The offices of Maples Corporate Services Limited Shanghai Huangpu Sub-branch of PO Box 309, Ugland House Bank of Communications Grand Cayman KY1-1104 No. 99 East Huaihai Road Cayman Islands Shanghai PRC Head Office and Principal Place of Business in China Company’s Website Block 6, No. 690 Bi Bo Road http://ir.yuewen.com/ Pudong XinQu Shanghai Stock Code PRC 772 Principal Place of Business in Hong Kong Room 1503-04 ICBC Tower 3 Garden Road, Central Hong Kong Principal Share Registrar and Transfer Office Maples Fund Services (Cayman) Limited PO Box 1093, Boundary Hall Cricket Square Grand Cayman KY1-1102 Cayman Islands Hong Kong Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor Hopewell Center 183 Queen’s Road East Wanchai Hong Kong Annual Report 2020 China Literature Limited FINANCIAL PERFORMANCE HIGHLIGHTS CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS/INCOME Year ended December 31, 2020 2019 2018 2017 2016 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenues 8,525,701 8,347,767 5,038,250 4,095,066 2,556,866 Gross prot 4,234,076 3,692,023 2,557,979 2,075,440 1,054,847 Operating (loss)/prot (4,474,668) 1,193,907 1,114,951 614,563 33,323 (Loss)/prot before income tax (4,538,720) 1,179,797 1,077,801 645,730 38,318 (Loss)/prot for the year (4,500,197) 1,112,134 912,398 562,692 30,360 (Loss)/prot attributable to equity holders of the Company (4,483,869) 1,095,953 910,636 556,129 36,683 Total comprehensive (loss)/income for the year (4,532,508) 1,167,355 1,342,293 412,562 57,589 Total comprehensive (loss)/income attributable to equity holders of the Company (4,516,202) 1,151,165 1,340,538 405,999 63,912 Non-IFRS prot attributable to equity holders of the Company 917,105 1,194,618 900,490 721,817 85,255 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of December 31, 2020 2019 2018 2017 2016 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Assets Non-current assets 9,815,429 14,059,479 13,556,968 5,703,237 5,016,493 Current assets 11,500,331 12,190,525 14,277,638 9,434,131 2,115,212 Total assets 21,315,760 26,250,004 27,834,606 15,137,368 7,131,705 Equity and liabilities Equity attributable to equity holders of the Company 15,093,507 19,396,567 18,403,478 12,621,196 5,166,225 Non-controlling interests 5,000 14,244 11,567 41,514 42,057 Total equity 15,098,507 19,410,811 18,415,045 12,662,710 5,208,282 Non-current liabilities 2,000,091 925,546 2,823,250 710,492 264,957 Current liabilities 4,217,162 5,913,647 6,596,311 1,764,166 1,658,466 Total liabilities 6,217,253 6,839,193 9,419,561 2,474,658 1,923,423 Total equity and liabilities 21,315,760 26,250,004 27,834,606 15,137,368 7,131,705 Annual Report 2020 China Literature Limited CHAIRMAN’S STATEMENT I am pleased to present our annual report for the year Upgrades in ecosystem. We are enhancing the ended December 31, 2020 to our shareholders. 2020 quality and visibility of our IPs across media formats, was a challenging year for a variety of reasons, but including comics, animation, film, TV and web series. we have taken steps to address these challenges with This approach has already landed us a number of upgrades in content, platform, and ecosystem. blockbusters. For example, the drama series My Heroic Husband (贅婿), which was jointly produced by New BUSINESS HIGHLIGHTS Classics Media, Tencent Pictures and China Literature Pictures, was a successful adaptation from our novel Upgrades in content. There was an increase in both of the same name. The drama series ranked No.1 on the number and quality of our writers and literary works. Enlightent’s web series playlist during its launch period, As of the end of 2020, China Literature had more than enjoying wide market popularity and winning praise 9 million writers on the platform, with a total of 13.9 from various media. Its success reflects the power of the million literary works. Approximately 46 billion Chinese three-way “New Classics Media-Tencent Pictures-China characters were added to our platform during 2020. Literature Pictures” partnership, and we look forward to According to Baidu’s search rankings for novels in seeing more quality works from this cooperation model February 2021, 26 of the top 30 online literary works in the future. originated on the China Literature platform. At the same time, we improved our writer ecosystem and Another example is the drama series Soul Land (斗羅 IP incubation resources. More writers had positive 大陸), which was also adapted from China Literature’s impressions of our ecosystem and IP practices, IP and produced by New Classics Media. It was including some of the platinum writers who left China ranked No.1 on Tencent Video’s hot search list and Literature and have come back to us as a result of the drama series list with over 4 billion video views, and changes we have made. This has strengthened our brought more attention to the accompanying Soul partnership with writers, and our reputation as the best Land animation series and online game. New Classics partner to writers. Media has also launched high-quality series with modern themes, such as My Best Friend’s Story (流金 Upgrades in platform. We have expanded our 歲月), which was again ranked No. 1 on the playlist of relationship with Tencent channels such as QQ Browser Enlightent’s TV series during its launch period following and Mobile QQ by distributing free-to-read content to the success of The First Half of My Life (我的前半生). a wider range of readers. In addition, we established New Classics Media also participated in the production a free reading content decision committee to provide of the recent hit movie Hi, Mom (你好, 李煥英), with box dedicated coordination and management of free office sales of over RMB5 billion, the second-highest content and to incubate high-quality free literary works ranking box office sales in the history of China’s film and writers. In December 2020, average DAUs for industry. We believe that New Classics Media will have our free reading channels reached approximately 10 more room to grow as part of the ecosystem of China million users. We will continue to explore the field of Literature. free reading so as to make more progress in this area in 2021. Annual Report 2020 China Literature Limited CHAIRMAN’S STATEMENT Upgrades in team. We believe that our core executive SIGNIFICANT BUSINESS team is now stronger and more diverse, as a result DEVELOPMENTS IN of introducing new leaders with extensive industry experience and notable entrepreneurial spirit in the In addition to the highlights described above, we had areas of IP operations, online business, investment, significant achievements in the following areas during legal and finance.
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