UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 20-F

(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



| ̈ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended               .

OR



|x | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from April
1, 2014 to December 31, 2014.

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------



Date of event requiring this shell
company report



Commission file number: 001-34988



SKY-MOBI LIMITED

(Exact name of Registrant as specified
in its charter)



N/A

(Translation of Registrant’s name
into English)



Cayman Islands

(Jurisdiction of incorporation or organization)



10/F, Building B, United Mansion

No. 2 Zijinghua Road, Hangzhou

Zhejiang 310013

People’s Republic of China

(Address of principal executive offices)



Fischer Xiaodong Chen, Chief Financial
Officer

Tel:  +(86) 571-8777-0978

E-mail: ir@sky-mobi.com

Facsimile number: +(86) 571-8775-8616

10/F, Building B, United Mansion

No. 2, Zijinghua Road, Hangzhou

Zhejiang 310013

People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)








Securities registered or to be registered
pursuant to Section 12(b) of the Act.



|Title of Each Class                                                                                                         |  | Name of Each Exchange on Which Registered
|--------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|                                                                                                                            | 
|American Depositary Shares, each representing
        eight
        common shares of par value US$0.00005 per
        share |  | NASDAQ Global Market                     



Securities registered or to be registered
pursuant to Section 12(g) of the Act.



NONE

(Title of Class)



Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act.



NONE

(Title of Class)








Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the transition report:



222,266,678 common shares of par value US$0.00005 per share,
as of December 31, 2014.



Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.     ̈  Yes    x  No



If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.     ̈  Yes    x  No



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    x  Yes     ̈  No



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).     ̈  Yes     ̈  No



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”
in Rule 12b-2 of the Exchange Act. (Check one):



 ̈  Large
accelerated filer             ̈  Accelerated
filer            x  Non-accelerated
filer



Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:



| |  ̈ | U.S. GAAP
| | - | ---------



| | x | International Financial Reporting Standards as issued by the International Accounting Standards Board
| | - | -----------------------------------------------------------------------------------------------------



| |  ̈ | Other
| | - | -----



If “Other” has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.     ̈  Item 17     ̈  Item 18



If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ̈  Yes    x  No



(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)



Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.     ̈  Yes     ̈  No











TABLE OF CONTENTS



|CONVENTIONS USED IN THIS TRANSITION REPORT | 1                                                                           
|------------------------------------------ | ----------------------------------------------------------------------------
|PART I                                     | 2                                                                           
|ITEM 1.                                    | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                       
|ITEM 2.                                    | OFFER STATISTICS AND EXPECTED TIMETABLE                                     
|ITEM 3.                                    | KEY INFORMATION                                                             
|ITEM 4.                                    | INFORMATION ON THE COMPANY                                                  
|ITEM 4A.                                   | UNRESOLVED STAFF COMMENTS                                                   
|ITEM 5.                                    | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                
|ITEM 6.                                    | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                  
|ITEM 7.                                    | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                           
|ITEM 8.                                    | FINANCIAL INFORMATION                                                       
|ITEM 9.                                    | THE OFFER AND LISTING                                                       
|ITEM 10.                                   | ADDITIONAL INFORMATION                                                      
|ITEM 11.                                   | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|ITEM 12.                                   | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|PART II                                    | 107                                                                         
|ITEM 13.                                   | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|ITEM 14.                                   | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|ITEM 15.                                   | CONTROLS AND PROCEDURES                                                     
|ITEM 16A.                                  | AUDIT COMMITTEE FINANCIAL EXPERT                                            
|ITEM 16B.                                  | CODE OF ETHICS                                                              
|ITEM 16C.                                  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      
|ITEM 16D.                                  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  
|ITEM 16E.                                  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      
|ITEM 16F.                                  | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                
|ITEM 16G.                                  | CORPORATE GOVERNANCE                                                        
|ITEM 16H.                                  | MINE SAFETY DISCLOSURE                                                      
|PART III                                   | 110                                                                         
|ITEM 17.                                   | FINANCIAL STATEMENTS                                                        
|ITEM 18.                                   | FINANCIAL STATEMENTS                                                        
|ITEM 19.                                   | EXHIBITS                                                                    



ii







CONVENTIONS USED IN THIS TRANSITION
REPORT



In this transition report,
unless otherwise indicated, (1) “we,” “us,” “our company,” “our”
or “Sky-mobi” refers to Sky-mobi Limited, a Cayman Islands company, its predecessor entities, subsidiaries
and consolidated special purpose entities, or SPEs, controlled by Sky-mobi Limited; (2) “SPEs” refers
to Hangzhou Sky Network Technologies Co., Ltd., or Hangzhou Sky, Hangzhou Mijia Technologies Co., Ltd., or Mijia, Hangzhou
Fanyi Technologies Co., Ltd., or Fanyi, Hangzhou Feineng Technologies Co., Ltd., or Feineng, Hangzhou Miyi Technologies Co.,
Ltd., or Miyi, Hangzhou Najia Technologies Co., Ltd., or Najia, Shanghai Tianchu Technologies Co., Ltd., or Tianchu, Nanjing
Zunqi Network Information Technologies Co., Ltd., or Zunqi, Nanjing Geyuan Information Technologies Co., Ltd., or Geyuan,
Hangzhou Dangyi Technologies Co., Ltd., or Dangyi, Shanghai Mugu Business Information Consulting Co., Ltd., or Mugu, Shenzhen
Feidong Network Technologies Co., Ltd., or Feidong, Hangzhou Fuyun Technologies Co., Ltd., or Fuyun and Hangzhou Duoqu Technologies Co., Ltd., or Duoqu; (3) “China”
or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong and
Macau; (4) “shares” or “common shares” refers to our common shares, par value US$0.00005 per
share; “ADSs” refers to our American depositary shares, each of which represents eight common shares;
and “ADRs” refers to the American depositary receipts which evidence our ADSs; (5) all references
to “RMB” or “Renminbi” are to the legal currency of China; and all references to
“$,” “US$” and “U.S. dollars” are to the legal currency of the United States;
(6) all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed
therein are due to rounding; and (7) all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this
transition report were made at a rate of RMB6.2046 to US$1.00, the noon buying rate in effect as of December 31, 2014,
as set forth in the H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the
RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on December 31,
2014, or at any other rate.



“Maopao platform” or “Maopao
platform products” refers to, collectively, our Maopao products and services, including but not limited to Maopao App Store,
Maopao Game Center, Maopao Community and Maopao Browser.



When calculating the number of Maopao platform
users, we count a handset with a particular SIM card to access Maopao platform as one user. Therefore, an individual who accesses
Maopao platform through one handset with two different SIM cards will be counted as two users, while an individual who accesses
Maopao platform through two different handsets using the same SIM card will also be counted as two users.



“DNU” stands for daily new users,
which represents the number of new users to Maopao Platform during a particular day, adjusted to eliminate double-counting of the
same user. Average DNU for a particular period is the average of the DNU during that period.



“MAU” stands for monthly active
users, which represents the number of users that visit Maopao Platform for at least once in a particular month, adjusted to eliminate
double-counting of the same user. Average MAU for a particular period is the average of the MAU during that period.



“MPU” stands for monthly paying
user, which represents the number of users that have purchased in-app virtual items or other contents in a particular month, adjusted
to eliminate double-counting of the same user. Average MPU for a particular period is the average of the MPU during that period.



“Paying ratio” equals to the
average MPU divided by the average MAU during a particular period of time.



“Fiscal 2013” and “fiscal
2014” represent the fiscal years ended March 31, 2013 and 2014, respectively.



This transition report on Form 20-F includes
(i) our audited consolidated statements of operations for the fiscal years ended March 31, 2013 and 2014 and for the nine
months ended December 31, 2014 and our unaudited consolidated statements of operations for the nine months ended December 31, 2013,
and (ii) our audited consolidated balance sheet data as of March 31, 2013 and 2014 and December 31, 2014.



On December 15, 2010, we completed
the initial public offering of 6,125,000 ADSs, each representing eight common shares of par value US$0.00005 per share. On
December 10, 2010, we listed our ADSs on the NASDAQ Global Market, or NASDAQ, under the ticker symbol “MOBI.”



We changed our fiscal year-end from March
31 to December 31 in May 2014, effective from the calendar year ended December 31, 2014. This transition report on Form 20-F covers
the nine-month period from April 1, 2014 through December 31, 2014 (the “Transition Period”) and reflects our financial
results thereof. Prior to this transition report on Form 20-F, our two most recent annual reports on Form 20-F cover the fiscal
years ended March 31, 2013 and March 31, 2014, respectively, and reflect financial results for the respective twelve-month periods
from April 1 to March 31. Unless otherwise noted, all references to “fiscal years” in this transition report on Form
20-F refer to the fiscal year which, prior to the Transition Period, ended on March 31.



1







PART I



| | ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
| | ------- | -----------------------------------------------------



Not Applicable.



| | ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
| | ------- | ---------------------------------------



Not Applicable.



| | ITEM 3. | KEY INFORMATION
| | ------- | ---------------



| | A. | Selected Financial Data
| | -- | -----------------------



We have changed our fiscal year end from
March 31 to December 31 in May 2014. We have derived our selected consolidated statement of profit or loss and other comprehensive
income data for the fiscal years ended March 31, 2013 and 2014 and for the nine months ended December 31, 2014 and the selected
consolidated statement of financial position data as of March 31, 2013 and 2014 and December 31, 2014 from our audited consolidated
financial statements included in this transition report. The unaudited financial data as of and for the nine months ended December
31, 2013 are presented solely for the purpose of providing meaningful comparisons with the nine-month period ended December 31,
2014. Our selected consolidated statement of profit or loss and other comprehensive income data for the fiscal years ended March 31,
2011 and 2012 and the selected consolidated statement of financial position data as of March 31, 2011 and 2012 have been derived
from our audited consolidated financial statements not included in this transition report. Our consolidated financial statements
are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International
Accounting Standards Board, or IASB.



You should read the selected consolidated
financial data set forth below in conjunction with the related notes and “Item 5. Operating and Financial Review and Prospects.”



|                                                                              |  | For the Fiscal Year Ended March 31,                        |          |   | For the Nine Months Ended December 31, | 
|----------------------------------------------------------------------------- |  | ---------------------------------------------------------- | -------- | - | -------------------------------------- | 
|                                                                              |  | 2011                                                       |          |   | 2012                                   | 
|                                                                              |  | RMB                                                        |          |   | RMB                                    | 
|                                                                              |  |                                                            |          |   |                                        | 
|                                                                              |  | (in thousands, except number of shares and per share data) |         
|Consolidated Statements of Profit or Loss and Other Comprehensive Income Data |  |                                                            |          |   |                                        | 
|Revenues                                                                      |  |                                                            | 675,294  |   |                                        | 
|Cost of revenues from third parties                                           |  |                                                            | (461,422 | ) |                                        | 
|Cost of revenues from related parties                                         |  |                                                            | (3,415   | ) |                                        | 
|Gross profit                                                                  |  |                                                            | 210,457  |   |                                        | 
|Operating expenses(1):                                                        |  |                                                            |          |   |                                        | 
|Research and development expenses                                             |  |                                                            | (52,260  | ) |                                        | 
|Sales and marketing expenses                                                  |  |                                                            | (38,200  | ) |                                        | 
|General and administration expenses                                           |  |                                                            | (98,938  | ) |                                        | 
|Other operating income, net                                                   |  |                                                            | —        |   |                                        | 
|Profit (Loss) from operations                                                 |  |                                                            | 21,059   |   |                                        | 
|Other gains and losses                                                        |  |                                                            | 11,179   |   |                                        | 
|Impairment of investment in associates                                        |  |                                                            | (5,760   | ) |                                        | 
|Impairment of an available-for-sale investment                                |  |                                                            | —        |   |                                        | 
|Finance costs                                                                 |  |                                                            | (4,333   | ) |                                        | 
|Share of results of associates                                                |  |                                                            | (6,012   | ) |                                        | 
|Gain on disposal of an associate                                              |  |                                                            | —        |   |                                        | 
|Gain on changes in fair value of convertible redeemable preferred shares      |  |                                                            | 106,684  |   |                                        | 
|Gain on changes in fair value of warrants                                     |  |                                                            | 7,377    |   |                                        | 
|Profit before tax                                                             |  |                                                            | 130,194  |   |                                        | 
|Income tax benefit(expense)                                                   |  |                                                            | 5,367    |   |                                        | 
|Profit for the year                                                           |  |                                                            | 135,561  |   |                                        | 
|Profit and total comprehensive income for the year                            |  |                                                            | 135,561  |   |                                        | 
|Profit and total comprehensive income attributable to:                        |  |                                                            |          |   |                                        | 
|Owners of the Company                                                         |  |                                                            | 136,310  |   |                                        | 
|Non-controlling interests                                                     |  |                                                            | (749     | ) |                                        | 
|                                                                              |  |                                                            | 135,561  |   |                                        | 
|Earnings per share:                                                           |  |                                                            |          |   |                                        | 
|Basic                                                                         |  |                                                            | 0.74     |   |                                        | 
|Diluted                                                                       |  |                                                            | 0.06     |   |                                        | 
|Earnings per ADS(2):                                                          |  |                                                            |          |   |                                        | 
|Basic                                                                         |  |                                                            | 5.92     |   |                                        | 
|Diluted                                                                       |  |                                                            | 0.48     |   |                                        | 



2







________________________



| | (1) | Includes share-based compensation expenses as follows:
| | --- | ------------------------------------------------------



|                                        |  | For the Fiscal Year Ended March 31, |        |  | For the Nine Months Ended December 31, | 
|--------------------------------------- |  | ----------------------------------- | ------ |  | -------------------------------------- | 
|                                        |  | 2011                                |        |  | 2012                                   | 
|Share-Based Compensation Data           |  | RMB                                 |        |  | RMB                                    | 
|                                        |  |                                     |        |  |                                        | 
|                                        |  | (in thousands)                      |       
|Research and development expenses       |  |                                     | 9,528  |  |                                        | 
|Sales and marketing expenses            |  |                                     | 4,738  |  |                                        | 
|General and administration expenses     |  |                                     | 33,368 |  |                                        | 
|Total share-based compensation expenses |  |                                     | 47,634 |  |                                        | 



| | (2) | Each ADS represents eight common shares.
| | --- | ----------------------------------------



The following table sets forth the reconciliation
of non-IFRS net profit for the period, a non-IFRS financial measure, from profit for the period, our most directly comparable financial
measure presented in accordance with IFRS, for the periods indicated.



3







|                                                                                                                        |  | For the Fiscal Year Ended March 31, |          |   | For the Nine Months ended December 31, | 
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | -------- | - | -------------------------------------- | 
|                                                                                                                        |  | 2011                                |          |   | 2012                                   | 
|                                                                                                                        |  | RMB                                 |          |   | RMB                                    | 
|                                                                                                                        |  |                                     |          |   |                                        | 
|                                                                                                                        |  | (in thousands)                      |         
|Non-IFRS Financial Data                                                                                                 |  |                                     |          |   |                                        | 
|IFRS profit for the period                                                                                              |  |                                     | 135,561  |   |                                        | 
|Share-based compensation charges                                                                                        |  |                                     | 50,290   |   |                                        | 
|Initial public offering expenses charged into current expenses                                                          |  |                                     | 3,659    |   |                                        | 
|Gain on changes in fair value of warrants                                                                               |  |                                     | (7,377   | ) |                                        | 
|Gain on changes in fair value of convertible redeemable preferred shares                                                |  |                                     | (106,684 | ) |                                        | 
|Foreign exchange gain relating to gain on changes in fair value of convertible redeemable preferred shares and warrants |  |                                     | (12,240  | ) |                                        | 
|Reversal of withholding tax on shareholding dividend (1)                                                                |  |                                     | (8,305   | ) |                                        | 
|Non-IFRS net profit for the period(2)                                                                                   |  |                                     | 115,670  |   |                                        | 

________________________



| | (1) | Reversal of withholding tax on shareholding dividend represents the reversal of the accrued withholding tax related to the
dividend to preferred shareholders.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | We define non-IFRS net profit for the period, a non-IFRS financial measure, as profit for the period excluding share-based
compensation charges, loss from initial public offering expenses charged into current expenses, gain on changes in the fair value
of convertible redeemable preferred shares and warrants and the foreign exchange gain relating thereto, and the reversal of withholding
tax on shareholding dividends. We review non-IFRS net profit for the period together with profit for the period to obtain a better
understanding of our operating performance. We also believe it is useful supplemental information for investors and analysts to
assess our operating performance without the effect of non-cash share-based compensation charges, loss from initial public offering
expenses charged into current expenses, gain on changes in the fair value of convertible redeemable preferred shares and warrants
and the foreign exchange gain relating thereto, and the reversal of withholding tax on shareholding dividends. However, the use
of non-IFRS net profit for the period has material limitations as an analytical tool. One of the limitations of using non-IFRS
net profit for the period is that it does not include all items that affect our profit for the period. In addition, because non-IFRS
net profit for the period is not calculated in the same manner by all companies, it may not be comparable to other similarly titled
measures used by other companies. In light of the foregoing limitations, you should not consider non-IFRS net profit for the period
in isolation from or as an alternative to total profit or other financial measures prepared in accordance with IFRS.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                     |  | As of March 31, |         |  | As of December 31, | 
|------------------------------------------------------------------------------------ |  | --------------- | ------- |  | ------------------ | 
|                                                                                     |  | 2011            |         |  | 2012               | 
|                                                                                     |  | RMB             |         |  | RMB                | 
|                                                                                     |  | (in thousands)  |        
|Consolidated Statement of Financial Position                                         |  |                 |         |  |                    | 
|Cash and cash equivalents                                                            |  |                 | 367,214 |  |                    | 
|Term deposits                                                                        |  |                 | 152,718 |  |                    | 
|Short-term investments and investment at fair value through profit or loss (“FVTPL”) |  |                 | —       |  |                    | 
|Total assets                                                                         |  |                 | 656,543 |  |                    | 
|Total liabilities                                                                    |  |                 | 155,003 |  |                    | 
|Total equity (deficit)                                                               |  |                 | 501,540 |  |                    | 
|Total equity and liabilities                                                         |  |                 | 656,543 |  |                    | 
|Share capital                                                                        |  |                 | 92      |  |                    | 
|Dividends                                                                            |  |                 | 13,000  |  |                    | 



4







Exchange Rate Information



Our business is primarily conducted in China
and almost all of our revenues are denominated in RMB. This transition report contains translations of RMB amounts into U.S. dollars
based on the noon buying rate on December 31, 2014, as set forth in H.10 statistical release of the Federal Reserve Board.
For your convenience, this transition report contains translations of some RMB or U.S. dollar amounts for the nine months ended
December 31, 2014 at US$1.00: RMB6.2046, which was the noon buying rate in effect as of December 31, 2014. The prevailing
rate on April 17, 2015 was US$1.00: RMB6.1976. We make no representation that any RMB or U.S. dollar amounts could have been, or
could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, the rates stated below, or at all. The
PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into
foreign currency and through restrictions on foreign exchange activities.



The following table sets forth information
concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your
convenience and are not necessarily the exchange rates that we used in this transition report or will use in the preparation of
our other periodic reports or any other information to be provided to you. The source of these rates is H.10 statistical release
of the Federal Reserve Board.



|                                 |  | Noon Buying Rate |       
|-------------------------------- |  | ---------------- | ------
|Period                           |  | Period End       |       
|                                 |  |                  |       
|Fiscal Year ended March 31, 2011 |  |                  | 6.5483
|Fiscal Year ended March 31, 2012 |  |                  | 6.2975
|Fiscal Year ended March 31, 2013 |  |                  | 6.2108
|Fiscal Year ended March 31, 2014 |  |                  | 6.2164
|2014                             |  |                  | 6.2046
|October                          |  |                  | 6.1124
|November                         |  |                  | 6.1429
|December                         |  |                  | 6.2046
|2015                             |  |                  |       
|January                          |  |                  | 6.2495
|February                         |  |                  | 6.2695
|March                            |  |                  | 6.1990
|April (through April 17, 2015)   |  |                  | 6.1976

________________________



| | (1) | Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant
fiscal or calendar year. Monthly averages were calculated by using the average of the daily rates during the relevant month.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Capitalization and Indebtedness
| | -- | -------------------------------



Not Applicable.



| | C. | Reasons for the Offer and Use of Proceeds
| | -- | -----------------------------------------



Not Applicable.



| | D. | Risk Factors
| | -- | ------------



Risks Related to Our Business and Our Industry



We have a limited operating history and the long-term
potential of our business model is unproven, which makes it difficult to evaluate our business.



We commenced our business in 2005 and launched
Maopao App Store for feature phones and smartphones in December 2006 and May 2012, respectively. As such, we have a limited operating
history for you to evaluate our business, financial performance and prospects, particularly in connection with our smartphone business.
Evolved from our feature phone business, our smartphone business is relatively new in the fast growing mobile application industry
in China.



5







Our revenue declined from 2012 to 2013 due
to the continuous decline of our feature phone business. Although our revenue increased from the nine months ended December 31,
2013 to the nine months ended December 31, 2014 as we shifted our strategic focus from feature phones to smartphones, we may not
be able to maintain revenue growth in future periods. Our business model may become obsolete due to the development of other business
models or technologies. It is also difficult to evaluate our prospects because we may not have sufficient experience to address
the risks frequently encountered by early stage companies entering new and rapidly evolving markets, such as the mobile application
market in China. Although our Maopao platform products for smartphones are rapidly gaining popularity across China, sustainability
of user demand and the continued growth of these smartphone products are subject to uncertainty. If our smartphone business does
not grow as expected or at all for any reason, the trading price of our ADSs may decline and the value of your investment may be
materially and adversely affected.



We generated net profit in the fiscal years
ended March 31, 2013 and 2014 and the nine months ended December 31, 2014. Our ability to maintain profitability depends on,
among other factors, the growth of the mobile applications industry in China, the continued acceptance of Maopao platform by smartphone
users, our ability to provide new applications and other content to meet the changing demands of our users, our ability to maintain
good relationships with industry participants and to control our costs and expenses. We may not be able to sustain profitability
on a quarterly or annual basis. Accordingly, you should not rely on our results of operations for any prior periods as an indication
of our future performance.



Significant changes in the policies, guidelines or practices
of mobile network operators or the PRC government with respect to mobile applications and other content may result in lower revenues
or additional costs for us and materially adversely affect our business operations, financial condition and results of operations.



PRC mobile network operators may change
their policies, guidelines or business practices which affect all mobile service providers and companies using their networks.
Because we rely on mobile network operators directly or through mobile service providers who in turn utilize mobile network operators’
billing channels for the collection of a substantial portion of our sales proceeds, a significant change in mobile network operators’
policies or guidelines may cause our revenues to decrease or operating costs to increase. Furthermore, our mobile service providers
and us are subject to review by mobile network operators from time to time and may be denied access to mobile network operators’
billing channels should we or our mobile service providers fail such reviews. As a result, our financial condition and results
of operations may be materially adversely affected by policy or guideline changes by PRC mobile network operators. For example,
an increasing number of branches and divisions of mobile network operators we cooperate with have been restructured into separate
corporations in the past few years. In response to such restructuring, we have been, and may continue to be prompted to enter into
new cooperation agreements and/or partnership agreements with these new entities and be subject to their policies and guidelines.
These new agreements, policies and guidelines may significantly deviate from the ones imposed by their predecessor branches and
divisions. If any of these entities adopt measures, guidelines, policies or revenue sharing arrangements that are less favorable
to us, our business and results of operations may be materially adversely affected.



PRC mobile network operators or the PRC
government could impose additional requirements with respect to the subscription or download of applications and other content
offered on Maopao platform, billing notifications or other consumer-protection measures or adopt other policies that may require
significant changes in how we promote and sell the applications and content on Maopao platform, which could materially adversely
affect our financial condition and results of operations.



Our failure to maintain cooperative relationships with
handset companies to pre-install our applications onto mobile handsets or to cooperate with additional handset companies would
result in a decrease in our market share.



We rely on handset companies to pre-install
our Maopao App Store, Maopao Game Center and other applications onto their mobile phones, which is the primary way we have developed
our large user base. We had entered into cooperation agreements with over 370 smartphone and 940 feature phone handset companies
as of December 31, 2014 to pre-install Maopao platform applications on their products. Our agreements with handset companies
generally have one- to two-year terms and contain automatic renewal provisions, pursuant to which we share with them a percentage
of revenues generated from user purchases or pay a fixed amount based on number of activations. Due to our reliance on handset
companies to pre-install our Maopao platform products on mobile phones, any termination of or deterioration in our existing relationships
with handset companies or our failure to cooperate with additional handset companies, particularly those with a substantial market
share or growth potential, would decrease our user base and market share.



The handset companies we partner with face
fierce competition in an industry characterized by evolving technological standards. Our handset company partners that have traditionally
focused on feature phones have experienced market share declines in recent years, which has resulted in a decrease in our feature
phone revenue. Furthermore, the amount paid to handset companies under revenue sharing arrangements constitutes a significant portion
of our total cost of revenues in recent years. Unfavorable changes to our revenue sharing arrangements with handset companies could
adversely affect our results of operations.



6







Handset companies often pre-install other
mobile application stores in addition to Maopao App Store or Maopao Game Center, which could adversely affect purchases from Maopao
App Store or Maopao Game Center, causing our revenues to decrease. In addition, certain handset companies may consider developing
their own mobile application store, which could adversely affect our relationships with them.



Our failure to increase the installation base of Maopao
platform among economic handsets would adversely affect our market share and results of operations.



We primarily collaborate with handset companies
to pre-install Maopao platform products on economic smartphones and feature phones. Our ability to increase the pre-installation
of Maopao platform depends on many factors, some of which are beyond our control. Although we work with a large number of economic
smartphone and feature phone manufacturers and brands that in aggregate hold a large market share in China, these handset companies
may not be able to maintain their market shares. The mobile phone market in China is rapidly evolving. On the one hand, after years
of high growth in feature phone sales in China, the feature phone market in China has declined since the second half of 2012, causing
the market share of certain feature phone manufacturers we partner with to decline. On the other hand, although we have been increasing
our collaboration with smartphone manufacturers in recent years, there is no guarantee that these companies will continue to occupy
substantial market share in the future. If the operations of the handset companies we partner with deteriorate, our business could
be materially and adversely affected.



In addition, mobile network carrier-subsidized
handsets, most of which have other mobile application stores pre-installed, historically have had a relatively large market share
in China, and their market share in China is continuously growing, which may adversely affect the pre-installation of Maopao platform
products onto handsets, particularly economic handsets. Our failure to increase the installation base of our Maopao App Store and
other Maopao platform products among economic handsets would adversely affect our market share and results of operations.



If we fail to establish a substantial market presence
in the rapidly growing smartphone market, our growth prospects could be materially adversely affected.



The mobile phone market in China has been
transitioning from feature phones to smartphones in recent years. Smartphones are technologically advanced devices with personal
computer-level versatility that operate advanced operating systems such as Android, Apple’s iOS, BlackBerry OS, Linux, Symbian
and Windows Phone. Smartphones are becoming more affordable in China partly because of PRC government-subsidized programs. Smartphones
are characterized by more powerful processors, larger screens and higher data storage capacity compared to feature phones, and
are able to easily install and run high performance multimedia applications. To maintain our user base and pursue monetization
opportunities in the ever growing smartphone market, we have since 2012 shifted the focus of our mobile application business from
feature phones to smartphones. We have launched a portfolio of Maopao platform products for smartphones, including our Maopao App
Store and Maopao Game Center.



Although we are actively pursuing strategic
cooperation to pre-install Maopao platform products on an increasing number of smartphone models, we cannot assure you that we
will be able to establish and maintain a substantial market presence in the smartphone market in China.



Our smartphone products operate mainly on Android-based
operating systems. If Android fails to maintain market share in the smartphone segment, our smartphone business may be adversely
affected.



Android is currently the dominant smartphone
operating system in China, especially in the economic smartphone market. Our current smartphone products are developed for and
operate solely on Android-based operating systems. Android may face competition from existing operating systems such as Apple’s
iOS, Microsoft’s Windows Phone and Blackberry OS, as well as new entrants to the mobile phone operating system market. We
cannot assure you that Android-based operating systems will continue to maintain or grow their market shares. If non Android-based
smartphones begin capturing significant market share in the future, we will be prompted to spend substantial resources to develop
and launch Maopao platform products for these operating systems. If we fail to develop products and services on new and emerging
operating systems, our smartphone user base may decline and our growth prospects could be adversely affected.



7







If our smartphone products do not achieve wide market
acceptance or if we fail to generate profits with respect to such products, our results of operations may be adversely affected.



In May 2012, we launched Maopao App Store
for smartphones, in particular Android-based smartphones, which we believe will be one of the major smartphone operating systems
in China. We have also launched a series of smartphone products, including Maopao Game Center and Maopao Browser. For the nine
months ended December 31, 2014, approximately 84.1% of our total revenues were generated from our smartphone business, an increase
from approximately 34.3% for the nine months ended December 31, 2013. However, we are new entrants to the smartphone market and
have limited development and operating experience in this emerging market, which has different characteristics than the feature
phone market.



For example, the smartphone market employs
open-source technologies by which our users can freely download our applications through alternative sources and without accessing
our Maopao App Store. We cannot assure you that we can keep abreast of the technical developments of the smartphone market to provide
quality smartphone products or that we can successfully establish relationships with smartphone companies in order to increase
the pre-installation of our Maopao platform products on their handsets. In addition, many smartphone companies have developed their
own application stores. If Maopao App Store is installed on these smartphones, it will compete with the application stores operated
by these smartphone companies and smartphone users may not use our Maopao App Store as frequently as feature phone users.



We may face increased competition, which could reduce
our market share and materially adversely affect our results of operations.



The mobile application market in China is
fast evolving and highly competitive. The market is characterized by the frequent introduction of new products and services, short
product life cycles, evolving industry standards, improved performance characteristics, rapid adoption of technological and product
advancement, and price sensitivity on the part of users. We compete primarily with mobile application store operators and mobile
game distributors. See “Item 4. Information on the Company—A. Business Overview—Competition.”



We may also face alliances between our existing
and new competitors and emergence of new competitors. Mobile service providers, handset companies or other industry players may
introduce a mobile application store or other business model to compete with us. In addition, some wireless communication chip
manufacturers have launched or plan to launch their own application stores.



Some of our competitors have significantly
greater financial, technological and marketing resources, stronger relationships with industry participants and a larger portfolio
of applications and content offerings than we do. Some of our competitors, especially major multinational application store operators,
have greater development experience and resources than we have. If new competitors emerge or competition among existing competitors
intensifies, we may be forced to provide more favorable revenue sharing arrangements to our business partners, which could adversely
affect our profitability. If we fail to compete effectively, our market share would decrease and our results of operations would
suffer.



If we fail to maintain cooperative relationships with
mobile network operators, our revenues and growth prospects may be adversely affected.



We cooperate with mobile network operators
in various aspects of our business, including the provision of customized software services at their physical stores, distribution
and promotion of applications and mobile content and payment collection. Three mobile network operators, China Mobile, China Unicom
and China Telecom, dominate the wireless telecommunications sector in China. As of the date of this transition report, we have
entered into strategic cooperation with each of China Mobile, China Unicom and China Telecom in various aspects of our operations:



| | · | China Mobile, the largest mobile network operator in China, has granted us access to their payment channels since 2012, which
enables us to collect a large portion of our sales proceeds through China Mobile directly from users without using mobile service
providers as intermediaries. In March 2012, we entered into a partnership agreement with China Mobile, pursuant to which we offer
its mobile games and mobile reading application on Maopao platform and share a percentage of revenue based on user purchases of
China Mobile’s in-game virtual items, premium features and reading content from Maopao platform;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in March 2014, we entered into a strategic partnership with the Wo Store, the official application store of China Unicom,
China’s second largest mobile network operator. Under this partnership, China Unicom designated us as an official business
partner to provide customized software services through its extensive network of physical stores;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8







| | · | in September 2014, we entered into a strategic partnership with E Surfing (“Tianyi”), China Telecom’s mobile
internet services platform. China Telecom designated us as an official business partner to provide customized software services
through its extensive network of physical stores; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we have also entered into game cooperation agreements with each of the three major mobile network operators, pursuant to which
we collect proceeds from distribution of selected games on third-party distribution channels through these mobile network operators.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See “Item 4. Information on the Company—A.
Business Overview — Cooperation with Mobile Network Operators.”



We plan to deepen our cooperation with the
mobile network operators to enlarge our user base, benefit from lower payment channel costs and faster payment collection and supplement
our mobile application and content offerings. If we fail to maintain our relationships with any of the mobile network operators,
we may not be able to find replacement operators in a timely manner or at all, and our business and prospects may be adversely
affected. Furthermore, mobile network operators monitor our operations and may impose sanctions if we fail to comply with their
policies or guidelines, including denying us access to their billing channels, which could adversely affect our financial condition
and results of operations.



We depend on mobile service providers, and ultimately
mobile network operators, for the collection of a portion of our revenues, and any termination of or deterioration in our relationships
with mobile service providers, or a disruption in our mobile service providers’ relationships with mobile network operators,
may result in disruptions to our operations.



For the fiscal years ended March 31,
2013 and 2014 and the nine months ended December 31, 2014, we collected a large portion of our revenues through mobile service
providers, who utilize mobile network operators’ billing channels pursuant to their agreements with mobile network operators
to provide billing and payment collection services.As of December 31, 2014, we had entered into agreements
with over 60 mobile service providers. Our agreements with mobile service providers generally have one- to three-year terms and
sometimes include automatic renewal provisions. We cannot assure you that we could renew these agreements or enter into new ones
when the existing agreements expire. Because we rely on mobile service providers to collect a portion of the sales proceeds from
our users, any termination of or deterioration in our relationships with mobile service providers may disrupt our operations and
materially adversely affect our financial condition and results of operations.



Our mobile service providers rely on mobile
network operators’ billing channels for the provision of payment collection services. A large portion of our sales proceeds
collected by mobile service companies were collected through billing channels of China Mobile, who has the largest subscriber base
in China. Any disruption or termination of our mobile service providers’ cooperation with the mobile network operators, particularly
China Mobile, could render these billing channels unavailable, which could materially adversely affect our operations.



We depend on the billing and collection systems of mobile
network operators and mobile service providers. The inaccuracy of these systems or changes in the operations of mobile network
operators and mobile service providers could affect our business and results of operations.



We depend on mobile network operators, either
directly or through mobile service companies, to maintain accurate records of payments by users and collect such payments. We receive
periodic statements from mobile network operators and mobile service providers that indicate the aggregate amount of fees charged
to users for purchases of in-app virtual items, premium features and other content. While we conduct independent sampling tests
to verify information provided to us, our sampling is on a relatively small scale and the inaccuracies identified are usually resolved
through negotiations with mobile service providers. Our business and results of operations could be adversely affected if the mobile
network operators or mobile service providers miscalculate our sales proceeds.



We have been collecting a large portion
of our revenues directly through China Mobile’s billing channels since 2012. We depend on China Mobile to maintain accurate
records of payments by users and collect payments. However, China Mobile may change its policies or business practices which
could affect our results of operations. For example, in 2012, China Mobile began implementing more stringent billing and collection
practices. Under these measures, if China Mobile detects abnormal data transmissions in billing, the underlying transaction
will be considered suspicious and the proceeds associated with such transaction will be written off. China Mobile may implement
further changes to its billing and collection practices in the future, which could materially adversely affect our financial condition
and results of operations.



We generally grant our mobile network operators
and mobile service providers credit terms ranging from 60 to 90 days. Receivables from the three major mobile network operators
accounted for 69.4% of our total trade receivables as of December 31, 2014. Receivables from our top ten mobile service providers
accounted for approximately 21.4% and 22.6% of our total trade receivables as of March 31, 2014 and December 31, 2014, respectively.
Failure to timely collect our receivables from mobile network operators or mobile service providers may adversely affect our cash
flows. In addition, our mobile service providers may from time to time experience cash flow difficulties and consequently delay
their payments to us. Any delay in payment or inability of mobile service providers to pay us may adversely affect our operations
and cash flows.



9







Our revenues and cost of revenues are affected by billing
and transmission failures that are often beyond our control. Failure to accurately record billing and transmission failures in
a timely manner could harm the credibility of our system and our relationships with industry participants.



After a mobile user confirms a purchase
of in-app virtual items, premium features or other content, the mobile service provider sends the user a confirmation SMS with
transaction details and a simultaneous message to the mobile network operator, which we refer to as a message original, or MO.
We also record such MO data on Maopao platform. Upon receipt of the MO data, the mobile network operator verifies the execution
of a transaction. If the transaction has been effected, the mobile network operator usually receives, from the user’s mobile
phone, a confirmation message, which we refer to as a message received, or MR. Based on MR data, the mobile network operator records
the transaction and bills the user.



The MR data are usually lower than the MO
data due to billing and transaction failures, which are caused by various reasons, including:



| | · | the mobile network operator experiencing technical problems with its network that prevent the transmission of MR data;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | the delivery of mobile applications and content from Maopao platform to a user being prevented because the user’s mobile
phone is turned off for an extended period of time, or the user’s prepaid phone card has run out of value; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we experiencing technical problems with Maopao platform that prevent the delivery of our applications and content.
| | - | ------------------------------------------------------------------------------------------------------------------



We recognize our revenues based on MR data.
In line with industry practice, we make payments to content providers and handset companies based on our MO data rather than MR
data, because MR data generally does not contain sufficient information to enable us to identify which application or content is
purchased through which handset model. Consequently, revenue sharing based on MO data may not accurately reflect content providers’
and handset companies’ contribution to transactions. Recognizing the difference between MO and MR data, we apply discount
ratios to our MO data to account for billing and transmission failures. If we fail to accurately reward our content providers and
handset companies pursuant to our revenue sharing arrangement with them due to billing and transmission failures, our relationship
with them could be materially and adversely affected, which may in turn materially and adversely affect our business and results
of operations.



Policy changes by PRC government authorities
and mobile network operators may also augment billing and transmission failures. See “—Significant changes in the policies,
guidelines or practices of mobile network operators or the PRC government with respect to mobile applications and other content
may result in lower revenues or additional costs for us and materially adversely affect our business operations, financial condition
and results of operations.”



Any adverse developments relating to Maopao Community
may adversely affect our results of operations.



Maopao Community has served and is expected
to continue to serve as an effective tool to retain and migrate our loyal Maopao Community users along with our transition to smartphones.
Accordingly, any of the following could materially adversely affect our business, financial condition and results of operations:



| | · | our failure to maintain or grow the user base of our Maopao Community;
| | - | ----------------------------------------------------------------------



| | · | our failure to maintain or increase average spending per user in Maopao Community;
| | - | ----------------------------------------------------------------------------------



| | · | any decrease in the popularity of applications and content offered in Maopao Community;
| | - | ---------------------------------------------------------------------------------------



| | · | failure by us or third-party content providers to upgrade, enhance or improve these applications and content in a timely manner
in response to changing preferences of Maopao Community users; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure by us or third-party content providers to develop and launch new applications and content appealing to Maopao Community
users.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



10







We may not be successful in effectively promoting or developing
our brand.



We believe our future success depends on,
among other things, continued market recognition and acceptance of our “Maopao” brand. We have been actively promoting
our “Maopao” brand by implementing various marketing initiatives including pre-installation of our Maopao platform
products on smartphones and feature phones by cooperating with handset companies and mobile network operators. If these marketing
efforts turn out to be inadequate, our growth may be adversely affected.



In addition, negative publicity or disputes
involving us, our brand, product offerings or management could materially adversely affect public perception of our brand. Many
of the factors that affect our brand may be outside our control. Concerns over the quality of products and services of handset
companies and content providers we partner with could also have a negative impact on our brand image and materially adversely affect
our sales, profits and prospects.



Our ability to generate revenues could suffer if the mobile
application market in China does not develop as anticipated.



The mobile application market in China has
evolved rapidly in recent years, with the introduction of new business models, changing user preferences, the increasing popularity
of smartphones over feature phones, new service and product offerings, new competitors and evolving strategies by existing competitors.
We expect these trends to continue, and in turn must adapt our strategies to stay competitive in this market.



In particular, we are focused on offering
a wide range of applications and other content on Maopao platform by cooperating with various industry participants including Chinese
handset companies, content providers, mobile network operators and mobile service providers. As smartphones become increasingly
popular in China, we have since 2012 shifted our strategic focus from feature phones to smartphones and have launched a portfolio
of smartphone products, including our Maopao App Store and Maopao Game Center for smartphones.



However, it is difficult to accurately predict
the user demand and future size, composition and growth of the mobile application market in China. Furthermore, given the limited
history and rapidly evolving nature of this market, we cannot predict the price that users will be willing to pay for applications
and content we offer or whether users will have concerns over security, reliability, cost and quality of customer service. If the
mobile application market in China does not develop as anticipated, our results of operations could be materially adversely affected.



Laws and regulations regulating online games in China
are developing and may change. If we fail to obtain or maintain all applicable permits and approvals, our business and results
of operations would be materially adversely affected.



Operating online games in China requires
a series of permits and approvals. For example, we have obtained a license from the Ministry of Culture with respect to the operation
of online games. In addition, the Internet publication of online games requires pre-approval from the General Administration of
Press and Publication, or GAPP. Effective on March 22, 2013, GAPP and the State Administration of Radio, Film and Television merged
into one entity, namely the State General Administration of Press, Publication, Radio, Film and Television, or SAPPRFT, which oversees
the press, publication, radio, film and TV sectors in China. We operate a substantial majority of our online games in collaboration
with third-party content providers, and such content providers are in charge of obtaining the approvals from SAPPRFT. For the remaining
online games we operate, we are responsible for obtaining approvals from SAPPRFT. Because the requirement for SAPPRFT approval
of online games was imposed in late 2009 and the approval process is lengthy, SAPPRFT has not yet approved any online games that
we operate. With respect to the online games that we operate alone, we have not submitted applications for SAPPRFT approval as
we are first required to obtain an online publication license from SAPPRFT. We cannot assure you that we will be able to obtain
such license in a timely manner or at all.



With respect to the online games that we
operate in collaboration with third-party content providers, the third-party content providers have submitted applications for
SAPPRFT approval for some of the games. We have requested content providers to submit applications to SAPPRFT for approval of the
remaining games as soon as possible. In case we or such content providers fail to obtain SAPPRFT approval, we may be subject to
various penalties, including fines and discontinuation of the relevant games. As online games are at an early stage of development
in China, new laws and regulations may require additional licenses and permits. As a result, substantial uncertainties exist regarding
the interpretation and implementation of PRC laws and regulations applicable to the operation of online games. We cannot assure
you that we will be able to timely obtain required licenses or any other new license required, and we may be found in violation
of PRC laws and regulations.



11







The PRC government has introduced various measures aimed
at regulating online games, the provision of virtual currency and other related content. If we are deemed to have violated any
of the rules and regulations, we may be subject to penalties and our results of operations may be materially adversely affected.



On June 3, 2010, the PRC Ministry of
Culture, or the MOC, issued the Tentative Rule on Administration of Online Games, or the Rule on Online Games, effective as of
August 1, 2010. According to the Rule on Online Games, companies that plan to engage in the operation of online games, issue
virtual currencies and provide virtual currency transaction services must obtain a license from the provincial counterpart of the
MOC. This rule also regulates content review and other aspects of the operation of online games as well as virtual currency transaction
services. In addition, theRule on Online Gamesprovides that all domestic online games must be filed with MOC within 30 days from the commencement of their online operation,
and all imported online games must be approved by the MOC before the commencement of their online operation. See “Item
4. Information on the Company — B. Business Overview — Regulations.”



In addition, the Notice on the Reinforcement
of the Administration of Internet Cafés and Online Games, or the Internet Cafés Notice, issued by the MOC in February
2007, directs the People’s Bank of China, or PBOC, to strengthen the administration of virtual currency in online games to
avoid any adverse impact on the PRC economy and financial system. This notice provides that the total amount of virtual currency
issued by online game operators and the amount purchased by individual game players should be strictly limited, with a strict and
clear division between virtual transactions and real transactions carried out by way of electronic commerce. This notice also provides
that virtual currency should only be used to purchase in-game virtual items.



Our mobile games may be subject to government
approval before placement on Maopao platform. A portion of our revenues from Maopao Community are collected through the sale of
our virtual currency, the K Currency.Our item-based revenue model may cause additional concerns with PRC regulators
who have been implementing regulations intended to limit the total amount of virtual currency issued by online game operators and
the amount purchased by an individual game player. The restrictions imposed by the above rules may result in lower sales of our
virtual currency, and could adversely affect our revenues from Maopao Community. If our operations or the applications and content
on Maopao platform are deemed to have violated any of these rules and regulations, we may be subject to penalties and our results
of operations may be materially adversely affected.



Regulation and censorship of information disseminated
over the Internet and wireless telecommunication networks in China may adversely affect our business, and we may be liable for
information displayed on, retrieved from or linked to our Maopao platform.



China has enacted regulations governing
telecommunication mobile service providers, Internet and wireless access and the distribution of news and other information over
the Internet and wireless telecommunication networks. Under these regulations, Internet content providers and Internet publishers,
such as our company, are prohibited from posting or displaying over the Internet or wireless networks content that, among other
things, violates PRC laws and regulations, impairs the national dignity of China, or is obscene, superstitious, fraudulent or defamatory.
When Internet content providers and Internet publishers find that information falling within the categories above is transmitted
on their websites or platforms, they must terminate the transmission or delete such information immediately, maintain records of
the violations and report the violations to the authorities.



Failure to comply with these requirements
could result in the revocation of required licenses and the closure of the websites or platforms involved. The website or platform
operator may also be held liable for such prohibited information displayed on, retrieved from or linked to such website or platform.
Mobile network operators such as China Mobile also have their own policies prohibiting or restricting the distribution of inappropriate
content. Since December 2009, the Chinese government has been increasing its efforts to crack down on inappropriate content disseminated
over the Internet and wireless networks.



On December 15, 2009, the Ministry
of Industry and Information Technology of the PRC, or MIIT (formerly the Ministry of Information Industry, or the MII), issued
the Notice Regarding Plan for Further Regulating Obscene Materials on Mobile Phones, or Circular 672. Under Circular 672, mobile
network operators are required to examine their business and promotional channels, as well as the business of their partners, and
must immediately terminate such business if any obscene material is involved. Mobile service providers involved in distributing
or publishing obscene material on mobile handsets are subject to immediate suspension or termination of cooperation with mobile
network operators, and a violation will be reported to the authorities. Mobile network operators and mobile service providers must
examine all websites accessed through mobile handsets and conduct daily inspections of such websites. If any obscene material is
found, access and transmission must cease and be reported to authorities.



On June 3, 2010, the MOC issued the
Rule on Online Games, according to which companies that plan to operate online games, issue virtual currency and provide virtual
currency transaction services must obtain a license from the provincial counterpart of the MOC. The MOC is responsible for content
review of online games. Online game operators are also required to establish a self-censorship mechanism and ensure the lawfulness
of the content of their games and corporate operations. On January 30, 2013, the State Council issued the Decision of the
State Council on Revising the “Regulations on the Protection of Right of Dissemination via Information Network” (“Order
No. 634”). Order No. 634 became effective on March 1, 2013. According to Order No. 634, the fines against
several infringement acts of right of dissemination via information network have been increased. A fine of five times of the illegal
business revenue or RMB 250,000 may be imposed.



12







As these regulations are subject to interpretation
by the authorities, we may not be able to determine the type of content that could result in liability as a mobile application
store operator. Although we may determine that the mobile applications and content provided on Maopao platform comply with regulatory
requirements, regulatory authorities may hold a different view. In addition, we may not be able to control or restrict the content
of other Internet content providers linked to or accessible through Maopao platform, despite our attempt to monitor such content.
For example, many industry participants we partner with, such as handset companies and content providers, have access to our technology.
Personnel who have access to our technology may develop malware and other inappropriate content.



Although we strive to closely monitor the
content displayed on Maopao platform, a distributor of malware or other inappropriate content developed in our proprietary format
could disseminate such content directly through the Internet without accessing our server and users may download such content onto
their mobile handsets. To the extent that regulatory authorities find any of the applications and content on Maopao platform objectionable,
they may require us to limit or eliminate the dissemination of such information or otherwise curtail such content on Maopao platform,
which may reduce our user traffic.



We may be subject to significant penalties
for violations of regulations arising from information displayed on, retrieved from or linked to Maopao platform, including a suspension
or shutdown of our operations. Any violation or perceived violation of such regulations may subject us to claims of contractual
breaches from the industry participants we work with, including mobile service providers and handset companies, and we may face
suspensions or termination of our cooperative relationships with other industry participants and/or claims for monetary damages,
and our financial condition and results of operations would be materially adversely affected.



We rely on third-party content providers for a majority
of the applications and content available on Maopao platform. Our failure to license or otherwise obtain applications or content
that meet user demand would materially adversely affect our business.



We contract with third-party content providers
to distribute their mobile applications and other content through Maopao platform. We typically enter into exclusive/non-exclusive
licensing agreements for a term of one to three years with third-party content providers, majority of which do not contain automatic
renewal provisions. If we fail to renew or enter into new licensing agreements with our content providers upon expiration of the
existing agreements at commercially acceptable terms, our operations may be negatively impacted. In addition, some third-party
content providers may introduce competing mobile applications and content, which could make it more difficult or impossible for
us to license their mobile applications and content in the future. There is no assurance that our content providers will continue
to develop and launch mobile applications and other content for Maopao platform on a timely basis or at all. If we fail to offer
a wide variety of mobile applications and content at reasonable prices, our financial condition and operating results may be materially
adversely affected.



Furthermore, we develop certain applications
and content available on Maopao platform in-house, such as our card game center. Such applications and content may compete with
those of our content providers and may discourage our content providers from developing and upgrading similar applications or content
for Maopao platform. If our collaboration with content providers deteriorates or terminates, the availability and quality of applications
and content for Maopao platform may suffer.



If we are unable to successfully develop, license, launch
and operate additional mobile applications and other attractive content that grows our user base and increases our revenues, our
results of operations will be adversely affected.



Our success largely depends on our ability
to anticipate and timely and effectively respond to changing user tastes and preferences and technological advances. To further
increase our user base and revenues, we are prompted to develop, license, launch and operate mobile games and other popular application
and content to replace our existing ones as they reach the end of their useful economic lives.



Our applications and other content are either
developed in-house or licensed from third-party content providers. We cannot assure you that we will be able to license from third-party
content providers or develop in-house a sufficient number of mobile games and other applications and content on commercial acceptable
terms or at all, nor can we assure you that they will be well received among users. If we fail to develop, license or acquire mobile
applications and other content that are commercially successful and appeal to users, our profitability and growth prospects will
decline.



13







Our failure to anticipate or successfully implement new
technologies could render Maopao platform uncompetitive or obsolete and reduce our revenues and market share.



The mobile applications industry is developing
rapidly. We invest in our proprietary Maopao platform and related technologies, including standard software development kits and
tool suites that are critical to our success. We need to anticipate the emergence of new technologies and keep abreast of technological
advances in order to maintain the competitiveness of our technologies, product offerings and development capabilities. We have
been devoting significant financial resources in research, development and operations to penetrate the emerging smartphone market
in China.



However, development activities are inherently
uncertain, and we might encounter practical difficulties in commercializing our products. Our significant expenditures on research
and development may not generate corresponding benefits. Given the fast pace mobile application store technology has developed,
we may not be able to timely improve Maopao platform and related technologies in a cost-effective manner, or at all. In addition,
new technologies in the mobile application industry in China could render the technologies and product offerings we are developing
or expect to develop obsolete or less competitive, decreasing our revenues and market share.



Undetected programming errors or flaws in our Maopao platform
products and applications available through Maopao platform could harm our reputation or decrease market acceptance of Maopao platform.



Our Maopao platform products and applications
available through our Maopao platform, such as multi-player games, which are subject to frequent improvement and update, may contain
errors or flaws. As we launch new features and updates under tight time constraint, these errors or flaws may not become apparent
until the updated features or version are accessed by users. As a result, we mostly rely on our users to inform us of programming
flaws compromising their experience. If we fail to promptly resolve programming errors or flaws, we may lose users and our operating
results, brand name and the market acceptance of Maopao platform products may suffer. In addition, Chinese government authorities
have promulgated rules and regulations targeting mobile service providers that charge for applications and other content without
user consent. If our programming error or flaw inadvertently charges users without their consent, we may be subject to administrative
penalties and fines.



Failure to maintain effective customer service could harm
our reputation or decrease market acceptance of Maopao platform, which would materially adversely affect out results of operations.



Customer service is critical to retaining
current users and attracting potential users. If Maopao platform or the mobile applications and other content offered through Maopao
platform contains errors or other flaws, or if we otherwise fail to provide quality customer service, our users may be less inclined
to use or recommend Maopao platform products to other potential users, and may switch to our competitors’ products.



Some China-based Internet companies have
experienced group complaints, sometimes organized by their competitors or people attempting to profit from such complaints. We
may not be able to timely and effectively address such complaints. Unsatisfactory customer service may disrupt our operations,
compromise user experience, harm our reputation, cause the number of our users to decline, and negatively affect market acceptance
of Maopao platform products, any of which could materially adversely affect our results of operations.



Unexpected network interruptions, data loss, security
breaches, computer virus attacks or other risks relating to the operation of Maopao platform could materially adversely affect
our business, financial condition and results of operations.



Any failure to maintain the satisfactory
performance, reliability, security and availability of Maopao platform products may harm our reputation and market share. Major
risks include, among others, any breakdowns or system failures in our network infrastructure resulting in a prolonged shutdown
of all or a material portion of our servers, including failures attributable to sustained power outages or unauthorized attempts
to access our systems.



Our critical servers and backup servers
are placed at different locations in Hangzhou. As a result, our network systems are vulnerable to natural disasters or accidents
affecting Hangzhou and its surrounding areas, such as fire, flood, power outage, telecommunications failures, computer viruses,
hacking and other similar occurrences. Any interruptions in the availability of our product offerings could reduce user satisfaction
and our competitiveness.



In addition, any security breach caused
by hacking, which involves unauthorized attempts to access our systems, or to cause intentional malfunctions or loss or corruption
of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could materially
adversely affect our business, financial condition and results of operations. We do not maintain insurance policies covering losses
relating to our systems, nor do we carry business interruption insurance.



14







The growth of our business may be adversely affected due
to our failure to ensure the security and privacy of confidential user information.



A significant barrier to the development
of wireless businesses is the secure transmission of confidential information over the mobile network. We rely on proprietary encryption
and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential
user information, such as user names and passwords. While we have not experienced any material breach of our security measures
to date, technology advancements, new discoveries in the field of cryptography or other developments could result in a compromise
or breach of the algorithms we use to protect user information.



A party who is able to circumvent these
security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to
expend significant capital and other resources to protect against or resolve such security breaches. Concerns over the security
and privacy of user information may have a material and adverse effect on our operations. To the extent that our activities involve
proprietary information, security breaches could damage our reputation and expose us to risks of loss or litigation. There can
be no assurance that our security measures will be sufficient to prevent security breaches, and failure to prevent security breaches
may materially adversely affect our business, prospects, financial condition and results of operations.



We could be liable for breaches of security of payment
processing agents, which may materially adversely affect our reputation and business.



In addition to collection through mobile
network operators and mobile service providers, we collect a small portion of our revenues through payment processing agents, which
assist us in collecting sales proceeds through third-party payment channels such as game cards and other prepaid cards, bank remittances,
China Post and virtual currency, such as QQ Currency. In transactions utilizing third-party payment channels, secured transmission
of confidential information, such as customers’ card numbers and expiration dates, personal information and billing addresses,
over mobile networks, the Internet and/or third-parties’ databases, is essential to maintain consumer confidence.



We do not have control over the security
measures of third-party payment channels and we cannot assure you that these security measures will be adequate in light of our
expected increased usage of their payment channels. Security breaches in these payment channels could expose us to litigation and
possible liability for failure to secure customer transaction data and could harm our reputation and user experience and discourage
users to pay through these third-party payment channels.



Our business is increasingly subject to the risks of international
operations.



International expansion forms an important
component of our growth strategy. Expanding our business internationally exposes us to a number of risks, including:



| | · | fluctuations in currency exchange rates;
| | - | ----------------------------------------



| | · | our ability to select the appropriate geographical regions for international expansion;
| | - | ---------------------------------------------------------------------------------------



| | · | difficulty in identifying appropriate local content providers, handset companies, mobile service providers or joint venture
partners and establishing and maintaining good relationships with them;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | difficulty in understanding local markets and cultures;
| | - | -------------------------------------------------------



| | · | compliance with foreign laws and regulations, including import and export requirements, foreign exchange controls and cash
repatriation restrictions, data privacy requirements, labor laws and anti-competition regulations; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | increased costs associated with doing business in foreign jurisdictions.
| | - | ------------------------------------------------------------------------



Our financial condition and operating results
could be significantly affected by these and other risks associated with international operations. Although we have implemented
policies and procedures designed to facilitate compliance with laws and regulations in foreign jurisdictions applicable to us,
our employees or business partners could violate such laws and regulations or our policies. Any such violations could materially
adversely affect our financial condition and operating results.



Our business could suffer if we do not successfully manage
our growth.



We have experienced a period of rapid growth
and expansion that has placed a strain on our management personnel, systems and resources. To accommodate our growth, we may need
to implement and maintain a variety of new and improved operational and financial systems, procedures and controls, and improve
our accounting and other internal management systems, all of which require substantial management efforts.



15







We will also need to expand, train, manage
and motivate our workforce, and manage our relationships with our users and other industry participants, such as content providers,
mobile service providers and mobile handset companies. All of these endeavors will require substantial management effort and skill
and additional costs. We cannot assure you that we will be able to effectively implement our growth strategies and manage the growth
of our operations, and any failure to do so may hamper our business strategy.



We may not be able to adequately protect our intellectual
property rights, which could harm our business and competitive position.



Trademarks, trade secrets, copyrights and
other intellectual property are important to our business. We rely on a combination of trademark, copyright and trade secret protection
laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual
property and our brand. We have invested significant resources to develop our intellectual property and acquire licenses to use
and distribute the intellectual property of others for our business. Our failure to maintain or protect these rights could harm
our business. In addition, any unauthorized use of our intellectual property by third parties may adversely affect our revenues
and reputation.



The validity, enforceability and scope of
protection available under intellectual property laws with respect to the mobile and Internet industries in China are uncertain
and still evolving. Implementation and enforcement of PRC intellectual property laws have historically been deficient, ineffective
and hampered by corruption and local protectionism. Accordingly, protection of intellectual property rights in China may not be
as effective as in the United States or other developed countries. Furthermore, policing unauthorized use of proprietary technology
is difficult and expensive, and we may need to resort to litigation to enforce or defend our patents or to determine the enforceability,
scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation
could result in substantial costs and divert resources and management attention, which could harm our business and competitive
position.



Our results of operations, financial performance and business
may suffer from intellectual property rights infringement claims against us.



We may be subject to claims alleging that
we are improperly using intellectual property owned by others or otherwise infringing their intellectual property rights. We license
a substantial portion of the applications and content available on Maopao platform from third-party content providers, including
single-player games, multiplayer games, mobile music and book titles.Although we implement measures to ensure that
the licensors are the rightful owners of intellectual property rights with respect to the licensed content, we may be subject to
infringement claims regarding such licensed content.



Regardless of the validity of such claims,
we could incur costs defending or settling any intellectual property infringement disputes. Intellectual property litigation could
force us to, among other things, cease offering certain mobile applications or content, develop alternatives or obtain licenses
from the owners of the infringed intellectual property. We may not be successful in developing alternatives or in obtaining licenses
on commercially acceptable terms or at all, materially adversely affecting our results of operations, financial performance and
business.



We substantially depend on our management and other key
personnel. If we lose their services, we could incur significant costs in finding suitable replacements and our business may be
severely disrupted.



Our success heavily depends upon the continued
services of our management and other key personnel. In particular, we rely on the expertise and experience of Mr. Michael
Tao Song, our chairman and chief executive officer. If one or more of our senior management or other key personnel were unable
or unwilling to continue their employment with us, we may not be able to replace them easily or at all. Our business, financial
condition and results of operations may suffer, and we may incur additional expenses to recruit, train and retain personnel.



If any of our management or key personnel
joins a competitor or forms a competing company, we may lose business partners, know-how, key professionals and staff members.
Each of our executive officers has entered into an employment agreement which contains confidentiality clauses and certain confidentiality
agreements with us. However, if any dispute arises with our officers, the non-competition provisions contained in their confidentiality
and non-competition clauses or agreements may not be enforceable, especially in China, where most of these executive officers and
key employees reside, on the grounds that we have not provided adequate compensation to these executive officers for their non-competition
obligations as required under PRC law.



16







We may not be successful in attracting and retaining qualified
personnel.



Hiring and retaining additional qualified
employees are critical to our operations and planned expansion. The mobile application industry in China is characterized by high
demand and intense competition for talent, and we may need to offer higher compensation and other benefits in order to attract
and retain key personnel, particularly considering our location in Hangzhou, a region less attractive to some potential employees
compared to cities such as Beijing or Shanghai. We cannot assure you that we will be able to attract or retain a sufficient number
of qualified personnel to achieve our business objectives. In addition, as our business has grown rapidly, our ability to train
and integrate new employees into our operations may not meet the increasing demands of our business.



Our principal shareholders have substantial influence
over our company and their interests may not be aligned with the interests of our other holders of our common shares and ADSs.



Our principal shareholders, Xplane Ltd.,
a British Virgin Islands company, and Mr. Michael Tao Song, our chief executive officer and chairman, held 30.0% and 33.2%
(including 10.4% held by Ms. Qinyi Zhu, wife of Mr. Song, through Xplane Ltd.) of our outstanding share capital as of December
31, 2014, respectively. Accordingly, Xplane Ltd. and Mr. Song have substantial influence over our business, including decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, the election of directors and other significant
corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could
deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce
the price of our ADSs. Alternatively, our principal shareholders may cause a merger, consolidation or change of control transaction
even our other shareholders oppose such a transaction.



We have limited insurance coverage, which could expose
us to significant costs and business disruption.



Other than insurance for some of our vehicles,
we have not purchased any insurance to cover our assets, property and business. If we were to incur substantial losses or liabilities
due to fire, explosion, flood or a wide range of other natural disasters or accidents or business interruption, our financial condition
and results of operations could be materially adversely affected.



The audit report included in this transition report is
prepared by auditors who are not inspected by the PCAOB and, as such, you are deprived of the benefits of such inspection.



Our independent registered public accounting
firm that issues the audit reports included in this transition report, as auditors of companies that are traded publicly in the
United States and a firm registered with the U.S. Public Company Accounting Oversight Board (United States), or the PCAOB, is required
by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United
States and professional standards. Because our auditors are located in the Peoples’ Republic of China, a jurisdiction where
the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently
inspected by the PCAOB.



Inspections of other firms that the PCAOB
has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures,
which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China
prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors
may be deprived of the benefits of PCAOB inspections.



The inability of the PCAOB to conduct inspections
of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control
procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our
reported financial information and procedures and the quality of our financial statements.



If additional remedial measures are imposed on the Big
Four PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought
by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, with respect to requests for the production
of documents, we could be unable to timely file future financial statements in compliance with the requirements of the Securities
Exchange Act of 1934, as amended.



Starting in 2011, the Chinese affiliates
of the “big four” accounting firms (including our independent registered public accounting firm) were affected by a
conflict between U.S. and Chinese law. Specifically, for certain U.S. listed companies operating and audited in mainland China,
the SEC and the PCAOB sought to obtain from the Chinese firms access to their audit work papers and related documents. The firms
were, however, advised and directed that under China law they could not respond directly to the U.S. regulators on those requests,
and that requests by foreign regulators for access to such papers in China had to be channeled through the China Securities Regulatory
Commission, or CSRC.



17







In late 2012, this impasse led the SEC to
commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against
the Chinese accounting firms (including our independent registered public accounting firm). A first instance trial of the proceedings
in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The administrative
law judge proposed penalties on the firms including a temporary suspension of their right to practice before the SEC, although
that proposed penalty did not take effect pending review by the Commissioners of the SEC. On February 6, 2015, before a review
by the Commissioners of the SEC had taken place, the firms reached a settlement with the SEC. Under the settlement, the SEC accepts
that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive matching
Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance
require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose
a variety of additional remedial measures on the firms depending on the nature of the failure. Remedies for any future noncompliance
could include, as appropriate, an automatic six-month bar on a single firm’s performance of certain audit work, commencement
of a new proceeding against a firm, or in extreme cases the resumption of the current proceeding against all four firms.



In the event that the SEC restarts the administrative
proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult
or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined
to not be in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including
possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor
uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected. If
our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we
were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements,
our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination
could ultimately lead to the delisting of our common shares from the Nasdaq or deregistration from the SEC, or both, which would
substantially reduce or effectively terminate the trading of our ADSs in the United States.



Failure to maintain an effective system of internal control
over financial reporting may adversely affecting investor confidence and the market price of our ADSs.



As a public company in the United States,
we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 and related rules, or Section 404,
require us to include a management report which contains management’s assessment of the effectiveness of our internal controls
over financial reporting in our annual report. In addition, an independent registered public accounting firm must attest to the
effectiveness of our internal control over financial reporting.



Our management has identified a material
weakness in our internal controls related to the lack of oversight review due to the short-term vacancy of chief financial officer,
resulting from our ex-chief financial officer’s departure in November 2014. Our management has concluded that our internal
control over financial reporting was not effective as of December 31, 2014. Our independent registered public accounting firm
has issued an adverse opinion on our effectiveness of internal control over financial reporting as of December 31, 2014. See “Item 15.
Controls and Procedures.”



As describe under Item 15.
“Controls and Procedures”, we have taken steps to address this material weakness. Simultaneously, other
well-established internal control measures were continuously followed and enhanced. However, we can make no assurance that
we can address additional material weaknesses or significant deficiencies that may subsequently arise. Our failure to
achieve and maintain effective internal control over financial reporting and disclosure controls and procedures may cause us
to fail to meet our periodic reporting obligations, result in material misstatements in our financial statements, restatement
of financial statements, Sanctions or investigations by regulatory authorities and loss of investor confidence in
the reliability of our reported financial information. Any of these events could limit our access to capital markets, harm
our results of operations, and decrease the trading price of our ADSs.



Furthermore, we have incurred and anticipate
that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply
with Section 404 and other requirements of the Sarbanes-Oxley Act.



18







We may undertake acquisitions, investments, joint ventures
or other strategic alliances, which could materially adversely affect our business. In addition, such undertakings may not
be successful.



Our strategy includes plans to grow both
organically and through acquisitions, joint ventures or other strategic alliances. Acquisitions, joint ventures and strategic
alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital requirements. We
may not be able to identify suitable acquisition candidates or alliance partners. Even if we identify suitable candidates
or partners, we may be unable to complete an acquisition or alliance on terms commercially acceptable to us. If we fail to
identify appropriate candidates or partners, or complete desired acquisitions, we may not be able to implement our strategies effectively
or efficiently.



In addition, our ability to successfully
integrate acquired companies and their operations may be adversely affected by a number of factors. These factors include:



| | · | diversion of management’s attention;
| | - | ------------------------------------



| | · | difficulties in retaining personnel of the acquired companies;
| | - | --------------------------------------------------------------



| | · | unanticipated problems or legal liabilities; and
| | - | ------------------------------------------------



| | · | tax and accounting issues.
| | - | --------------------------



If we fail to integrate acquired companies
efficiently, our earnings, revenue growth and business could be negatively affected.



Furthermore, the acquired companies may
not perform to our expectations for various reasons, including legislative or regulatory changes that affect the products in which
the acquired companies specialize and the loss of key personnel and users. If we do not realize the benefits envisioned from
such acquisitions, joint ventures or other strategic alliances, our overall profitability and growth plans may suffer.



We may not realize gains from our equity investments.



We have made capital investments in a number
of start-up companies in the mobile network and mobile games industry. As of December 31, 2014, our equity investments included
RMB105.5 million (US$17.0 million) in 25 companies primarily engaged in wireless technology development and related applications
in the PRC.We have also invested in one private equity fund targeting the mobile and technology space to achieve
long term returns. Our equity investments may fail to appreciate or decline in value and our ability to recover our investments
will depend on the success of the companies in which we invest.



Equity investments involve significant risks. Any
equity investment we make in a company could be subject to dilution as a result of the issuance of additional equity interests.
In addition, equity interests are subordinate to indebtedness in the event that the issuer cannot meet its obligations or files
for bankruptcy. In addition, if a company in which we invest requires additional capital and is unable to obtain it, we may
not recover our investment.



We may not recover our equity investments
if the companies in which we invest do not perform well and we could incur impairment losses, which could materially and adversely
affect our results of operations. For example, we recognized a RMB0.8 million (US$0.1 million) impairment of our investment in
Shanghai Mingyou Network Technologies Co. Ltd., or Mingyou, and a RMB1.9 million (US$0.3 million) impairment of our investment
in Beijing Brtech Co., Ltd., or Brtech, during the nine months ended December 31, 2014 due to the continuing underperformance and
negative cash flow forecast of these entities.



We may be unable to secure additional funding or to obtain
such funding on favorable terms.



We believe that our current cash and cash
equivalents and the anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the next 12
months. We may, however, require additional cash resources to finance our growth or other future developments, including investments
or acquisitions. The amount and timing of such additional financing needs will vary principally depending on the timing of new
product or service launches, investments or acquisitions, and cash flow from our operations.



If our resources are insufficient to satisfy
our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional
equity securities or securities convertible into our common shares could result in additional dilution to our shareholders. The
incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants
that would restrict our operations.



19







Our ability to obtain additional capital
on acceptable terms is subject to a variety of uncertainties, including:



| | · | investors’ perception of, and demand for, securities of mobile application store operators in China;
| | - | ----------------------------------------------------------------------------------------------------



| | · | conditions of the United States and other capital markets in which we may seek to raise funds;
| | - | ----------------------------------------------------------------------------------------------



| | · | our results of operations, financial condition and cash flows;
| | - | --------------------------------------------------------------



| | · | PRC governmental regulation of foreign investment in China;
| | - | -----------------------------------------------------------



| | · | economic, political and other conditions in China; and
| | - | ------------------------------------------------------



| | · | PRC governmental policies relating to foreign currency borrowings.
| | - | ------------------------------------------------------------------



Financing may not be available in amounts
or on terms acceptable to us, if at all, especially if there is a recession or other events causing volatility in capital markets
worldwide.



We may experience fluctuations in quarterly operating
results.



Our quarterly operating results have experienced
fluctuations due to a variety of factors, including policy changes, the demand for our products and competing products, our launch
of new mobile applications and content and our revenue sharing arrangements with industry participants. Although our revenue sharing
arrangements with industry participants vary within a small range, such differences may result in gross margin fluctuations from
period to period.



For instance, our cost of revenues as a
percentage of total revenues may be higher in a particular period if a handset company that is entitled to a relatively higher
percentage of revenue introduces a new handset model through which we generate a substantial amount of revenues, compared to other
periods when revenues are generated through handsets from handset companies that are entitled to a relatively lower percentage
of revenue. In addition, changes in policies and practices of network operators may affect the availability of mobile service providers
and user experience in a particular period, result in increased billing and transmission failure rates, cause delays associated
with switching from certain mobile service providers to others, and affect our quarterly results of operations.



Our revenues may be affected by seasonality.
For example, our revenues tend to be higher during holiday seasons when users tend to purchase more in-app virtual items, premium
features and other content through Maopao platform. Such seasonality was less prominent in recent periods, but may become more
prominent in the future. Operating results for a particular period are not necessarily indicative of our future
results. If our operating results for any quarter fall below investor expectations or estimates by securities research analysts,
the trading price of our ADSs may decline.



Risks Related to Doing Business in China



Changes in economic and political policies of the PRC
government could materially adversely affect the economic growth of China, negatively impacting our business.



We conduct substantially all of our operations
in China. Accordingly, our business, results of operations, financial condition and prospects are subject to a significant degree
to economic, political and legal developments in China. The growth of the Chinese economy slowed in the past few years and there
is also uncertainty with respect to the Chinese economy for 2015 and beyond. Any prolonged slowdown in the Chinese economy, in
particular the mobile applications industry, could negatively impact our business, operating results and financial condition. For
example, our users may decrease spending on our offerings, while we may have difficulty expanding our user base to offset the impact
of decreased spending by our existing users.



The PRC government exercises significant
control over China’s economic growth through direct allocation of resources, monetary and tax policies and a host of other
government policies, such as those that encourage or restrict investment in certain industries by foreign investors, control the
exchange between RMB and foreign currencies and regulate the growth of the economy or specific markets. Government involvement
has been instrumental in China’s significant growth in the past 30 years. If the PRC government’s policies fail to
help the Chinese economy achieve further growth or otherwise negatively affect our business, our growth rate, strategy and results
of operations could be adversely affected.



20







If the PRC government determines that the contractual
arrangements that establish the structure for operating our business do not comply with applicable PRC laws and regulations, we
could be subject to severe penalties.



We are a Cayman Islands company and, as
such, we are classified as a foreign enterprise under Chinese law, and our PRC subsidiaries, Hangzhou Dianneng Technologies Co.,
Ltd., or Dianneng, Pusida (Beijing) Technologies Co., Ltd., or Pusida, and Hangzhou Tiandian Investment Consulting Co., Ltd., or
Tiandian, are foreign-invested enterprises. Various regulations in China restrict foreign-invested entities from holding certain
licenses required to operate mobile application store business, including telecommunications value-added services operation licenses,
and from making certain strategic investments in China.



In light of these restrictions, we rely
on our SPEs to hold
and maintain the licenses necessary to operate our mobile application store business and make strategic investments in China.We do not have any equity interest in our SPEs, but receive their economic benefits through various contractual arrangements
and certain corporate governance and shareholder rights arrangements.



We have entered into contractual arrangements
with each of our SPEs and each of their shareholders which provide us with control over our SPEs. For a description of these contractual
arrangements, see “Item 4. Information on the Company — B. Organizational Structure — Contractual Arrangements
with the SPEs and their Shareholders.”



Under the equity pledge agreements included
in these contractual arrangements, the shareholders of each of our SPEs pledged their respective equity interests in these SPEs
to Dianneng.According to PRC law, such a pledge must be registered with the relevant administration for industry
and commerce. We have registered the pledge of our SPEs’ equity interests with the local Administration for Industry and
Commerce. However, we cannot assure you that Dianneng will be able to enforce these pledges if PRC laws and regulations applicable
to the equity pledge change in the future.



The Notice Regarding Strengthening the Administration
of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MII Notice, issued by the MII in July
2006, reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set
up foreign-invested enterprises and obtain a business operating license to conduct any value-added telecommunications business
in China. Under the MII Notice, a domestic company that holds a telecommunications value-added services operation license is prohibited
from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including
providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in
China.



The relevant trademarks and domain names
that are used in the value-added telecommunications business must be owned by the local license holder. The MII Notice further
requires each telecommunications value-added services operation license holder to have the necessary facilities for its approved
operations and to maintain such facilities in the regions covered by its license. In addition, all value-added telecommunications
mobile service providers must maintain network and information security in accordance with the standards set forth under relevant
PRC regulations. Due to a lack of regulatory interpretations, it is unclear what impact the MII Notice will have on us or the other
Chinese telecommunications and Internet companies that have adopted the same or similar corporate and contractual structures as
ours.



On September 28, 2009, the GAPP, together
with the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications, jointly issued
a Notice on Further Strengthening of the Administration of Pre-examination and Approval of Online Games and the Examination and
Approval of Imported Online Games, or the GAPP Notice. The GAPP Notice provides that foreign investors may not invest in online
game operating businesses in China via wholly-owned, equity joint venture or cooperative joint venture investments, and expressly
prohibits foreign investors from gaining control over or participating in domestic online game operators through indirect measures
such as establishing joint venture companies, contractual, or technical arrangements, or through a disguised form, such as incorporating
user registration, user account management or payment system into online gaming platforms that are ultimately controlled or owned
by foreign investors. We are not aware of any online game companies adopting the same or similar contractual arrangements as ours
having been penalized or ordered to be terminated since the GAPP Notice first became effective. Due to the ambiguity among various
regulations on online games and a lack of interpretative materials from the relevant PRC authorities governing online game operations,
there are uncertainties regarding whether PRC authorities would consider our corporate structure and contractual arrangements to
be foreign investment in online game operation businesses. If our contractual arrangements
were deemed to be such an “indirect means” or “disguised form” under the GAPP Notice, our contractual arrangements
may be challenged by the SAPPRFT. If we, our PRC subsidiary or SPEs are found to be in violation of the GAPP Notice to operate
our mobile games, the SAPPRFT, in conjunction with relevant regulatory authorities, would have the power to investigate and deal
with such violations, including in the most serious cases where relevant licenses and registrations would be suspended or revoked.



21







In the opinion of DaHui Lawyers, our PRC
counsel, as of the date of this transition report, (i) the ownership structure and the business and operation model of each
of our SPEs are in compliance with all existing PRC laws and regulations in all material respects and (ii) each contract under
Dianneng’s contractual arrangements with our SPEs and each of their shareholders is valid and binding and does not result
in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation
and application of PRC laws and regulations, including the MII Notice and the GAPP Notice. Accordingly, we cannot assure you that
PRC regulatory authorities will ultimately take a view that is consistent with the opinion of our PRC counsel.



If we are found to be in violation of any
existing or future PRC laws or regulations, including the MII Notice and the GAPP Notice, or fail to obtain or maintain any of
the required permits or approvals, the relevant regulatory authorities would have broad discretion in dealing with such violation,
including, without limitation:



| | · | revoking the business and operating licenses of our wholly owned subsidiaries, consolidated SPEs and subsidiaries incorporated
in the PRC;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | discontinuing or restricting any related party transactions among our wholly-owned subsidiaries, consolidated SPEs and subsidiaries
incorporated in the PRC;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | levying fines or imposing other requirements on our wholly owned subsidiaries, consolidated SPEs and subsidiaries incorporated
in the PRC;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | requiring us to change our ownership structure or restructure our operations; or
| | - | --------------------------------------------------------------------------------



| | · | restricting or prohibiting us from using the proceeds from public offerings to finance our operations in the PRC.
| | - | -----------------------------------------------------------------------------------------------------------------



Any of these or similar actions could significantly
disrupt our business and materially reduce our revenues, profitability and cash flows.



If any of these penalties results in our
inability to direct the activities of any of our SPEs that significantly impacts our economic performance, and/or our failure to
receive the economic benefits from any of them, we may not be able to consolidate the financial results of these SPEs into our
consolidated financial statements in accordance with IFRS.



Our contractual arrangements with the SPEs and their respective
shareholders may not provide control over the SPEs as effectively as direct ownership of these companies.



We conduct our mobile application business
and pursue strategic investment opportunities in China through our SPEs. We enter into contractual arrangements with our SPEs and
their respective shareholders in order to provide us with effective control over these companies.See “Item
4. Information on the Company — B. Organizational Structure — Contractual Arrangements with the SPEs and their Shareholders.”



As a result of these contractual arrangements,
we have control over our SPEs. Accordingly, we consolidate the results of operations, assets and liabilities of the SPEs in our
financial statements.



Although DaHui Lawyers, our PRC counsel,
has advised us that each contract under these contractual arrangements is valid, binding and enforceable under current PRC laws
and regulations, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws
and regulations. Accordingly, we cannot guarantee that our contractual arrangements will remain compliant with PRC law in the future,
or that PRC authorities will not take a view contrary to the opinion of our PRC counsel. In addition, these contractual arrangements
may not be as effective in providing us with control over the SPEs as direct ownership. Furthermore, the SPEs or their respective
shareholders may breach the contractual arrangements.



We cannot assure you that when conflicts
of interest arise, the SPEs and their respective shareholders will act completely in our interests or that these conflicts of interests
will be resolved in our favor. In any such event, we would have to rely on legal remedies under PRC law. These remedies may not
always be effective, particularly in light of uncertainties in the PRC legal system. See “ — Uncertainties with respect
to the PRC legal system could materially adversely affect us.”



In the fiscal years ended March 31,
2013 and 2014 and the nine months ended December 31, 2014, our SPEs contributed in aggregate 95.8%, 90.0% and 98.2%, respectively,
of our total revenues. In the event that we are unable to enforce the contractual arrangements, we may not be able to direct the
activities of our SPEs, and as a result, our ability to conduct our business may be negatively affected, and we may not be able
to consolidate the financial results of the SPEs into our consolidated financial statements in accordance with IFRS.



22







We believe that we have the ability to renew
the contractual arrangements with our consolidated SPEs when necessary based on (i) our exclusive option to purchase all or
part of the equity interests in our consolidated SPEs, when and to the extent permitted by PRC law, or to request any existing
shareholders of our consolidated SPEs to transfer all or part of their equity interests in our consolidated SPEs to another PRC
person or entity designated by us at any time at our discretion, and (ii) the powers of attorney that shareholders of our
consolidated SPEs’ have granted to us.



Our ability to enforce the equity pledge
agreements between us and the shareholders of our consolidated SPEs may be subject to limitations imposed by PRC laws, rules and
regulations.



Under our equity pledge agreements with
our consolidated SPEs and their respective shareholders, these shareholders have agreed to pledge all of their respective equity
interests in the consolidated SPEs to us. These pledges secure the performance of our consolidated SPEs’ obligations under
the various contractual arrangements, including the business operation agreements and technology development agreements. As of
December 31, 2014, the pledges of equity interests by shareholders of our consolidated SPEs were registered with the relevant
local branch of the State Administration for Industry & Commerce.



According to applicable PRC laws, when an
obligor fails to pay its debt, the pledgee may choose to either conclude an agreement with the pledgor to obtain the pledged equity
or seek payments from the proceeds of the auction or sale of the pledged equity. If our consolidated SPEs or their shareholders
fail to perform their respective obligations secured by the pledges under the equity pledge agreements, one remedy in the event
of default under the equity pledge agreements is to require the pledgor to sell the pledged equity interests in an auction or private
sale and remit the proceeds to our wholly owned subsidiary in the PRC, net of related taxes and expenses. Such an auction or private
sale may not result in our receipt of the full value of the equity interests in our consolidated SPEs.



In addition, the registration forms of
the local branch of the State Administration for Industry & Commerce, indicate that, the amounts of registered
equity interests pledged to our wholly owned subsidiary by Hangzhou Sky, Mijia, Fanyi, Feineng, Miyi, Najia, Tianchu, Zunqi
,Geyuan, Dangyi, Mugu, Feidong, Fuyun and Duoqu, were RMB20.0 million, RMB10.0 million, RMB10.0 million, RMB1.0 million,
RMB56.0 million, RMB10.0 million, RMB1.0 million, RMB0.5 million, RMB0.5 million, RMB1.0 million, RMB0.5 million, RMB1.0
million, RMB1.0 million and RMB0.5 million, respectively, which in aggregate represent 100% of the registered capital of our
consolidated SPEs. A PRC court may take the position that the amounts listed on the equity pledge registration
forms represent the full amounts of the collateral that have been registered and perfected. In that event, a PRC court could
deem the obligations secured under the equity pledge agreements in excess of the amounts listed on the equity pledge
registration forms to be unsecured debt, materially adversely affecting our ability to be repaid.



Substantial uncertainties exist with respect to the enactment
timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current
corporate structure, corporate governance and business operations.



The Ministry of Commerce, or MOFCOM, published
a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing
laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. The draft Foreign Investment Law embodies an expected
PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and
the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. While the MOFCOM solicited
comments on this draft earlier this year, substantial uncertainties exist with respect to its enactment timetable, interpretation
and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current
corporate structure, corporate governance and business operations in many aspects.



23







Among other things, the draft Foreign Investment
Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether
a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entities
established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign
jurisdiction would nonetheless be, upon market entry clearance by the MOFCOM, treated as a PRC domestic investor provided that
the entity is “controlled” by PRC entities and/or citizens. In this connection, “foreign investors” refers
to the following subjects making investments within the PRC: (i) natural persons without PRC nationality; (ii) enterprises incorporated
under the laws of countries or regions other than China; (iii) the governments of countries or regions other than the PRC and the
departments or agencies thereunder; and (iv) international organizations. Domestic enterprises under the control of the subjects
as mentioned in the preceding sentence are deemed foreign investors, and “control” is broadly defined in the draft
law to cover the following summarized categories: (i) holding, directly or indirectly, not less than 50% of shares, equities, share
of voting rights or other similar rights of the subject entity; (ii) holding, directly or indirectly, less than 50% of the voting
rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision
making bodies, or having the voting power to material influence on the board, the shareholders’ meeting or other equivalent
decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the
subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined
to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a catalogue of special administrative
measures, which is classified into the “catalogue of prohibitions” and “the catalogue of restrictions”,
to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in the
catalogue of prohibitions. However, unless the underlying business of the FIE falls within the catalogue of restrictions, which
calls for market entry clearance by the MOFCOM, prior approval from the government authorities as mandated by the existing foreign
investment legal regime would no longer be required for establishment of the FIE.



The “variable interest entity”
structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits
in the industries that are currently subject to foreign investment restrictions in China. See “—If the PRC government
determines that the contractual arrangements that establish the structure for operating our business do not comply with applicable
PRC laws and regulations, we could be subject to severe penalties.” Under the draft Foreign Investment Law, variable interest
entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled”
by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “negative
list,” the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either
PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable
interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without
market entry clearance may be considered as illegal.



Our controlling shareholder, Mr. Michael
Tao Song, a PRC citizen, directly and through his wife, possesses and controls 33.2% of the voting power of our company. However,
the draft Foreign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies
with a VIE structure, whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the
public on this point. Moreover, it is uncertain whether the mobile application industry, in which our variable interest entities
operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to
be issued.  If the enacted version of the Foreign Investment Law and the final “negative list” mandate further
actions, such as MOC market entry clearance, to be completed by companies with existing VIE structure like us, we face uncertainties
as to whether such clearance can be timely obtained, or at all.



The draft Foreign Investment Law, if enacted
as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the
draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and
the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment
and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are
required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may
potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject
to criminal liabilities.



The shareholders of our consolidated SPEs may have potential
conflicts of interest with us, which may substantially disrupt our business.



The registered shareholders of our consolidated
SPEs are our current or former directors, officers or employees and their relatives. For example, Mr. Michael Tao Song, our
founder, chairman and chief executive officer, is one of the registered shareholders of Mijia, a consolidated SPE incorporated
in 2007. In addition, Mr. Song owned approximately 33.2% of our outstanding common shares as of the date of this transition
report on Form 20-F. See “Item 4. Information on the Company — B. Organizational Structure” for a list of the
registered shareholders of our consolidated SPEs and their respective shareholdings.



Conflicts of interest may arise with respect
to such shareholders’ duties to us and our consolidated SPEs. If any conflicts arise, these shareholders may not act in our
best interests and such conflicts of interest may not be resolved in our favor. In addition, these shareholders may breach or cause
our consolidated SPEs to breach or refuse to renew their existing contractual arrangements that allow us to exercise effective
control over them and to receive economic benefits from them.



24







The laws of the Cayman Islands provide that
directors of a company owe a fiduciary duty to the company, which requires them to act in good faith and in the best interests
of the company and not to use their positions for personal gain. If certain shareholders of our consolidated SPEs do not comply
with their fiduciary duties to us as our designated directors, or if we cannot resolve any conflicts of interest or disputes between
us and any current or future registered shareholders of our consolidated SPEs, we would have to rely on legal proceedings to remedy
the situation, the outcome of which would be uncertain and which could substantially disrupt our business.



Contractual arrangements we have entered into may be subject
to scrutiny by PRC tax authorities, and a finding that we or our SPEs owe additional taxes could reduce our net income and the
value of your investment.



Under applicable PRC laws and regulations,
arrangements and transactions among related parties may be subject to audit or challenge by PRC tax authorities. We could face
adverse tax consequences if PRC tax authorities determine that the contractual arrangements between our PRC subsidiary on the one
hand, and our SPEs on the other, do not represent an arm’s-length price and adjust our SPEs’ income in the form of
a transfer pricing adjustment.



A transfer pricing adjustment could, among
other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our SPEs,which could
in turn increase their respective tax liabilities. In addition, PRC tax authorities may impose late payment fees and other penalties
on our SPEs for underpaid taxes. Our net income may be adversely affected if our SPEs’ tax liabilities increase or if they
are found to be subject to late payment fees or other penalties.



Our business benefits from certain government tax incentives.
Expiration, reduction or discontinuation of, or changes to, these incentives will increase our tax burden and reduce our net income.



We are currently entitled to and benefiting
from the following government tax incentives:



| | · | Hangzhou Sky, one of our SPEs, as a “software enterprise,” was entitled to a full exemption from enterprise income
tax, or EIT, in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012. The reduced applicable EIT rate for Hangzhou Sky from
2010 to 2012 was 12.5%. Hangzhou Sky was qualified as a “high and new technology enterprise” in 2011, entitling it
to a preferential EIT tax rate of 15% from 2011 to 2013. In 2013, Hangzhou Sky obtained the “key software development enterprise”
status, which entitled it to a preferential EIT tax rate of 10% for two years from 2013 to 2014. In 2014, Hangzhou Sky renewed
the status of its “high and new technology enterprise”, entitling it to a preferential EIT tax rate of 15% from 2014
to 2016;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mijia, one of our SPEs, as a “software enterprise,” was entitled to a full exemption from EIT in 2010 and 2011
and a 50% reduced EIT rate from 2012 to 2014. The reduced applicable EIT rate for Mijia from 2012 to 2014 is 12.5%. In 2013, Mijia
qualified as a “high and new technology enterprise”, entitling it to a preferential EIT tax rate of 15% from 2013 to
2015;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Miyi, one of our SPEs, as a “software enterprise,” is entitled to a full exemption from EIT in 2013 and 2014 and
a 50% reduced EIT rate from 2015 to 2017. The reduced applicable EIT rate for Miyi from 2015 to 2017 is 12.5%;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Najia, one of our SPEs, as a “software enterprise,” is entitled to a full exemption from EIT in 2013 and 2014 and
a 50% reduced EIT rate from 2015 to 2017. The reduced applicable EIT rate for Najia from 2015 to 2017 is 12.5%; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Mopin, one of our subsidiaries, as a “software enterprise,” is entitled to a two-year
full exemption from EIT from the first year of profitable operation after offsetting prior years’ tax losses, and a 50% reduction
of the applicable EIT rate for the succeeding three years.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Once these entities cease to qualify as
“high and new technology entities” or “software enterprises”, as applicable, their applicable EIT rates
may increase to up to 25%, which could adversely affect our results of operations.



25







Prior to January 1, 2012, pursuant to Provisional
Regulation of China on Business Tax and its implementing rules, any entity or individual rendering services in the territory of
PRC was generally subject to a business tax at the rate of 5% on the revenues generated from provision of such services. In November
2011, the Ministry of Finance, or the MOF, and the State Administration of Taxation, or the SAT, jointly issued two circulars setting
out the details of the VAT Pilot Program, which changes business tax to value-added tax for certain industries, including, among
others, research and development and technical services, information technology services, and cultural and creative services. The
VAT Pilot Program initially applied only to these industries in Shanghai, and has been expanded to eight additional provinces,
including Beijing, Tianjin, Zhejiang Province (including Ningbo), Anhui Province, Guangdong Province (including Shenzhen), Fujian
Province (including Xiamen), Hubei Province and Jiangsu Province in 2012. On May 24, 2013, the MOF and the SAT jointly issued the
Circular on Tax Policies on the Nationwide Expansion of the Pilot Program for the Collection of Value Added Tax in Lieu of Business
Tax in the Transportation Industry and Certain Modern Services Industries, or Circular 37, which expanded the VAT Pilot Program
nationwide as of August 1, 2013. Pursuant to the Circular on the Inclusion of Telecommunications Industry in the Pilot Collection
of Value-added Tax in Lieu of Business Tax promulgated by MOF and the SAT on April 29, 2014, or Circular 43, Circular 37 has been
replaced by Circular 43 and the VAT Pilot Program has been expanded to cover telecommunication service, as currently conducted
by us, as of June 1, 2014. See “Item 5. Operating and Financial Review and Prospects — Taxation.”



Various local governments in China have
provided discretionary preferential tax treatments to us. However, these local governments may decide to reduce or eliminate these
preferential tax treatments at any time. Furthermore, these local implementations of tax laws may be found to violate national
laws or regulations and we may be subject to retroactive imposition of higher taxes as a result. Any expiration, reduction or discontinuation
of, or changes to, these tax incentives will increase our tax burden and reduce our net income and materially adversely affect
our operating results.



We may rely on dividends and other distributions on equity
paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries
to make payments to us, or the tax implications of making payments to us, could materially adversely affect our ability to conduct
our business.



We are a holding company, and we may rely
on dividends and other distributions on equity from our PRC subsidiaries for our cash requirements. PRC regulations permit our
subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not
distributable as cash dividends.



Furthermore, if our PRC subsidiaries incur
debt in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.
Most of our assets are held by, and substantially all of our earnings and cash flows are attributable to, our PRC subsidiaries.
If earnings from our PRC subsidiaries were to decline, our earnings and cash flow would be materially adversely affected.



Our cash flows are principally derived from
dividends paid to us by our PRC subsidiaries. As a result, our ability to distribute dividends largely depends on earnings from
our PRC subsidiaries and their ability to pay dividends out of those earnings. We cannot assure you that our PRC subsidiaries will
generate sufficient earnings and cash flows in the future to make up the historical accumulated losses and pay dividends or otherwise
distribute sufficient funds to enable us to meet our obligations, pay interest and expenses or declare dividends.



In addition, under the PRC Enterprise Income
Tax Law and the Implementing Rules, both of which became effective on January 1, 2008, dividends generated from our PRC subsidiaries
after January 1, 2008 and payable to us may be subject to a withholding tax rate of 10% if the PRC tax authorities subsequently
determine that we are a non-resident enterprise, unless a tax treaty with China provides for a different withholding arrangement.



We may be classified as a “resident enterprise”
for PRC EIT purposes, which could result in our global income becoming subject to the 25% PRC EIT rate.



The PRC Enterprise Income Tax Law provides
that enterprises established outside of China whose “effective management” is located in China are considered “resident
enterprises” and will generally be subject to the uniform 25% EIT rate on global income. Under the Implementing Rules, “effective
management” is defined as substantial and overall management and control over such aspects as the production and business,
personnel, accounts and properties of an enterprise.



In April 2009, the SAT released a circular
that sets out the standards and procedures for determining the location of the “effective management” of an enterprise
registered outside of the PRC and funded by Chinese enterprises as controlling investors, or a Chinese Funded Enterprise. Under
the circular, a Chinese Funded Enterprise shall be considered a resident enterprise if all of the following apply: (i) a Chinese
Funded Enterprise’s major management department and personnel who are responsible for carrying out daily operations are located
in the PRC; (ii) the department or the personnel who have the right to decide or approve the Chinese Funded Enterprise’s
financial and human resource matters are located in the PRC; (iii) the major assets, account book, company seal and meeting
minutes of the Chinese Funded Enterprise are located or stored in the PRC; and (iv) the directors or management personnel
holding no less than 50% voting rights of the Chinese Funded Enterprise habitually reside in the PRC.



26







The circular provides that the above standards
shall apply to enterprises registered outside of the PRC and funded by Chinese enterprises as controlling investors, and therefore
such standards may be cited for reference only and may not be directly adopted when considering whether our “effective management”
is in the PRC or not. Accordingly, it is still uncertain whether we may be considered a resident enterprise under the PRC Enterprise
Income Tax Law. If we are considered a resident enterprise and earn income other than dividends from our PRC subsidiaries such
as income from our international operations, we will be subject to a 25% PRC income tax rate on our global income, which could
significantly increase our tax burden and materially adversely affect our cash flow and profitability.



If we are classified as a “resident enterprise”
for PRC EIT purposes, you may be subject to PRC withholding tax on dividends from us or to PRC income tax on gains realized on
the transfer of our ADSs or common shares.



Under the PRC Enterprise Income Tax Law
and related Implementing Rules, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident
enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place
of business if the relevant income is not effectively connected with the establishment or place of business, to the extent such
dividends have their source within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is
also subject to the 10% PRC income tax rate if such gain is regarded as income derived from sources within the PRC unless a treaty
otherwise provides.



Under the PRC Individual Income Tax Law
and related tax rules, dividends from sources within the PRC paid to foreign individual investors who are not PRC residents are
generally subject to a PRC withholding income tax at a rate of 20%, and gains from PRC sources realized by such investors on the
transfer of our ADSs or common shares are generally subject to a 20% PRC withholding income tax, and in each case, are subject
to any reduction or exemption set forth in the applicable tax treaties and PRC laws.



If we are considered a PRC “resident
enterprise,” it is unclear whether dividends we pay with respect to our common shares or ADSs, or the gain you may realize
from the transfer of our common shares or ADSs, would be treated as income derived from sources within the PRC and be subject to
PRC tax. If we are required under the PRC Enterprise Income Tax Law to withhold PRC income tax on dividends payable to our non-PRC
investors that are “non-resident enterprises,” or if you are required to pay PRC income tax on the transfer of our
common shares or ADSs, the value of your investment in our common shares or ADSs may be materially adversely affected.



We face uncertainty regarding PRC tax reporting obligations
and consequences for certain indirect transfers of the stock of our operating company.



On February 3, 2015, SAT issued the Announcement
of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties
by Non-Resident Enterprises, or Circular 7, to revise and strengthen the administration of corporate income tax on indirect transfers
of equities and other properties of PRC resident enterprises, or PRC Taxable Property, by non-resident enterprises. Pursuant to
Circular 7, where a non-resident enterprise indirectly transfers PRC Taxable Property to avoid tax liability by implementing arrangements
without reasonable commercial purpose, such indirect transfer will be re-identified and recognized as a direct transfer of PRC
Taxable Property. As a result, gains derived from such indirect transfer attributable to the PRC Taxable Property may be subject
to PRC withholding tax at a rate of up to 10%. In the case of the indirect transfer of property of unregistered establishments
set up by a foreign enterprise in the PRC, the applicable tax rate would be 25%. Circular 7 imposes tax filing obligations on both
the transferors and the transferees, as well as the PRC resident entity being indirectly transferred. As a result, we and our subsidiaries
may be subject to filing obligations or being taxed under Circular 7, and may be required to expend valuable resources to comply
with Circular 7 or to establish that we and our non-resident enterprises should not be taxed under Circular 7 for any previous
or future restructuring or disposal of shares of offshore entities.



Uncertainties with respect to the PRC legal system could
materially adversely affect us.



We conduct our business primarily through
our subsidiaries and SPEs in China. Our operations in China are governed by PRC laws and regulations. The PRC legal system is based
on statutes. Prior court decisions may be cited for reference but have limited precedential value.



Since 1979, PRC legislation and regulations
have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed
a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities
in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published
decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.



27







In addition, the PRC legal system is based
in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have retroactive
effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition,
any litigation in China may be protracted and result in substantial costs and divert resources and management attention.



PRC regulation of loans and direct investment by offshore
holding companies to PRC entities may delay or prevent us from making additional loans or capital contributions to our PRC operating
subsidiaries, which could materially adversely affect our liquidity and our ability to fund and expand our business.



As an offshore holding company of our PRC
operating subsidiaries, we may extend additional loans or make additional capital contributions to our PRC subsidiaries. Loans
by us to our PRC subsidiaries, which are foreign-invested enterprises, to finance their activities cannot exceed statutory limits
and must be registered with the State Administration of Foreign Exchange, or SAFE, or its local counterpart.



Capital contributions must be approved by
the MOFCOM or its local counterpart. We may not be able to obtain these government approvals on a timely basis, if at all, with
respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals, our ability to capitalize
our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our
business.



Governmental control of currency conversion may adversely
affect the value of your investment.



The PRC government imposes controls on the
convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially
all of our revenues in RMB. Under our current corporate structure, our income primarily comes from dividends and other payments
from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to
remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated
obligations.



Under PRC foreign exchange regulations,
payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions,
can be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or SAFE, by complying with
certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted
into foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign
currencies.



The PRC government may also at its discretion
restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents
us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies
to our shareholders, including holders of our ADSs.



In addition, on August 29, 2008, SAFE
promulgated Circular 142 to regulate the conversion of foreign currency into Renminbi by a foreign-invested company by restricting
the use of the converted Renminbi. Circular 142 requires that the registered capital of a foreign-invested company that has been
settled in Renminbi converted from foreign currencies may only be used for purposes within its business scope approved by the applicable
governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight
of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies.



The use of such Renminbi capital may not
be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans
have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines. As a result, Circular 142
may significantly limit our ability to transfer the net proceeds from any offering of our securities to our subsidiaries in the
PRC. We may not be able to convert the net proceeds into Renminbi to invest in or acquire any other PRC companies, or establish
other SPEs in the PRC.



On November 16, 2011, SAFE promulgated
the Circular of the State Administration of Foreign Exchange on Issues Relating to Further Clarification and Regulation of Certain
Capital Account Items under Foreign Exchange Control (“Circular 45”) to further strengthen and clarify its existing
regulations on foreign exchange control under SAFE Circular 142. Circular 45 expressly prohibits foreign invested entities, including
wholly foreign owned enterprises, from converting registered capital in foreign exchange into RMB for the purpose of equity investment,
granting certain loans, repayment of intercompany loans, and repayment of bank loans which have been transferred to a third party.



28







Further, Circular 45 generally prohibits
foreign invested entities, such as our PRC subsidiaries, from converting registered capital in foreign exchange into RMB for the
payment of various types of cash deposits. If our variable interest entity requires financial support from us or our PRC subsidiaries
in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability
to fund our variable interest entity’s operations will be subject to statutory limits and restrictions, including those described
above.



On March 30, 2015, the SAFE issued the Circular
on Reforming the Administration Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested Enterprises, or
Circular 19, which will replace the Circular 142 when it becomes effective on June 1, 2015. Circular 19 provides that, among other
things, the Renminbi capital converted from the foreign currency registered capital of a foreign-invested enterprise may be used
for equity investments within the PRC. Since Circular 19 was recently issued, there are uncertainties in interpretation and implementation
as to actual transactions. In light of the various requirements imposed by existing PRC regulations on loans to and direct investment
in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations
or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries
or any consolidated affiliated entities or with respect to future capital contributions by us to our PRC subsidiaries. If we fail
to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be
negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.



Fluctuations in the value of the RMB may materially adversely
affect the value of your investment.



The value of the RMB against the U.S. dollar
and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21,
2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated
more than 20% against the U.S. dollar over the following three years. For almost two years after reaching a high against the U.S.
dollar in July 2008, the Renminbi traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high.
In June 2010, the PRC government announced that it would increase Renminbi exchange rate flexibility. From June 2010 to March 2012,
the RMB appreciated by 7.8% against the U.S. dollar. In March 2014, the People’s Bank of China widened the band around which
the value of the Renminbi is allowed to deviate from the daily reference rate, which may allow for greater volatility in the U.S.
dollar and Renminbi exchange rate. There remains significant international pressure on the PRC government to adopt a more flexible
currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar.



Substantially all of our revenues, and a
significant portion of our financial assets, are denominated in RMB. We principally rely on dividends and other distributions paid
to us by our PRC subsidiaries. Any significant revaluation of the RMB may materially adversely affect our cash flows, revenues,
earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. Any fluctuations of
the exchange rate between the RMB and the U.S. dollar could also result in foreign currency translation losses for financial reporting
purposes.



We may be subject to penalties, including restrictions
on our ability to inject capital into our PRC subsidiaries and our PRC subsidiaries’ ability to distribute profits to us,
if our PRC resident shareholders or beneficial owners fail to comply with relevant PRC foreign exchange rules.



On October 21, 2005, SAFE issued Relevant
Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment Through Offshore
Special Purpose Vehicles, or the SAFE Circular 75, which became effective as of November 1, 2005. The SAFE Circular 75 requires
PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose
of capital financing with assets or equities of PRC companies, or an “offshore special purpose vehicle.”



In addition, any PRC resident that is a
shareholder of an offshore special purpose vehicle is required to amend its SAFE registration with respect to that offshore special
purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment
or creation of any security interest over any assets located in China or other material changes in share capital. In May 2007,
SAFE issued relevant guidance to its local branches with respect to the process for SAFE registration, which standardized more
specific and stringent supervision of the registration relating to the SAFE Circular 75.



29







On July 4, 2014, the SAFE issued the Circular
on the Administration of Foreign Exchange Issues Related to Overseas Investment, Financing and Roundtrip Investment by Domestic
Residents through Offshore Special Purpose Vehicles, or the SAFE Circular 37, which replaced the SAFE Circular 75. The SAFE Circular
37 requires PRC residents to register with the competent local SAFE branch in connection with their direct establishment or indirect
control of an offshore special purpose vehicle, for the purpose of overseas investment and financing, with such PRC residents’
legally owned assets or equity interests in domestic enterprises or offshore assets or interests. The SAFE Circular 37 further
requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such
as any change of basic information (including change of the PRC residents, name and operation term), increase or decrease of capital
contribution by the PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC
resident holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of
that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent
cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional
capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could
result in liability under the PRC law for evasion of foreign exchange controls.



We are committed to comply with the SAFE
Circular 37 and have taken steps to ensure that our shareholders and beneficial owners who are subject to the SAFE Circular 37
also comply with the relevant rules. However, we cannot provide any assurance that all of our shareholders and beneficial owners
who are PRC residents will comply with our request to make, obtain or update any applicable registrations or comply with other
requirements required by the SAFE Circular 37 or other related rules. In case of any non-compliance on any of our PRC resident
shareholders or beneficial owners, our PRC subsidiaries and such shareholders and beneficial owners may be subject to fines and
other legal sanctions, including restriction on our ability to contribute additional capital into our PRC subsidiaries and our
PRC subsidiaries’ ability to distribute dividends to our offshore holding companies, which will adversely affect our business.



Failure to comply with the registration requirements for
employee share option plans may subject our PRC equity incentive plan participants or us to fines and other legal or administrative
sanctions.



On February 15, 2012, SAFE promulgated
the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies,
or SAFE Circular No. 7, to replace the previous Operating Procedures for Administration of Domestic Individuals Participating
in the Employee Stock Ownership Plan or Stock Option Plan of Offshore Listed Companies. SAFE Circular No. 7 regulates foreign
exchange matters associated with employee stock option incentives or similar incentives permitted under applicable laws and regulations
granted to PRC residents by companies whose shares are listed on offshore stock exchanges. Pursuant to SAFE Circular No. 7,
all PRC residents participating in share incentive plans of offshore listed companies shall, through their employers, jointly retain
qualified PRC agents to register with local SAFE branches. PRC residents include PRC nationals or foreign citizens having been
consecutively residing in PRC for not less than one year, acting as directors, supervisors, senior management personnel or other
employees of PRC entities affiliated with such offshore listed company. A qualified PRC agent may be a PRC entity involved in the
share incentive plan or a PRC institution eligible for asset trusteeship, which is lawfully selected to handle various foreign
exchange matters related to share incentive plans and applies annually for a quota for conversion and/or payment of foreign currencies
in connection with the domestic individuals’ exercise of their employee stock options. The foreign exchange proceeds received
by PRC residents from sale of shares under share incentive plans granted by offshore listed companies must be remitted to bank
accounts in China opened by their employers or PRC agents.



Furthermore, a Notice Concerning Individual
Income Tax on Earnings from Employee Stock Options, jointly issued by the MOF and SAT, provides that domestic companies that implement
employee share option programs must file the employee share option plans and other relevant documents with local tax authorities
having jurisdiction over the companies before implementing such plans, and must file share option exercise notices and other relevant
documents with local tax authorities before exercise by their employees of any share options, and clarify whether the shares issuable
under the employee share options referenced in the notices are shares of publicly-listed companies.



We have registered with the local SAFE bureau
on behalf of our employees who have been granted shares or share options under our share incentive plan and follow other procedures
set forth in SAFE Circular No. 7 and other applicable regulations and we have filed the employee share option plans and other
relevant documents with local tax authorities with competent jurisdiction. If we or any of our PRC option holders fail to comply
with SAFE Circular No. 7, Notice Concerning Individual Income Tax on Earnings from Employee Stock Options or other relevant
regulations in connection with our future grants of shares or share options, we or the relevant PRC option holders may be subject
to fines and other legal or administrative sanctions.



The approval of the CSRC may have been required in connection
with our initial public offering in December 2010 under PRC regulations. The regulation also establishes more complex procedures
for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.



On August 8, 2006, six PRC regulatory
agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the SAT, the State Administration for
Industry and Commerce, the CSRC and SAFE jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors, or the M&A Rule, which became effective on September 8, 2006 and was amended on June 22, 2009. The
M&A Rule requires offshore special purpose vehicles that are controlled by PRC companies or residents and that have been formed
for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets
to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange.



30







On September 21, 2006, the CSRC published
a notice on its website specifying the documents and materials that special purpose vehicles are required to submit when seeking
CSRC approval for their listings outside of China. The interpretation and application of the M&A Rule remain unclear, and our
initial public offering may have required approval from the CSRC. If CSRC approval had been required for our initial public offering
in December 2010, our failure to obtain or delay in obtaining such approval would subject us to sanctions imposed by the CSRC and
other PRC regulatory agencies, which could include fines and penalties on our operations in China, restrictions or limitations
on our ability to pay dividends outside of China, and other forms of sanctions that may materially adversely affect our business,
results of operations and financial condition.



Our PRC counsel, DaHui Lawyers, has advised
us that, based on their understanding of the current PRC laws, regulations and rules and the procedures announced on September 21,
2006, because (i) we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of
the equity or assets of PRC domestic companies and (ii) no provision in the M&A Rule explicitly classifies the contractual
arrangements with Hangzhou Sky and Mijia as a type of transaction subject to the M&A Rule. However,
our PRC counsel further advised us that since there has been no official interpretation or clarification of the M&A Rule, there
remains some uncertainty as to how the M&A Rule will be interpreted or implemented in the context of an overseas offering and
the opinions summarized above are subject to any new laws and regulations or further implementations and interpretations of competent
government authorities in any form relating to the M&A Rule. If the CSRC or other
PRC government authorities determine that prior CSRC approval is required, any future registered offering will be delayed until
we obtain the approval from the CSRC, which may take several months or longer. If a prior approval from the CSRC is required but
not obtained, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities.



The M&A Rule also established additional
procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming
and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction
in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from the MOFCOM be obtained in circumstances
where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies.



We may grow our business in part by acquiring
other companies operating in our industry. Complying with the M&A Rule to complete such transactions could be time-consuming,
and any required approval processes, including approval from MOFCOM, may delay or inhibit our ability to complete such transactions,
which could affect our ability to expand our business or maintain our market share.



We face risks of health epidemics and other disasters,
which could severely disrupt our operations.



Our business could be materially adversely
affected by the outbreak of H1N1, or swine influenza, avian influenza, severe acute respiratory syndrome, or SARS, influenza A
virus subtype H7N9, or another epidemic. For instance, in early 2013, there were outbreaks of influenza A virus subtype H7N9 in
nine provinces of China. Any prolonged recurrence of swine influenza, avian influenza, SARS or other adverse public health developments
in China could adversely affect economic activities in China and require the temporary closure of our offices. Such closures could
severely disrupt our business and adversely affect our results of operations.



Our operations are vulnerable to interruption
and damage from man-made or natural disasters, including wars, acts of terrorism, snowstorms, earthquakes, fire, floods, environmental
accidents, power loss, communications failures and similar events. If any man-made or natural disaster were to occur in the future,
our ability to operate our business could be seriously impaired.



Labor laws in the PRC may adversely affect our results
of operations.



China adopted a labor contract law effective
on January 1, 2008 that establishes more restrictions and increases costs for employers to dismiss employees. For example,
the labor contract law requires certain terminations to be based upon seniority and not merit. If we significantly change or decrease
our workforce in the PRC, the labor contract law could adversely affect our ability to effect such changes in a timely and cost
effective manner, and our results of operations could be adversely affected.



In addition, the labor contract law requires
employers to pay compensation to their employees who agree to bear non-competition obligations on a monthly basis after the employees’
employments expire or terminate, which will increase employers’ operating expenses. According to Interpretation (IV) of the
Supreme People’s Court of Several Issues on the Application of Law in the Trial of Labor Dispute Cases, promulgated on January 18,
2013, a court will sustain an employees’ claim of three months’ compensation even when the employer requests to terminate
the non-competition obligations.



31







Risks Related to Our ADSs



The market price for our ADSs may be volatile, which could
result in substantial losses to you.



The market price for our ADSs may be volatile
and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of
operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations
of other companies operating in our industry, announcements by us or our competitors of material acquisitions, strategic partnerships,
joint ventures or capital commitments, fluctuations in exchange rates between the RMB and the U.S. dollar, intellectual property
litigation, release of transfer restrictions on our outstanding shares or ADSs, and economic or political conditions in China.
In addition, the performance and fluctuation in market prices of other companies with operations located mainly in China that have
listed their securities in the United States may affect the volatility in the price and trading volumes of our ADSs.



Volatility in global capital markets, as
was experienced during the global financial crisis, could also have an adverse effect on the market price of our ADSs. Furthermore,
the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating
performance of particular companies. These market fluctuations may also materially adversely affect the market price of our ADSs.



Future sales or issuances of a substantial number of our
ADSs or common shares could adversely affect the price of our ADSs.



If our shareholders sell substantial amounts
of our ADSs, including those issued upon the exercise of outstanding options, in the public market, the market price of our ADSs
could fall. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate. If any existing shareholder or shareholders sell a substantial amount of common shares,
the prevailing market price for our ADSs could decline.



In addition, we may issue additional common
shares or ADSs to fund future acquisitions or our operations. Your ownership interest in our company would be diluted and this,
in turn, could materially adversely affect the price of our ADSs.



You may not have the same voting rights as the holders
of our common shares and must act through the depositary to exercise your rights.



As an ADS holder, you may only exercise
voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement. Under the
deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the
depositary will vote the underlying common shares in accordance with these instructions. Otherwise, you will not be able to exercise
your right to vote unless you withdraw the common shares underlying your ADSs.



Pursuant to our amended and restated memorandum
and articles of association, we may convene a shareholders’ meeting upon ten clear days’ notice. When a shareholder’s
meeting is convened, you may not receive sufficient advance notice to withdraw the common shares underlying your ADSs to allow
you to vote with respect to any specific matter. If we give timely notice, the depositary will notify you of the upcoming vote
and arrange to deliver our voting materials to you.



We cannot assure you that you will receive
the voting materials in time to instruct the depositary to vote the common shares underlying your ADSs. In addition, the depositary
and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.
This means that you may not be able to exercise your right to vote and the common shares underlying your ADSs may not be voted
as you requested.



Your right to participate in any future rights offerings
may be limited, which may dilute your holdings and you may not receive cash dividends if it is impractical to make them available
to you.



From time to time, we may distribute rights
to our shareholders, including rights to acquire our securities. However, we cannot make any such rights available to you in the
United States unless we register such rights and the securities to which such rights relate under the Securities Act of 1933, as
amended, or the Securities Act, or an exemption from the registration requirements is available. Also, under the deposit agreement,
the depositary will not make rights available to you unless the distribution to ADS holders of both the rights and any related
securities are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no
obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration
statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities
Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.



32







In addition, the depositary has agreed to
pay you the cash dividends or other distributions it or the custodian receives on our common shares or other deposited securities
after deducting its fees and expenses. You will receive these distributions in proportion to the number of common shares your ADSs
represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution
available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property
through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary
may decide not to the such property and you will not receive such distribution.



You may be subject to limitations on the transfer of your
ADSs.



Your ADSs are transferable on the books
of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient
in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers
of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable
to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement,
or for any other reason.



You may face difficulties in protecting your interests,
and your ability to protect your rights through the U.S. federal courts may be limited because we are organized under Cayman Islands
law, conduct substantially all of our operations in China and all of our directors and officers reside outside the United States.



We are organized in the Cayman Islands and
substantially all of our assets are located outside of the United States. We conduct substantially all of our operations in China
through our subsidiaries and SPEs in China. All of our officers and directors reside outside the United States and a substantial
portion of their assets are located outside of the United States. As a result, it may be difficult for you to bring an action against
us or against these individuals in the United States in the event that you believe that your rights have been infringed under the
securities laws or otherwise.



Even if you are successful in bringing an
action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets
or the assets of our directors and officers. In addition, it is uncertain whether the courts of the Cayman Islands or the PRC would
recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the
securities laws of the United States or any state, and it is uncertain whether Cayman Islands or PRC courts would be competent
to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws
of the United States or any state.



Our corporate affairs are governed by our
memorandum and articles of association and by the Companies Law and common law of the Cayman Islands. The rights of shareholders
to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman
Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law,
which has persuasive, but not binding, authority on a court in the Cayman Islands.



The rights of our shareholders and the fiduciary
responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedents in some jurisdictions in the United States. In particular, because Cayman Islands law has no legislation specifically
dedicated to the rights of investors in securities, and thus no statutorily defined private causes of action to investors in securities
such as those found under the Securities Act or the Exchange Act, it provides significantly less protection to investors. In addition,
Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United
States.



As a result of all of the above, our public
shareholders may have more difficulty in protecting their interests through actions against our management, directors or major
shareholders than would shareholders of a corporation organized in a jurisdiction in the United States.



33







Our articles of association contain anti-takeover provisions
that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares,
including common shares represented by our ADSs, at a premium.



Our amended and restated articles of association
contain provisions that limit the ability of others to acquire control of our company. These provisions could deprive our shareholders
of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to
obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority,
without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers,
preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions,
including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights associated with our common shares, in the form of ADS or otherwise. Preferred shares could be issued
quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult.



If our board of directors decides to issue
preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our common shares and ADSs may
be materially adversely affected. Furthermore, our amended and restated articles of association provide for a staggered board,
which means that our directors are divided into three classes, with one-third of our board standing for election every year. This
means that at least two annual shareholders’ meetings, instead of one, are generally required in order to effect a change
in a majority of our directors. Our staggered board can discourage proxy contests for the election of our directors and purchases
of substantial blocks of our shares by making it more difficult for a potential acquirer to take control of our board in a relatively
short time. In addition, our shareholders holding, in aggregate, less than 25% of the paid up capital of our company do not have
the ability to call general meetings or to propose special matters for consideration at such meetings.



We believe we may be a passive foreign investment company,
which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or common shares.



Based on the market price of our ADSs, the
value of our assets and the composition of our income and assets, we believe that it is likely that we were a passive foreign investment
company, or PFIC, for U.S. federal income tax purposes for the nine-month period ended December 31, 2014. A non-U.S. corporation
will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at
least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable
to assets that produce passive income or are held for the production of passive income. A separate determination must be made after
the close of each taxable year as to whether we were a PFIC for that year.



Because the value of our assets for purposes
of the PFIC test will generally be determined by reference to the market price of our ADSs and common shares, our PFIC status will
depend in large part on the market price of our ADSs and common shares, which may fluctuate significantly. Because we believe that
it is likely that we were a PFIC for the nine-month period ended December 31, 2014, certain adverse U.S. federal income tax
consequences could apply to U.S. Holders (as defined in “Item 10. Additional Information — E. Taxation — United
States Federal Income Taxation”) of our ADSs or common shares with respect to any “excess distribution” received
from us and any gain from a sale or other disposition of our ADSs or common shares. See “Item 10. Additional Information
— E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”



| | ITEM 4. | INFORMATION ON THE COMPANY
| | ------- | --------------------------



Our legal and commercial name is Sky-mobi
Limited. We commenced operations through Hangzhou Sky, a limited liability company established in China, in 2005. Hangzhou Sky
is principally engaged in our cooperation with handset companies and providing mobile applications and content to our users. To
enable us to raise capital from international investors, our holding company, Sky-mobi Limited (formerly Profit Star Limited),
was incorporated under the laws of the Cayman Islands as an exempted limited liability company in April 2007. In October 2010,
Profit Star Limited changed its name to Sky-mobi Limited.



In June 2007 and December 2009, we incorporated
Pusida and Dianneng, our wholly-owned subsidiaries in China, respectively. In May 2010, we incorporated Profit Star Software (HK)
Limited, or Profit Star HK, our wholly-owned subsidiary, in Hong Kong. We transferred all of our equity interest in Pusida and
Dianneng to Profit Star HK.



In October 2010, we incorporated Sky Network
International Limited, or Sky BVI, our wholly-owned subsidiary, in the British Virgin Islands. We made Sky BVI our intermediary
holding company by transferring all of our equity interest in Profit Star HK to Sky BVI.



In December 2010, we completed our initial
public offering of 6,125,000 ADSs, each representing eight common shares of par value US$0.00005 per share. We listed our
ADSs on NASDAQ on December 10, 2010.



In September 2011, we incorporated Me Share
Limited in Hong Kong, which was 100% held by Sky BVI. Me Share Limited primarily engages in mobile application store services for
overseas markets, with a majority of its R&D support from Shanghai Texuan Information Technologies Co., Ltd., Me Share Limited’s
wholly owned subsidiary in China. In December 2011, we incorporated Sky Technologies International Limited, or Sky Technologies
BVI, our subsidiary, in the British Virgin Islands. We then transferred all of our equity interest in Me Share Limited to Sky Technologies
BVI. In April 2012, Me Share Limited changed its name to Powerplay Technologies Limited.



34







In December 2011, we incorporated Tiandian,
our wholly-owned subsidiary in China.



In June 2013, we established Hangzhou Mopin
Technologies Co., Ltd. which primarily focuses on cooperation with mobile network operators. As of December 31, 2014, we held 79.88%
equity interest in this subsidiary and the remaining equity interest is held by certain of our officers.



PRC laws restrict foreign-invested
entities engaging in value-added telecommunication services. To comply with PRC laws, we conduct our value-added
telecommunication services and strategic investment in China through 14 SPEs, namely Hangzhou Sky, Mijia, Fanyi, Feineng,
Miyi, Najia, Tianchu, Zunqi ,Geyuan, Dangyi, Mugu, Feidong, Fuyun Duoqu and their respective subsidiaries. These SPEs and
their subsidiaries primarily focus on the provision of mobile application services. We have entered into a series of
contractual arrangements with each of these SPEs and their respective shareholders, through our wholly-owned subsidiary,
Dianneng, through which we exercise effective control over the operations of these entities and receive the economic benefits
of the shareholders’ equity interests in these entities. See “—B. Organizational
Structure—Contractual Arrangements with the SPEs and their shareholders.” Our principal executive offices are
located at 10/F, Building B, United Mansion, No. 2, Zijinghua Road, Hangzhou, Zhejiang 310013,
People’s Republic of China. Our telephone number at this address is +86-571-87770978. Our registered office in the
Cayman Islands is located at the offices of Codan Trust Company (Cayman) Limited, our registered agent, at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.



| | A. | Business Overview
| | -- | -----------------



We are a leading mobile application platform
in China.Our core product, Maopao App Store, allows users to browse and download a wide range of entertainment-oriented
mobile applications and content, including mobile games, music and books.



We launched our Maopao App Store for feature
phones in December 2006, followed by a variety of other feature phone applications, through which we captured substantial market
share in China. In response to the rise of smartphones and increasing demand for applications and mobile content designed for smartphones,
we launched Maopao App Store for smartphones in May 2012. Throughout the years, we have developed a portfolio of Maopao platform
products, including Maopao Game Center, Maopao Browser and Maopao Community that provide rich functionality and engaging user experience
to Android smartphone and feature phone users. As of December 31, 2014, our Maopao platform products had attracted an aggregate
of over 1.5 billion users, including approximately 291.6 million smartphone users. For the three months ended December 31, 2014,
our average DNU and MAU were approximately 530,000 and 33,690,000, respectively.



Building upon our success in Maopao App
Store, we are in the process of enhancing our Maopao platform to integrate a broad spectrum of Maopao platform products and third-party
applications and mobile content that cater to the varying interests, needs and preferences of smartphone and feature phone users
in China.



As a leading mobile application platform
in China with a large and highly engaged user base, we are centrally positioned in China’s mobile application sector, which
includes:



| | · | users, especially younger users with modest income, who constitute the majority of China’s mobile phone
user base. Maopao platform enables smartphone and feature phone users to access and download a wide selection of mobile games and
other applications and content for free and purchase in-app virtual items, premium features and other content at attractive price
points;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | handset companies, including handset manufacturers and independent handset design
houses. We contract with a large number of handset companies to pre-install our Maopao App Store as their default app store, together
with a combination of other Maopao platform applications that may appeal to their customers, on their handsets before shipment.
We provide these handset companies’ customers with a standardized interface to access and download applications and content
from our Maopao platform. Such strategic collaboration effectively extends our user reach
to the customers of these handsets. We work closely with handset companies to optimize the performance of Maopao platform applications
on each of their handset models and enhance user experience. As of December 31, 2014, we had cooperation agreements with over
370 smartphone and 940 feature phone handset companies to pre-install Maopao platform applications on their products, respectively;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35







| | · | mobile network operators’ retail locations.We work closely with China Mobile, China Unicom
                                                                                                              and China Telecom to provide customized software services at their physical stores, including the pre-installation of a wide
                                                                                                              range                                                                                                               of
                                                                                                              applications
                                                                                                              that appeal to their customers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | content providers, including application developers and content title owners. Through Maopao platform, their
applications and content are distributed to thousands of handset models and hundreds of millions of potential users without extensive
customization. We had entered into licensing agreements with over 600 content providers as of December 31, 2014 to provide
a variety of applications and other content, ranging from single-player games and multi-player games to social network applications
that appeal to Chinese users;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | third-party distribution partners. In addition to offering games through Maopao platform,
we also publish a selection of licensed and self-developed games by partnering with major app stores and mobile browsers in China,
such as 91 Wireless, Qihoo 360, Xiaomi App Store and iOS App Store. Partnership with these distribution channels allows us to expand
our customer base and take advantage of the popularity of their platforms and user base;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | payment service providers, including mobile network operators, mobile service providers and other payment processing
agents. We primarily collect sales proceeds from mobile network operators and mobile service providers when users purchase in-app
virtual items, premium features and other content from Maopao platform. In addition, we work with independent payment processing
agents to collect sales proceeds through a variety of payment channels, including pre-paid phone cards, pre-paid game cards, bank
debit cards, wire-transfers and Alipay. As of December 31, 2014, we had entered into agreements with over 60 mobile service
providers in China and overseas and 20 independent payment processing agents. We are also increasingly collaborating with mobile
network operators directly to collect payment from users to enhance channel efficiency and ultimately improve our gross margin;
and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | mobile network operators, whom we cooperate with in various aspects of our business, including the provision
of customized software services at their physical stores, distribution of applications and mobile content and payment collection.
As of the date of this transition report, we have entered into strategic cooperation with all three dominate mobile network operators
in China, namely, China Mobile, China Unicom and China Telecom.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We share revenue from our Maopao platform
with handset manufacturers, mobile network operators, content providers, third-party distribution partners and payment service
providers. We believe that our revenue sharing approach aligns the interests of other industry participants with ours, motivates
them to launch better products and services and fosters a long-term mutually beneficial relationship with us. The below chart sets
forth our current business model:







36







Note:



| | (1) | In addition to offering games through our proprietary platform, we also publish a selection of licensed and self-developed
games by partnering with major app stores and mobile browsers in China.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have grown substantially since we launched
Maopao App Store for feature phones in 2006. Since 2012, we have gradually shifted the strategic focus of our business from feature
phones to smartphones by launching a portfolio of Maopao platform products for smartphones. As of December 31, 2014, our Maopao
platform products had attracted an aggregate of over 1.5 billion users, including approximately 291.6 million smartphone users.
The following table sets forth our average DNU, MAU and paying ratio of Maopao smartphone platform for the periods indicated:



|                 |  | For the Three Months Ended             |       
|---------------- |  | -------------------------------------- | ------
|                 |  | June 30, 2014                          |       
|                 |  | (In thousands, except for percentages) |       
|                 |  |                                        |       
|Average DNU      |  |                                        | 450   
|                 |  |                                        |       
|Average MAU      |  |                                        | 30,000
|                 |  |                                        |       
|Paying Ratio (%) |  |                                        | 11.9% 



Our Products and Services



We focus on providing entertainment-oriented
applications and mobile content primarily through our Maopao App Store, complemented by a range of other Maopao platform applications
that are popular among our users, including Maopao Game Center, Maopao Community and Maopao Browser.



Maopao App Store



Maopao App Store is a leading mobile application
store in China. Through Maopao App Store, our users can conveniently browse and download a wide variety of mobile games as well
as other applications and mobile content.



Maopao App Store enables:



| | · | handset companies to pre-install Maopao App Store onto smartphones and feature phones to enhance
mobile phone features and user experience. It expands the portfolios of mobile applications and content available to mobile phone
users, enhancing the attractiveness of handsets;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                    

| | · | content providers to gain access to a large number of users and potential users without incurring
significant marketing efforts or extensively customizing their content for different handset models;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                       

| | · | users to conveniently browse and download mobile applications from Maopao App Store and purchase
in-app virtual items, premium features and other content from their handsets; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                   

| | · | us and other industry participants to collect payments from users through payment service providers,
including mobile network operators, mobile service providers and independent payment processing agents. The availability of these
user-friendly payment channels incentivizes other industry participants by aligning their interest with ours via revenue sharing.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other Maopao Platform Products



Building upon the success of our Maopao
App Store, we have developed a portfolio of Maopao platform products to further improve the functionality and user experience of
smartphones and feature phones. Our most downloaded Maopao platform applications include Maopao Game Center, Maopao Community and
Maopao Browser.



37







Maopao Game Center.Our dedicated
game store, Maopao Game Center, features an extensive selection of mobile games sourced from third-party game publishers or developed
in-house. We categorize these games by topic, popularity, date of release and various other groupings for our users to conveniently
browse, search and download.



Since 2012, we have been promoting, primarily
through our Maopao Game Center, an increasing number of “light games”, which are mainly easy-to-play micropayment single-player
games that do not require significant data usage or constant mobile network connection. Our “light games” primarily
target students and working-class frequent gamers with lower-end handsets and smaller data plans.



Maopao Community. On our Maopao Community,
members may create virtual profiles, befriend others who share similar ideas, interests or activities and view the profiles or
track the status of their friends through blogs, pictures, instant messages and other social networking functions. Our Maopao Community
also features a wide selection of multi-player games, enabling our Maopao Community members interact with each other in the wireless
game world. We have launched Maopao Community for smartphones in May 2013 which maintains the user interface our feature phone
users are accustomed to and enables feature phone users to transfer their game status, virtual items and community contacts to
Maopao Community installed on their smartphones. Maopao Community has served and is expected to continue to serve as an effective
tool to retain and migrate our loyal Maopao Community users along with our transition to smartphones.



Maopao Browser. Our Maopao Browser
offers mobile users the ability to locate vast amount of information available online. It also features as-your-type suggestions,
complemented with direct links to websites where relevant, and an automatically generated directory of popular websites and applications
grouped by various categories for users to conveniently browse and access.



Applications and Content Available Through Maopao Platform



The main categories of mobile applications
and content available through Maopao platform include:



| | · | single-user applications and content, including single-player games, multimedia applications
and other single-user content; and
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | multi-user applications, including multi-player games and social network applications.
| | - | --------------------------------------------------------------------------------------



In the fiscal years ended March 31,
2013 and 2014, our total number of single-user applications and content titles offered on Maopao platform was 469,256 and 378,955,
respectively, and our total number of multi-user applications was 598 and 1,582, respectively. In the nine months ended December
31, 2014, our total number of single-user applications and content titles offered on Maopao platform was 674,72, and our total
number of multi-user applications was 2,679.



We organize the applications and content
we offer based on popularity and functions, and update the user interface for each of our Maopao platform products on a weekly
basis to prioritize new and popular applications and content offerings. We actively position our content offerings on Maopao platform
based on our analysis of statistical user behavior data and user preferences. We aim to eliminate duplication and competition among
the applications and content offered on our Maopao platform.



Most of our games are free to download and
play, and we generate revenues primarily from sales of in-game virtual items and premium features. The paying ratio of our games
increased from 10.2% in the three months ended March 31, 2014 to 14.1% in the three months ended December 31, 2014. Other applications
and mobile content we offer on Maopao platform are generally free to download in an effort to increase our customer base and loyalty.
We intend to launch additional applications and content that complement our existing offerings based on future collaborative efforts
with third parties and in-house development capabilities.



The following table sets forth the key operating
data for our smartphone platform for the periods indicated:



38







|                           |  | For the Three Months Ended |      
|-------------------------- |  | -------------------------- | -----
|                           |  | June 30, 2014              |      
|Single-player games        |  |                            |      
|                           |  |                            |      
|Average MPU (in thousands) |  |                            | 3,513
|                           |  |                            |      
|Average ARPU (RMB)         |  |                            | 8.8  
|                           |  |                            |      
|Multi-player games         |  |                            |      
|                           |  |                            |      
|Average MPU (in thousands) |  |                            | 54   
|                           |  |                            |      
|Average ARPU (RMB)         |  |                            | 161.4



Single-Player Games



Single-player games, such as card games,
simple strategic games and action games, involve a single player and usually relatively simple rules. Our most popular single-player
games include Raging Sharks, a leisure game, and Infinity Wars, a tower defense card game.



Most of our single-player games are free
to download and play. We usually charge RMB2 to RMB10 for each in-game purchase, such as performance-enhancement skills, weapons
and accessories. On our feature phone Maopao App Store, for some single-player games, we charge a one-time subscription fee for
unlimited access over a period of time, typically less than one month. We also introduce special offers where mobile phone users
can download a bundle of single-player games at a discount.



Other Single-User Mobile Applications



Users can access a broad range of other
applications through Maopao platform. Some of the most popular applications include video players, music players, screen lockers,
instant maps, real-time stock quotes and analysis, weather, network clock and electronic dictionary. We offer most of these applications
for free.



Multi-Player Games and Social Network Functions



We offer an expanding selection of multi-player
games on our Maopao platform, such as multi-player role-playing games and multi-player version of popular card games and strategy
games. Ourmost popular multi-player games include Fantasy of Three Kingdoms, Armed Heroes Online and the Xian Jian
Wen Qing.



Most of our multi-player games are free
to download and play. We charge users for each in-game purchase, such as performance-enhancement skills, weapons and accessories.
For example, more than a hundred in-game virtual items are available for download in the Fantasy of the Three Kingdoms, one of
our most popular multi-player games, and each item typically costs RMB1 to RMB15. During the three months ended December 31, 2014,
the average MPU for our multi-player games was approximately 41,000 and the average ARPU was RMB175.8.



We also offer a wide selection of social
network tools on Maopao platform, including the mobile versions of popular Internet applications in China, such as QQ instant messenger
and Weibo, as well as our own Maopao Community social network. We have a strategic cooperative relationship with Weibo Corporation,
a leading online media company and mobile value-added service provider in China, under which we promote its brand and products
through our Maopao platform products and in return receive commissions based on number of user registrations through our Maopao
platform products.



Content Sourcing and Management



The popularity and success of our Maopao
platform depends on the quality of applications and content we offer, a substantial majority of which are sourced from third-party
content providers. We have also developed certain applications in-house that are popular among our users, such as our mobile book
reader, mobile music player, single-player games and social network applications. Leveraging our statistical user behavior data
and user feedback, we provide our in-house development team and content providers with suggestions and guidance to develop quality
applications and content that address our users’ varying needs and interests.



39







We selectively collaborate with content
providers and had entered into licensing agreements with over 600 content providers as of December 31, 2014. Our content providers
include some of the largest Internet companies in China, such as Baidu and many independent content developers, as well as certain
of our mobile network operators and mobile service providers who offer their mobile applications and content through Maopao platform.
We select content providers based on their reputation and track record and the needs, preferences and interests of mobile users
and handset companies.



We strive to maintain close relationships
with our content providers and motivate them to continuously introduce appealing applications through Maopao platform. Maopao platform
effectively extends the customer reach of our content providers, enabling them to design content that can be delivered to handsets
with a myriad of hardware and operation system configurations without significant marketing spending or extensive customization
for different handset models.



In order to diversify our mobile games offerings
and further expand our user base, we have been promoting an increasing number of “light games” since 2012, primarily
through our Maopao Game Center, which target students and working-class frequent gamers with lower-end handsets and smaller data
plans. “Light games” are mainly easy-to-play micropayment single-player games that do not require significant data
usage or constant mobile network connection. Partly attributable to our ongoing marketing efforts and the surging popularity of
our “light games”, we have achieved significant growth in our revenue from single-player games in the nine months ended
December 31, 2014. We expect the growth of our light gaming business to deepen our relationships with additional small and mid-size
mobile game developers, which account for a large percentage of our content providers.



Contract Terms with Content Providers



We typically enter into exclusive or non-exclusive
licensing agreements with a term of one to three years with selected third-party content providers and share with them a percentage
of revenue or a fixed fee based on number of activations. To incentivize developers’ investment in certain applications that
may require substantial resources and a longer development cycle, such as multi-player games, we sometimes pay content developers
a minimum guaranteed amount in advance to cover part of their development costs in addition to revenue sharing with them once launched.



Support to Content Providers



We emphasize cooperating with content providers.
We license our standard software development kits and related tool suites for free to encourage content providers to develop content
in our proprietary format. We have designed our standard software development kits and related tool suites with modularized functions
to allow content providers to focus on content creation and improvements without concerns over compatibility with handset hardware,
software or network environments. This simplifies our content providers’ development process and shortens their time-to-market.



We have also established a standardized
process to assist content providers to develop and launch applications and content. Our specialized content provider support team
assists content providers in better utilizing our development tools and accelerating their development process. Our field engineers,
some of whom are temporarily stationed at the offices of content providers, assist content providers with project management and
other technical aspects of application development. For example, our field engineers provide technical support to content providers
developing applications and content for the 3G network environment. We also work with selected content providers to test applications
and content before launching them on Maopao platform. After launching an application or content title on Maopao platform, we give
suggestions to content providers to improve their applications and content based on user feedback. We believe these efforts facilitate
the development process of our content providers and enhance our relationship with them. We also host industry events and sponsor
large industry conferences for the content developer community, such as the 3G Application Software Forum we held in Hangzhou in
February 2010, the Global Mobile Internet Conference we sponsored in May 2012, May 2013 and May 2014, and the 2014 TFC Global Mobile
Game Developer Conference and Game Expo we sponsored in September 2014, which is the latest mobile gaming business exhibition in
China. We believe our close collaboration with content providers has well positioned us to offer creative and well-integrated digital
lifestyle and entertainment solutions to our users.



Cooperation with Handset Companies



We primarily promote our Maopao platform
by collaborating with handset companies, including handset manufacturers and independent design houses, to pre-install our Maopao
platform products in their mobile handsets. We believe that, in the highly fragmented and competitive handset market in China,
pre-installation of a mobile application onto handsets before they reach mobile users is a highly effective way for a mobile application
to achieve success.



40







We have formed strong collaborative relationships
with handset companies to embed our Maopao platform products for different types of mobile baseband, chipsets and reference designs.We have cooperated with over 370 smartphone and 940 feature phone handset companies as of December 31, 2014. The handset
companies we collaborate with include branded handset manufacturers such as K-Touch, Coolpad, Konka, ZTE, Gionee and OPPO, as well
as independent design houses such as Topwise and Water World. We select handset companies based on their reputation, development
capabilities and market share and geographic reach of their handsets.



Pursuant to our agreements with handset
companies, which typically have two-year terms and contain automatic renewal provisions, we generally pay handset companies a percentage
of the revenues generated from user purchases within the pre-installed applications or a fixed amount based on number of activations.
Handset companies also place high value on our content selection which is based on years of analysis of statistical data obtained
from an extensive user base and an insight into market trends and user preferences. Pre-installing Maopao platform products that
cater to handset customers’ needs and interests enhances the functionality and user experience of mobile handsets and helps
promote handset sales.



In addition, collaboration with us enables
handset companies to take advantage of our large user base and economics of scale to reduce development costs and costs associated
with negotiating with individual content providers and payment processing agents. We work closely with handset companies to develop
new handset features and optimize the operating environment of individual handset models. Our knowledge of their handset designs
and functions in turn helps us to develop our Maopao platform products to better utilize the hardware and software resources of
mobile handsets. We believe we have built a reputation among handset companies on our competitive value proposition and track record.



Cooperation with Mobile Network Operators



We have established strategic cooperation
with all three dominant mobile network operators in China, namely China Mobile, China Unicom and China Telecom and collaborate
with them in various aspects of our business.



Pre-installation. We contract with
each of China Mobile, China Unicom and China Telecom to pre-install a wide range of applications that appeal to customers at their
physical stores nationwide and share with them a percentage of revenue generated from the pre-installed applications. In March
2014, we entered into a strategic partnership with the Wo Store of China Unicom, the official application store of China’s
second largest mobile network operator. Under this partnership, China Unicom designated us as its official business partner to
provide customized software services through China Unicom’s extensive network of physical stores. As of December 31, 2014,
this strategic partnership covered China Unicom’s physical stores in the fast growing smartphone markets of Zhejiang, Hubei,
Guangdong and Guangxi provinces. We have designed and developed specifically for mobile network operators a smartphone assistant
software, Mopin Smartphone Assistant, which provides a one-stop solution for the installation of various smartphone applications
that cater to different customer demographics at the time a customer purchases smartphones at physical stores of mobile network
operators. In addition, Mopin Smartphone Assistant enables mobile network operators to track and analyze user download and purchases,
which helps promote their mobile data plans and enhance their customer services.



Payment collection services. Each
of China Mobile, China Unicom and China Telecom has entered into cooperation agreements with us, granting us access to their payment
channels for us to collect sales proceeds from them directly without using mobile service providers as intermediaries, thus effectively
improving the efficiency of payment collection. See “—Payment channels—Mobile Network Operators.”



Mobile content distribution services.
We have entered into partnership agreements with each of China Mobile, China Unicom and China Telecom, pursuant to which we offer
their applications on Maopao platform and share with them a percentage of revenue based on user purchases or fixed commission based
on user downloads or activations.



We plan to intensify our cooperation with
mobile network operators to increase our user base, benefit from lower payment channel costs and faster payment collection and
supplement our mobile application and content offerings.



Cooperation with Third-Party Distribution Partners



To complement our proprietary distribution
channels, we also distribute our mobile games, primarily high-grossing games licensed from third-party game developers, through
a wide range of third-party distribution partners, including app stores, mobile browsers and web portals in China, such as 91 Wireless,
Qihoo 360, Xiaomi App Store and iOS App Store. We generally share with these third-party distribution partners a percentage of
the sales proceeds from distributing our games on their properties.



We believe our cooperation with these third-party
distribution network effectively extends our customer reach and diversifies our revenue streams.



41







Payment Channels



Mobile Network Operators



We rely primarily on mobile network operators
for payment collection. We have entered into cooperation agreements with all three dominant mobile network operators in China,
granting us access to their payment channels, which enables us to collect payment directly from them without using mobile service
providers as intermediaries. Our cooperation agreements with mobile network operators usually contain provisions relating to proceeds
sharing ratios, processing fee ratios and billing rates. We usually settle our balances with mobile network operators every month.
Revenues collected through the three mobile network operators, China Mobile, China Unicom and China Telecom, contributed approximately
30.8%, 11.2% and 7.1%, respectively, of our total revenues for the nine months ended December 31, 2014, as compared to approximately
20.5%, 1.5% and 0.1% in the nine months ended December 31, 2013, respectively.



Mobile Service Providers



We collected a portion of our revenues
through the billing channels of mobile service providers, who have access to mobile network operators’ payment channels
pursuant to their respective agreements with mobile network operators.After a mobile user confirms his or her
purchase of in-app virtual items, premium features or other content, Maopao platform prompts the user to send an SMS to one
of our selected mobile service providers, who will then send the user a confirmation SMS with transaction details and a
simultaneous message to the mobile network operator. Upon receipt of the confirmation SMS, the mobile network operator
records the transaction and bills the user. As of December 31, 2014, we had entered into agreements with over 60 mobile
service providers.We select mobile service providers based on their network coverage, service quality,
proceeds sharing arrangements and track record of payment collection. Our cooperation agreements with mobile service
providers usually contain provisions relating to proceeds sharing ratios, processing fee ratios and billing rates of mobile
network operators and generally have terms of one to three years without automatic renewal provisions. We generally share
with mobile service providers a percentage of the payments they collect, which are net of the fees they pay to mobile network
operators. We receive settlement statements from mobile service providers on a monthly basis, which indicate the aggregate
amount of fees that were charged to users for purchases through Maopao platform. We usually settle our balances with mobile
service providers every month. Revenues generated through our top three mobile service providers, Union Mobile Pay, A8 New
Media and Guojiao Shixun, contributed approximately 7.7%, 1.9% and 1.5%, respectively, of our total revenues for the nine
months ended December 31, 2014.



Our mobile service providers depend on mobile
network operators for billing and collection services. See “Item 3. Key Information — D. Risk Factors —
Risks Related to Our Business and Our Industry — We depend on mobile service providers, and ultimately mobile network
operators, for the collection of a substantial majority of our revenues, and any loss of or deterioration in our relationships
with mobile service providers, or a disruption in our mobile service providers’ relationships with mobile network operators,
may result in severe disruptions to our operations and loss of revenues.”



Third-party Payment Channels



In addition to mobile network operators
and mobile service providers’ billing channels, we offer a variety of other payment options to our users, including game
cards of third-party companies such as Giant Interactive, Netease, Perfect World and Shanda, other prepaid cards, bank remittance,
China Post, and virtual currency such as QQ Currency, among others.Users may use game cards or other prepaid
cards to make purchases in our Maopao Community. For these payment channels, we usually collect through independent payment processing
agents and share a percentage of proceeds with them, which is usually lower than the commission we pay mobile service providers.
Our agreements with the independent payment processing agents generally have terms of one year with automatic renewal provisions.



Sales and Marketing



We aim to increase sales by continuously
introducing applications and content that appeal to our users, increasing our users’ purchasing frequency and average spending.
Our market research team keeps abreast of the latest market trends and user preferences by analyzing user statistical data and
provide content development suggestions to third-party content providers and our in-house development team on a real-time basis.
We market and promote Maopao App Store and our applications and other content to users through the following channels.



| | · | Pre-installation. We primarily promote our Maopao platform by collaborating with handset companies, including
                                                                                                              handset manufacturers and independent design houses, to pre-install our Maopao platform products in their handsets. We
                                                                                                              emphasize maintaining close relationships with handset companies to increase the number of mobile handsets pre-installing
                                                                                                              Maopao platform products. As of December 31, 2014, we had cooperated with over 370 smartphone and 940 feature phone handset
                                                                                                              companies. We are also developing relationships with additional handset companies to further extend our user reach. In
                                                                                                              addition, we collaborate with China Mobile, China Unicom and China Telecom to pre-install our Maopao platform applications at
                                                                                                              their                                                                                                               physical
                                                                                                              stores
                                                                                                              nationwide.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42







| | · | Advertising and promotions.We regularly introduce sales events based on certain themes
and grouping similar applications and content into packages.We have implemented a Talented User program, under which some
of our users who are familiar with Maopao platform and its applications and content recommend and promote applications and content
to other users in forums that discuss frequently asked questions about Maopao platform. We also attend and sponsor various industry
events and conferences, such as the Global Mobile Internet Conference in May 2014 in Beijing, China, the Daiwa Hong Kong China
Investment Seminar 2014 in June 2014 in Tokyo, Japan, the 2014 MarcumBP China Best Ideas Investment Conference in September
2014 in Beijing, China and the 2014 TFC Global Mobile Game Developer Conference and Game Expo in September 2014 in Guangzhou, China,
to introduce our Maopao platform products to potential users and business partners and increase product visibility internationally.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Prior to launching new applications and
content, we usually conduct test marketing by offering the new applications or content to selected users. We analyze user purchases
and feedback to forecast demand, growth potential and acceptable price range of the applications and content, and plan our launch
and marketing accordingly to enhance marketing efficiency.



International Expansion



We believe we are well-equipped to expand
into overseas markets with a large number of users of China-manufactured mobile handsets, such as India, Indonesia, Malaysia and
other emerging markets in Southeast Asia and South America and have already initiated our expansion efforts in these markets. We
have identified key mobile market participants, including local mobile network operators, content providers and handset manufacturers
in these markets and have integrated them into our global network. We have a dedicated research and development and sales team
covering each of our major overseas markets and we have translated the user interface of many of our single-player games and other
applications into local languages, including English, Hindi and Thai.



We will continue to collaborate with China-based
handset companies to have Maopao platform products pre-installed onto their handsets for export.



Operation of Maopao Platform



Maopao platform is operated on our network
infrastructure of over 1,100 computer servers. Our network infrastructure automatically reports any detected malfunctions on a
real-time basis to our network control center, which allows us to quickly respond to and resolve issues to ensure the stability
and security of our network.



Our operations team, which consisted of
96 employees as of December 31, 2014, is responsible for the operation of applications and other mobile content available
on Maopao platform. They ensure the proper functioning of wireless connection and data transmission systems and application features,
initiate remediation processes once bugs or other defects are detected and provide application updates for users to download. Our
operations team also polices against rampant piracy in China, which allows users to bypass mobile application stores, damaging
the operations and reputation of application store operators, content providers and other industry participants. We regularly analyze
the download and billing records of handsets using Maopao platform in order to detect piracy.



Customer Service



We place high value on quality customer
services. We have an in-house call center and a website forum that provide real-time assistance to Maopao platform users. Our in-house
call center provides customer service 24 hours a day, seven days a week.



Our customer service representatives are
trained to address user inquires and complaints and educate users and potential users about Maopao platform products. We actively
monitor user complaints and provide feedback to content providers to identify and address potential issues. We were granted the
“Golden Ear Microphone Award” by Customer Care & Management World Group in 2011 for our call center providing
the best customer experience.



We endeavor to hire qualified customer representatives
and regularly evaluate their performance. Each customer representative completes monthly mandatory training conducted by experienced
managers on product knowledge, service attitude, complaint handling and communication skills.



43







Our Technologies



We have focused on and will continue to
invest in our technologies, which help us connect the various resources of the mobile application ecosystem and deliver superior
user experience. Our technologies enable users to search and download an expanding collection of applications and purchase virtual
items, premium features and other content that cater to their varying interests on a platform that is highly scalable and reliable.
We believe Maopao platform and related technologies provide practical solutions to the problems facing mobile application providers
in China.



Data Mining and Big Data Analytic Technologies



We apply big data analytic technologies
to ensure the quality of our Maopao platform products, enhance user experience and achieve higher user engagement and monetization.
Leveraging our advanced data mining and big data analytic capabilities, we are able to extract, process and analyze a vast and
growing amount of user behavior and preference data, such as user demographics, preferred log-in time, in-app activity levels,
purchase patterns and effectiveness of promotional activities, to identify applications and content that our users will be most
interested in. By comparing the user behavior and preference data we have compiled against an index of user-specific parameters,
our personalized recommendation engine provides real-time tailored mobile application recommendations that appeal to each individual
user.



Cloud Computing Platform



Our cloud computing platform, Maopao Cloud
Services, is a distributed computing platform tailored for mobile gaming business. It is built with proprietary technology that
enables servers clusters to perform with enhanced computing power and higher stability to facilitate the low-latency and long running
time of mobile games. Maopao Cloud Services offers a suite of cloud services such as elastic computing, database storage and services
and large-scale data processing. It identifies the most efficient and stable connection in our network for each task which enables
real-time dynamic allocation of our servers, bandwidth and other resources to support the requirements of our users and content
providers.



Content Delivery Network



By integrating our proprietary content distribution
network with third-party content delivery networks, we have built in a distributed, load-balanced mobile application distribution
system based on cloud-based infrastructure and distributed storage technologies that achieves high availability at high speed.
This system allows heavy traffic on our Maopao platform to be redistributed to different servers based on the processing capability
of each server to minimize our users’ waiting time. Designed specifically for a large Chinese mobile user base that is geographically
dispersed, this infrastructure can be expanded easily as data storage and user visits increase and is optimized to handle small
files, fragmented small file retrieval and remote backup.



Compatibility with Mobile Handsets



China’s mobile handset market is characterized
by the fragmentation of handset hardware, ranging from economic feature phones designed for basic telecommunication functions to
top-of-the-line smartphone models. A successful mobile application must be compatible with such diversified hardware, as well as
a myriad of operating systems and other software available on handsets in China.



Maopao platform is designed to be compatible
with or customized for all mainstream handset development hardware and software and to facilitate the operation of individual applications
on various mobile operating systems. With our familiarity of various handset models in China through our cooperation with handset
companies and involvement in their handset design process, we design Maopao platform products to better utilize the resources of
popular handset models’ hardware and software and bypass their system bottlenecks, enhancing the performance of our applications
and content in the actual operative environment.



Connectivity with Mobile Networks



China’s mobile network environment
also presents challenges to mobile application providers. Each of the three dominant mobile network operators has numerous provincial
subsidiaries operating local networks in their respective regions. Therefore, a national mobile application provider must deal
with diverse network operating environments. Utilizing our core development team’s experience in telecommunications networking,
we have a good grasp of the local network operating environments in different regions in China, including their connectivity, interconnection
among different networks and their respective fee standards.



Maopao platform is designed to make the
best use of network resources, accommodating varying network operating conditions. For example, when users use the applications
and content on Maopao platform, Maopao platform automatically detects local network conditions, lists network connection alternatives
and selects the optimal connection solution. When connecting to a local wireless network with data transmission problems, our built-in
algorithms will minimize data error during transmission.



44







Digital Rights Management



Maopao platform is designed to protect against
piracy. Unlike other application stores that rely on open source software like Java based programs, our proprietary MRP format
has built-in encryption features for content-protection and secured billing. Each mobile handset installing Maopao platform products
is assigned with an individual computing method for its billing records. Even if hackers attack a handset, the impact is usually
limited to that specific handset.



Scalable Hardware Infrastructure



Each physical server in our infrastructure
network functions as a virtualized central server, which supports simultaneous mobile application access by approximately one million
mobile users. We utilize this technological foundation for mass computing and operational stability, supporting most sophisticated
applications such as multi-player games and complicated social network functions.



Single Socket Solution and Easy Upgrade Process



We implement a single socket solution, which
significantly improves wireless data transmission speed and application stability. Unlike certain other mobile application stores
that require users to open a socket for each application, our single-socket approach saves users the time and resources needed
for opening and closing different sockets and switching among sockets. Maopao platform and the cloud computing at our servers allow
the concurrent operation of several functions through one socket on a given handset.



For certain applications, such as multi-player
games, users generally have to reload the entire application for application upgrades, which drastically slows down the application
and compromises user experience. Maopao platform simplifies the upgrade process by reloading only the part of the applications
that requires upgrade, significantly reducing the reloading time.



Competition



The mobile application market in China is
fast evolving and highly competitive. The market is characterized by frequent introduction of new products and services, short
product life cycles, evolving industry standards, regular improvement in performance characteristics, rapid adoption of technological
and product advancements, user price sensitivity and aggressive price cutting by competitors with resulting downward pressure on
gross margins. We compete with:



| | · | other independent application store operators;
| | - | ----------------------------------------------



| | · | handset companies, mobile service providers, mobile operating systems and other industry participants that have developed or
may develop their own application stores;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | large Chinese Internet companies that may develop their own mobile application stores, applications or other mobile content;
and
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | other mobile application distributors and other content providers, such as mobile game distributors.
| | - | ----------------------------------------------------------------------------------------------------



Our major competitors include 91 Wireless,
Tencent, Qihoo 360 and Wandoujia. We may also face alliances between our existing and new competitors. New competitors may also
emerge. Some of our competitors or potential competitors may have greater development experience and resources than we have. We
compete primarily on the basis of user base, relationships with mobile handset companies, mobile network operators, mobile service
providers and mobile network operators, key technologies and research and development capabilities. For a discussion of risks relating
to the mobile application market in China, see “Item 3. Key Information — D. Risk Factors — Risks Related
to Our Business and Our Industry — We may face increased competition, which could reduce our market share and materially
adversely affect our results of operations.”



Intellectual Property



We regard our copyrights, trademarks, trade
secrets and other intellectual property critical to our success, and rely on a combination of trademark and copyright law, trade
secret protection and confidentiality and/or license agreements with our employees, content providers and others to protect our
proprietary rights. Our research and development personnel have entered into confidentiality and proprietary information agreements
or agreements containing confidentiality and proprietary clauses with us, pursuant to which they are required to assign to us all
of the inventions, designs and technologies they develop during their employment with us.



45







Licenses from Third Parties



While we develop certain applications in-house,
a majority of the applications and content offered on our Maopao platform are developed by and sourced from third-party content
developers. We selectively collaborate with content providers and had entered into licensing agreements with over 600 content providers
as of December 31, 2014. Under the license agreements, we generally share a percentage of revenue with the content developers
or pay a fixed fee based on number of activations. We sometimes pay content providers a minimum guaranteed amount in advance to
cover part of their development costs in addition to revenue sharing.



Trademarks, Trade Names, Copyrights and Domain Names



As of the date of this
transition report, we have applied for the registration of  ,  , 
,  and other trademarks in China.We have obtained 132 copyright registrations for
software we developed, including development tools for our MRP format, as well as our Maopao platform products. In addition,
we have registered 103 domain names, including sky-mobi.com and 51mrp.com, our primary websites.



While we actively protect our proprietary
rights, these efforts may not be adequate to prevent the infringement or misappropriation of our intellectual property. This is
particularly the case in China, where intellectual property laws may not protect our proprietary rights as fully as in the United
States. Infringement or misappropriation of our intellectual property could materially harm our business.



In addition, our product offerings may infringe
patents, copyrights or other intellectual property rights held by third parties, subjecting us to legal proceedings and claims,
see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Our Industry —
Our results of operations, financial performance and business may be adversely affected by potential intellectual property rights
infringement claims against us.”



Seasonality



Our results of operations may be affected
by seasonal trends caused by user behavior and demand for our applications and content offerings. Our revenues are generally higher
during holiday seasons, when users tend to download more applications and content from Maopao platform and incur higher purchases.
Such seasonality has appeared less prominent in recent periods as our user base continue to increase.



Insurance



We maintain directors and officers liability
insurance and do not maintain any property insurance other than insurance for our vehicles. Consistent with industry practice in
China, we do not maintain business interruption insurance. Damage to any of our equipment or buildings or a significant product
liability claim that is not covered by our insurance policies could have a material adverse effect on our results of operations.
See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Our Industry —
We have limited insurance coverage, which could expose us to significant costs and business disruption.”



Regulations



Regulation of the Telecommunications Industry



Telecommunications Services



The Regulations on Telecommunications of
the PRC, or the Regulations on Telecommunications, promulgated by the State Council of the PRC, or the State Council, on September
25, 2000 and amended on July 29, 2014, regulate the telecommunications industry and related activities and services in the PRC.
The MIIT regulates the telecommunications industry on a national level and the relevant provincial-level Communications Administrative
Bureaus, or the CABs, supervise and regulate the telecommunications industry in their respective administrative regions.



The Regulations on Telecommunications classify
telecommunications services into two main categories: (1) basic telecommunications services and (2) telecommunications
value-added services, and further divide each main category into several sub-categories. The provision of telecommunications value-added
services in the PRC is subject to the examination and approval of, and requires a license issued by, the MIIT or the relevant CABs.
According to the Catalog for Classification of Telecommunications Businesses, which became effective on April 1, 2003, our
business constitutes provision of information services through mobile networks and the Internet, and is classified in the category
of telecommunications value-added services.



46







On September 25, 2000, the State Council
promulgated the Administrative Measures on Internet Information Services, or the Internet Measures, as amended in January 2011,
which regulate the provision of Internet information services. Under the Internet Measures, “Internet information services”
refer to services that provide Internet information to online users, and are categorized as either commercial services or non-commercial
services. Pursuant to the Internet Measures, commercial Internet information services operators must obtain a value-added telecommunications
license for Internet information services from the MIIT or the relevant CABs before engaging in any commercial Internet information
services operations within the PRC. In addition, if the Internet information services involve provision of information relating
to news, publication, education, medicine, health, pharmaceuticals, medical equipment and other services for which statutory approvals
are required from other additional governmental authorities, such approvals must be obtained before applying for such license.



On March 1, 2009, the MIIT issued the
Administrative Measures for the Licensing of Telecommunications Business Operations, which set forth the basic requirements that
an applicant must satisfy when applying for a license to provide telecommunications value-added services in the PRC. Such requirements
include the following:



| | · | the applicant is a duly incorporated company;
| | - | ---------------------------------------------



| | · | the applicant has the necessary funds and professional staff suitable for its business activities;
| | - | --------------------------------------------------------------------------------------------------



| | · | the applicant has the reputation or capability to provide customers with long-term services;
| | - | --------------------------------------------------------------------------------------------



| | · | to operate telecommunications value-added services business across two or more provinces, autonomous regions or centrally administered
municipalities, the applicant should have a minimum registered capital of RMB10.0 million; to operate telecommunications value-added
services business within one province, autonomous region or centrally administered municipality only, the applicant should have
a minimum registered capital of RMB1.0 million;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the applicant has the necessary premises, facilities and technical scheme;
| | - | --------------------------------------------------------------------------



| | · | the applicant and its major capital contributors and key business managers have no record of violating rules of the telecommunication
supervision and administration during the past three years; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | other requirements provided by relevant authorities.
| | - | ----------------------------------------------------



Provision of telecommunications value-added
services across two or more provinces, autonomous regions or centrally administered municipalities requires the approval of the
MIIT and a Trans-regional Telecommunications Value-added Services Operation License issued by the MIIT. Provision of such services
to one province, autonomous region or centrally administered municipality requires only the approval of the relevant CAB, which
will issue a Telecommunications Value-added Services Operation License. We provide our telecommunications services from Zhejiang
province only and we do not have servers in other parts of China. As such, we only need the approval of the Zhejiang CAB.Each
of Hangzhou Sky, Mijia, Fanyi, Feineng, Miyi, Najia and Leidong has been granted a Telecommunications Value-added Services Operation
License by Zhejiang CAB.



On March 13, 2005, the MII issued the
Specifications for Telecommunications Services, which specify the telecommunications service standards to which telecommunications
service providers in the PRC should conform. It also requires telecommunications services providers to establish a sound service
quality management system and make periodic reports to the relevant telecommunications authorities.



Foreign Investments in the Telecommunications
Value-added Services Industry



Foreign direct investment in the telecommunications
services industry in China is regulated by the Regulations on the Administration of Foreign-Invested Telecommunications Enterprises,
or the FITE Regulations, issued by the State Council on December 11, 2001, became effective on January 1, 2002 and was amended
by the State Council on September 10, 2008. According to the FITE Regulations, a foreign investor’s ultimate equity
interests in any entity providing telecommunications value-added services in the PRC may not exceed 50% and a foreign investor
wishing to acquire any equity interest in a telecommunications value-added services business in the PRC must demonstrate a good
track record and prior experience in providing telecommunications value-added services outside the PRC.



47







The Guiding Catalog for Foreign Investment
Industries (2015 Revision), which was promulgated by MOFCOM and the National Development and Reform Commission on March 10, 2015,
or the Guiding Catalog 2015, also imposes the 50% restriction on foreign ownership in value-added telecommunications business.



On July 13, 2006, the MII issued the
MII Notice, which prohibits holders of telecommunications value-added services operating licenses, including Trans-regional Telecommunications
Value-added Services Operation Licenses and Telecommunications Value-added Services Operation Licenses, from leasing, transferring
or selling their licenses to any foreign investors in any manner, or providing any resources, premises or facilities to any foreign
investors for illegal operation of telecommunications services businesses in the PRC.



The MII Notice also requires that (1) holders
of telecommunications value-added services operation licenses or their shareholders must directly own the domain names and trademarks
used by such license holders in their daily operations; (2) each license holder must have the necessary facilities for its
approved business operations and maintain such facilities in the regions covered by its license; and (3) all value-added telecommunications
service providers maintain network and Internet security in accordance with the standards set forth in relevant PRC regulations.
If a license holder fails to comply with the requirements in the MII Notice and fails to remedy such non-compliance within a designated
period, the MIIT or relevant CABs may take administrative actions against such license holders, including revoking their telecommunications
valued-added services operation licenses. We provide our services through our controlled SPEs that own Telecommunications Value-added
Services Operation Licenses.



Regulation of the Software Development Industry



Software Development



On October 16, 2000, the MII, Ministry
of Education, Ministry of Science and Technology and the SAT promulgated the Certifying Standards and Administrative Measures for
Software Enterprises (Proposed), which specify the certifying standards of software enterprises. Circular of Printing and Distributing
the Administrative Measures for the Recognition of Software Enterprise promulgated by SAT, MOF, MIIT and National Development and
Reform Commission on February 6, 2013 further provides that the standards of software enterprises should comply with relevant provisions
stipulated by Circular on Relevant Taxation Policies for Further Encouraging the Development of the Software and Integrated Circuit
Industries, or Circular No. 27 (2012).



Enterprises that are qualified as “software
enterprises” are entitled to certain preferential policies in the PRC. According to the Circular on Relevant Taxation Policies
for Encouraging the Development of the Software and Integrated Circuit Industries, or Circular No. 25, issued by the
MOF, SAT and General Administration of Customs on September 12, 2000 , newly-established software development enterprises may be
exempted from income tax in the first two years of profitability and pay income taxes at half the standard rate for the next three
years.



On February 22, 2008, the MOF and SAT
promulgated the Notice on Several Preferential Policies in Respect of Enterprise Income Tax, or Notice 2008 No. 1, reiterating
the policy that a software enterprise newly established within China may, upon determination, be exempted from income taxes for
its first two profit-making years and will be subject to income tax at half the standard rate for the next three years. On April 24,
2009, the MOF and SAT promulgated the Notice on Several Issues Relevant to the Implementation of the Preferential Policies on Enterprise
Income Tax, which states that software enterprises and integrated circuit production enterprises established prior to the end of
2007 may, upon certification, enjoy the preferential policies on EIT reductions and exemptions within specified periods as provided
in the Notice 2008 No. 1. An enterprise that made profits in 2007 or in the years preceding 2007 and started enjoying the
EIT reductions and exemptions within specified periods may enjoy the relevant preferential policies from 2008 until the expiration
of the specified periods.



According to the Circular No. 27 (2012),
issued by the MOF and SAT on April 20, 2012 and became effective on January 1, 2011, enterprises which enjoyed preferential treatment
under Notice 2008 No. 1before December 31, 2010 may continue to enjoy preferential treatment until the expiration of
the original five-year period.



The software development enterprise certification
is subject to annual examination. Hangzhou Sky was granted a software enterprise certification on December 14, 2007, and passed
the annual inspection for 2008 and 2009. It enjoyed the preferential income tax policy, i.e., income tax exemption for the first
two profit-making years (i.e., 2008 and 2009), and a reduced rate for the next three years. Mijia was granted a software enterprise
certification on September 10, 2009, and passed the annual inspection for 2010 and 2011. It enjoyed the preferential income tax
policy, i.e., income tax exemption for the first two profit-making years (i.e., 2010 and 2011), and a reduced rate for the next
three years.



48







On March 1, 2009, the MIIT issued the
Administrative Measures for Software Products, or the Measures for Software Products, to regulate the development, production,
sale and import of software products, including computer software, software embedded in information systems and equipment, and
computer software provided in conjunction with other information or technology services. The Measures for Software Products forbid
the development, production, sale and import of software products that infringe intellectual property rights of third parties,
contain computer viruses, harm computer system security, do not conform with applicable software standards of PRC or contain content
prohibited by PRC law.



The Measures for Software Products require
registration and filing of software products with provincial level software registration institutions authorized to accept and
review software products registration applications. Once accepted for review, the software product registration application will
be publicly announced, and if no objection is received within a seven-working-day publication period, a software registration number
and a software product registration certificate will be granted. A software registration certificate is valid for five years and
may be renewed upon expiration.



Foreign Investments in the Software Development
Industry



According to the Guiding Catalog 2015, foreign
investment is encouraged in the sector of software development and production. As such, there are no restrictions on foreign investment
in the software development industry in the PRC aside from requirements to obtain business licenses and other permits that every
software developer in the PRC must obtain.



Regulation of Intellectual Property Rights



Trademarks



Registered trademarks in the PRC are protected
by the Trademark Law of the PRC, which came into effect in 1982 and was revised in 1993, 2001 and 2013 as well as the Implementation
Regulation of the PRC Trademark Law adopted by the State Council in 2002. A trademark can be registered in the PRC with the Trademark
Office under the State Administration for Industry and Commerce. The protection period for a registered trademark in the PRC is
ten years starting from the registration date and may be renewed if an application for renewal is filed within twelve months prior
to expiration. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration.
Where a trademark for which a registration has been made is identical or similar to another trademark which has already been registered
or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application
for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the
existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another
party and has already gained a “sufficient degree of reputation” through such party’s use.



Copyright



Copyright in the PRC is protected by the
Copyright Law of the PRC, which was promulgated in 1990 and revised in 2001 and 2010. Under the revised Copyright Law, copyright
protection has been extended to Internet activities, products disseminated over the Internet and software products. The amended
Copyright Law also requires registration of a copyright pledge. Copyrights are reserved by the author, unless otherwise specified
by law. According to Article 16 of the Copyright Law, if a work constitutes “work for hire,” the employer, instead
of the employee, is considered the legal author of the work and will enjoy the copyrights of such “work for hire” other
than rights of authorship.



“Works for hire” include (1) drawings
of engineering designs and product designs, maps, computer software and other works for hire, which are created mainly with the
materials and technical resources of the legal entity or organization with responsibilities being assumed by such legal entity
or organization and (2) those works the copyrights of which are, in accordance with the laws or administrative regulations
or under contractual arrangements, enjoyed by a legal entity or organization. The actual creator may enjoy the rights of authorship
of such “work for hire.”



A copyright owner may transfer its copyrights
to others or permit others to use its copyrighted works. Use of copyrighted works of others generally requires a license from the
copyright owner. The protection period for copyrights in the PRC varies, with 50 years as the minimum period of protection. The
protection period for a “work for hire” for which a legal entity or organization owns the copyright (except for the
right of authorship) is 50 years, expiring on December 31 of the fiftieth year after the first publication of such work.



In China, computer software copyrights are
protected by the Copyright Law. The State Council and the State Copyright Administration of the PRC have promulgated various regulations
relating to the protection of software copyrights in China. Under these regulations, computer software that is independently developed
and exists in a physical form is protected, and a software copyright owner may license or transfer its software copyrights to others.
Registration of software copyrights, exclusive licenses and transfer contracts with the Copyright Protection Center of China (previously,
the State Copyright Administration) or its local branches is encouraged.



49







Although such registration is not mandatory
under PRC law, it provides owners with more protection. On January 30, 2013, the State Council issued the Decision of the
State Council on Revising the “Regulations for the Protection of Computer Software” (“Order No. 632”),
which became effective on March 1, 2013. Order No. 632 increases fines for the following actions.



| | (1) | Reproducing in full or in part a copyright owner’s software;
| | --- | ------------------------------------------------------------



| | (2) | Distributing, renting, or disseminating via an information network a copyright owner’s software to the public;
| | --- | --------------------------------------------------------------------------------------------------------------



| | (3) | Intentionally evading or disabling a copyright owner’s technical measures for protecting the software copyright thereof;
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | (4) | Intentionally deleting or modifying electronic information on software rights management; or
| | --- | --------------------------------------------------------------------------------------------



| | (5) | Transferring, or granting license, to others the right to exercise a copyright owner’s software copyright.
| | --- | ----------------------------------------------------------------------------------------------------------



Under the circumstances specified in Item
(1) or Item (2) of the previous paragraph, a fine of RMB 100 per item or a fine of between one and five times the
value of the goods may be imposed (in addition to the sanctions initially imposed by the original regulations); under the circumstances
specified in Item (3), Item (4) or Item (5) of the previous paragraph, a fine of less than RMB 200,000 may be imposed
(in addition to the sanctions initially imposed by the original regulations).



Regulation of the Internet



Internet domain names



Internet domain names in the PRC are regulated
by (i) the Administrative Measures on Registration of Chinese Domain Name (Proposed), which was promulgated on November 3, 2000
by PRC’s domain name registrar, the China Internet Network Information Center, or CNNIC , (ii) the Administrative Measures
on the PRC Internet Domain Name, which was promulgated by the MII and became effective on December 20, 2004, (iii) the Implementation
Rules of Registration of Domain Name, which was promulgated by CNNIC and became effective on May 29, 2012, and (iv) the Measures
on Domain Name Disputes Resolution for the Chinese Internet issued by CNNIC which became effective on June 28, 2012.



Domain name service organizations accept
applications for network domain names and domain name registration applicants become holders of the registered domain or name after
registration. A holder needs to pay operation fees on time to keep its registered domain name or the domain name registrar may
revoke the domain name. In case any registration information of a domain name changes, the holder must file the change with the
domain name registrar within 30 days after such change. CNNIC is responsible for the administration of .cn domain names and Chinese
domain names.



Provision of Internet Information
Services



On September 25,
2000, the State Council promulgated the Administrative Measures on Internet Information Services, or the Internet Measures, as
amended in January 2011, which regulate the provision of Internet information services. Under the Internet Measures, “Internet
information services” refer to services that provide Internet information to online users, and are categorized as either
commercial services or non-commercial services. Pursuant to the Internet Measures, commercial Internet information services operators
must obtain a value-added telecommunications license for Internet information services from the MIIT or the relevant CABs before
engaging in any commercial Internet information services operations within the PRC. In addition, if the Internet information services
involve provision of information relating to news, publication, education, medicine, health, pharmaceuticals, medical equipment
and other services for which statutory approvals are required from other additional governmental authorities, such approvals must
be obtained before applying for such license.



Internet content providers are not allowed
to provide services beyond the scope of the content that has been licensed or registered. The Internet Measures also provide a
list of prohibited content on the Internet. Internet information service providers are required to monitor and censor the information
on their websites, and when prohibited content is found, they should terminate the transmission immediately, keep relevant records
and report the prohibited content immediately to relevant authorities.



50







According to these measures, commercial
Internet information service providers must obtain a License for Internet Content Providers, or ICP license.



On February 17, 2011, the MOC issued
the Provisional Regulations for the Administration of Internet Culture, or the Internet Culture Regulations, which took effect
on April 1, 2011 and replaced the Provisional Regulations for the Administration of Internet Culture, which were issued by
the MOC on May 10, 2003 and were amended on July 1, 2004.



The Internet Culture Regulations apply to
entities engaging in activities related to “Internet cultural products,” including music and video files, network games,
animation features and audiovisual products, performed plays and artwork converted for dissemination via the internet. Pursuant
to these regulations, commercial entities are required to apply to the relevant local branch of the MOC for an Internet Culture
Operating Permit if they engage in any of the following types of activities:



| | · | the production, duplication, importation, wholesale, retail, leasing or broadcasting of Internet cultural products;
| | - | -------------------------------------------------------------------------------------------------------------------



| | · | the dissemination of Internet cultural products on the Internet or transmission thereof to (i) client end devices such
as computers, fixed-line or mobile phones, television sets or gaming consoles and (ii) places offering internet access services,
such as internet cafes, for the purpose of browsing, reading, using or downloading such products; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the exhibition or holding of contests related to Internet cultural products.
| | - | ----------------------------------------------------------------------------



Online Games



On July 11, 2008, the General Office
of the State Council promulgated the Regulation on Main Functions, Internal Organization and Staffing of GAPP, or the Regulation
on Three Provisions. On September 7, 2009, the Central Organization Establishment Commission issued the corresponding interpretations,
or the Interpretations on Three Provisions. The Regulation on Three Provisions and the Interpretation on Three Provisions granted
the MOC overall jurisdiction to regulate the online game industry, and granted the SAPPRFT the authority to issue approvals for
the Internet publication of online games. Specifically, (a) the MOC is empowered to administrate online games (other than
the pre-examination and approval before Internet publication of online games); (b) subject to the MOC’s overall administration,
the SAPPRFT is responsible for the pre-examination and approval of the Internet publication of online games; and (c) once
an online game is launched, the online game will be only administrated and regulated by the MOC.



On June 3, 2010, the MOC issued the
Tentative Rule on Administration of Online Games, or the Rule on Online Games, effective as of August 1, 2010. According to
the Rule on Online Games, companies that plan to operate online games, issue virtual currency and provide virtual currency transaction
services must obtain a license from the provincial counterpart of the MOC. The MOC is responsible for reviewing the content of
online games. Online game operators are also required to establish a self-censorship mechanism and ensure the lawfulness of the
content of their games and corporate operations. In addition, theRule on Online Gamesprovides that all domestic online games must be filed with MOC, and all imported online games must be approved by the MOC.



Online game operators must provide instructions
to users and necessary warnings regarding content, functions and targeted players of online games, and display them conspicuously
on their website and in the games. Online games targeting minors must not include any content that allures minors to imitate behavior
undermining public morality or instigate crimes, or any content which is harmful to minors’ health, such as content depicting
terror or cruelty.



Online game operators must take technical
measures to prevent minors from accessing unsuitable games or game functions, restrict minors’ playing time and prevent minors
from becoming addicted to online games. Online game operators must require Internet users to go through an identity registration
process with valid identification and online game operators must keep such registration information. In addition, the Rule on Online
Games prohibits providers of virtual currency transaction services from offering these services to minors.



On September 28, 2009, GAPP, the National
Copyright Administration and National Office of Combating Pornography and Illegal Publications jointly issued the GAPP Notice.
The GAPP Notice provides, among other things, that foreign investors are not permitted to invest in online game operating businesses
in China via wholly-owned equity joint venture or cooperative joint venture investments, and expressly prohibits foreign investors
from gaining control over or participating in PRC operating companies’ online game operations through indirect ways, such
as establishing other joint venture companies, entering into contractual arrangements with or providing technical support for such
operating companies, or through a disguised form such as incorporating user registration, user account management or payment through
game cards into online gaming platforms that are ultimately controlled or owned by foreign investors. Violations of the GAPP Notice
will result in severe penalties.



51







Network Information Protection



On December 28, 2012, the Standing
Committee of the National People’s Congress issued the Decision on Strengthening Network Information Protection.



According to the Decision on Strengthening
Network Information Protection, organizations and individuals shall neither steal nor otherwise unlawfully obtain the personal
electronic information of citizens, nor sell or illegally provide others with such electronic information. To collect and use the
personal electronic information of citizens during business activities, network service providers and other enterprises and public
institutions shall follow the principles of lawful, righteous and necessary collection and use, specify the purposes, ways and
scope of information collection and use, obtain the consent of the persons whose information is collected, and shall not collect
and use such information in violation of laws or regulations, or in breach of mutual agreements.



Network service providers and other enterprises
and public institutions shall make public the rules on collecting and using the personal electronic information of citizens. No
organization and individual may send commercial electronic information to the landline number, mobile phone number or personal
e-mail address of an electronic information recipient without his/her consent or request, or after he/she has given an explicit
refusal.



Punishments against violations of this decision
includes giving a warning, imposing fines, confiscating illegal gains, revoking licenses or cancelling record-filing, shutting
down the websites concerned, and prohibiting the persons subject to liability from engaging in network services business. In addition,
the violations shall be recorded in the social credit files of the parties concerned, and be made public. Violations that constitute
violations of public security administration shall be given public security administration punishments in accordance with PRC law.
Criminal liabilities shall be investigated in accordance with the law against violations hereof that constitute criminal offenses.
Whoever infringes upon the civil rights and interests of others shall bear civil liabilities in accordance with the law.



On July 16, 2013, the MIIT issued the
Order for the Protection of Telecommunication and Internet User Personal Information, or the Order, which became effective on September
1, 2013. Under the Order, if an Internet service provider wishes to collect or use personal information, it may do so only if such
collection is necessary for the services it provides. Further, the Internet service provider must disclose to its users the purpose,
method and scope of any such collection or use, and must obtain consent from its users whose information is being collected or
used. Internet service providers are also required to establish and publish their rules relating to personal information collection
or use, keep any collected information strictly confidential, and implement technological and other measures to maintain the security
of such information. Internet service providers are required to cease any collection or use of the user personal information, and
de-register the relevant user account, when a given user stops using the relevant Internet.



Dividend Distribution



The principal regulations governing distribution
of dividends of wholly foreign-owned enterprises include the Foreign-invested Enterprise Law promulgated by the Standing Committee
of the National People’s Congress, as amended on October 31, 2000, and the Implementation Rules of the Foreign-invested
Enterprise Law issued by the State Council, as amended on April 12, 2001.



Under these laws and regulations, foreign-invested
enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting
standards and regulations. In addition, foreign-invested enterprises in China are required to allocate at least 10% of their respective
net profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of
the enterprises. Foreign-invested enterprises are not allowed to distribute profits until deficits of previous fiscal years have
been made up.



Foreign Currency Exchange



The principal regulations governing foreign
currency exchange in the PRC are the Foreign Exchange Administration Regulations promulgated by the State Council, as amended on
August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, RMB are freely convertible for
current account items, as long as true and lawful transaction basis is provided, but not for capital account items, such as capital
transfers, direct investments, loans, repatriation of investments and investments in securities and derivatives outside of the
PRC, unless the prior approval of the State Administration of Foreign Exchange, or SAFE, is obtained and prior registration with
SAFE is made.



On December 25, 2006, the People’s
Bank of China issued the Administration Measures on Individual Foreign Exchange Control and SAFE issued its Implementation Rules
on January 5, 2007, both of which became effective on February 1, 2007. Under these regulations, all foreign exchange
matters involved in employee stock ownership plans, stock option plans and similar plans participated in by onshore individuals
must be transacted upon approval from SAFE or its authorized branch.



52







On March 28, 2007, SAFE promulgated
the Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Option Plan or Stock Option
Plan of An Overseas Listed Company, or Circular 78. Under Circular 78, PRC citizens who participate in stock incentive plans or
equity compensation plans of an overseas publicly listed company are required, through a PRC agent or PRC subsidiaries of such
overseas publicly-listed company, to complete certain foreign exchange registration procedures with respect to the plans upon the
examination by, and approval of, SAFE.



On August 29, 2008, SAFE issued the
Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises, or SAFE Circular No. 142. Pursuant to SAFE Circular No. 142, RMB-converted
capital invested by a foreign-invested enterprise must be used within the enterprise’s business scope as approved by the
examination and approval authority, and cannot be used to make equity investments in China unless otherwise provided for in the
enterprise’s business scope. Documents certifying the purposes of RMB converted from foreign capital, including a business
contract, must be submitted for such conversion.



In addition, SAFE strengthened its oversight
of the flow and use of RMB-converted capital invested by a foreign-invested enterprise. The use of such RMB capital may not be
altered without SAFE’s approval, and such RMB capital may not in any case be used to repay an existing RMB loan if the proceeds
of such loan have not been used. Furthermore, on November 19, 2010, SAFE issued the Notice on Strengthening the Administration
of Foreign Exchange, or Notice No. 59, which requires the authenticity of settlement of net proceeds from offshore offerings
to be closely examined and the net proceeds to be used in the manner described in the offering documents. Violations of SAFE Circular
No. 142 and Notice No. 59 could result in severe monetary or other penalties.



On March 30, 2015, the SAFE issued the Circular
on Reforming the Administration Approach Regarding the Foreign Exchange Capital Settlement of Foreign-invested Enterprises, or
Circular 19, which will replace the Circular 142 when it becomes effective on June 1, 2015. Circular 19 provides that, among other
things, the Renminbi capital converted from the foreign currency registered capital of a foreign-invested enterprise may be used
for equity investments within the PRC. Since Circular 19 was recently issued, there are uncertainties in interpretation and implementation
as to actual transactions.



Offshore Financing



On October 21, 2005, SAFE issued the
SAFE Circular 75, which became effective as of November 1, 2005. The SAFE Circular 75 requires PRC residents to register with
the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with
assets or equities of PRC companies, or an “offshore special purpose vehicle.”



PRC residents that are shareholders or beneficial
owners of offshore special purpose vehicles established before November 1, 2005 were required to register with the local SAFE
branch before March 31, 2006. In addition, any PRC resident that is a shareholder of an offshore special purpose vehicle is
required to amend its SAFE registration with respect to that offshore special purpose company in connection with any increase or
decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets
located in China or other material changes in share capital.



In May 2007, SAFE issued guidance to its
local branches with respect to the process for SAFE registration, which standardized more specific and stringent supervision on
the registration relating to the SAFE Circular 75. SAFE issued a series of subsequent rules, including the Notice on Printing and
Distributing the Implementing Rules for the Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities
of Domestic Residents Conducted via Offshore Special Purpose Companies, or Circular 19, which became effective on July 1,
2011. Circular 75 and these implementing rules require PRC residents and PRC enterprises to register or file with relevant PRC
government authorities their direct or indirect offshore investment activities, round-trip investments in the PRC conducted through
an offshore entity and subsequent changes in their share capital.



We have requested our shareholders and beneficial
owners to disclose whether they or their shareholders or beneficial owners fall within the scope of the SAFE Circular 75 and urge
those who are PRC residents to register with the local SAFE branch as required under the SAFE Circular 75. However, we cannot provide
any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain
or update any applicable registrations or comply with other requirements required by the SAFE Circular 75 or other related rules.
In case of any non-compliance on any of our PRC resident shareholders or beneficial owners, our PRC subsidiaries and such shareholders
and beneficial owners may be subject to fines and other legal sanctions, including restrictions on our ability to contribute additional
capital to our PRC subsidiaries and our PRC subsidiaries’ ability to distribute dividends to our offshore holding companies,
which may adversely affect our business.



53







On July 4, 2014, the SAFE issued the SAFE
Circular 37, which replaced the SAFE Circular 75. Under the SAFE Circular 37, PRC residents must register with the competent local
SAFE branch in connection with their direct establishment or indirect control of an offshore special purpose vehicle, for the purpose
of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises
or offshore assets or interests. The SAFE Circular 37 further requires amendment to the registration in the event of any significant
changes with respect to the special purpose vehicle, such as any change of basic information (including change of the PRC residents,
name and operation term), increase or decrease of capital contribution by the PRC residents, share transfer or exchange, merger,
division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to fulfill
the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions
to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle
may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the
various SAFE registration requirements described above could result in liability under the PRC law for evasion of foreign exchange
controls.



On February 15, 2012, SAFE promulgated
the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies,
or SAFE Circular No. 7, to replace the previous Operating Procedures for Administration of Domestic Individuals Participating
in the Employee Stock Ownership Plan or Stock Option Plan of Offshore Listed Companies. SAFE Circular No. 7 regulates foreign
exchange matters associated with employee stock option incentives or similar incentives permitted under applicable laws and regulations
granted to PRC residents by companies whose shares are listed on offshore stock exchanges. Pursuant to SAFE Circular No. 7,
all PRC residents participating in share incentive plans of offshore listed companies shall, through their employers, jointly retain
qualified PRC agents to register with local SAFE branches. PRC residents include PRC nationals or foreign citizens having been
consecutively residing in PRC for not less than one year, acting as directors, supervisors, senior management personnel or other
employees of PRC entities affiliated with such offshore listed company. A qualified PRC agent may be a PRC entity involved in the
share incentive plan or a PRC institution eligible for asset trusteeship, which is lawfully selected to handle various foreign
exchange matters related to share incentive plans and applies annually for a quota for conversion and/or payment of foreign currencies
in connection with the domestic individuals’ exercise of their employee stock options. The foreign exchange proceeds received
by PRC residents from sale of shares under share incentive plans granted by offshore listed companies must be remitted to bank
accounts in China opened by their employers or PRC agents.



Furthermore, a Notice Concerning Individual
Income Tax on Earnings from Employee Stock Options, jointly issued by the MOF and SAT, provides that domestic companies that implement
employee share option programs must file the employee share option plans and other relevant documents with local tax authorities
having jurisdiction over the companies before implementing such plans, and must file share option exercise notices and other relevant
documents with local tax authorities before exercise by their employees of any share options, and clarify whether the shares issuable
under the employee share options referenced in the notices are shares of publicly-listed companies.



We have registered with the local SAFE bureau
on behalf of our employees who have been granted shares or share options under our share/option incentive plan and follow other
procedures set forth in SAFE Circular No. 7 and other applicable regulations and we have filed the employee share option plans
and other relevant documents with local tax authorities with competent jurisdiction.



Overseas Listing



On August 8, 2006, six PRC regulatory
agencies, namely the MOFCOM, SAT, the SAT, the CSRC and SAFE, jointly adopted the M&A Rule, which became effective on September 8,
2006. The M&A Rule, as amended by the MOFCOM on June 22, 2009, requires offshore special purpose vehicles that are controlled
by PRC companies or residents and that have been formed for the purpose of seeking a public listing on an overseas stock exchange
through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on
an overseas stock exchange.



On September 21, 2006, the CSRC published
a notice on its website specifying the documents and materials that special purpose vehicles are required to submit when seeking
CSRC approval for their listings outside of China. The interpretation and application of the M&A Rule remain unclear, and our
initial public offering might have required approval from the CSRC. If it did, it is uncertain how long it will take us to obtain
the approval. If CSRC approval was required for our initial public offering, our failure to obtain or delay in obtaining the CSRC
approval would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies, which could include fines and penalties
on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions
that may materially adversely affect our business, results of operations and financial condition.



54







Following the State Council’s decision
to establish the security review system for mergers and acquisitions of domestic enterprises by foreign investors on February 3,
2011, the MOFCOM promulgated the Regulations on Implementing the Security Review System for Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors on August 25, 2011, or the Security Review System Regulations, which specifically prohibits
foreign investors from using contractual control to circumvent the aforesaid security review.



| | B. | Organizational Structure
| | -- | ------------------------



The following diagram illustrates our shareholding
and corporate structure and the place of incorporation of each of our significant subsidiaries and SPEs as of the date of this
transition report. For a listing of all of our subsidiaries and SPEs as of the date of this transition report, see
Exhibit 8.1 filed herewith.







55







| | (1) | Mijia is one of our SPEs in China and is currently 46.4% owned by Mr. Michael Tao Song, 23.2%
owned by Mr. Li Ou, our former chief technology officer, 9.28% owned by Mr. Yan Tang, a former officer of our Company
and the remaining 21.12% owned by seven of our employees.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Hangzhou Sky is one of our SPEs in China and is currently 80% owned by Mijia and 20% owned by Ms. Qinyi
Zhu, wife of Mr. Michael Tao Song.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Miyi is one of our SPEs in China and is currently 99.29% owned by Mr. Michael Tao Song and 0.71%
owned by Mr. Yan Tang.
| | --- | -----------------------------------------------------------------------------------------------------------------------



| | (4) | Najia is one of our SPEs in China and is currently 60% owned by Mr. Li Ou and 40% owned by Mr.
Yan Tang.
| | --- | --------------------------------------------------------------------------------------------------------



| | (5) | Including the following 10 SPEs: Fanyi, which is currently 100% owned by Mr. Li Ou; Feineng,
which is currently 60% owned by Mr. Michael Tao Song, our founder, chairman and chief executive officer, and 40% owned by
Mr. Li Ou; Tianchu, which is currently 60% owned by Mr. Michael Tao Song and 40% owned by Mr. Li Ou; Zunqi, which
is currently 100% owned by Ms. Zi Jin, an officer of the Company; Geyuan, which is currently 100% owned by Mr. Peng Jin,
an employee of the Company; Dangyi, which is currently 100% owned by Mr. Guoping Ou, an employee of the Company; Mugu, which
is currently 100% owned by Mr. Wenjie Wu, an officer of the Company; Feidong, which is currently 100% owned by Mr. Wanyan Shao,
an employee of the Company; Fuyun, which is currently 100% owned by Mr. Guodong Xu, an employee of the Company and Duoqu, which
is currently 90% owned by Ms. Zi Jin and 10% owned by Mr. Rui Zeng, an officer of the Company.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Hangzhou Mopin Technologies Co., Ltd. is one of our PRC subsidiaries and is currently 79.88% owned
by us and 20.12% owned by certain of our officers.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------



We have entered into contractual arrangements
with each of our SPEs and their respective shareholders through which we exercise effective control over the operations of these
entities and receive the economic benefits of the shareholders’ equity interests in these entities. As a result of these
contractual arrangements, under IFRS, we are considered to have control over each of our SPEs, and thus consolidate their results
in our consolidated financial statements. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing
Business in China — If the PRC government determines that the contractual arrangements that establish the structure for operating
our business do not comply with applicable PRC laws and regulations, we could be subject to severe penalties.”



Unless terminated at Dianneng’s sole
discretion, each agreement with the SPEs has a term of ten years or 20 years and is renewable at Dianneng’s sole discretion.



Contractual Arrangements with the SPEs and their Shareholders



Our relationships with our SPEs and their
shareholders are governed by a series of contractual arrangements. Under PRC law, each of our SPEs and Dianneng is an independent
legal person and none of them is exposed to liabilities incurred by the other parties. Other than pursuant to the contractual arrangements
among our SPEs and their respective shareholders and Dianneng, our SPEs are not required to transfer any funds generated from their
operations to Dianneng.



Exclusive Business Cooperation or
Service Agreements. Our SPEs have entered into the following service agreements with Dianneng: a technical support service
agreement, a strategy consulting service agreement and an intellectual property license agreement, under which our SPEs engage
Dianneng as their exclusive provider of technical support and strategy consulting services and Dianneng agrees to grant to our
SPEs a non-exclusive and non-transferable license to use certain intellectual property owned by it. Our SPEs pay Dianneng service
fees and royalties as determined by Dianneng based on the services provided and the actual use of the intellectual property, respectively.
Dianneng own any intellectual property created or obtained by SPEs under the strategy consulting service agreement.



Equity Pledge Agreements.
Our SPEs and their respective shareholders have entered into equity pledge agreements with Dianneng, under which the shareholders
of our SPEs pledged all of their equity interests in the SPEs to Dianneng as collateral for all of payments from the SPEs due to
Dianneng under the above service agreements. If any event of default as defined under these agreements occurs, Dianneng, as pledgee,
will be entitled to dispose of the pledged equity interests in certain ways, including by negotiating with such shareholders for
the transfer of the pledged equity interests.



Purchase Option Agreements.
Our SPEs and their shareholders have entered into a purchase option agreements with Dianneng, under which the shareholders of the
SPEs irrevocably granted to Dianneng or their designee an exclusive option to purchase equity interests in the SPEs or all or a
part of the assets owned by the SPEs at a purchase price equal to their respective initial contributions to the registered capital
of the SPEs.



Dianneng may exercise such options at any
time. In addition, the SPEs and their shareholders agree that without Dianneng’s consent, the SPEs will not sell, transfer,
mortgage or otherwise dispose of any of its assets, business or beneficial interests, engage in any transactions that could substantially
affect its assets, liabilities, operations, equity interests or other legal rights, or declare any dividend, unless all the equity
interests in or assets of the SPEs have been transferred to Dianneng pursuant to the option under this agreement.



56







Powers of Attorney. The shareholders
of the SPEs have executed a power of attorney to irrevocably grant to Dianneng or its designees the power of attorney to exercise
all of their rights as shareholders of the SPEs, including the right to appoint and elect board members and senior management members
and other voting rights.



| | C. | Property, Plant and Equipment
| | -- | -----------------------------



Our principal executive offices are located
at 10/F, Building B, United Mansion, No. 2, Zijinghua Road, Hangzhou, Zhejiang 310013, People’s Republic of
China. We also maintain offices in Beijing, Shanghai, and Shenzhen under leases with terms ranging from one to three years. In
aggregate, we maintained a total of approximately 6,300 square meters of office space as of December 31, 2014. We lease all
of our facilities from independent third parties and do not own any real property.



The following table sets forth a summary
of our material leases as of the date of this transition report:



|Location |  | Space (in square meters) |       |  | Usage of Property |              | Expiration
|-------- |  | ------------------------ | ----- |  | ----------------- | ------------ | ----------
|Hangzhou |  |                          | 3,112 |  |                   | Headquarters |           
|         |  |                          | 2,600 |  |                   | Office       |           
|Beijing  |  |                          | 176   |  |                   | Office       |           
|         |  |                          | 133   |  |                   | Office       |           
|Shanghai |  |                          | 140   |  |                   | Office       |           
|Shenzhen |  |                          | 128   |  |                   | Office       |           



We believe that our leased facilities are
adequate to meet our needs for the foreseeable future, and that we will be able to obtain adequate facilities, principally through
leasing of additional properties, to accommodate our future expansion.



| | ITEM 4A. | UNRESOLVED STAFF COMMENTS
| | -------- | -------------------------



None.



| | ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
| | ------- | --------------------------------------------



The following discussion of our financial
condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements
and their related notes included in this transition report. This transition report contains forward-looking statements. See “
— H. Safe Harbor.” Our actual results and the timing of selected events could differ materially from those anticipated
in these forward-looking statements, which involve risks and uncertainties. In evaluating our business, you should also carefully
consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this transition
report.



| | A. | Operating Results
| | -- | -----------------



Overview



We are a leading mobile application platform
in China. Since inception, we have focused on building a large and engaged user base. Our core product, Maopao App Store, allows
users to browse and download a wide range of entertainment-oriented mobile applications and content, including games, music and
books. Throughout the years, we have developed a portfolio of Maopao platform products that provide rich functionality and engaging
user experience to Android smartphone and feature phone users, including Maopao Game Center, Maopao Community and Maopao Browser.
We collaborate with over 370 smartphone and 940 feature phone handset companies to pre-install Maopao platform products on their
handsets before shipment. In addition, we partner with mobile network operators to provide customized software services at their
physical stores, including the pre-installation of a wide range of applications that appeal to their customers. As of December
31, 2014, our Maopao platform products in aggregate had attracted approximately 291.6 million smartphone users and approximately
1.3 billion feature phone users.For the three months ended December 31, 2014, our average DNU and MAU were approximately
530,000 and 33,690,000, respectively.



57







We have experienced substantial growth since
we launched Maopao platform in 2006. In response to the rise of smartphones and increasing demand for applications and mobile content
designed for smartphones, we have shifted our strategic focus to the smartphone market in 2012, launching a series of Maopao platform
products for smartphones. For the nine months ended December 31, 2014, approximately 84.1% and 15.9% of our revenues were derived
from our smartphone and feature phone business, respectively. As the growth of China’s smartphone market is increasingly
driven by economic smartphones, we are focused on the monetization opportunities in this segment. As we transition from the feature
phone business to the smartphone business, we do not expect the transition to require significant additional resources in terms
of personnel, server capacity and customer support other than promotional expenses.



We generate revenues primarily through our
users’ in-app purchase of virtual-items and premium features. We source the majority of these applications and content from
third-party content providers and develop the remainder of the applications and content in-house. We collect payments primarily
through mobile service providers, who utilize mobile network operators’ billing channels to collect payment for user purchases
of Maopao platform products. We have established and are deepening our partnership with mobile network operators to collect payments
directly. In addition, we work with independent payment processing agents to collect payments through a variety of third-party
payment channels, including prepaid cards, bank remittance and online payments.



We share revenue from Maopao platform with
handset companies, content providers, mobile network operators and mobile service providers. Costs associated with payments under
proceeds sharing arrangements with these industry participants account for most of our cost of revenues.



Factors Affecting Our Results of Operations



We have benefited from general conditions
affecting the mobile applications industry in China, including overall economic growth, which has resulted in increases in disposable
income and discretionary consumer spending; government and industry initiatives accelerating the technological advancement and
growth of the mobile handset and mobile applications industry; the growing popularity of and increasing reliance on mobile handsets
for communication needs, sourcing of information and entertainment; and favorable demographic trends, particularly increasing urbanization
of young people, who are more inclined to use mobile applications and content. Our results of operations will continue to be affected
by such general conditions.



Our results of operations are also directly
affected by the following specific factors:



The continued growth of China’s mobile handset industry,
especially the smartphone segment



We generate revenues from both our smartphone
and feature phone businesses. A primary factor impacting our revenues is the sales volume of mobile handsets in China. In response
to the rise of smartphones and increasing demand for applications and mobile content designed for smartphones, we have since 2012
gradually shifted the strategic focus of our business from feature phones to smartphones by launching a portfolio of Maopao platform
products for smartphones. For the fiscal years ended March 31, 2013 and 2014 and the nine months ended December 31, 2014, our revenue
from smartphone business accounted for nil, 43.3% and 84.1% of our total revenues, respectively.



Another factor that may drive the growth
of our business is the growth of the domestic mobile handset industry in China. The rapid growth of the domestic mobile handset
market in recent years makes mobile handsets more affordable to a wider variety of people and enables users of economic mobile
handsets to upgrade their mobile phones at relatively low cost. These mobile users typically pay greater attention to mobile handsets’
performance-to-price ratio and tend to be more attracted to mobile phones’ entertainment functionality. We believe that the
mobile entertainment industry will benefit from the proliferation of economic domestic mobile handsets in China.



Our ability to increase the installation base of our products



Our results of operations significantly
depend on the overall size of our user base, which in turn largely depends on the size of the installation base of our Maopao platform
products and demand for handsets pre-installing Maopao platform products. To build and broaden our user base, we have primarily
relied on pre-installing our Maopao platform products onto smartphones and feature phones. We believe our success substantially
depends on our ability to maintain and enhance our relationships with handset companies and establish cooperation with additional
handset companies, particularly those with substantial market share or high growth potential.



As of December 31, 2014, we had pre-installation
arrangements with over 370 smartphone and 940 feature phone handset companies. As of December 31, 2014, our Maopao platform
products had approximately 291.6 million cumulative smartphone users and 1.3 billion cumulative feature phone users. Our large
user base has contributed to our growth and our central position in the mobile application sector.



58







Our ability to continue to source and offer popular applications
and content and monetize our large user base



We generate revenues primarily through users’
in-app purchase of virtual-items and premium features. This substantially depends on our ability to source applications and content
that cater to rapidly changing user preferences, mobilize our user base into a community of active paying members and appropriately
price our content offerings. Our ability to identify and offer applications and other content appealing to our target users in
China, such as single-player games, multi-player games, mobile books, dating-related applications and other social network functions,
has significantly contributed to our growth.



We believe the popularity of our applications
and content on Maopao platform affects the loyalty and spending of our users. Our results of operations significantly depend on
our ability to source, aggregate and update applications and content on Maopao platform to cater to users’ changing interests,
needs and preferences and attract users to download and pay for such applications and content.



Revenues from single-player games have experienced
significant growth in recent years. Since 2012, we have gradually shifted our strategic focus from feature phones to mobile phones
and have been collaborating with an increasing number of third-party small- to mid-sized game developers to promote an expanding
selection of “light games”, which are mainly easy-to-play micropayment single-player games that do not require significant
data usage or constant mobile network connection. We expect to enhance and deepen our cooperation with third-party developers and
distribute additional single-player games going forward through our Maopao platform and third-party distribution channels.



Revenues from multi-player games have also
grown rapidly since February 2010 when we launched Fantasy of the Three Kingdoms, our first major top-selling multi-player game,
and we continue to increase our offerings of multi-player games to capture user interest. During the nine months ended December 31,
2014, we offered over 2,000 multi-player games on our Maopao platform, among which Fantasy of the Three Kingdoms, Armed Heroes
Online and Xian Jian Wen Qing ranked in the top of our best-selling games. We expect to introduce new multi-player games going
forward by collaborating with third-party game developers.



We typically determine the prices of applications
and content we offer. Most of our applications are free to download, and we generate our revenues from sales of in-app virtual
items and premium features. In addition, we offer certain applications and content free of charge to complement our product offerings
and stimulate user interest. We believe our results of operations significantly depend on our ability to balance free offerings
with paid offerings and price our product offerings competitively to optimize user monetization.



From an industry perspective, we believe
that the mobile games sector is the most popular mobile applications and one of the fastest growing mobile application sectors
in China. In order to enhance our monetization opportunities, we have been since 2012 promoting, primarily through our Maopao Game
Center, an increasing number of “light games”, which are mainly easy-to-play micropayment mobile games that do not
require significant data usage or constant mobile network connection. Our “light games” target students and working
class frequent gamers with lower-end handsets and smaller data plans. Our Maopao Game Center provides distribution, billing and
data analysis capabilities for small and mid-sized game developers and easy downloads of mobile games for economic mobile handset
users. We believe that Maopao Game Center enhances our collaboration with game developers, especially small and mid-sized game
developers, and further expands our user base.



Our ability to more efficiently collect sales proceeds



We collect a portion of our sales proceeds
through mobile service providers who utilize mobile network operators’ billing channels to collect sales proceeds from user
purchases on Maopao platform. Billing and transmission failures, such as failures to transmit MR data due to technical problems
with the network or mobile service providers’ failure to collect all or part of sales proceeds, adversely affect collection
efficiency. Mobile service providers’ ability to avoid and address such failures varies. When users make a purchase, we direct
the purchase to the mobile service provider of our choice.



We aim to maximize collection of sales proceeds
by collaborating with mobile service providers with better collection performance, shorter payment periods and lower transmission
error rates, and closely monitoring them to lower collection related risks. We share a percentage of sales proceeds with mobile
service providers. We have established and are deepening our partnership with mobile network operators directly without using mobile
service providers as intermediaries to collect payment. In addition, users can make purchases in our Maopao Community through various
third-party payment channels. Payment channel cost represented the largest component of our cost of revenues in each of the
fiscal years ended March 31, 2013 and 2014 and the nine months ended December 31, 2014.



59







To reduce payment channel cost as a percentage
of our cost of revenues, we intend to increasingly collect payments (i) directly through mobile network operators or (ii) through
independent payment processing agents.



Our ability to control costs related to handset companies
and content providers



We share revenue with handset companies
that pre-install Maopao platform products as well as content providers from whom we license applications and content. Payments
to handset companies and content providers constituted a significant portion of our cost of revenues in each of the fiscal years
ended March 31, 2013 and 2014 and the nine months ended December 31, 2014. Therefore, any change in our revenue sharing arrangements
with handset companies and content providers could significantly affect our results of operations. In addition, we selectively
purchase third-party applications and mobile content from content providers, and have developed certain applications and mobile
content in-house.As the applications or mobile content purchased or developed in-house do not involve revenue sharing
with content providers, we may achieve higher profit margins if these applications and mobile content gain increasing popularity
among our users.



In line with industry practice in China,
we share revenue with content providers and handset companies based on user transaction data recorded by mobile service providers.
To identify a particular handset company and applications and content users purchase from its handsets, a designated authorization
code is built in to its handset when pre-installing Maopao platform products. There has been instances where handset companies,
when introducing a new handset model in tight time frame, pre-installed our Maopao platform products to enhance handset features
without obtaining authorization codes from us. In such circumstances, we were not able to recognize the handset models purchasing
from Maopao platform and as a result was not able to share revenue with these handset companies.



Our track record of revenue sharing with
handset companies has promoted our brand and our capability to generate additional revenue streams for handset companies. As such,
an increasing number of handset companies have partnered with us to pre-install our authorized codes in each of the fiscal years
ended March 31, 2013 and 2014 and the nine months ended December 31, 2014.



Our ability to address challenges associated with policy
changes and mobile network operators’ business practices



PRC government authorities and mobile network
operators may issue or revise rules, policies or guidelines that affect our results of operations. For example, an increasing number
of branches and divisions of mobile network operators we cooperate with have been restructured into separate corporations in the
past few years. In response to such restructuring, we have been, and may continue to be prompted to enter into new cooperation
agreements and/or partnership agreements with these new entities and be subject to their policies and guidelines. These new agreements,
policies and guidelines may significantly deviate from the ones imposed by their predecessor branches and divisions.If
more stringent measures are imposed by the government or mobile network operators, our results of operations may be materially
adversely affected.



Revenues



Our revenues amounted to RMB601.1 million,
RMB485.6 million and RMB586.0 million (US$94.5 million) in the fiscal years ended March 31, 2013 and 2014 and the nine months
ended December 31, 2014, respectively. We began generating revenues from our smartphone business in the fiscal year ended March
31, 2014.



Revenues from Smartphone Business



Along with our shift in business focus,
our revenues from smartphone business has increased significantly from RMB122.6 million for the nine months ended December 31,
2013 to RMB492.7 million (US$79.4 million) for the nine months ended December 31, 2014. Revenues from smartphone business accounted
for 34.3% and 84.1% of our total revenues for the nine months ended December 31, 2013 and 2014, respectively. Revenues from smartphone
business consist of:



| | · | revenues from single-player games. We derive a significant portion of our revenues from sales of self-developed and
licensed single-player games, such as card games, simple strategic games and action games, through Maopao platform and third-party
distribution channels. Most of our single-player games are free to download and play whereas we charge RMB2 to RMB10 for each in-game
purchase of virtual items or premium features. Our smartphone users can make in-app purchases from a wide variety of single-player
games we offered through our mobile network operators and mobile service providers.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



60







| | · | revenues from multi-player games. We offer a wide selection of multi-player games, such as multi-player role-playing
games, through our Maopao platform and third-party distribution channels. Most of our multi-player games are free to download and
play, whereas we charge RMB1 to RMB15 for each in-game purchase of virtual items or premium features. Our smartphone users can
make in-game purchases in the multi-player games we offered through (i) third-party payment channels including pre-paid phone cards
and game cards, bank debit cards and online payment solutions, (ii) mobile network operators, and (iii) mobile service providers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | other revenues. Other revenues primarily include the commission we earn by allowing content providers, mobile network
operators and mobile service providers to distribute their mobile applications and other contents to mobile users through our Maopao
platform, which is based on a percentage of the revenue generated from, or number of activations of, these mobile applications
or other contents. Other revenues also include single-player game revenues generated from overseas markets.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Revenues from Feature Phone Business



Revenues from feature phone business primarily
represent revenues generated from single-player games offered in the feature phone version of Maopao Application Store, and multi-player
games and social network applications offered in the feature phone version of Maopao Community. Maopao Community has served and
is expected to continue to serve as an effective tool to retain our loyal Maopao Community users.



The following table sets forth our smartphone
revenue and feature phone revenue, both in absolute amount and as a percentage of total revenues, for the periods indicated:



|                                     |  | For the Fiscal Year Ended March 31, |         |  | For the Nine Months Ended December 31, | 
|------------------------------------ |  | ----------------------------------- | ------- |  | -------------------------------------- | 
|                                     |  | 2013                                |         |  | 2014                                   | 
|                                     |  | RMB                                 |         |  | %                                      | 
|                                     |  |                                     |         |  |                                        | 
|                                     |  | (in thousands, except percentage)   |        
|Revenues                             |  |                                     |         |  |                                        | 
|                                     |  |                                     |         |  |                                        | 
|Revenues from smartphone business    |  |                                     |         |  |                                        | 
|Revenues from single-player games    |  |                                     | -       |  |                                        | 
|Revenues from multi-player games     |  |                                     | -       |  |                                        | 
|Other revenues                       |  |                                     | -       |  |                                        | 
|                                     |  |                                     | -       |  |                                        | 
|                                     |  |                                     |         |  |                                        | 
|Revenues from feature phone business |  |                                     | 601,107 |  |                                        | 
|Total Revenues                       |  |                                     | 601,107 |  |                                        | 



Cost of Revenues and Gross Margin



Our cost of revenues consists primarily
of costs associated with payments to industry participants and direct costs. The following table sets forth our cost of revenues,
both in absolute amount and as a percentage of total revenues, for the periods indicated:



61







|                                                        |  | For the Fiscal Year Ended March 31, |         |  | For the Nine Months Ended December 31, | 
|------------------------------------------------------- |  | ----------------------------------- | ------- |  | -------------------------------------- | 
|                                                        |  | 2013                                |         |  | 2014                                   | 
|                                                        |  | RMB                                 |         |  | %                                      | 
|                                                        |  |                                     |         |  |                                        | 
|                                                        |  | (in thousands, except percentage)   |        
|Cost of Revenues                                        |  |                                     |         |  |                                        | 
|Costs associated with payments to industry participants |  |                                     | 375,987 |  |                                        | 
|Direct costs                                            |  |                                     | 42,793  |  |                                        | 
|Total cost of revenues                                  |  |                                     | 418,780 |  |                                        | 



Costs associated with payments to industry
participants represent consideration paid to (i) payment channels for collecting sales proceeds from users; (ii) handset
companies for pre-installing Maopao platform products onto their handsets before shipment; (iii) third-party distribution channels
through which we publish our licensed games; and (iv) content providers for licensing applications and content that we offer
on our Maopao platform or through third-party distribution channels.



| | · | Payment channels. We have been collecting a large portion of our proceeds from the three
dominant mobile network operators in China directly without engaging mobile service providers as intermediaries, and in return
share with them a percentage of our sales proceeds collected through them. We plan to deepen our cooperation with the mobile network
operators to achieve faster payment collection at lower payment channel costs. To a lesser extent, we also collaborate with a number
of mobile service providers to collect sales proceeds through payment channels of mobile network operators and in turn generally
share with them a percentage of our sales proceeds collected through them. See “Item 4. Information on the Company —A. Business Overview. — Payment Channels.”
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Handset companies. We generally pay handset companies a percentage of the revenue that are generated from their handsets
or a fixed fee based on number of activations. To identify a particular handset company and users purchases from its handsets,
a designated authorization code is built in to its handset when pre-installing Maopao platform products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Third-party distribution partners. We generally pay third-party distribution partners a percentage of sales proceeds
from the games distributed through their properties.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Content providers. We typically pay content providers a percentage of the revenue derived from their applications or
mobile content or a fixed fee based on number of activations. To a lesser extent, we selectively purchase applications and mobile
contents from content providers, the payment of which is included in our cost of revenues at the time of the acquisition. We do
not capitalize and amortize such payments over the life of the application or mobile content because such applications and mobile
content usually have short life cycles and the acquisition cost for each application or mobile content is relatively low.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Direct costs primarily include employee salaries and benefits,
utilities, depreciation of equipment and office expenses directly related to the operation of Maopao platform. The decrease in
direct costs was primarily due to decreased headcounts for our feature phone business as we transitioned to the smartphone business.



Our gross margins were 30.3%, 24.9%, 24.8%
and 20.7% in the fiscal years ended March 31, 2013 and 2014 and in the nine months ended December 31, 2013 and 2014, respectively.
The decrease in our gross margin from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014 and from the
nine months ended December 31, 2013 to the nine months ended December 31, 2014 was primarily a result of the higher revenue contribution
of our smartphone business. Our smartphone business in general has a lower profit margin compared to our feature phone business
as we generally offer more attractive revenue sharing propositions to smartphone content providers and handset companies, in an
effort to facilitate our transition to the smartphone business.



62







Operating Expenses



Our operating expenses consist of research
and development expenses, sales and marketing expenses, general and administration expenses and other operating income. The following
table sets forth a breakdown of our operating expenses in absolute amount and as a percentage of our total operating expenses for
the periods indicated:



|                                    |  | For the Fiscal Year Ended March 31, |         |   | For the Nine Months Ended December 31, | 
|----------------------------------- |  | ----------------------------------- | ------- | - | -------------------------------------- | 
|                                    |  | 2013                                |         |   | 2014                                   | 
|                                    |  | RMB                                 |         |   | %                                      | 
|                                    |  |                                     |         |   |                                        | 
|                                    |  | (in thousands, except percentage)   |        
|Operating Expenses*                 |  |                                     |         |   |                                        | 
|Research and development expenses   |  |                                     | 73,027  |   |                                        | 
|Sales and marketing expenses        |  |                                     | 35,369  |   |                                        | 
|General and administration expenses |  |                                     | 69,491  |   |                                        | 
|Other operating income, net         |  |                                     | (2,320  | ) |                                        | 
|                                    |  |                                     |         |   |                                        | 
|Total operating expenses            |  |                                     | 175,567 |   |                                        | 

____________

* Includes share-based compensation expenses as follows:



|                                        |  | For the Fiscal Year Ended March 31, |        |  | For the Nine Months Ended December 31, | 
|--------------------------------------- |  | ----------------------------------- | ------ |  | -------------------------------------- | 
|Share-Based Compensation                |  | 2013                                |        |  | 2014                                   | 
|Data                                    |  | RMB                                 |        |  | RMB                                    | 
|                                        |  |                                     |        |  |                                        | 
|                                        |  | (in thousands)                      |       
|Research and development expenses       |  |                                     | 5,900  |  |                                        | 
|                                        |  |                                     |        |  |                                        | 
|Sales and marketing expenses            |  |                                     | 2,067  |  |                                        | 
|                                        |  |                                     |        |  |                                        | 
|General and administration expenses     |  |                                     | 14,017 |  |                                        | 
|                                        |  |                                     |        |  |                                        | 
|Total share-based compensation expenses |  |                                     | 21,984 |  |                                        | 



Research and development expenses



Our research and development expenses consist
primarily of salaries and benefits for personnel engaged in the research and development of Maopao platform products and communication
fees we paid for testing our research and development work. Research and development expenses accounted for 12.1%, 8.0%, 8.3% and
4.4% of our total revenues in the fiscal years ended March 31, 2013 and 2014 and the nine months ended December 31, 2013 and
2014, respectively.



Our research and development expenses decreased
from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014 and from the nine months ended December 31, 2013
to the nine months ended December 31, 2014, primarily because we reduced resources allocated to our feature phone business.



Sales and marketing expenses



Our sales and marketing expenses primarily
consist of salaries and benefits for our sales and marketing staff, training expenses for our sales team, traveling, entertainment,
office expenses and market survey fees related to our sales and marketing activities. Sales and marketing expenses accounted for
5.9%, 7.5%, 7.4% and 5.3% of our total revenues in the fiscal years ended March 31, 2013 and 2014 and the nine months ended
December 31, 2013 and 2014, respectively.



Our sales and marketing expenses increased
from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014 and from the nine months ended December 31, 2013
to the nine months ended December 31, 2014, primarily due to increased sales and marketing efforts, which was in line with the
expansion of our smartphone business. We expect that our sales and marketing expenses to continue to increase as we promote our
Maopao brand and expand our smartphone business.



63







General and administration expenses



Our general and administration expenses
primarily consist of salaries and benefits for our general and administration, finance and human resources personnel, training
expenses, depreciation and amortization expenses, office rentals, professional service fees and other expenses incurred for general
corporate purposes. General and administration expenses accounted for approximately 11.6%, 12.0%, 12.3% and 8.0% of our total revenues
in the fiscal years ended March 31, 2013 and 2014 and in the nine months ended December 31, 2013 and 2014, respectively.



Our general and administration expenses
decreased from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014, primarily due to decreased headcounts
for our general and administrative personnel in an effort to enhance labor efficiency. Our general and administration expenses
increased from the nine months ended December 31, 2013 to the nine months ended December 31, 2014, primarily due to the increased
professional fee in line with the continued expansion of our business and change of our fiscal year.We expect our
general and administration expenses, including expenses related to maintaining effective internal control over financial reporting
and complying with our reporting obligations, to remain relatively stable in the future. We also expect to incur additional general
and administrative expenses in line with the expansion of our business.



Other operating income, net



Our other operating income in the nine months
ended December 31, 2014 was RMB1.5 million (US$0.2 million), which primarily related to local government grants of RMB1.5 million.
Our other operating income in the fiscal year ended March 31, 2014 was RMB5.8 million, which primarily related to local government
grants of RMB4.0 million and reimbursement from the depositary of RMB1.9 million related to the ADS program. Other operating income
in the fiscal year ended March 31, 2013 was RMB2.3 million, which primarily related to local government grants of RMB2.9 million
for certain research and development projects.



Other Gains and Losses



We had other gains of RMB15.5 million, RMB17.5
million, RMB11.6 million and RMB17.7 million (US$2.9 million) in fiscal 2013 and 2014 and the nine months ended December 31, 2013
and 2014, respectively. Other gains in the nine months ended December 31, 2014 primarily related to interest income of RMB15.1
million and change in fair value of investment at FVTPL of RMB3.8 million, partially offset by an exchange loss of RMB0.6 million.
Other gains in the fiscal year ended March 31, 2014 primarily related to interest income of RMB15.9 million, income on short-term
investments of RMB2.6 million and change in fair value of investment at FVTPL of RMB1.1 million, partially offset by an exchange
loss of RMB2.1 million. Other gains in the fiscal year ended March 31, 2013 primarily related to interest income of RMB16.2
million, partially offset by an exchange loss of RMB0.4 million.



Impairment on Investment in Associates



We recognized a RMB0.8 million impairment
of our investment in Mingyou and a RMB1.9 million impairment of our investment in Brtech during the nine months ended December
31, 2014, a RMB0.7 million impairment of our investment in Dream Sky during the fiscal year ended March 31, 2014, and a RMB1.4
million impairment of our investment in DigiMobi during the fiscal year ended March 31, 2013, due to their continued underperformance
and the negative discounted cash flow forecasts.



Impairment on an Available-for-sale Investment



We recognized a RMB0.8 million impairment
of our investment in Mokee during the fiscal year ended March 31, 2014 due to its continued underperformance and the negative discounted
cash flow forecast. We did not recognize any impairment on an available-for-sale investment in the nine months ended December 31,
2014 or the fiscal year ended March 31,2013.



Share of Results of Associates



We had 26 associates as of December 31,
2014, all of which are private companies primarily engaged in wireless technology development and related applications in the PRC.
The results, assets and liabilities of these associates are incorporated in our consolidated financial statements using the equity
method of accounting.





64







Share-based Compensation



In March 2010, we adopted our 2010 Share
Incentive Plan, or the 2010 Plan. The maximum number of shares that may be issued under the 2010 Plan initially was 15,000,000 shares.
As of December 31, 2014, an aggregate of 8,033,146 restricted shares and options to purchase 1,394,193 common shares were
outstanding under the 2010 Plan. See “—Item 6. Directors, Senior Management and Employees—B. Compensation of
Directors and Senior Executive Officers—Share Incentive Plan.”



On April 1, 2010, we granted 1,443,600 share
options to our employees. On September 15, 2010, we granted an aggregate of 3,320,400 share options with exercise prices of
US$0.26 per share to our executive officers and other employees. On January 6, 2011, we granted an aggregate of 100,000
share options with exercise prices of US$1.00 per share to our executive officers and other employees. On January 9,
2011, we granted an aggregate of 100,000 share options with exercise prices of US$1.00 per share to our executive officers
and other employees.



On April 1, 2010, Xplane Ltd. issued
493,400 of its restricted shares to its shareholders who were also our employees. Of these 493,400 shares, 40% vest on the second
anniversary of the grant date and 20% vest on the third, fourth, and fifth anniversaries of the grant date. We measured the fair
value of these restricted shares based on the fair value of our shares, as Xplane Ltd. has no other assets except for its investment
in us. The fair value of such restricted shares as of April 1, 2010 was RMB126 (US$19) per share. We recognize the total amount
of approximately RMB62.4 million as compensation expense over the five-year deemed service, or vesting, period with a corresponding
increase in reserve in the statement of changes in equity.



On March 7, 2012, we issued 4,038,176
of our restricted shares to our employees. At the same time, Xplane Ltd. granted 3,340,400 of our restricted shares to employees
of our company. The holders of these shares retain the voting and dividends rights of, but are restricted from selling, such non-vested
restricted shares. The 7,378,576 shares vest 25% on each anniversary of the grant date. We measured the fair value of the restricted
shares based on the open market quote of our shares, which was RMB2.88 (US$0.46). We recognize the total amount of approximately
RMB21.3 million as compensation expense over the four-year deemed service, or vesting period with a corresponding increase in reserve
in the statement of changes in equity.



On April 15, October
30 and November 18, 2013, we issued 100,000, 1,600,000 and 40,000 restricted shares to our directors and senior management. The
holders of these shares retain the voting and dividend rights of, but are restricted from selling, such non-vested restricted shares.
These shares vest one-fourth or one-third on each anniversary of the respective grant dates. We measured the fair value of the
restricted shares based on the open market quote of our shares, which was RMB1.24 (US$0.20), RMB2.99 (US$0.49) and RMB2.61 (US$0.43),
respectively. We will recognize the total amount of RMB5,008,000 as compensation expense over the deemed service years, or vesting
period with a corresponding increase in reserve in the consolidated statement of changes in equity. During the fiscal year ended
March 31, 2014 and the nine-month period ended December 31, 2014, we recognized an aggregate of RMB1,436,000 and RMB271,000 as
compensation expense.



On April 21, April
29, May 8 and June 30, 2014, we issued 24,000, 120,000, 160,000 and 160,000 restricted shares to our directors, senior management
and employees. The holders of these shares retain the voting and dividend rights of, but is restricted from selling, such non-vested
restricted shares. The shares granted on May 8 was immediately vested. The remaining shares vest one-fourth on each anniversary
of the respective grant dates or 30%, 30%, 40% on the first, second and third anniversaries of the respective grant dates. We measured
the fair value of the restricted shares based on the open market quote of our shares, which was RMB5.91 (US$0.96), RMB5.09 (US$0.83),
RMB4.70 (US$0.76) and RMB6.37 (US$1.04), respectively. We will recognize the total amount of RMB2,249,000 as compensation expense
over the deemed service years, or vesting period with a corresponding increase in reserve in the consolidated statement of changes
in equity. During the nine-month period ended December 31, 2014, we recognized an aggregate of RMB1,065,000 as compensation expense.



On December
31, 2014, we issued 6,252,992 restricted shares to certain of our senior management and employees. The holders of these shares
retain the voting and dividend rights of, but is restricted from selling, such non-vested restricted shares. These shares vest
20%, 20%, 30% and 30% at the end of 4 months, 12 months, 24 months and 36 months of the respective
grant dates, respectively. We measured the fair value of the restricted shares based on the open market quote of our shares, which
was RMB2.91 (US$0.48). We will recognize the total amount of RMB18,222,000 as compensation expense over the deemed service years,
or vesting period with a corresponding increase in reserve in the consolidated statement of changes in equity.



65







Taxation



Cayman Islands



We are incorporated in the Cayman Islands.
Under Cayman Islands law, we are not subject to income or capital gains tax. In addition, payment of dividends by us to our shareholders
is not subject to withholding tax in the Cayman Islands.



China



PRC Enterprise Income Tax, or EIT



Prior to January 1, 2008, companies
established in China were generally subject to a state tax and local EIT at statutory rates of 30% and 3%, respectively. Our SPE,
Hangzhou Sky, was established in 2005 and qualified as a “software enterprise” in 2007. Under PRC tax laws and regulations,
an enterprise qualified as a “software enterprise” was entitled to an exemption from EIT for its first two profitable
years and a 50% reduction of its applicable EIT rate for the subsequent three years. Hangzhou Sky was thus entitled to a full exemption
from the EIT in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012.



On March 16, 2007, the National People’s
Congress of China enacted a new enterprise income tax law, or the PRC Enterprise Income Tax Law, which took effect beginning
January 1, 2008. On December 6, 2007, the State Council also adopted the Implementing Rules for the Enterprise Income
Tax Law, or the Implementing Rules, which also took effect beginning January 1, 2008. Under the PRC Enterprise Income Tax
Law, foreign invested enterprises, or FIEs, and Chinese domestic companies are subject to EIT at a uniform rate of 25%. Our PRC
subsidiaries and SPEs other than Hangzhou Sky, Mijia, Miyi, Najia and Mopin are currently subject to the EIT rate of 25%.



Preferential tax treatments will continue
to be granted to entities that are classified as “high and new technology enterprises strongly supported by the State”
or that conduct business in encouraged sectors, whether FIEs or domestic companies. On February 22, 2008, the MOF and SAT
promulgated the Notice on Several Preferential Policies in Respect of Enterprise Income Tax, or Notice No. 1, reiterating
the policy that a software enterprise newly established within China may, upon determination, be exempted from income taxes for
its first two profit-making years and shall be subject to the income tax at half the standard rate for the next three years.



On April 24,
2009, the MOF and SAT promulgated the Notice on Several Issues Relevant to the Implementation of the Preferential Policies on Enterprise
Income Tax, which states that software enterprises and integrated circuit production enterprises established prior to the end of
2007 may, upon certification, enjoy the preferential policies on the EIT reductions and exemptions within specified periods
as provided in Notice No. 1. Therefore, as a “software enterprise,” Hangzhou Sky was entitled to an exemption
from the EIT in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012. The reduced applicable EIT rate for Hangzhou Sky from
2010 to 2012 was 12.5%. In addition, Hangzhou Sky qualified as a “high and new technology enterprise” in 2011, entitling
it to a 15% preferential EIT rate from 2011 to 2013. In 2013, Hangzhou Sky obtained the “key software development enterprise”
status, which entitles it to a preferential EIT tax rate of 10% for two years from 2013 to 2014. In 2014, Hangzhou Sky renewed
the status of its “high and new technology enterprise”, entitling it to a preferential EIT tax rate of 15% from 2014
to 2016.



Mijia, as a “software enterprise,”
was entitled to a full exemption from EIT in 2010 and 2011 and is entitled to a 50% reduced EIT rate from 2012 to 2014. The reduced
applicable EIT rate for Mijia from 2012 to 2014 was 12.5%. In 2013, Mijia was qualified as a “high and new technology enterprise”,
entitling it to a preferential EIT tax rate of 15% from 2013 to 2015.



Miyi, as a “software enterprise,”
is entitled to a full exemption from EIT in 2013 and 2014 and a 50% reduced EIT rate from 2015 to 2017. The reduced applicable
EIT rate for Miyi from 2015 to 2017 is 12.5%.



Najia, one of our SPEs, as a “software
enterprise,” is entitled to a full exemption from EIT in 2013 and 2014 and a 50% reduced EIT rate from 2015 to 2017. The
reduced applicable EIT rate for Najia from 2015 to 2017 is 12.5%.



Mopin, as a “software enterprise,”
is entitled to a two-year full exemption from EIT from the first year of profitable operation after offsetting prior years’
tax losses, and a 50% reduction of the applicable EIT rate for the succeeding three years.



However, continued qualification as a “high
and new technology enterprise” is subject to a review every three years by the relevant government authorities in China,
and continued qualification as a “software enterprise” is subject to an annual assessment by the relevant government
authorities in China. Consequently, Hangzhou Sky, Mijia, Miyi, Najia or Mopin may not meet the qualifications and the relevant
government authorities may revoke their “high and new technology enterprise” or “software enterprise” status
in the future. Any increase in these entities’ EIT rate may materially adversely affect our results of operations.



In addition, under the PRC Enterprise Income
Tax Law and the Implementing Rules, dividends generated from the business of our PRC subsidiaries after January 1, 2008 and
payable to us may be subject to a withholding tax rate of 10% as we are a non-resident enterprise incorporated outside of the PRC
and the Cayman Islands does not have a tax treaty with China that provides for a different withholding arrangement. Distributions
of earnings generated before January 1, 2008 are exempt from PRC withholding tax.



66







The PRC Enterprise Income Tax Law provides
that enterprises established outside China whose “effective management” is located in China are considered “resident
enterprises” and will generally be subject to the uniform 25% EIT rate on their global income. Under the Implementing Rules,
“effective management” is defined as substantial and overall management and control over such aspects as the production
and business, personnel, accounts and properties of an enterprise. We may be deemed to be a PRC resident enterprise under the PRC
Enterprise Income Tax Law and we may be subject to PRC EIT at the rate of 25% on our worldwide income. See “Item 3. Key Information
– D. Risk Factors — Risks Related to Doing Business in China — We may be classified as a “resident
enterprise” for PRC EIT purposes, which could result in our global income becoming subject to the 25% PRC EIT rate.”



PRC Business Tax and Value Added Tax



Prior to January 1, 2012, pursuant to Provisional
Regulation of China on Business Tax and its implementing rules, any entity or individual rendering services in the territory of
PRC was generally subject to a business tax at the rate of 5% on the revenues generated from provision of such services. In November
2011, the MOF and the SAT jointly issued two circulars setting out the details of the VAT Pilot Program, which changes business
tax to value-added tax for certain industries, including, among others, transportation services, research and development and technical
services, information technology services, and cultural and creative services. The VAT Pilot Program initially applied only to
these industries in Shanghai, and has been expanded to eight additional provinces, including Beijing, Tianjin, Zhejiang Province
(including Ningbo), Anhui Province, Guangdong Province (including Shenzhen), Fujian Province (including Xiamen), Hubei Province
and Jiangsu Province in 2012. On May 24, 2013, the MOF and the SAT jointly issued the Circular on Tax Policies on the Nationwide
Expansion of the Pilot Program for the Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and
Certain Modern Services Industries, or Circular 37, which expanded the VAT Pilot Program nationwide as of August 1, 2013. Pursuant
to the Circular on the Inclusion of Telecommunications Industry in the Pilot Collection of Value-added Tax in Lieu of Business
Tax promulgated by MOF and the SAT on April 29, 2014, or Circular 43, Circular 37 has been replaced by Circular 43 and the VAT
Pilot Program has been expanded to cover telecommunication service, as currently conducted by us, as of June 1, 2014.



Critical Accounting Policies and Estimates



We prepare our financial statements in conformity
with IFRS, which requires us to make judgments, estimates and assumptions. We regularly evaluate these estimates and assumptions
based on the most recently available information, our own historical experience and various other assumptions that we believe to
be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from our expectations as a result of changes in our estimates.



An accounting policy is considered critical
if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such
estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates
that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.



We believe that the following accounting
policies involve a higher degree of judgment and complexity in their applications and require us to make significant accounting
estimates. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with
our consolidated financial statements and other disclosures included in this transition report.



Fiscal Year



We have changed our fiscal year to end on
December 31, effective from the calendar year ended December 31, 2014. Previously, our fiscal year ended on March 31.



67







Revenue Recognition



Single-player Game Revenue



We generate single-player game revenue
from sales of self-developed and licensed single-player games through our Maopao platform and third-party distribution channels.
We operate most of our single-player games under a free-to-play model. Under the free-to-play model, mobile game players can download
the games to their mobile devices free-of-charge, while they may also purchase in-game virtual items or premium features to enhance
gaming experience. We have entered into cooperation agreements with handset companies to pre-install our Maopao platform products
on mobile handsets before they reach users. The applications and contents are predominantly delivered to customers through mobile
network operators in China. We contract with mobile service providers, who further contract with and utilize mobile network operators’
billing channels, as well as contract directly with mobile network operators to collect payment from the our customers on our behalf.
Mobile network operators and mobile service providers are entitled to commissions, which are a percentage of the gross fees collected
from our customers by the mobile network operators. We also pay content fees and service fees to content developers and handset
companies, respectively, based on a prescribed percentage of the gross proceeds confirmed by the mobile network operators.



For revenues from the sale of in-app virtual
items, premium features and other contents from our application stores, we recognize revenue on a gross basis at the time when
each purchase is successfully made and the collectability is reasonably assured. We act as the primary obligor and recognize 1)
the commissions retained by mobile network operators and mobile service providers and 2) content fees and service fees mentioned
above as cost of revenues in our consolidated statements of profit or loss and other comprehensive income. As the virtual items
are immediately consumed, revenue is recognized upon consumption.



For certain single player games, we act
as the agent of the relevant content providers to facilitate the payment collection, as we are not involved in the operation of
the games and the relevant content providers are the primary obligors in the arrangement. Under such circumstances, the amount
of revenue we recognize equals the net proceeds after deducting the amount shared by the content providers. As we have no
further obligations to the content providers upon the completion of the in-game purchase, revenue is recognized upon the purchase
of such in-game virtual items and premium features.



Multiplayer Game Revenue



We offer multiplayer games through our
Maopao Community and other distribution channels. Users can top up their accounts using a number of payment options including pre-paid
phone cards, pre-paid game cards, bank debit cards and online payment solutions, to purchase virtual items and premium features
in the multiplayer games. We collect payment through payment processing agents or mobile service providers, who are entitled to
a commission for processing customer prepayments. Customer accounts are first charged up with cash credit and recorded as advance
payment, which may be consumed to purchase in-game virtual items and later recorded into deferred revenue.



Multiplayer game revenues are derived from
the purchase of in-game virtual items having an unlimited life. Such revenues are initially deferred and are subsequently recognized
following the historical user retention pattern over the estimated consumption period of the durable virtual items, ranging from
1 to 12 months. The user retention pattern and consumption period are estimated based on the historical data and log-in patterns
of paying users. We assess these estimates on a regular basis to ensure the accuracy of the data.



For certain multiplayer games, we act as
the agent of the relevant content providers to facilitate the payment collection, as we are not involved in the operation of the
games and the content providers are the primary obligor in the arrangement. Under such circumstances, the amount of revenue we
recognize equals the net proceeds after deducting the amounts shared by the content providers. As we have no further
obligations to the content providers upon the completion of the in-game purchase, revenue is recognized upon the purchase of in-game
virtual items and premium features.



Other Revenue



We also allow content providers, mobile
network operators and mobile service providers to sell their mobile applications and other contents to mobile users through Maopao
Platform, for which we charge a commission based on a percentage of the revenue earned from those applications or number of active
users. We record such revenue as other revenues upon receipt of monthly statements from the content providers, mobile network operators
and mobile service providers.



Other revenue also include single-player
game revenues we generated from overseas through overseas mobile service providers in the same way disclosed above. We recognize
such revenue upon receipt of acknowledgement of successful downloads from these mobile service providers.



Taxation



We estimate income tax expense for each
jurisdiction in which we operate and for each period presented, which includes estimating current tax exposure as well as assessing
realizable deferred tax assets and deferred tax liabilities.



68







As of March 31, 2013, 2014 and December
31, 2014, our deferred tax assets were RMB1.8 million, RMB2.0 million and RMB2.7 million (US$0.4 million), respectively, primarily
resulting from temporary differences between accounting and tax bases. We recognize deferred income taxes for temporary differences
between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, as net operating
loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. In the event we were to determine
that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to the
carrying amount of our deferred tax assets would increase our net income in the period in which such determination was made. Likewise,
if we determined that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to
the carrying amount of our deferred tax assets would be charged to our consolidated statements of profit or loss and other comprehensive
income in the period in which such determination is made.



We consider positive and negative evidence
to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers,
among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory
carry forward periods, our experience with tax attributes expiring unused and tax planning alternatives. Our ability to realize
deferred tax assets depends on our ability to generate sufficient taxable income within the carry forward periods provided for
in the tax law. As of December 31, 2014, no deferred tax assets had been recognized in respect of tax losses of RMB32.9 million
(US$5.3 million).



Impairment of investments in associates



We assess the impairment of our equity investments
accounted for under the equity method by considering factors including, but not limited to, current economic and market conditions,
the operating performance of the companies, including current earnings trends and undiscounted cash flows, and other company-specific
information, such as recent financing rounds. The fair value determination, particularly for investments in privately held companies
whose revenue models remain unclear, requires significant judgment to determine appropriate estimates and assumptions. Changes
in these estimates and assumptions could affect the calculation of the fair value of the investments. If any impairment exists,
we will write down the investment to its fair value and take a corresponding charge to our consolidated statements of profit or
loss and other comprehensive income. Any reversal of impairment loss is recognized to the extent that the recoverable amount of
the investment subsequently increases.



Consolidation of SPEs



PRC laws restrict foreign ownership of telecommunication
businesses. To comply with the PRC laws, we conduct substantially all of our telecommunication business through our SPEs and their
subsidiaries. Through Dianneng, one of our subsidiaries in the PRC, we have entered into contractual arrangements with each of
our SPEs and their shareholders, such that they are considered special purpose entities that we control. We believe we have substantive
termination rights pursuant to the purchase option agreements, which allow us to control the shareholders of these SPEs. We believe
that the purchase option agreements are currently exercisable and legally enforceable under PRC law.



We also believe that the amount of consideration
to exercise the option under PRC law does not represent a financial barrier or disincentive for us to exercise our rights under
the purchase option agreements. Under the powers of attorney entered into by each of the shareholders of the SPEs, each of the
shareholders of the SPEs irrevocably grants any person designated by us the power to exercise all voting rights of the shareholders
of the SPEs. We believe this gives us the power to direct the activities that most significantly impact the SPEs’ economic
performance. We believe that our ability to exercise effective control, together with the exclusive business cooperation agreements
or service agreements and equity pledge agreements, entitles us to receive substantially all of the economic benefits from the
SPEs in consideration for the services provided by our PRC subsidiaries. Accordingly, in accordance with IFRS, we consolidate their
financial results and assets and liabilities in our consolidated financial statements.



We believe that our contractual arrangements
with the SPEs could limit our ability to enforce these contractual arrangements and the interests of the shareholders of the SPEs
may diverge from those of our company. This may potentially increase the risk that they would seek to act contrary to the contractual
terms of these agreements, for example by influencing the SPEs not to pay the service fees when required to do so. See “Item
3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China – Our Contractual arrangements
with our SPEs and their respective shareholders may not be as effective in providing control over these entities as direct ownership.



Consolidated Results of Operations



The following table sets forth a summary
of our consolidated results of operations by amount and as a percentage of our total revenues for the periods indicated. This information
should be read together with our audited consolidated financial statements and related notes included elsewhere in this transition
report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.



69







|                                                                              |  | For the Fiscal Year Ended March 31,                        |          |   | For the Nine Months Ended December 31, | 
|----------------------------------------------------------------------------- |  | ---------------------------------------------------------- | -------- | - | -------------------------------------- | 
|                                                                              |  | 2013                                                       |          |   | 2014                                   | 
|                                                                              |  | RMB                                                        |          |   | %                                      | 
|                                                                              |  |                                                            |          |   |                                        | 
|                                                                              |  | (in thousands, except number of shares and per share data) |         
|Consolidated Statements of Profit or Loss and Other Comprehensive Income Data |  |                                                            |          |   |                                        | 
|Revenues                                                                      |  |                                                            | 601,107  |   |                                        | 
|Cost of revenues from third parties                                           |  |                                                            | (412,246 | ) |                                        | 
|Cost of revenues from related parties                                         |  |                                                            | (6,534   | ) |                                        | 
|Gross profit                                                                  |  |                                                            | 182,327  |   |                                        | 
|Research and development expenses                                             |  |                                                            | (73,027  | ) |                                        | 
|Sales and marketing expenses                                                  |  |                                                            | (35,369  | ) |                                        | 
|General and administration expenses                                           |  |                                                            | (69,491  | ) |                                        | 
|Other operating income, net                                                   |  |                                                            | 2,320    |   |                                        | 
|Profit (loss) from operations                                                 |  |                                                            | 6,760    |   |                                        | 
|Other gains and losses                                                        |  |                                                            | 15,531   |   |                                        | 
|Impairment of investment in  associates                                       |  |                                                            | (1,367   | ) |                                        | 
|Impairment of an available-for-sale investment                                |  |                                                            | —        |   |                                        | 
|Share of results of associates                                                |  |                                                            | (935     | ) |                                        | 
|Gain on disposal of an associate                                              |  |                                                            | —        |   |                                        | 
|Profit before tax                                                             |  |                                                            | 19,989   |   |                                        | 
|Income tax expense                                                            |  |                                                            | (2,733   | ) |                                        | 
|Profit for the year                                                           |  |                                                            | 17,256   |   |                                        | 



Nine Months Ended December 31, 2014 Compared to Nine Months
Ended December 31, 2013



Revenues increased by 64.2%, or RMB229.0
million, to RMB586.0 million (US$94.5 million) in the nine months ended December 31, 2014 from RMB357.0 million in the nine months
ended December 31, 2013, primarily due to the continued strong growth in our smartphone business, partially offset by the continued
decline in our feature phone business. We have since 2012 gradually shifted our strategic focus from feature phones to smartphones.
Approximately 84.1% and 15.9% of our revenues were derived from our smartphone and feature phone business in the nine months ended
December 31, 2014, respectively, compared to 34.3% and 65.7% of revenues derived from our smartphone and feature phone business
in the nine months ended December 31, 2013, respectively.



Revenue from Smartphone Business



Revenue from single-player games increased
significantly by 358.6%, or RMB293.3 million, to RMB375.1 million (US$60.5 million) in the nine months ended December 31, 2014
from RMB81.8 million in the nine months ended December 31, 2013. Revenue from single-player games as a percentage of our total
revenues increased from 22.9% in the nine months ended December 31, 2013 to 64.0% in the nine months ended December 31, 2014. The
increases were primarily attributable to (i) the increased popularity of our single-player games for smartphones, as we invested
significantly in further expanding our content offerings with more diversified single-player games that cater to our growing customer
base, and (ii) our continued efforts in strengthening the distribution and monetization of single-user games for smartphones through
our Maopao platform and third-party distribution partners.



Revenue from multi-player games increased
significantly by 230.1%, or RMB50.5 million, to RMB72.4 million (US$11.7 million) in the nine months ended December 31, 2014 from
RMB21.9 million in the nine months ended December 31, 2013. Revenue from multi-player games as a percentage of our total revenues
increased from 6.1% in the nine months ended December 31, 2013 to 12.4% in the nine months ended December 31, 2014. The increases
were primarily attributable to our continued efforts to strengthen the distribution and monetization of multi-player games for
smartphone through our Maopao platform and third-party distribution partners.



70







Other revenues increased significantly
by 140.1%, or RMB26.4 million, to RMB45.2 million (US$7.3 million) in the nine months ended December 31, 2014 from RMB18.8 million
in the nine months ended December 31, 2013. Other revenues as a percentage of our total revenues increased from 5.3% in the nine
months ended December 31, 2013 to 7.7% in the nine months ended December 31, 2014. The increases were primarily attributable to
our increased distribution of applications and contents from content providers and mobile network operators through our Maopao
platform.



Revenue from Feature Phone Business



Our revenue from feature phone business
decreased by 60.2%, or RMB141.1 million, to RMB93.3 million (US$15.0 million) in the nine months ended December 31, 2014 from RMB234.4
million in the nine months ended December 31, 2013. Our revenue from feature phone business as a percentage of our total revenues
decreased from 65.7% in the nine months ended December 31, 2013 to 15.9% in the nine months ended December 31, 2014. The decreases
were primarily due to the continued decline in our feature phone business, which reflected (i) the shift in our strategic focus
from feature phones to smartphones since 2012, and (ii) the continued decline in the Chinese feature phone market in general.



Cost of Revenues.Cost of revenues
increased by 73.0%, or RMB196.0 million, from RMB268.4 million in the nine months ended December 31, 2013 to RMB464.4 million (US$74.9
million) in the nine months ended December 31, 2014, primarily attributable to the rapid growth of our smartphone business, partially
offset by the continued decline in our feature phone business.



Gross Profit.As a result of the
foregoing, gross profit increased by 37.3%, or RMB33.0 million, from RMB88.6 million in the nine months ended December 31, 2013
to RMB121.6 million (US$19.6 million) in the nine months ended December 31, 2014. Our gross margin was 20.7% in the nine months
ended December 31, 2014, compared to 24.8% in the nine months ended December 31, 2013, primarily due to the higher revenue contribution
of our smartphone business in the nine months ended December 31, 2014, which generally has a lower profit margin as we typically
offer more attractive revenue sharing propositions to our smartphone business partners, in an effort to expand our smartphone user
base and further improve our smartphone content offerings, as opposed to the revenue sharing arrangements with our feature phone
business partners.



Operating Expenses.Operating expenses
increased by 7.1%, or RMB6.8 million, from RMB95.8 million in the nine months ended December 31, 2013 to RMB102.6 million (US$16.5
million) in the nine months ended December 31, 2014. The increase in our operating expenses was primarily due to the significant
expansion of our smartphone business, partially offset by the decrease in headcount for our declining feature phone business and
our efforts to enhance labor efficiency.



| | · | Sales and marketing expenses increased by 18.4%, or RMB4.9 million, to RMB31.2 million (US$5.0 million) in the nine months
ended December 31, 2014 from RMB26.4 million in the nine months ended December 31, 2013, primarily due to increased sales and marketing
activities to promote our Maopao brand and smartphone business. The number of our sales and marketing employees increased from
128 as of December 31, 2013 to 157 as of December 31, 2014. In the nine months ended December 31, 2014, we recorded RMB0.1 million
(US$20 thousand) in share-based compensation under sales and marketing expenses, which decreased by RMB3.3 million from RMB3.4
million in the nine months ended December 31, 2013.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | General and administration expenses increased by 7.0%, or RMB3.1 million, from RMB43.9 million in the nine months ended December
31, 2013 to RMB47.0 million (US$7.6 million) in the nine months ended December 31, 2014, primarily due to the increased professional
fee, primarily including audit and legal fee, in line with the continued expansion of our business, partially offset by cost savings
associated with our strengthened cost control efforts. In the nine months ended December 31, 2014, we recorded RMB3.4 million (US$0.5
million) in share-based compensation under general and administration expenses, which decreased by RMB2.1 million from RMB5.5 million
in the nine months ended December 31, 2013.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Research and development expenses decreased by 12.1%, or RMB3.6 million, from RMB29.5 million in the nine months ended December
31, 2013 to RMB25.9 million (US$4.2 million) in the nine months ended December 31, 2014, primarily due to the decreased staff cost
as we rebalanced resources between the smartphone and feature phone businesses. In the nine months ended December 31, 2014, we
recorded RMB0.4 million (US$58 thousand) in share-based compensation under research and development expenses, which decreased by
RMB3.3 million from RMB3.7 million in the nine months ended December 31, 2013.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



71







Profit (loss) from Operations.As
a result of the foregoing, we incurred profit from operations of RMB18.9 million (US$3.1 million) in the nine months ended December
31, 2014, compared to loss from operations of RMB7.3 million in the nine months ended December 31, 2013.



Other Gains and Losses.Other gains
increased by 53.3%, or RMB6.2 million, from RMB11.6 million in the nine months ended December 31, 2013 to RMB17.7 million (US$2.9
million) in the nine months ended December 31, 2014. The increase in other gains was primarily attributable to change in fair value
of investment at FVTPL of RMB3.8 million (US$0.6 million) and increase in interest income of RMB1.3 million (US$0.2 million).



Impairment of Investment in Associates.
Impairment of investment in associates in the nine months ended December 31, 2014 primarily related to our investment in Mingyou
and Brtech due to their poor business performance and negative discounted cash flow forecasts. Impairment of investment in an associate
in the nine months ended December 31, 2013 primarily related to our investment in Dream Sky due to its poor business performance
and negative discounted cash flow forecast.



Share of Results of Associates.Our
share of results of associates increased from RMB3.4 million in the nine months ended December 31, 2013 to RMB8.5 million (US$1.4
million) in the nine months ended December 31, 2014, primarily attributable to our investments in 25 companies in the nine months
ended December 31, 2014, which are primarily engaged in wireless technology development and related applications in the PRC.



Profit before Tax.As a result
of the foregoing, our profit before tax increased significantly from RMB6.2 million in the nine months ended December 31, 2013
to RMB99.9 million (US$16.1 million) in the nine months ended December 31, 2014.



Income Tax Expense.Our income
tax expenses decreased by 81.1%, or RMB5.0 million, from RMB6.1 million in the nine months ended December 31, 2013 to RMB1.2 million
(US$0.2 million) in the nine months ended December 31, 2014. The decrease in our income tax expenses was primarily due to the additional
income tax expenses in the nine months ended December 31, 2013, which was triggered by the inter-group transfer of an associate
due to our change of investment strategy.



Profit for the Period.As a result
of the foregoing, profit for the period increased from RMB28 thousand in the nine months ended December 31, 2013 to RMB98.7 million
(US$15.9 million) in the nine months ended December 31, 2014.



Fiscal Year Ended March 31, 2014 Compared to Fiscal Year
Ended March 31, 2013



Revenues decreased by 19.2%, or RMB115.6
million, to RMB485.6 million in fiscal 2014 from RMB601.1 million in fiscal 2013, primarily due to the continued decline in our
feature phone business, partially offset by the stronger than expected growth in our smartphone business.



Prior to the second calendar quarter of 2014, we categorized our revenues into application store revenues
and Maopao community revenues. Application store revenues refer to revenues from sales of mobile applications and other content
through our mobile application stores, Maopao App Store and Maopao Game Center. Maopao community revenues refer to revenue generated
from user purchases of virtual items and premium features in Maopao Community.



Application store revenues decreased by
28.6%, or RMB109.3 million, from RMB381.6 million in fiscal 2013 to RMB272.3 million in fiscal 2014, primarily due to the continued
decline in our feature phone business, partially offset by the stronger than expected growth in our smartphone business. Our cumulative
number of users increased from approximately 1.2 billion as of March 31, 2013 to approximately 1.4 billion as of March 31, 2014,
among which approximately 147.3 million were smartphone users. Average revenue per download on Maopao platform increased due to
improved content installations. See “— Factors Affecting Our Results of Operations — Our ability to address challenges
associated with policy changes and mobile network operators’ business practices.” We have invested significantly in
further expanding our content offerings with more diversified applications and licensed games from third party developers in China.



Our Maopao Community revenues decreased
by 18.9%, or RMB33.6 million, from RMB177.7 million in fiscal 2013 to RMB144.0 million in fiscal 2014, primarily due to the continued
decline in our feature phone business. We expect that our Maopao Community revenues to continue to represent a significant percentage
of total revenues in the near future as we focus on increasing the average revenue per user in our Maopao Community and migrating
our feature phone Maopao Community users to smartphones.



Other revenues increased by 65.3%, or
RMB27.3 million, from RMB41.9 million in fiscal 2013 to RMB69.2 million in fiscal 2014, primarily attributable to our increased
distribution of applications and contents from content providers, mobile network operators and mobile service providers through
our Maopao platform.



72







Cost of Revenues.Cost of revenues
decreased by 13.0%, or RMB54.3 million, from RMB418.8 million in fiscal 2013 to RMB364.4 million in fiscal 2014, primarily attributable
to (i) the decline in our feature phone business and (ii) decreased payment channel costs as we have been increasingly collaborating
directly with mobile network operators to collect sales proceeds.



Gross Profit.As a result of the
foregoing, gross profit decreased by 33.6%, or RMB61.2 million, from RMB182.3 million in fiscal 2013 to RMB121.1 million in fiscal
2014. Our gross margin was 24.9% in fiscal 2014, compared to 30.3% in fiscal 2013, primarily due to the higher revenue contribution
of our smartphone business in fiscal 2014 which generally has a lower profit margin as we generally offer more attractive revenue
sharing propositions to our smartphone business partners, in an effort to facilitate our transition to the smartphone business.



Operating Expenses.Operating expenses
decreased by 27.3%, or RMB47.9 million, from RMB175.6 million in fiscal 2013 to RMB127.6 million in fiscal 2014. The decrease in
our operating expenses was primarily due to the decrease in total headcount for our declining feature phone business and our efforts
to enhance labor efficiency.



| | · | Sales and marketing expenses increased by 2.8%, or RMB1.0 million, to RMB36.4 million in fiscal 2014 from RMB35.4 million in
fiscal 2013, primarily due to increased sales and marketing activities to promote our Maopao brand and smartphone business. The
number of our sales and marketing employees increased from 111 as of March 31, 2013 to 128 as of March 31, 2014. In fiscal 2014,
we recorded RMB3.6 million in share-based compensation under sales and marketing expenses, which increased by RMB1.5 million from
RMB2.1 million in fiscal 2013.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | General and administration expenses decreased by 16.0%, or RMB11.1 million, from RMB69.5 million in fiscal 2013 to RMB58.4
million in fiscal 2014, primarily due to our strengthened cost control efforts. In fiscal 2014, we recorded RMB8.7 million in share-based
compensation under general and administration expenses, which decreased by RMB5.3 million from RMB14.0 million in fiscal 2013.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Research and development expenses decreased by 47.1%, or RMB34.4 million, from RMB73.0 million in fiscal 2013 to RMB38.6 million
in fiscal 2014, primarily due to decreased headcount for our research and development personnel as we balanced resources between
the smartphone and feature phone businesses. Our research and development staff decreased from 218 as of March 31, 2013 to 157
as of March 31, 2014. In fiscal 2014, we recorded RMB4.3 million in share-based compensation under research and development expenses,
which decreased by RMB1.6 million from RMB5.9 million in fiscal 2013.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Profit (loss) from Operations.As
a result of the foregoing, we incurred loss from operations of RMB6.5 million in fiscal 2014, compared to profit from operations
of RMB6.8 million in fiscal 2013.



Other Gains and Losses.Other gains
increased by 12.6%, or RMB2.0 million, from RMB15.5 million in fiscal 2013 to RMB17.5 million in fiscal 2014. The increase in other
gains was primarily attributable to income on short-term investments of RMB2.6 million, which related to a fixed-income financial
product we purchased from a Chinese bank, partially offset by a 1.8% decrease in interest income from RMB16.2 million in fiscal
2013 to RMB15.9 million in fiscal 2014.



Impairment of Investment in Associates.Impairment of investment in associates in fiscal 2014 primarily related to our investment in Dream Sky due to its poor business
performance and negative discounted cash flow forecast. Impairment of investment in an associate in fiscal 2013 primarily related
to our investment in DigiMobi due to its poor business performance and negative discounted cash flow forecast.



Share of Results of Associates.Our
share of results of associates increased from RMB0.9 million in fiscal 2013 to RMB2.4 million in fiscal 2014, primarily attributable
to our investments in Shanghai Fangcun Information Technology Co., Ltd. and eight additional associates in fiscal 2014, all of
which are private companies primarily engaged in wireless technology development and related applications in the PRC.



Profit before Tax.As a result
of the foregoing, our profit before tax decreased by 40.6%, or RMB8.1 million, from RMB20.0 million in fiscal 2013 to RMB11.9 million
in fiscal 2014.



Income Tax Expense.Our income
tax expenses increased by 164.1%, or RMB4.5 million, from RMB2.7 million in fiscal 2013 to RMB7.2 million in fiscal 2014. The increase
in our income tax expenses was primarily due to additional income tax expenses triggered by the inter-group transfer of an associate
due to our change of investment strategy. Such additional income tax was paid to the relevant tax bureau in April 2014.



73







Profit for the Year.As a result
of the foregoing, profit for the year decreased from RMB17.3 million in fiscal 2013 to RMB4.7 million in fiscal 2014.



| | B. | Liquidity and Capital Resources
| | -- | -------------------------------



We have financed our operations primarily
through cash generated from operations, the issuance of Series A preferred shares and our initial public offering. All of our Series
A preferred shares were automatically converted into common shares immediately upon the completion of our initial public offering
in December 2010. Our cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as
to withdrawal or use, and which have maturities of three months or less when purchased. As of March 31, 2013 and 2014 and
December 31, 2014, we had RMB135.0 million, RMB79.1 million and RMB205.0 million (US$33.0 million) in cash and cash equivalents,
respectively.



As a holding company, we may rely on dividends
and other distributions from our PRC subsidiaries for our cash requirements. PRC regulations permit our subsidiaries to pay dividends
to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
In addition, each of our subsidiaries and SPEs in China is required to set aside at least 10% of its after tax profits, as determined
on a calendar year basis and in accordance with relevant accounting principles and financial regulations applicable to enterprises
established in the PRC (“PRC GAAP”), if any, to fund a statutory reserve until such reserve reaches 50% of its registered
capital. The statutory reserve, equal to RMB1.0 million as of December 31, 2014, is the same under both PRC GAAP and IFRS
and is reflected as statutory reserve in the consolidated statements of changes in equity in our consolidated financial statements.
These reserves are not distributable as cash dividends. The difference between net profit, as determined under PRC GAAP, and the
amount allocated to statutory reserve, for each of our subsidiaries and SPEs in China, represents amounts that are free of restriction.



Such amounts differ from subsidiary or SPE
equity less statutory reserve as determined under IFRS due to accounting differences between PRC GAAP and IFRS. The aggregate retained
earnings of our PRC subsidiaries and SPEs after setting aside required statutory reserve funding, determined in accordance with
PRC GAAP, amounted to RMB355.6 million (US$57.3 million) as of December 31, 2014. However, the amount of retained earnings
distributable to our offshore entities may be less than such amounts, as any dividend distribution may be subject to relevant taxes
in the PRC when our SPEs make payments to our PRC subsidiaries under contractual arrangements and when our PRC subsidiaries distribute
dividends to the offshore entities. As discussed in “Item 8. Financial Information — A. Consolidated Statements and
Other Financial Information — Dividend Policy,” we do not plan to declare and pay any dividends on our shares or ADSs
in the near future and currently intend to retain most, if not all, of our available funds and any future earnings to operate and
expand our business. Furthermore, if our PRC subsidiaries incur debt in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments to us.



Prior to July 1, 2010, we received
economic benefits generated from our SPEs through various contractual arrangements entered into by Pusida, our PRC subsidiary,
with the SPEs. On July 1, 2010, through Dianneng, our other PRC subsidiary, we entered into contractual arrangements with
Hangzhou Sky, Mijia and their respective shareholders to replace their previous contractual arrangements with Pusida. Such contractual
arrangements include technical support service agreements, strategy consulting service agreements and intellectual property license
agreements with Hangzhou Sky and Mijia, respectively, and an exclusive business cooperation agreement with Fanyi.



In addition, in February 2011, through Dianneng,
we entered into similar contractual arrangements with Feineng and its shareholders, including a technical support service agreement,
strategy consulting service agreement and intellectual property license agreement. In December 2012, through Dianneng, we entered
into similar contractual arrangements with each of Najia, Miyi and Tianchu and their respective shareholders, including a technical
support service agreement, strategy consulting service agreement and intellectual property license agreement. During the fiscal
year ended March 31, 2014, through Dianneng, we entered into similar contractual arrangements with each of Zunqi, Geyuan, Kaimi,
Dangyi and their respective shareholders, including a technical support service agreement, strategy consulting service agreement
and intellectual property license agreement. Under these contractual arrangements, our SPEs pay their earnings in the form of services
fees and royalties to our PRC subsidiaries. Our PRC subsidiaries pay their earnings to our offshore intermediate holding company
primarily through dividends.



The following table sets forth a summary
of our net cash flows for the periods indicated:



74







|                                                    |  | For the Fiscal Year Ended March 31, |         |   | For the Nine Months Ended December 31, | 
|--------------------------------------------------- |  | ----------------------------------- | ------- | - | -------------------------------------- | 
|                                                    |  | 2013                                |         |   | 2014                                   | 
|                                                    |  | RMB                                 |         |   | RMB                                    | 
|                                                    |  |                                     |         |   |                                        | 
|                                                    |  | (in thousands)                      |        
|Net cash provided by (used in) operating activities |  |                                     | 73,289  |   |                                        | 
|Net cash (used in) provided by investing activities |  |                                     | (54,543 | ) |                                        | 
|Net cash used in financing activities               |  |                                     | (20,830 | ) |                                        | 
|                                                    |  |                                     |         |   |                                        | 
|Net decrease in cash and cash equivalents           |  |                                     | (2,084  | ) |                                        | 
|Cash and cash equivalents at beginning of year      |  |                                     | 137,538 |   |                                        | 
|Effect of foreign exchange rate changes             |  |                                     | (429    | ) |                                        | 
|Cash and cash equivalents at end of year            |  |                                     | 135,025 |   |                                        | 



Cash provided by operating activities was
RMB73.3 million, RMB47.8 million and RMB65.0 million in the fiscal years ended March 31, 2013 and 2014 and the nine months
ended December 31, 2013, respectively, and cash used in operating activities was RMB16.5 million (US$2.7 million) in the nine months
ended December 31, 2014. The cash outflow in the nine months ended December 31, 2014 was primarily due to the increased turnover
date of trade receivables from mobile network operators as we offered more favorable payment terms to our smartphone business partners.
The decrease in the fiscal year ended March 31, 2014 was primarily attributable to a decrease in profit before tax resulted
from (i) the continued decline in our feature phone business, and (ii) the higher revenue contribution of our smartphone business,
which generally has a lower gross margin. The increase in the fiscal year ended March 31, 2013 was primarily attributable to cost
savings from direct cooperation with China Mobile on the game platform. For a detailed reconciliation of our net income to net
cash provided by/used in operating activities, please refer to our consolidated cash flow statements contained in this transition
report.



We had RMB244.1 million (US$39.4 million)
net cash from investing activities for the nine months ended December 31, 2014 primarily due to (i) RMB148.5 million in disposal
of investment at FVTPL, (ii) RMB92.3 million of proceeds of disposal of an associate, (iii) RMB50.0 million of redemption of short-term
investments, and (iv) a RMB13.4 million decrease in term deposits, partially offset by RMB58.1 million of payment of investment
in associates. We had RMB7.9 million net cash provided by investing activities for the nine months ended December 31, 2013 primarily
due to RMB7.1 million of interest income received. We had RMB76.0 million net cash used in investing activities for the fiscal
year ended March 31, 2014 primarily due to (i) RMB215.0 million in purchase of investment at FVTPL and short-term investments,
(ii) a RMB50.2 million investment in associates, and (iii) RMB2.0 million in purchases of property and equipment, partially offset
by a RMB177.5 million decrease in term deposits and a RMB12.8 million interest income received. We had RMB54.5 million net cash
used in investing activities for the fiscal year ended March 31, 2013 primarily due to (i) a RMB34.9 million increase in term
deposits, (ii) a RMB32.1 million increase in investment in payment of investment in associates and available-for-sale investments,
and (iii) RMB3.4 million in purchases of property and equipment, partially offset by a RMB16.2 million interest income received.



We had RMB101.1 million (US$16.3 million)
net cash used in financing activities for the nine months ended December 31, 2014 primarily due to RMB103.1 million in payments
for share repurchase, partially offset by RMB1.0 million from the exercise of share options. We had RMB23.2 million net cash used
in financing activities for the nine months ended December 31, 2013 primarily due to RMB28.0 million in payments for repurchase
of common shares, partially offset by RMB3.6 million from the exercise of share options and RMB1.2 million of capital contributions
from non-controlling interests. We had RMB25.8 million net cash used in financing activities for the fiscal year ended March 31,
2014, primarily consisting of RMB34.2 million in payments for repurchase of common shares, partially offset by RMB7.1 million from
the exercise of share options and RMB1.2 million of capital contributions from non-controlling interests. We had RMB20.8 million
net cash used in financing activities for the fiscal year ended March 31, 2013, primarily consisting of RMB25.3 million in
payments for repurchase of common shares, partially offset by RMB2.5 million from the exercise of share options and RMB2.0 million
of capital contributions from non-controlling interests.



75







Capital Expenditures



We had capital expenditures of RMB3.4 million,
RMB2.0 million, RMB1.4 million and RMB5.7 million (US$0.9 million ) in the fiscal years ended March 31, 2013 and 2014 and
the nine months ended December 31, 2013 and 2014, respectively, which were mainly used to purchase servers and computers to support
the expansion of our business.



We anticipate that we will be able to meet
our needs to fund operations for at least the next 12 months with operating cash flow and existing cash balances, including any
investments or acquisitions we may decide to pursue. If these sources are insufficient to satisfy cash requirements, we may seek
to sell additional equity or debt securities or to obtain a credit facility. The sale of additional equity or equity-linked securities
could result in additional dilution to shareholders. The incurrence of indebtedness would result in increased debt service obligations
and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts
or on terms acceptable to us, if at all.



Recently Issued Accounting Pronouncements



We have not early adopted the following
new and revised standards, amendments or interpretations that have been issued but are not yet effective.



Annual Improvements to IFRSs 2010 - 2012 Cycle



The Annual Improvements to IFRSs 2010
- 2012 Cycle include a number of amendments to various IFRSs, in which the relevant amendments are summarized below.



The amendments to IFRS 2 (i) change the
definitions of “vesting condition” and “market condition”; and (ii) add definitions for “performance
condition” and “service condition” which were previously included within the definition of “vesting condition”.
The amendments to IFRS 2 are effective for share-based payment transactions for which the grant date is on or after July 1, 2014.



The amendments to the basis for conclusions
of IFRS 13 clarify that the issue of IFRS 13 and consequential amendments to IAS 39 and IFRS 9 did not remove the ability to measure
short- term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of
discounting is immaterial.



Our directors anticipate that the application
of the amendments included in the Annual Improvements to IFRSs 2010 – 2012 Cyclewill have no material impact on our
consolidated financial statements.



Annual Improvements to IFRSs 2011 - 2013 Cycle



The Annual Improvements to IFRSs 2011
- 2013 Cycle include a number of amendments to various IFRSs, in which the relevant amendments are summarized below.



The amendments to IFRS 13 clarify that
the scope of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a
net basis includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if
those contracts do not meet the definitions of financial assets or financial liabilities within IAS32.



The amendments to IAS 40 clarify that
IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required. Consequently, an entity acquiring
investment property must determine whether:



| | (a) | The property meets the definition of investment property in terms of IAS 40; and
| | --- | --------------------------------------------------------------------------------



| | (b) | The transaction meets the definition of a business combination under IFRS 3.
| | --- | ----------------------------------------------------------------------------



Our directors anticipate that the application
of the amendments included in the Annual Improvements to IFRSs 2011 – 2013 Cyclewill have no material impact on our
consolidated financial statements.



Annual Improvements to IFRSs 2012 - 2014 Cycle



The Annual Improvements to IFRSs 2012-2014
Cycle include a number of amendments to various IFRSs, which are summarized below.



76







The amendments to IFRS 5 introduce specific
guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to
owners (or vice versa), or when held-for-distribution accounting is discontinued. The amendments apply prospectively.



The amendments to IFRS 7 provide additional
guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures
required in relation to transferred assets and clarify that the offsetting disclosures (introduced in the amendments to IFRS 7Disclosure – Offsetting Financial Assets and Financial Liabilities issued in December 2011 and effective for periods
beginning on or after 1 January 2013) are not explicitly required for all interim statements to comply with IAS 34 Interim Financial
Reporting.



The amendment to IAS 19 clarify that the
high quality corporate bonds used to estimate the discount rate for post-employment benefits should be issued in the same currency
as the benefits to be paid. These amendments would result in the depth of the market for high quality corporate bonds being assessed
at currency level. The amendments apply from the beginning of the earliest comparative period presented in the financial statements
in which the amendments are first applied. Any initial adjustment arising should be recognized in retained earnings at the beginning
of that period.



The amendments to IAS 34 clarify the requirements
relating to information required by IAS 34 that is presented elsewhere within the interim financial report but outside the interim
financial statements. The amendments require that such information be incorporated by way of a cross-reference from the interim
financial statements to the other part of the interim financial report that is available to users on the same terms and at the
same item as the interim financial statements.



Our directors do not anticipate that the
application of these will have a material effect on our consolidated financial statements.



Amendments to IAS 16 and IAS 38: Clarification
of Acceptable Methods of Depreciation and Amortization



The amendments of IAS 16 prohibit entities
from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a
rebuttable presumption that revenue is not an appropriate basis for amortization of an intangible asset. This presumption can only
be rebutted in the following two limited circumstances:



| | (a) | When the intangible asset is expressed as a measure of revenue; or
| | --- | ------------------------------------------------------------------

| | (b) | When it can be demonstrated that revenue and consumption of the economic benefits of the intangible assets are highly correlated.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



The amendments apply prospectively for
annul periods beginning on or after 1 January 2016. Currently, we use the straight-line method for depreciation and amortization
for its property, plant and equipment, and intangible assets respectively. Our directors believe that the straight-line method
is the most appropriate method to reflect the consumption of economic benefits inherent in the respective assets and accordingly,
our directors do not anticipate that the application of these amendments to IAS 16 and IAS 38 will have a material impact on our
consolidated financial statements.



IFRS 9 Financial Instruments



IFRS 9 issued in 2009 introduces new requirements
for the classification and measurement of financial assets. IFRS 9 was subsequently amended in 2010 to include the requirements
for the classification and measurement of financial liabilities and for de-recognition, and was further amended in 2013 to include
the new requirements for hedge accounting.



Key requirements of IFRS 9 are described
as follows:



| | · | All recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurementare
subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose
objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal
and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods.
All other debt investments and equity investments are measured at their fair value at the end of subsequent reporting periods.
In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity
investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit
or loss.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



77







| | · | With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that
liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s
credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value
of financial liabilities attributable to change in the financial liabilities’ credit risk are not subsequently reclassified
to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at
fair value through profit or loss was presented in profit or loss.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes
in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words,
it is no longer necessary for a credit event to have occurred before credit losses are recognized.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Based on our financial assets and financial
liabilities as at December 31, 2014, our directors anticipate that the adoption of IFRS 9 in the future will affect the classification
and measurement of our available-for-sale investments and is not likely to have significant impact on the amounts of our other
financial assets and financial liabilities. Regarding our available-for-sale investments, it is not practicable to provide a reasonable
estimate of that effect until a detailed review has been completed.



Our directors anticipate that the application
of the other new and revised IFRSs will have no material impact on our consolidated financial statements.



IFRS 15Revenue from Contracts with
Customers



In May 2014, IFRS 15 was issued which establishes
a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will
supersede the current revenue recognition guidance including IAS 18 Revenue,IAS 11 Construction Contracts and the
related Interpretations when it becomes effective.



The core principle of IFRS 15 is that an
entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces
a 5-step approach to revenue recognition:



Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the
contract.

Step 3: Determine the transaction prices.

Step 4: Allocate the transaction price to the performance
obligations in the contract.

Step 5: Recognize revenue when (or as) the entity
satisfies a performance obligation.



Under IFRS 15, an entity recognizes revenue
when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular
performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific
scenarios. Furthermore, extensive disclosures are required by IFRS 15.



Our directors anticipate that the application
of IFRS 15 in the future may have a material impact on the amounts reported and disclosures made in our consolidated financial
statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until we perform a detailed
review.



Our directors anticipate that the application
of the other new and revised IFRSs will have no material impact on our consolidated financial statements.



78







| | C. | Research and Development, Patents and Licenses, etc.
| | -- | ----------------------------------------------------



We have an experienced team of engineers.
As of December 31, 2014, our research and development staff consisted of 182 software, hardware and system engineers. We recruit
our engineers throughout China and have established various recruiting and training programs with leading universities in China.



Our senior management team heads our research
and development efforts and sets out strategic directions for the advancement of our offerings. Under their guidance, our research
and development plans currently focus on the following areas:



| | · | Improving our hardware infrastructure and computational capability. In order to prevent system malfunctions and downtime that
may result from our expanding user base, we focus on investing in our hardware infrastructure and computational capability to support
more mobile users concurrently accessing more diversified applications and content and interacting with each other through Maopao
Community.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Developing systematic solutions for smartphone applications along with our transition from feature phone business to smartphone
business.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | Developing new versions of Maopao platform products for both smartphone and feature phone operating systems, which will help
expand our user base and facilitate interaction among users.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Improving the capabilities and functionalities of Maopao platform products while enabling users with older versions of Maopao
platform products to easily access newly developed applications. We believe this will enable us to further enrich the applications
available on Maopao platform and capitalize on market growth following the popularization of 3G networks. We will continue to utilize
in-house and third-party development capabilities to diversify our content portfolio, particularly video chat and video streaming
related applications.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that the improvement of our technology
is vital to maintaining our long-term competitiveness. We have established laboratories for advanced mobile user experience testing,
mobile applications testing and system simulation.



In each of the fiscal years ended March 31,
2013 and 2014 and the nine months ended December 31, 2013 and 2014, our research and development expenses were RMB73.0 million,
RMB38.6 million, RMB29.5 million and RMB25.9 million (US$4.2 million), representing 12.1%, 8.0%, 8.3% and 4.4% of our total revenues
during the same periods, respectively.



| | D. | Trend Information
| | -- | -----------------



Other than as disclosed elsewhere in this
transition report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from December 31,
2013 to December 31, 2014 that are reasonably likely to materially adversely affect our net revenues, income, profitability,
liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future
operating results or financial conditions.



| | E. | Off-Balance Sheet Arrangements
| | -- | ------------------------------



We have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative
contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated
financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging
or research and development services with us.



| | F. | Contractual Obligations
| | -- | -----------------------



The following table sets forth our contractual
obligations as of December 31, 2014:



79







|                            |  | Payment Due by Period |       
|--------------------------- |  | --------------------- | ------
|                            |  | total                 |       
|                            |  | (RMB in thousands)    |       
|Operating lease commitments |  |                       | 12,004
|Capital commitments         |  |                       | 9,102 
|                            |  |                       |       
|Total                       |  |                       | 21,106



| | G. | Safe Harbor
| | -- | -----------



This transition report contains forward-looking
statements that relate to future events, including our prospects, future operating results and future financial performance and
condition, all of which are largely based on our current expectations and projections. The forward-looking statements are contained
principally in the sections entitled “Item 3. Key Information — D. Risk Factors,” “Item 4. Information
on the Company” and “Item 5. Operating and Financial Review and Prospects.” These statements are made under the
“safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking
statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,”
“estimate,” “intend,” “plan,” “believe,” “potential,” “continue,”
“is/are likely to” or other similar expressions.



We have based these forward-looking statements
largely on our current expectations and projections about future events and financial trends that we believe may affect our financial
condition, results of operations, business strategy and financial needs. These forward-looking statements include, among others,
statements relating to: our business strategies and initiatives as well as our business plans; our future business development,
results of operations and financial condition; expected changes in our revenues and certain cost or expense items; our expectations
with respect to increased revenue growth and our ability to sustain profitability; our products under development or planning;
our ability to attract clients and further enhance our brand recognition; and trends and competition in the mobile applications
industry.



This transition report also contains data
related to the mobile applications industry in China, including projections that are based on a number of assumptions. The mobile
applications industry in China may not grow at projected rates, or at all. The failure of the market to grow at projected rates
may materially adversely affect our business and the market price of our ADSs. In addition, the rapidly changing nature of the
mobile applications industry in China subjects any projections or estimates relating to the growth prospects or future condition
of our market to significant uncertainties. If any one or more of the assumptions underlying the market projections is incorrect,
our actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking
statements.



The forward-looking statements made in this
transition report relate only to events or information as of the date on which the statements are made in this transition report
on Form 20-F. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect
the occurrence of unanticipated events. You should read this transition report on Form 20-F in its entirety and review the factors
and risks we describe in reports we will file from time to time with the SEC after the date of this transition report. See “Item
10. Additional Information — H. Documents on Display.” with the understanding that our actual future results may be
materially different from what we expect. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge
from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the
impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements.



| | ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| | ------- | ------------------------------------------



| | A. | Directors and Senior Management
| | -- | -------------------------------



The following table sets forth information
regarding our directors and executive officers as of the date of this transition report. There are no family relationships among
any of the directors or executive officers of our company.



80







|Directors and Executive Officers |  | Age |  | Position/Title                               
|-------------------------------- |  | --- |  | ---------------------------------------------
|Michael Tao Song                 |  | 38  |  | Founder, Chairman and Chief Executive Officer
|Kui Zhou                         |  | 47  |  | Independent Director                         
|Wei Zhou                         |  | 36  |  | Independent Director                         
|Jimmy Lai                        |  | 58  |  | Independent Director                         
|Carl Yeung                       |  | 35  |  | Director                                     
|Fischer Xiaodong Chen            |  | 45  |  | Chief Financial Officer                      
|Long Zhang                       |  | 38  |  | Senior Vice President of Game Operations     



Mr. Michael Tao Song
is our founder, chairman and chief executive officer. Mr. Song was appointed as a director by Xplane Ltd., a holder of our
common shares. Prior to founding our company, Mr. Song worked as a product director at Eastcom Communications Co., Ltd., a
telecommunications technology company listed on the Shanghai Stock Exchange, from 2000 to 2005. Mr. Song received his bachelor’s
degree in applied mathematics from Tianjin University in 2000.



Mr. Kui Zhou has been
an independent director of our company since August 2007. Mr. Zhou was appointed as a director by Sequoia Capital China II,
L.P., our shareholder. Mr. Zhou has been a principal of Sequoia Capital China since 2005 and a partner of Sequoia Capital
China since May 2007. He is also a director of Boyaa Interactive International Limited, a China-based online card and board game
developer and operator listed on the Hong Kong Stock Exchange, a director of VanceInfo Technologies Inc., a China-based IT service
provider listed on the New York Stock Exchange, and a director of Xiamen Changelight Co., Ltd., a China-based LED and solar cell
research and manufacturing company listed on the Growth Enterprises Market of the Shenzhen Stock Exchange. He also serves on the
board of several privately held companies, including HDT Holding Technologies Inc., a China-based online advertising and marketing
company; Shanghai Hintsoft Software Co., Ltd., a China-based Internet cafe software provider; and Beijing Speedpay Technology Co.,
Ltd., a high-tech company committed to wireless payment and mobile e-commerce business, all of which are invested by Sequoia Capital
China. Prior to joining Sequoia Capital China, Mr. Zhou served as a senior vice president at Legend Capital from 2001 to 2005.
From 1999 to 2001, he served as a manager of the corporate business development department of Legend Holdings Ltd. Mr. Zhou
received his bachelor’s degree in electrical automation from Wuhan Technology University in 1989 and his master’s of
business administration degree from Tsinghua University in 2000.



Mr. Wei Zhou has served
as our independent director since December 2010. Mr. Zhou has served as the chief financial officer and managing partner of Locojoy
Holdings Limited, a leading mobile game company in China since December 2013. Mr. Zhou was the chief financial officer
of Charm Communications Inc., a leading domestic television advertising agency in China listed on NASDAQ from November 2009 to
November 2013. Mr. Zhou was the chief financial officer of Zhaopin Limited, which operates a China-based online recruitment
website (www.zhaopin.com), from June 2008 to October 2009. Mr. Zhou also served as Zhaopin Limited’s director of strategic
planning from July 2005 to May 2007. Mr. Zhou served as an associate director with Abax Global Capital, a Hong Kong based
investment fund focusing on direct investments in private and public-sector Chinese companies, from June 2007 to May 2008. From
2001 to 2005, Mr. Zhou worked in the Hong Kong office of Goldman Sachs in the investment banking division and the Asian Special
Situations Group. Mr. Zhou received his bachelor’s degree from Harvard University in 2001.



Mr. Jimmy Lai became
our independent director since April 2013. Mr. Lai has served as the chief financial officer of Chukong Holdings Limited,
an innovative mobile entertainment platform operator in China since August 2013. Prior to that, Mr. Lai recently served as
the chief financial officer of Gamewave Group Ltd, a leading online game company in China from 2011 to 2013. Previously, he served
as the chief financial officer for several US-listed and private companies, including Daqo New Energy Corp, a leading polysilicon
manufacturer based in China listed on the NYSE from 2009 to 2011, and Linktone Ltd, a leading provider of interactive entertainment
products and services in China listed on the Nasdaq from 2008 to 2009. From 2006 to 2008, Mr. Lai was the chief financial officer
of Palm Commerce Holdings, a leading information technology solution provider for the China lottery industry. Prior to that, he
served as an associate vice president of investor relations at Semiconductor Manufacturing International Corporation, a company
listed on the NYSE and the Main Board of the Hong Kong Stock Exchange, from 2002 to 2006, and as a controller and director of financial
planning at AMX Corporation, a leading system control company, from 1997 to 2001. Mr. Lai received his MBA degree from the
University of Texas at Dallas and a bachelor’s degree in statistics from the National Cheng Kung University in Taiwan. Mr. Lai
is a certified public accountant licensed in the State of Texas.



Mr. Carl Yeung has been
a non-executive director of the Company since October 2013. Mr. Yeung has been the chief financial officer of BAIOO Family Interactive
Limited, an online entertainment destination designed for children and listed on the HKSE, since October 2013. Mr. Yeung served
as our chief financial officer since February 2010 to October 2013. Prior to joining us, Mr. Yeung was the chief financial
officer of ATA Inc., a computer-based testing and testing-related service provider based in China and listed on NASDAQ from 2006
to 2010. From 2002 to 2006, Mr. Yeung worked as an analyst and associate at Merrill Lynch (Asia Pacific) Limited. Mr. Yeung
also served as an independent non-executive director of China Natural Gas, Inc. from 2008 to November 2010. Mr. Yeung received
his bachelor’s degree in economics with concentrations in finance and operations management from the Wharton School, University
of Pennsylvania, and his bachelor’s degree in applied science with a concentration in systems engineering from the School
of Engineering and Applied Sciences, University of Pennsylvania, in 2002.



81







Mr. Fischer Xiaodong Chen
has been our chief financial officer since April 2015. Prior to joining us, Mr. Chen served as the chief financial officer of ET
Solar Group Corp, a leading provider of smart energy solutions, responsible for the company’s equity financing, merger and
acquisitions, financial reporting and business restructuring from 2008 to 2015. From 2006 to 2008, Mr. Chen served as the vice
president of financing and investor relations at China Sunergy Co., Ltd (NASDAQ: CSUN), where he was instrumental to the company’s
2007 IPO. Between 1993 and 2006, Mr. Chen worked at JPMorgan Chase, where he executed many investment and commercial banking transactions
for China-based clients. Mr. Chen received his bachelor’s degree in International Finance from Tianjin College of Finance
and Economics.



Mr. Long Zhang has been our
senior vice president of game operations since September 2014. Prior to joining us, Mr. Zhang served as the managing director of
the China division of Glu Mobile, a leading global developer and publisher of mobile games.

During his tenure at Glu Mobile, Mr. Zhang led initiatives in
establishing operations in the China market, forging licensing partnerships with major Chinese game publishers, localizing and
distributing mobile games and developing the overall business infrastructure. Prior to Glu Mobile, Mr. Zhang served a similar role
at Gameloft China, a global mobile game developer, where he oversaw the company's business development initiatives in China. Mr.
Zhang received a bachelor's degree in information management from Beijing Union University.



| | B. | Compensation of Directors and Executive Officers
| | -- | ------------------------------------------------



For the nine months ended December 31,
2014, we paid an aggregate of approximately RMB2.0 million (US$0.3 million) in cash to our directors and executive officers. For
share-based compensation awards granted to our directors and executive officers, see “— Share Incentive Plan.”



Other than the below-mentioned statutory
contributions mandated by applicable PRC law, we have not set aside or accrued any amount of cash to provide pension, retirement
or other similar benefits to our officers and directors. Our PRC subsidiaries and SPEs are required by law to make contributions
equal to certain percentages of each employee’s salary for his or her retirement benefit, medical insurance benefits, housing
funds, unemployment and other statutory benefits. Our subsidiaries and the SPEs contributed an aggregate of approximately RMB4,102
(US$661) for retirement and similar benefits for our officers and directors in the nine months ended December 31, 2014.



Share Incentive Plan



We have adopted our 2010 Share Incentive
Plan, or the 2010 Plan, to motivate, attract, and retain employees, directors and consultants and promote the success of our business.
The maximum number of common shares which could be issued pursuant to all awards under the 2010 Plan was initially 15,000,000 shares.
The amount increases annually on the first business day of each calendar year by an amount equal to the lesser of (x) one
percent of the number of common shares outstanding as of such date, or (y) a lesser number of common shares determined by
the compensation committee; provided, however, that no more than 15,000,000 shares may be issued upon the exercise of incentive
options. As of December 31, 2014, an aggregate of 8,033,146 restricted shares and option to purchase 1,394,193 common shares
were outstanding under the 2010 Plan.



Types of Awards. The types
of awards we may grant under the 2010 Plan include, among others, options, restricted shares and restricted share units.



Plan Administration. The compensation
committee of our board of directors administers the 2010 Plan, and may delegate its administrative authority to a committee of
one or more members of our board or one or more of our officers, subject to certain restrictions. The compensation committee will
designate the eligible individuals who may receive awards, and determine the types and number of awards to be granted and the terms
and conditions of each award grant, including, but not limited to, the exercise price, grant price or purchase price, any reload
provision, any restrictions or limitations on the award, any schedule for vesting, lapse of forfeiture restrictions or restrictions
on the exercisability of an award and accelerations or waivers thereof, any provisions related to non-competition and recapture
of gain on an award, based in each case on such considerations as the committee in its sole discretion determines. The compensation
committee has the sole power and discretion to cancel, forfeit or surrender an outstanding award.



Award Agreements. Options
and other awards granted under the 2010 Plan are evidenced by a written award agreement that sets forth the material terms and
conditions for each grant.



82







Eligibility. We may grant
awards to employees, consultants of a service recipient, which includes our subsidiaries or any affiliated entities designated
by our board for purposes of the 2010 Plan, as well as our non-employee directors.



Acceleration of Awards upon Corporate
Transactions. The compensation committee may, in its sole discretion, upon or in anticipation of a corporate transaction,
accelerate awards, purchase the awards from the holder or replace the awards.



Vesting Schedule. In general,
the compensation committee determines, or the relevant award agreement specifies, the vesting schedules.



Amendment and Termination.
The compensation committee may at any time amend, modify or terminate the 2010 Plan. Amendments to the 2010 Plan are subject to
shareholder approval to the extent required by law or security exchange rules. In addition, shareholder approval is specifically
required to increase the number of shares available under the 2010 Plan, or to permit the compensation committee to extend the
term or the exercise period of an option beyond ten years, or if amendments result in material increases in benefits or a change
in eligibility requirements. Any amendment, modification or termination of the 2010 Plan must not impair any rights or obligations
under awards already granted without consent of the holder of such awards. Unless terminated earlier, the 2010 Plan will expire
and no further awards may be granted after the tenth anniversary of the shareholders’ approval of the 2010 Plan.



The following table summarizes, as of the
date of this transition report, the outstanding options that we have granted our directors, executive officers and other individuals
as a group under the 2010 Plan.



|Name                         |  | Common Shares Underlying Outstanding Options |         |  | Exercise  Price (US$/Share) |  |      | Grant Date |  | Expiration Date   
|---------------------------- |  | -------------------------------------------- | ------- |  | --------------------------- |  | ---- | ---------- |  | ------------------
|Zhou Wei                     |  |                                              | *       |  |                             |  | 1.00 |            |  | January 6, 2011   
|Other individuals as a group |  |                                              | 802,389 |  |                             |  | 0.26 |            |  | March 1, 2010     
|                             |  |                                              | 242,868 |  |                             |  | 0.26 |            |  | April 1, 2010     
|                             |  |                                              | 248,936 |  |                             |  | 0.26 |            |  | September 15, 2010

________________________



*Less than 1% of our outstanding common shares.



**The expiration date for the options is the earlier of the
tenth anniversary of the grant date of such options or upon the termination of the option holder’s services by reason of
cause, or two years following the termination of the option holder’s services by reason of death or disability, or 90 days
following the termination of the option holder’s services for any reason other than death or disability and not for cause.



| | C. | Board Practices
| | -- | ---------------



Board of Directors



Our board of directors consists of five
members. A director is not required to hold any shares in our company by way of qualification. A director may vote with respect
to any contract or transaction in which he or she is materially interested provided the nature of the interest is disclosed prior
to its consideration and any vote on such contract or transaction. The directors may exercise all the powers of our company to
borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whether outright
or as security for any debt, liability or obligation of our company or of any third-party. None of our non-executive directors
has a service contract with us that provides for benefits upon termination of employment.



Committees of the Board of Directors



We have three committees under the board
of directors: an audit committee, a compensation committee and a corporate governance and nominating committee. We have adopted
a charter for each of the three committees.



Audit Committee



Our audit committee consists of Wei Zhou,
Kui Zhou and Jimmy Lai. Wei Zhou, Kui Zhou and Jimmy Lai satisfy the “independence” requirements of Rule 5605 of the
NASDAQ Stock Market Marketplace Rules and Rule 10A-3 under the Exchange Act. Wei Zhou is the chairman of our audit committee and
meets the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Our audit committee
oversees our accounting and financial reporting processes and the audits of the financial statements of our company. Our audit
committee is responsible for, among other things:



83







| | · | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted
to be performed by our independent registered public accounting firm;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s
response;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the Securities
Act;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | · | discussing the annual audited financial statements with management and our independent registered public accounting firm;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | annually reviewing and reassessing the adequacy of our audit committee charter;
| | - | -------------------------------------------------------------------------------



| | · | meeting separately and periodically with management and our independent registered public accounting firms;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | reporting regularly to the full board of directors; and
| | - | -------------------------------------------------------



| | · | such other matters that are specifically delegated to our audit committee by our board of directors from time to time.
| | - | ----------------------------------------------------------------------------------------------------------------------



Compensation Committee



Our compensation committee consists of Kui
Zhou, Wei Zhou, and Jimmy Lai. Kui Zhou, Wei Zhou and Jimmy Lai satisfy the “independence” requirements of Rule 5605
of the NASDAQ Stock Market Marketplace Rules. Our compensation committee assists the board of directors in reviewing and approving
the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors
and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is
deliberated. The compensation committee is responsible for, among other things:



| | · | reviewing and making recommendations to the board with respect to the total compensation package for our four most senior executives;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | approving and overseeing the total compensation package for our executives other than the four most senior executives;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | reviewing and making recommendations to the board with respect to the compensation of our directors; and
| | - | --------------------------------------------------------------------------------------------------------



| | · | reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Corporate Governance and Nominating Committee



Our corporate governance and nominating
committee consists of Wei Zhou, Kui Zhou and Jimmy Lai. All of them satisfy the “independence” requirements of Rule
5605 of the NASDAQ Stock Market Marketplace Rules. The corporate governance and nominating committee assists our board of directors
in identifying individuals qualified to become our directors and in determining the composition of the board and its committees.
The corporate governance and nominating committee is responsible for, among other things:



| | · | identifying and recommending nominees for election or re-election to our board of directors, or for appointment to fill any
vacancy;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing annually with our board of directors its current composition in light of the characteristics of independence, age,
skills, experience and availability of service to us;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | identifying and recommending to our board the directors to serve as members of committees;
| | - | ------------------------------------------------------------------------------------------



| | · | advising the board periodically with respect to significant developments in the law and practice of corporate governance as
well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters
of corporate governance and on any corrective action to be taken; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our
procedures to ensure proper compliance.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



84







Duties of Directors



Under Cayman Islands law, our directors
have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise
the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances.
In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, amended
from time to time.



Terms of Directors and Officers



Pursuant to our amended and restated memorandum
and articles of incorporation, our board of directors are divided into three classes, Class A directors, Class B directors
and Class C directors, who shall retire from office and be eligible for re-election at the first, second and third annual general
meeting, respectively. Mr. Michael Tao Song has been designated as a Class A director. Mr. Kui Zhou and Mr. Wei
Zhou have been designated as Class B directors. Mr. Jimmy Lai and Mr. Carl Yeung have been designated as Class C directors.
At each subsequent annual general meeting after the third annual general meeting, the directors of the class who have been longest
in office shall retire and shall be eligible for re-election. A director may only be removed by the shareholders. Officers are
elected by and serve at the discretion of the board of directors.



Employment Agreements



We have entered into a three-year employment
agreement with each of our executive officers. We may terminate an executive officer’s employment for cause, at any time,
without prior notice or remuneration, for certain acts of the officer, including, but not limited to, conviction of a crime, material
violation of our rules and regulations, or other misconduct that causes material damage to us. Furthermore, an executive officer
may terminate the employment at any time upon prior written notice to us. Each executive officer is entitled to severance pay equal
to a certain specified number of months of his base salary if we terminate his employment without any of the causes specified above.



Each of our executive officers has agreed
to hold in strict confidence any trade secrets or confidential information of our company or trade secrets of any third-party received
by us. Each executive officer has agreed that the intellectual property rights related to all work products, inventions, computer
software, or other technological information which he has developed while performing his duties at our company or through mainly
using our resources shall belong to us. Each executive officer has agreed to assist us to obtain and exercise all such intellectual
property rights.



| | D. | Employees
| | -- | ---------



We had 489, 453 and 515 full-time employees
as of March 31, 2013 and 2014 and December 31, 2014, respectively. We consider our relations with our employees to be good.
The following table sets forth the number of our employees categorized by areas of operations as of December 31, 2014:



|Function                                         |  | Number of Employees |     |  | Percentage | 
|------------------------------------------------ |  | ------------------- | --- |  | ---------- | 
|Research and development                         |  |                     | 182 |  |            | 
|Sales and marketing (including customer service) |  |                     | 157 |  |            | 
|Operations                                       |  |                     | 96  |  |            | 
|General and administration                       |  |                     | 80  |  |            | 
|Total                                            |  |                     | 515 |  |            | 



Our success depends on our ability to attract,
retain and motivate qualified personnel. We believe we offer our employees competitive compensation packages, and we have generally
been able to attract and retain qualified personnel and maintain a stable core management team. We believe that we maintain a good
working relationship with our employees and we have not experienced any significant labor disputes. For a description of the employment
agreement we signed with some members of our senior management, see “Item 6. Director, Senior Management and Employees
— C. Board Practices — Employment Agreements.”



Substantially all of our employees are based
in the PRC. In accordance with PRC laws, our full-time employees in China participate in various employee benefit plans including
pension, medical benefit plans, unemployment insurance, work-related injury insurance and childbirth insurance.



85







Compensation for our full-time employees
typically consists of a base salary, seniority pay and other subsidies. In addition, based on our results of operations, we may
award bonuses to our employees solely at our discretion. Our employees are also eligible for equity incentives. For more information
on the terms of our share incentive plan, see “Item 6. Director, Senior Management and Employees — B. Compensation
of Directors and Executive Officers — Share Incentive Plan.”



We hire a portion of our employees through
on-campus recruiting programs at various universities, including Zhejiang University, Zhejiang Sci-Tech University, Nanjing University,
Nanjing University of Science and Technology, Huazhong University of Science and Technology, Wuhan University of Zhejiang University
of Technology, Northwest Hangzhou Electronics University, and Xi’an Jiaotong University.



| | E. | Share Ownership
| | -- | ---------------



As of December 31, 2014, we had 222,266,678
common shares outstanding. The following table sets forth information with respect to the beneficial ownership of our common shares
as of December 31, 2014, by:



| | (1) | each of our directors and executive officers who are also our shareholders; and
| | --- | -------------------------------------------------------------------------------



| | (2) | each person known to us to own beneficially more than 5% of our common shares.
| | --- | ------------------------------------------------------------------------------



Beneficial ownership is determined in accordance
with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage
ownership of that person, we have included shares that the person has the right to acquire within 60 days of this transition report,
including through the exercise of any option, warrant or other right, the vesting of restricted shares or the conversion of any
other security. These shares, however, are not included in the computation of the percentage ownership of any other person.



|                                                    |  | Common Shares Beneficially Owned |           
|--------------------------------------------------- |  | -------------------------------- | ----------
|                                                    |  | Number                           |           
|Directors and Executive Officers:                   |  |                                  |           
|Michael Tao Song (1)                                |  |                                  | 73,811,801
|Kui Zhou (2)                                        |  |                                  | 9,389,800 
|Wei Zhou (3)                                        |  |                                  | *         
|Jimmy Lai (3)                                       |  |                                  | —         
|Carl Yeung (3)                                      |  |                                  | —         
|Fischer Xiaodong Chen (3)                           |  |                                  | —         
|Long Zhang (3)                                      |  |                                  | —         
|All Directors and Executive Officers as a Group (4) |  |                                  | 83,301,601
|                                                    |  |                                  |           
|Principal Shareholders:                             |  |                                  |           
|Mobi Joy Limited(5)                                 |  |                                  | 50,647,288
|Xplane Ltd.(6)                                      |  |                                  | 66,597,976
|Sequoia Capital China II, L.P.(7)                   |  |                                  | 7,871,480 
|Sequoia Capital China Principals Fund II, L.P.(7)   |  |                                  | 1,322,136 
|Sequoia Capital China Partners Fund II, L.P.(7)     |  |                                  | 196,184   



______________________



| | * | Less than 1% of our total outstanding shares.
| | - | ---------------------------------------------





| | (1) | Represents (i) 50,647,288 common shares held by Mobi Joy Limited., a British Virgin Islands company
controlled by Mr. Song, and (ii) 23,164,513 common shares held by Ms. Qinyi Zhu, wife of Mr. Song, through Xplane Ltd.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Represents 10,470,248 common shares held by the Sequoia Funds. Mr. Zhou disclaims beneficial
ownership with respect to the shares held by the Sequoia Funds except to the extent of his pecuniary interest therein. The business
address for Mr. Zhou is Room 3606, Tower 3, China Central Place, No 77 Jianguo Road, Chaoyang District, Beijing 100025, People’s
Republic of China.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The business address for Mr. Zhou is Building No.4, Tianchang Park, Media Village, Beiyuan Road, Beijing, People’s
Republic of China. The business address for Mr. Lai is Tower 3 28th floor, Wangjing Soho, 1 Futong East Avenue, Beijing, People’s
Republic of China. The business address for Mr. Yeung is 10/F #36 Han Zhong Road, Tianhe Software Park, Guangzhou, Guangdong, People’s
Republic of China. The business address for Mr. Chen and Mr. Zhang is 10/F, Building B, United Mansion, No. 2 Zijinghua Road, Hangzhou,
Zhejiang, People’s Republic of China.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



86







| | (4) | Represents common shares held by all of our directors and executive officers as a group.
| | --- | ----------------------------------------------------------------------------------------



| | (5) | The registered address for Mobi Joy Limited is Romasco place, Wickhams Cay 1, P.O.Box 3140, Road
Town, Tortola. British Virgin Islands, VG1110. Mr. Song is the sole shareholder of Mobi Joy Limited.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | The registered address for Xplane Ltd. is Romasco Place, Wickhams Cay 1, P. O. Box 3140, Road
Town, Tortola, British Virgin Islands, VG1110.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Each of the Sequoia Funds is a limited partnership incorporated in Cayman Islands. The general partner of each of the Sequoia
Funds is Sequoia Capital China Management II, L.P., whose general partner is SC China Holding Limited, a company incorporated in
the Cayman Islands. SC China Holding Limited is wholly owned by Max Wealth Enterprises Limited, a British Virgin Islands company
wholly owned by Neil Nanpeng Shen. Mr. Shen disclaims beneficial ownership with respect to the shares held by each of the
Sequoia Funds except to the extent of his pecuniary interest therein. Mr. Shen has voting and dispositive control over the
shares being offered by the Sequoia Funds. The address of each of the Sequoia Funds is Suite 2215, Two Pacific Place, 88 Queensway,
Hong Kong, PRC.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



| | A. | Major Shareholders
| | -- | ------------------



See “Item 6. Directors, Senior Management
and Employees — E. Share Ownership.”



| | B. | Related Party Transactions
| | -- | --------------------------



Contractual Arrangements



PRC law restricts foreign ownership
of businesses providing telecommunications value-added services. To comply with PRC law, we operate our mobile application
store and strategic investment business through Dianneng’s contractual arrangements with our SPEs. See “Item 4.
Information on the Company — B. Organizational Structure” for a description of these contractual
arrangements.



Shareholders Agreement



Pursuant to our shareholders agreement entered
into in August 2007, as amended and restated, in connection with our pre-IPO preferred share financing, we have granted certain
registration rights to holders of our registrable securities, which include our common shares issued upon conversion of our preferred
shares, including preferred shares issued upon exercise of our warrants. Set forth below is a description of the registration rights
granted under the agreement.



Demand Registration Rights. Holders
of at least 50% of the registrable securities then outstanding have the right to demand that we file a registration statement for
at least 20% of the registrable securities then held by such holders (or any lesser percentage if the anticipated gross proceeds
from the offering exceed US$5,000,000). However, we are not obliged to effect a demand registration if we have already effected
two demand registrations.



Form F-3 or Form S-3 Registration Rights.
At any time when we are eligible for registration on Form F-3 or Form S-3, holders of our registrable securities then outstanding
have the right to request that we file a registration statement under Form F-3 or Form S-3. However, we are not obliged to effect
any such registration if we have already effected two registrations on Form F-3 or Form S-3 for the holders within the 12-month
period preceding the date of request.



Deferral of Registration. We are
not obligated to effect the above demand registration or Form F-3 or Form S-3 registration (i) if we intend to effect the
filing for our own account of a registration statement of common shares within 60 days of receipt of a request, and we are actively
employing in good faith our reasonable best efforts to cause such registration statement to become effective within 60 days of
initial filing, or (ii) during the period starting with the date of filing by us of, and ending six months following the effective
date of, any registration statement pertaining to our common shares, provided that in either case, the holders of registrable securities
are entitled to join such registration under the piggyback registration rights described below. Furthermore, we have the right
to defer filing a registration statement for up to 90 days under demand registration rights or up to 60 days under Form F-3 or
Form S-3 registration rights if we provide the requesting holders a certificate signed by our chief executive officer stating that
in the good faith judgment of the board of directors filing a registration statement will be detrimental to us and our shareholders,
but we cannot exercise the deferral right more than once in any 12-month period.



87







Piggyback Registration Rights. If
we propose to file a registration statement for a public offering of our securities other than pursuant to a demand registration
right or an F-3 or S-3 registration statement, or relating to an employee benefit plan or a corporate reorganization, then we must
offer holders of registrable securities an opportunity to include in this registration all or any part of their registrable securities.



Expenses of Registration. We will
bear all registration expenses incurred in connection with any demand, piggyback or F-3 or S-3 registration, other than any underwriting
discounts and selling commissions.



Employment Agreement



We have entered into employment agreements
with each of our management members and each of the individual shareholders of Xplane Ltd. For a description of the employment
agreement with our management, see “Item 6. Directors, Senior Management and Employees — C. Board Practices —
Employment Agreements.”



Transactions with Certain Officers, Shareholders and Affiliates
and Key Management Personnel



We license certain mobile content from our
associates, namely Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd., or Zhang Xing, Hangzhou Sibi Technologies Co., Ltd., or
Sibi, Beijing Brtech Co., Ltd., or Brtech, Hangzhou Breaking Dawn Network Technologies Co. Ltd., or Breaking Dawn, Hangzhou TaiKu
Technologies Co. Ltd., or Taiku, Hangzhou Quyuan Technologies Co. Ltd., or Quyuan, Hangzhou Qianlong Technologies Co. Ltd., or
Qianlong, Hangzhou Joyreach Technologies Co., Ltd., or Joyreach, Shanghai Mihoyo Network Technology Co. Ltd., or Mihoyo, Shanghai
Tongyu Network Technology Co., Ltd., or Tongyu and Beijing Jamo Games Technologies Co.,Ltd., or Jamo. The following table sets
forth the related cost of revenues we have recorded for the periods indicated:



|              |  | For the Fiscal Year Ended March 31, |       |  | For the Nine Months Ended December 31, | 
|------------- |  | ----------------------------------- | ----- |  | -------------------------------------- | 
|              |  | 2012                                |       |  | 2014                                   | 
|              |  | RMB                                 |       |  | RMB                                    | 
|              |  | (in thousands)                      |      
|Zhang Xing    |  |                                     | 357   |  |                                        | 
|Sibi          |  |                                     | 2,271 |  |                                        | 
|Brtech        |  |                                     | 982   |  |                                        | 
|Breaking Dawn |  |                                     | 2,924 |  |                                        | 
|Taiku         |  |                                     | —     |  |                                        | 
|Quyuan        |  |                                     | —     |  |                                        | 
|Qianlong      |  |                                     | —     |  |                                        | 
|Joyreach      |  |                                     | —     |  |                                        | 
|Mihoyo        |  |                                     | —     |  |                                        | 
|Tongyu        |  |                                     | —     |  |                                        | 
|Jamo          |  |                                     | —     |  |                                        | 



We also provide pre-installation and distribution
service for Qianlong, Taiku and Jamo and charge a commission based on the number of active users or share proceeds from user purchases.
In the nine months ended December 31, 2014, we charged a total of RMB1.8 million (US$0.3 million), RMB5.2 million (US$0.8 million)
and RMB1.3 million (US$0.2 million) commission or revenue sharing from Qianlong, Taiku and Jamo, respectively.



In addition, we have certain amounts due
to and from the related parties, namely Zhang Xing, Sibi, Brtech, Breaking Dawn, TaiKu, Quyuan, Qianlong, Joyreach, Mihoyo and
Tongyu, ten of our associates, and Xplane Ltd., our principle shareholder. The following table sets forth the amounts due to and
from those related parties for the periods indicated:



88







|                                 |  |                                                                                  |  | For the Fiscal Year Ended March 31, |       |  | For the Nine Months Ended December 31, | 
|-------------------------------- |  | -------------------------------------------------------------------------------- |  | ----------------------------------- | ----- |  | -------------------------------------- | 
|                                 |  |                                                                                  |  | 2013                                |       |  | 2014                                   | 
|                                 |  |                                                                                  |  | RMB                                 |       |  | RMB                                    | 
|                                 |  |                                                                                  |  | (In thousands)                      |      
|Amounts Due from Related Parties |  | Nature of Advances or Payment                                                    |  |                                     |       |  |                                        | 
|Xplane Ltd.                      |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 125   |  |                                        | 
|Taiku                            |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 306   |  |                                        | 
|Breaking Dawn                    |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 92    |  |                                        | 
|Qianlong                         |  | Trading in nature, unsecured, interest-free advances and repayable on demand     |  |                                     | —     |  |                                        | 
|Taiku                            |  | Trading in nature, unsecured, interest-free advances and repayable on demand     |  |                                     | —     |  |                                        | 
|Jamo                             |  | Trading in nature, unsecured, interest-free advances and repayable on demand     |  |                                     | —     |  |                                        | 
|Amounts Due to Related Parties   |  |                                                                                  |  |                                     |       |  |                                        | 
|Zhang Xing                       |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 577   |  |                                        | 
|Sibi                             |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 426   |  |                                        | 
|Brtech                           |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 127   |  |                                        | 
|Breaking Dawn                    |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 2,924 |  |                                        | 
|Taiku                            |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 
|Quyuan                           |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 
|Qianlong                         |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 
|Joyreach                         |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 
|Mihoyo                           |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 
|Tongyu                           |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | —     |  |                                        | 



The amounts due from the Sequoia Funds represent
a capital injection made by Fanyi on behalf of the Sequoia Funds for their 15% equity interest in Hangzhou Guanzhun Technologies
Co., Ltd., or Guanzhun, one of our associates.



89







Other Related Party Transactions



In June 2013, we established Hangzhou Qianlong
Technology Limited, or Qianlong, with Li Ou, our former chief technology officer, to carry out mobile games development and operation
related business. We and Li Ou signed definitive agreements to contribute RMB 10.0 million and RMB 15.0 million into Qianlong,
and hold a 40% equity interest and a 60% equity interest in Qianlong, respectively. We also entered into a RMB 25.0 million loan
agreement with Qianlong to fund its future operations. The loan bears a 3% annual interest rate and can only be used to develop
Qianlong’s business. In order to focus on the management of Qianlong and to avoid conflict of interests, Li Ou resigned from
our Company in June 2013.



The above-mentioned related party transactions
have been unanimously approved by the Board, the audit committee and a special independent committee formed by the Board.



Share Incentive Plan



See “Item 6. Directors, Senior Management
and Employees — B. Compensation of Directors and Executive Officers — Share Incentive Plan.”



| | C. | Interests of Experts and Counsel
| | -- | --------------------------------



Not applicable.



| | ITEM 8. | FINANCIAL INFORMATION
| | ------- | ---------------------



| | A. | Consolidated Statements and Other Financial Information
| | -- | -------------------------------------------------------



We have appended consolidated financial
statements as part of this transition report.



Legal Proceedings



Mr. Carl Yeung, currently our non-executive
director and our previous chief financial officer, served as an independent director and the chairman of the audit committee of
China Natural Gas, Inc., or CHNG, a Delaware corporation whose shares of common stock were listed on NASDAQ from 2008 to November
2010. CHNG and certain of its officers and directors, including Mr. Yeung, have been named as defendants in a putative class
action lawsuit alleging violations of the federal securities laws. The action, captioned Vandevelde v. China Natural Gas, Inc.,
et al.,No. 10-cv-00728, was filed in the United States District Court for the District of Delaware on August 26,
2010. On August 12, 2011, the Court entered an order appointing Robert Skeway, an individual investor, as lead plaintiff and
approving his selection of lead counsel.



Lead plaintiff and Raimundo Jo-Fung, another
individual investor, who together seek to represent a class of all persons who purchased CHNG common stock between March 10,
2010 and September 21, 2011, filed an amended complaint on October 11, 2011. Plaintiffs assert claims for violations
of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The amended complaint alleges the defendants made false or
misleading statements in CHNG’s Annual Reports on Form 10-K for the years ended December 31, 2009, and December 31,
2010, and in various quarterly reports, by purportedly failing to disclose a series of loans and related party transactions. The
amended complaint also asserts claims against certain of CHNG’s current and former officers and directors for violations
of Section 20(a) of the Exchange Act, including Mr. Yeung. The suit seeks unspecified monetary damages. Mr. Yeung
could potentially be held individually liable for civil damages in these actions.



On December 12, 2011 CHNG filed a motion
to dismiss and the motion is now fully briefed. Mr. Yeung has not been served with a copy of the summons and complaint.



Since July 27, 2012, Mr. Yeung
has no longer been named as a co-defendant in this case.



Other than the foregoing, we are not a party
to any material litigation or other legal proceeding and are not aware of any pending or threatened litigation or other legal proceeding
that may materially adversely affect our business or operations.



90







Dividend Policy



We are a holding company incorporated in
the Cayman Islands. We may rely on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends
to our shareholders. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits,
if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is
required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves. These reserves
are not distributable as cash dividends. Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, the
instruments governing the debt may restrict their ability to pay dividends or make other payments to us.



In May 2010, we declared and paid dividends
in the amount of RMB13.0 million to our common shareholders, and we also approved a distribution payable to our preferred shareholders
who have participating rights in the amount of RMB4.3 million. However, we do not plan to declare and pay any dividends on our
shares or ADSs in the near future. We intend to retain most, if not all, of our available funds and any future earnings to operate
and expand our business.



Our board of directors has discretion as
to whether to distribute dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay
dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay
any dividends, we will pay our ADS holders to the same extent as holders of our common shares, subject to the terms of the deposit
agreement, including the fees and expenses payable thereunder. Cash dividends on our common shares, if any, will be paid in U.S.
dollars.



| | B. | Significant Changes
| | -- | -------------------



Except as disclosed elsewhere in this transition
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included
in this transition report.



| | ITEM 9. | THE OFFER AND LISTING
| | ------- | ---------------------



| | A. | Offer and Listing Details
| | -- | -------------------------



Our ADSs, each representing eight common
shares, have been listed on NASDAQ since December 10, 2010. Our ADSs are traded under the symbol “MOBI.”



The following table provides the high and
low trading prices for our ADSs on NASDAQ for the periods shown.



|                                                           |  | Sales Price |      
|---------------------------------------------------------- |  | ----------- | -----
|                                                           |  | High        |      
|Annual Highs and Lows                                      |  |             |      
|Fiscal Year ended March 31, 2012 (since December 10, 2010) |  |             | 23.25
|Fiscal Year ended March 31, 2013                           |  |             | 3.45 
|Fiscal Year ended March 31, 2014                           |  |             | 11.47
|Calendar Year ended December 31, 2014                      |  |             | 11.47
|                                                           |  |             |      
|Quarterly Highs and Lows                                   |  |             |      
|First Fiscal Quarter ended June 30, 2013                   |  |             | 3.44 
|Second Fiscal Quarter ended September 30, 2013             |  |             | 4.78 
|Third Fiscal Quarter ended December 31, 2013               |  |             | 5.53 
|Fourth Fiscal Quarter ended March 31, 2014                 |  |             | 11.47
|Second Calendar Quarter ended June 30, 2014                |  |             | 9.40 
|Third Calendar Quarter ended September 30, 2014            |  |             | 10.42
|Fourth Calendar Quarter ended December 31, 2014            |  |             | 7.78 
|First Calendar Quarter ended March 31, 2015                |  |             |      
|                                                           |  |             |      
|Monthly Highs and Lows                                     |  |             |      
|November 2014                                              |  |             | 7.35 
|December 2014                                              |  |             | 4.76 
|January 2015                                               |  |             | 4.10 
|February 2015                                              |  |             | 4.48 
|March 2015                                                 |  |             | 4.80 
|April 2015 (through April 24, 2015)                        |  |             | 5.17 



91







| | B. | Plan of Distribution
| | -- | --------------------



Not applicable.



| | C. | Markets
| | -- | -------



Our ADSs, each representing eight common
shares, have been listed on NASDAQ since December 10, 2010. Our ADSs are traded under the symbol “MOBI.”



| | D. | Selling Shareholders
| | -- | --------------------



Not applicable.



| | E. | Dilution
| | -- | --------



Not applicable.



| | F. | Expenses of the Issue
| | -- | ---------------------



Not applicable.



| | ITEM 10. | ADDITIONAL INFORMATION
| | -------- | ----------------------



| | A. | Share Capital
| | -- | -------------



Not applicable.



| | B. | Memorandum and Articles of Association
| | -- | --------------------------------------



We are a Cayman Islands company and our
affairs are governed by our memorandum and articles of association and the Companies Law of the Cayman Islands, which is referred
to as the Companies Law below.



All share and per share data have been adjusted
to reflect a 100-for-1 share split that became effective on August 2, 2007 and a further 200-for-1 share split that became
effective on November 18, 2010. As of the date of this transition report, our authorized share capital is US$1,000,000 consisting
of 20,000,000,000 shares with par value of US$0.00005 each. The following are summaries of material provisions of our currently
effective amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material
terms of our common shares. This summary is not complete, and you should read our currently effective amended and restated memorandum
and articles of association.



Registered Office



The registered office of our company is
at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman
Islands or at such other place as the Directors may from time to time decide.



Board of Directors



See “Item 6.C. Board Practices — Board of Directors.”



92







Common Shares



General. All of our outstanding
common shares are fully paid and non-assessable. Certificates representing the common shares are issued in registered form. Our
shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.



Dividends. The holders of
our common shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law and
to the amended and restated articles of association.



Voting Rights. Each common
share is entitled to one vote on all matters upon which the common shares are entitled to vote. Voting at any shareholders’
meeting is by show of hands unless a poll is demanded. A poll may be demanded by our chairman or any shareholder, present in person
or by proxy.



A quorum required for a meeting of shareholders
consists of at least two shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly
authorized representative, who hold not less than one-third of our voting share capital. An annual general meeting shall be held
in each year other than the year in which the amended and restated articles of association was adopted. Extraordinary general meetings
may be held at such times as may be determined by our board of directors and may be convened by a majority of our board of directors
or the chairman of the board on its/his own initiative. Also, any one or more shareholders holding not less than 25% of our voting
share capital may require an extraordinary general meeting to be called by the board of directors by written requisition to our
board of directors or secretary. Advance notice of at least 10 clear days is required for the convening of our annual general meeting
and other shareholders’ meetings.



An ordinary resolution to be passed by the
shareholders requires the affirmative vote of a simple majority of the votes attaching to the common shares cast in a general meeting,
while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the common shares.
A special resolution is required for important matters such as amendments to the memorandum and articles of association, a change
of name or voluntary liquidation. Holders of the common shares may effect certain changes by ordinary resolution, including altering
the amount of our authorized share capital, consolidate and divide all or any of our share capital into shares of larger amount
than our existing share capital, and cancel any unissued shares.



Transfer of Shares. Subject
to the restrictions of our amended and restated memorandum and articles of association, as applicable, any of our shareholders
may transfer all or any of his or her common shares by an instrument of transfer in the usual or common form or any other form
approved by our board.



Our board of directors may, in its sole
discretion, decline to register any transfer of any common share which is not fully paid up or on which we have a lien. Our directors
may also decline to register any transfer of any common share unless (a) the instrument of transfer is lodged with us, accompanied
by the certificate for the common shares to which it relates and such other evidence as our board of directors may reasonably require
to show the right of the transferor to make the transfer; (b) the instrument of transfer is in respect of only one class of
common shares; (c) the instrument of transfer is properly stamped, if required; (d) in the case of a transfer to joint
holders, the number of joint holders to whom the common share is to be transferred does not exceed four; (e) the shares concerned
are free of any lien in favor of us; or (f) a fee of such maximum sum as NASDAQ may determine to be payable, or such lesser
sum as our board of directors may from time to time require, is paid to us in respect thereof.



If our directors refuse to register a transfer
they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and
the transferee notice of such refusal. The registration of transfers may, on notice being given by advertisement in such one or
more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of
directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the
register closed for more than 30 days in any year.



Liquidation. On a return of
capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution
among the holders of common shares shall be distributed among the holders of the common shares on a pro rata basis.



Calls on Shares and Forfeiture of
Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares
in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. The shares that
have been called upon and remain unpaid on the specified time are subject to forfeiture.



Redemption of Shares. Subject
to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option
of the holders, on such terms and in such manner, including out of capital, as may, before the issue of such shares, be determined
by our board of directors.



93







Variations of Rights of Shares.
All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied
with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.



Inspection of Books and Records.
Holders of our common shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders
or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where
You Can Find Additional Information.”



Changes in Capital. We may
from time to time by ordinary resolutions:



| | · | increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | sub-divide our existing shares, or any of them into shares of a smaller amount; and
| | - | -----------------------------------------------------------------------------------



| | · | cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person
and diminish the amount of our share capital by the amount of the shares so cancelled.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Subject to the Companies Law and our amended
and restated memorandum and articles of association with respect to matters to be dealt with by ordinary resolution, we may, by
special resolution, reduce our share capital and any capital redemption reserve in any manner authorized by law.



Issuance of Additional Shares.
Our amended and restated memorandum and articles of association authorizes our board of directors to issue additional common shares
from time to time as our board of directors shall determine, to the extent there are available authorized but unissued shares.



Our amended and restated memorandum and
articles of association authorizes our board of directors to establish from time to time one or more series of preferred shares
and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:



| | · | designation of the series;
| | - | --------------------------



| | · | the number of shares of the series;
| | - | -----------------------------------



| | · | the dividend rights, conversion rights and voting rights; and
| | - | -------------------------------------------------------------



| | · | the rights and terms of redemption and liquidation preferences.
| | - | ---------------------------------------------------------------



The issuance of preferred shares may be
used as an anti-takeover device without further action on the part of the shareholders. Issuance of these shares may dilute the
voting power of holders of common shares.



Differences in Corporate Law



The Companies Law is modeled after that
of England and Wales but does not follow recent statutory enactments in England. In addition, the Companies Law differs from laws
applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between
the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware.



Mergers and Similar Arrangements.
A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved
by the directors of each constituent company and authorization by (a) a special resolution and (b) such other authorization,
if any, as may be specified in its articles of association.



94







A merger between a Cayman parent company
and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose a subsidiary
is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.



The consent of each holder of a fixed or
floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.



Except in certain circumstances, a shareholder
of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation.
The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds
that the merger or consolidation is void or unlawful.



In addition, there are statutory provisions
that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number
of each class of shareholders and creditors representing 75% in value of each such class of shareholders or creditors, as the case
may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening
of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting
shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected
to approve the arrangement if it determines that:



| | · | the statutory provisions as to the required majority vote have been met;
| | - | ------------------------------------------------------------------------



| | · | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without
coercion of the minority to promote interests adverse to those of the class;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of
his interest; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| | · | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
| | - | ------------------------------------------------------------------------------------------------------------------



When a take-over offer is made and accepted
by holders of 90.0% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of
such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection
can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so
approved unless there is evidence of fraud, bad faith or collusion.



If an arrangement and reconstruction is
thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily
be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially
determined value of the shares.



Shareholders’ Suits.
In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority
shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands,
there are exceptions to the foregoing principle, including when:



| | · | a company acts or proposes to act illegally or ultra vires;
| | - | -----------------------------------------------------------



| | · | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote
that has not been obtained; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | those who control the company are perpetrating a “fraud on the minority.”
| | - | -------------------------------------------------------------------------



Indemnification of Directors and Executive
Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company’s memorandum
and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud
or the consequences of committing a crime.



Our amended and restated memorandum and
articles of association permit indemnification of officers and directors for losses, damages costs and expenses incurred in their
capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such directors or officers.
This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
In addition, we intend to enter into indemnification agreements with our directors and senior executive officers that will provide
such persons with additional indemnification beyond that provided in our amended and restated memorandum and articles of association.



95







Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions,
we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.



Directors’ Fiduciary Duties.
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders.
This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith,
with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform
himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The
duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation.
He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director
and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director,
officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed
to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests
of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such
evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction,
and that the transaction was of fair value to the corporation.



As a matter of Cayman Islands law, a director
of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he
owes the following duties to the company — a duty to act bona fide in the best interests of the company, a duty not to make
a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a
position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. A director
of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director
need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person
of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with
regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.



Shareholder Action by Written Consent.
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by
amendment to its certificate of incorporation. Similarly, our amended and restated articles of association provide that any action
required or permitted to be taken at any annual or extraordinary general meetings of the company may be taken only upon the vote
of the members at an annual or extraordinary general meeting duly noticed and convened in accordance with our amended and restated
articles of association and the law and may not be taken by a written resolution of members without a meeting.



Shareholder Proposals. Under
the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,
provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors
or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.



Our amended and restated articles of association
allow any shareholder holding 25% or more of our paid up capital carrying the right of voting at general meetings to requisition
a shareholder’s meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual
general meetings. However, our amended and restated articles of association require us to call such meetings.



Cumulative Voting. Under the
Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority
shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is
entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. As
permitted under Cayman Islands law, our amended and restated articles of association do not provide for cumulative voting. As a
result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.



Removal of Directors. Under
the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Under our amended and restated articles of association, directors may be removed by ordinary resolution at any time before the
expiration of their period of office.



96







Transactions with Interested Shareholders.
The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless
the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it
is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following
the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or
which owns or owned 15% or more of the target’s outstanding voting stock within the past three years. This has the effect
of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be
treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested
shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming
an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition
transaction with the target’s board of directors.



Cayman Islands law has no comparable statute.
As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However,
although Cayman Islands law does not regulate transactions between a company and its significant shareholders, such transactions
must be entered into bona fide in the best interests of the company for a proper corporate purpose and not with the effect of constituting
a fraud on the minority shareholders.



Dissolution; Winding up. Under
the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved
by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of
directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated
by the board. Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by
a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of
its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion
of the court, just and equitable to do so.



Under the Companies Law of the Cayman Islands
and our amended and restated articles of association, our company may be dissolved, liquidated or wound up by a special resolution.



Variation of Rights of Shares.
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority
of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and
our amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary
the rights attached to any class only with a special resolution passed at a general meeting of the holders of the shares of that
class.



Amendment of Governing Documents.
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority
of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman
Islands law, our amended and restated memorandum and articles of association may only be amended by special resolution.



Inspection of Books and Records.
Under the Delaware General Corporation Law, any shareholder of a corporation may for any proper purpose inspect or make copies
of the corporation’s stock ledger, list of shareholders and other books and records.



Holders of our shares will have no general
right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we intend
to provide our shareholders with transition reports containing audited financial statements.



Anti-takeover Provisions in Our Memorandum
and Articles of Association. Some provisions of our amended and restated memorandum and articles of association may discourage,
delay or prevent a change of control of our company or management that shareholders may consider favorable, including a provision
that authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,
privileges and restrictions of such preference shares without any further vote or action by our shareholders.



Such shares could be issued quickly with
terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board
of directors decides to issue these preference shares, the price of our ADSs may fall and the voting and other rights of the holders
of our common shares and ADSs may be materially adversely affected.



97







However, under Cayman Islands law, our directors
may only exercise the rights and powers granted to them under our amended and restated memorandum and articles of association for
a proper purpose and for what they believe in good faith to be in the best interests of our company.



Rights of Non-resident or Foreign
Shareholders. There are no limitations imposed by our amended and restated memorandum and articles of association on the
rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions
in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership
must be disclosed.



| | C. | Material Contracts
| | -- | ------------------



We have not entered into any material contracts
other than in the ordinary course of business and other than those described in “Item 4. Information on the Company”
or elsewhere in this transition report on Form 20-F.



| | D. | Exchange Controls
| | -- | -----------------



See “Item 4. Information on the Company
— B. Business Overview — Regulations — Dividend Distribution” and “— Foreign Currency Exchange.”



| | E. | Taxation
| | -- | --------



The following summary of the material Cayman
Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or common shares is based upon laws and relevant
interpretations thereof in effect as of the date of this transition report, all of which are subject to change. This summary does
not deal with all possible tax consequences relating to an investment in our ADSs or common shares, such as the tax consequences
under state, local and other tax laws not addressed herein.



Cayman Islands Taxation



The Cayman Islands currently levies no taxes
on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance
tax or estate duty or withholding tax applicable to us or to any holder of our ADSs and common shares. There are no other taxes
likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments
executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands
on transfers of shares of Cayman Islands companies, except those which hold interests in land in the Cayman Islands. The Cayman
Islands is not party to any double tax treaties save for a double tax treaty entered into with the United Kingdom in 2010. There
are no exchange control regulations or currency restrictions in the Cayman Islands.



Pursuant to Section 6 of the Tax Concessions
Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council:



(1) that no law which is enacted in the
Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations;
and



(2) that the aforesaid tax or any tax
in the nature of estate duty or inheritance tax shall not be payable on or in respect of our shares, debentures or other obligations
or by way of the withholding in whole or in part of any relevant payment as defined in Section 6 (3) of the Tax Concessions
Law (1999 Revision) of the Cayman Islands.



The undertaking for us is for a period
of twenty years from August 10, 2010.



People’s Republic of China Taxation



If the PRC tax authorities determine that
our Cayman Islands holding company is a “resident enterprise” for EIT purposes, a withholding tax rate of 10% for our
non-PRC enterprise shareholders or potentially 20% for non-PRC individual shareholders may be imposed on dividends they receive
from us and on gains they recognize from transferring our shares or ADSs. See “Item 3. Key Information — D. Risk Factors
— Risks Related to Doing Business in China — We may be classified as a ‘resident enterprise’ for PRC EIT
purposes, which could result in our global income becoming subject to the 25% PRC EIT rate.”



98







United States Federal Income Taxation



The following discussion describes certain
U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in our ADSs or common
shares. This discussion applies only to U.S. Holders that hold the ADSs or common shares as capital assets (generally, property
held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the
United States as of the date of this transition report and on U.S. Treasury regulations in effect or, in some cases, proposed,
as of the date of this transition report, as well as judicial and administrative interpretations thereof available on or before
such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the
tax consequences described below.



The following discussion neither deals with
the tax consequences to any particular investor nor describes all of the tax consequences applicable to persons in special tax
situations such as:



| | · | banks;
| | - | ------



| | · | certain financial institutions;
| | - | -------------------------------



| | · | insurance companies;
| | - | --------------------



| | · | regulated investment companies;
| | - | -------------------------------



| | · | real estate investment trusts;
| | - | ------------------------------



| | · | broker-dealers;
| | - | ---------------



| | · | traders that elect to mark to market;
| | - | -------------------------------------



| | · | U.S. expatriates;
| | - | -----------------



| | · | tax-exempt entities;
| | - | --------------------



| | · | persons liable for alternative minimum tax;
| | - | -------------------------------------------



| | · | persons holding ADSs or common shares as part of a straddle, hedging, conversion or integrated transaction;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | persons who acquired ADSs or common shares pursuant to the exercise of any employee share option or otherwise as compensation;
or
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | partnerships or pass-through entities, or persons holding ADSs or common shares through such entities.
| | - | ------------------------------------------------------------------------------------------------------



INVESTORS ARE URGED TO CONSULT THEIR
TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL,
NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR COMMON SHARES.



The discussion below of the U.S. federal
income tax consequences to “U.S. Holders” will apply to you if you are the beneficial owner of our ADSs or common shares
and you are, for U.S. federal income tax purposes,



| | · | an individual who is a citizen or resident of the United States;
| | - | ----------------------------------------------------------------



| | · | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United
States or under the laws of the United States, any State thereof or the District of Columbia;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
| | - | ------------------------------------------------------------------------------------------------------



99









| | · | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more
U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a U.S. person.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If you are a partner in a partnership or
other entity taxable as a partnership that holds common shares, your tax treatment will depend on your status and the activities
of the partnership. If you are a partner in such a partnership, you should consult your tax advisor.



The discussion below assumes that the representations
contained in the deposit agreement are true and the obligations in the deposit agreement and any related agreement have been and
will be complied with in accordance with their terms. If you own ADSs, you should be treated as the owner of the underlying common
shares represented by those ADSs for U.S. federal income tax purposes.



The U.S. Treasury has expressed concerns
that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may
be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example, pre-releasing ADSs
to persons that do not have the beneficial ownership of the securities underlying the ADSs). Accordingly, the creditability of
any PRC taxes and the availability of the reduced tax rate for any dividends received by certain non-corporate U.S. Holders, including
individual U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between
the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners
of underlying common shares.



Passive Foreign Investment Company



Based on the market price of our ADSs, the
value of our assets and the composition of our income and assets, we believe that it is likely that we were a PFIC for U.S. federal
income tax purposes for the nine-month period ended December 31, 2014. A non-U.S. corporation will be a PFIC for U.S. federal
income tax purposes for any taxable year if either:



| | · | at least 75% of its gross income for such year is passive income; or
| | - | --------------------------------------------------------------------



| | · | at least 50% of the value of its assets (based on an average of the quarterly values of the assets)
during such year is attributable to assets that produce passive income or are held for the production of passive income.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For this purpose, we will be treated as
owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which
we own, directly or indirectly, more than 25% (by value) of the stock. In applying this rule, while it is not clear, we believe
the contractual arrangements between us and our affiliated entities should be treated as ownership of stock.



A separate determination must be made after
the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the
asset test will generally be determined by reference to the market price of our ADSs or equity shares, our PFIC status will depend
in large part on the market price of the ADSs or common shares, which may fluctuate significantly.



If we are a PFIC for any taxable year during
which you hold ADSs or common shares, we generally will continue to be treated as a PFIC with respect to you for all succeeding
years during which you hold ADSs or common shares, unless we cease to be a PFIC and you make a “deemed sale” election
with respect to the ADSs or common shares. If such election is made, you will be deemed to have sold ADSs or common shares you
hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC and any gain from such
deemed sale would be subject to the consequences described in the following two paragraphs. After the deemed sale election, your
ADSs or common shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we
subsequently become a PFIC.



For each taxable year that we are treated
as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you
receive and any gain you recognize from a sale or other disposition (including a pledge) of the ADSs or common shares, unless you
make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than
125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period
for the ADSs or common shares will be treated as an excess distribution. Under these special tax rules:



| | · | the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or common shares;
| | - | ----------------------------------------------------------------------------------------------------------------------------



100







| | · | the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year
in which we were a PFIC, will be treated as ordinary income; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations,
as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting
tax attributable to each such year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The tax liability for amounts allocated
to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such
years, and gains (but not losses) realized on the sale or other disposition of our ADSs or common shares cannot be treated as capital,
even if you hold the ADSs or common shares as capital assets.



If we are treated as a PFIC with respect
to you for any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments
in other entities that are PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned
by us in that proportion which the value of the ADSs or common shares you own bears to the value of all of our ADSs or common shares,
and you may be subject to the adverse tax consequences described in the preceding two paragraphs with respect to the shares of
such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC
rules to any of our subsidiaries.



A U.S. Holder of “marketable stock”
(as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the PFIC rules described above regarding
excess distributions and recognized gains. If you make a mark-to-market election for our ADSs or common shares, you will include
in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or common shares
as of the close of your taxable year over your adjusted basis in such ADSs or common shares. You will be allowed an ordinary deduction
for the excess, if any, of the adjusted basis of the ADSs or common shares over their fair market value as of the close of the
taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the ADSs or common shares
included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain
on the actual sale or other disposition of the ADSs or common shares, will be treated as ordinary income. Ordinary loss treatment
will also apply to the deductible portion of any mark-to-market loss on the ADSs or common shares, as well as to any loss realized
on the actual sale or other disposition of the ADSs or common shares, to the extent that the amount of such loss does not exceed
the net mark-to-market gains previously included for such ADSs or common shares. Your basis in the ADSs or common shares will be
adjusted to reflect any such income or loss amounts. If you make a mark-to-market election, any distributions we make would generally
be subject to the rules discussed above under “— Taxation of Dividends and Other Distributions on the ADSs or Common
Shares,” except that the lower tax rate applicable to qualified dividend income would not apply.



The mark-to-market election is available
only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined
in applicable U.S. Treasury regulations. Our ADS are listed on NASDAQ which is a qualified exchange or other market for these purposes.
Consequently, if the ADSs continue to be listed on NASDAQ and are regularly traded, and you are a holder of ADSs, we expect the
mark-to-market election would be available to you if we were to become a PFIC. Because a mark-to-market election cannot be made
for equity interests in any lower-tier PFICs that we own, a U.S. Holder may continue to be subject to the PFIC rules with respect
to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income
tax purposes. You should consult your tax advisors as to the availability and desirability of a mark-to-market election, as well
as the impact of such election on interests in any lower-tier PFICs.



Alternatively, if a non-U.S. corporation
is a PFIC, a holder of shares in that corporation may avoid taxation under the PFIC rules described above regarding excess distributions
and recognized gains by making a “qualified electing fund” election to include in income its share of the corporation’s
income on a current basis. However, you may make a qualified electing fund election with respect to your ADSs or common shares
only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such
information.



Subject to certain exceptions based on the
value of PFIC stock held, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S.
Treasury may require. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that
may apply to you.



You are strongly urged to consult your tax
advisor regarding the application of the PFIC rules to your investment in ADSs or common shares and the advisability of making
any election described in this section.



101







Taxation of Dividends and Other Distributions on the ADSs
or Common Shares



Subject to the PFIC rules discussed above,
the gross amount of any distributions we make to you with respect to our ADSs or common shares generally will be includible in
your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or on the date of receipt by
you, in the case of common shares, but only to the extent the distribution is paid out of our current or accumulated earnings and
profits (as determined under U.S. federal income tax principles). Any such dividends will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the
distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles),
such excess amount will be treated first as a tax-free return of your tax basis in your ADSs or common shares, and then, to the
extent such excess amount exceeds your tax basis in your ADSs or common shares, as capital gain. We currently do not, and we do
not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect
any distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable
return of capital or as capital gain under the rules described above.



With respect to certain non-corporate U.S.
Holders, including individual U.S. Holders, any dividends may be taxed at the lower capital gains rate applicable to “qualified
dividend income,” provided (1) either (a) the ADSs or common shares, as applicable, are readily tradable on an
established securities market in the United States or (b) we are eligible for the benefits of a qualifying income tax treaty
with the United States that includes an exchange of information program, (2) we are neither a PFIC nor treated as such with
respect to you (as discussed above) for the taxable year in which the dividend was paid and the preceding taxable year and (3) certain
holding period requirements are met. Under U.S. Internal Revenue Service authority, ADSs are considered for purposes of clause
(1) above to be readily tradable on an established securities market in the United States if they are listed on NASDAQ as
are our ADSs. However, based on existing guidance, it is not entirely clear whether dividends you receive with respect to the common
shares will be taxed as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange. As discussed
above in “— Passive Foreign Investment Company,” we believe that it is likely that we were a PFIC for the nine-month
period ended December 31, 2014. If we are treated as a “resident enterprise” for PRC tax purposes under the PRC
Enterprise Income Tax Law, we may be eligible for the benefits of the income tax treaty between the United States and the PRC.
You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend
income for any dividends paid with respect to our ADSs or common shares.



Any dividends will constitute foreign source
income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above),
the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be
limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided
by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our ADSs or common shares
will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general
category income.”



If PRC withholding taxes apply to any dividends
paid to you with respect to our ADSs or common shares, the amount of the dividend would include the withheld PRC taxes and, subject
to certain conditions and limitations, such PRC withholding taxes generally will be treated as foreign taxes eligible for credit
against your U.S. federal income tax liability. The rules relating to the determination of the foreign tax credit are complex and
you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances, including
the effects of any applicable income tax treaties.



Taxation of Disposition of ADSs or Common Shares



Subject to the PFIC rules discussed above,
you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of ADSs or common shares equal to the
difference between the amount realized for the ADSs or common shares and your tax basis in the ADSs or common shares. The gain
or loss generally will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that
has held the ADSs or common shares for more than one year, you may be eligible for reduced tax rates. The deductibility of capital
losses is subject to limitations. As discussed above in “— Passive Foreign Investment Company,” we believe that
it is likely that we were a PFIC for the nine-month period ended December 31, 2014. Any gain or loss you recognize on a disposition
of ADSs or common shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. However,
if we are treated as a “resident enterprise” for PRC tax purposes, we may be eligible for the benefits of the income
tax treaty between the United States and the PRC. In such event, if PRC tax were to be imposed on any gain from the disposition
of the ADSs or common shares, a U.S. Holder that is eligible for the benefits of the income tax treaty between the United States
and the PRC may elect to treat the gain as PRC source income for foreign tax credit purposes. You should consult your tax advisors
regarding the proper treatment of gain or loss in your particular circumstances, including the effects of any applicable income
tax treaties.



102







Information Reporting and Backup Withholding



Any dividend payments with respect to ADSs
or common shares and proceeds from the sale, exchange or redemption of ADSs or common shares may be subject to information reporting
to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S.
Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise
exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification
on U.S. Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S.
information reporting and backup withholding rules.



Backup withholding is not an additional
tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain
a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the
U.S. Internal Revenue Service and furnishing any required information in a timely manner.



Additional Reporting Requirements



Certain U.S. Holders who are individuals
are required to report information relating to an interest in our ADSs or common shares, subject to certain exceptions (including
an exception for ADSs or common shares held in accounts maintained by certain financial institutions). U.S. Holders should consult
their tax advisors regarding the effect, if any, of these rules on their ownership and disposition of the ADSs and common shares.



| | F. | Dividends and Paying Agents
| | -- | ---------------------------



Not Applicable.



| | G. | Statement by Experts
| | -- | --------------------



Not Applicable.



| | H. | Documents on Display
| | -- | --------------------



We previously filed with the SEC our registration
statement on Form F-1, as amended, and related prospectus under the Securities Act of 1933, with respect to our common shares
represented by the ADSs. We also filed with the SEC a related registration statement on Form F-6 with respect to the ADSs.



We are subject to periodic reporting and
other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we are required to
file reports, including annual reports on Form 20-F, and other information with the SEC. All documents filed by us with the SEC
can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. The SEC also maintains a web site at www.sec.govthat
contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with
the SEC using its EDGAR system.



As a foreign private issuer, we are exempt
from the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive
officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial
statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.



We intend to furnish Citibank, N.A., the
depositary of our ADSs, with all notices of shareholders’ meeting and other reports and communications that are made generally
available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and,
upon our written request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’
meeting received by the depositary from us.



In accordance with Rule 5250(d) of the NASDAQ
Listing Rules, we will post this transition report on Form 20-F on our website at http://ir.sky-mobi.com/sec.cfm. In addition,
we will provide hard copies of our transition report free of charge to shareholders and ADS holders upon request.



103







| | I. | Subsidiary Information
| | -- | ----------------------



For a listing of our subsidiaries, see “Item
4. Information on the Company — B. Organizational Structure,” as well as Exhibit 8.1 filed herewith.



| | ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | -------- | ----------------------------------------------------------



Foreign Exchange Risk



Our revenues and purchases are generally
denominated in Renminbi. Our assets and liabilities are also denominated in Renminbi, except for cash held in other currencies,
which amounted to RMB88.2 million (US$14.2 million) as of December 31, 2014. As a result, fluctuations in the exchange rates
between the U.S. dollar and Renminbi will affect our results of operations and financial condition. The Renminbi’s exchange
rate with the U.S. dollar is affected by, among other things, changes in China’s political and economic conditions and China’s
foreign exchange policies. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations
in RMB exchange rates and achieve policy goals.



On July 21, 2005, the PRC government
changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against
the U.S. dollar over the following five years. In June 2010, the PRC government announced that it would increase Renminbi exchange
rate flexibility and since that time the Renminbi has gradually appreciated against the U.S. dollar. However, it remains unclear
how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a more
flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar.



To the extent that we need to convert U.S.
dollars into RMB for our operations or other uses within the PRC, appreciation of the RMB against the U.S. dollar would have an
adverse effect on the RMB amount we would receive from the conversion. On the other hand, a decline in the value of RMB against
the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our company
and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the price of our ADSs. As
of December 31, 2014, we had RMB-denominated cash balances of RMB399.1 million. Assuming we had converted the RMB399.1 million
into U.S. dollars at the exchange rate of $1.00 for RMB6.2046 as of December 31, 2014, this cash balance would have been US$64.3
million. Assuming a 5% depreciation of the RMB against the U.S. dollar, this cash balance would have decreased to US$61.3 million
as of December 31, 2014 resulting in US$3.0 million of foreign exchange loss.



Interest Rate Risk



We do not have any outstanding long-term
or short-term loans. Our exposure to interest rate risk primarily relates to interest income generated by excess cash invested
in bank deposits with original maturities of three months or less and time deposits with maturity terms of three months or more
but less than one year. If we borrow money in future periods, we may be exposed to interest rate risk related to interest expenses
incurred by any short-term or long-term bank borrowings. We have not used any derivative financial instruments to manage our interest
risk exposure. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates.
However, our future interest income may be lower than expected due to changes in market interest rates.



Inflation Risk



In recent years, inflation has not had a
material impact on our results of operations. According to the National Bureau of Statistics of China, the change in China’s
Consumer Price Index was 2.6%, 2.6% and 2.0% in calendar year 2012, 2013 and 2014, respectively. If inflation rises, it may materially
adversely affect our business.



Credit Risk



Our maximum exposure to credit risks is
equivalent to the total carrying amount of loan receivables, trade and other receivables, amounts due from related parties, cash
and cash equivalents, term deposits, investments at FVTPL and available-for-sale investments in the aggregate amount of RMB693.0
million, RMB688.0 million and RMB745.6 million (US$120.2 million) as of March 31, 2013 and 2014 and December 31, 2014, respectively.



Collection of our revenues is substantially
done through mobile network operators. We had RMB125.4 million trade receivables from mobile network operators as of December 31,
2014. We also collect a portion of our revenues through mobile service providers with whom we have co-operative service agreements.
The total carrying amount of trade receivables from mobile service providers was RMB36.8 million, RMB22.3 million and RMB64.4 million
(US$10.4 million), respectively as of March 31, 2013 and 2014 and December 31, 2014. In order to minimize credit risk, we
assess the credit worthiness of the mobile service providers prior to contracting with them.



104







In addition, we allocate revenue payments
among mobile service providers based on their payment history and our assessment of their relationship with mobile network operators,
which will impact the mobile service providers’ ability to pay. We monitor the subsequent performance of the mobile service
providers in order to mitigate collection risk going forward. In addition, we review the recoverable amount of each individual
trade receivable at the end of each reporting period to determine if a provision should be made for uncollectible amounts.



We have concentration of credit risk with
exposure limited to certain mobile service providers and one mobile network operator. As of March 31, 2013 and 2014 and December
31, 2014, our ten mobile service providers and the mobile network operator accounted for approximately RMB51.9 million, RMB47.4
million and RMB161.8 million (US$26.1 million), or 80%, 78% and 85%, of our trade receivables, respectively. We closely monitor
the subsequent settlement of trade receivables and do not grant long credit periods to the counterparties.



As of March 31, 2013 and 2014 and December
31, 2014, all of our cash and cash equivalents and time deposits were held by reputable financial institutions.We
believe that we are not exposed to unusual risks as these financial institutions have high credit quality. We have not experienced
any losses on deposits of cash and cash equivalents and short-term investments. Prior to entering into contracts, we make a credit
assessment of our counterparties to assess the collectability of the contracts.



| | ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| | -------- | ------------------------------------------------------



| | A. | Debt Securities
| | -- | ---------------



Not applicable.



| | B. | Warrants and Rights
| | -- | -------------------



Not applicable.



| | C. | Other Securities
| | -- | ----------------



Not applicable.



| | D. | American Depositary Shares
| | -- | --------------------------



Fees and Charges Our ADS holders May Have to Pay



ADS holders will be required to pay the
following service fees to the depository:



|Service                                                                                                |  | Fee                                                                                      
|------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------
|•    Issuance of ADSs                                                                                  |  | Up to US$0.05 per ADS issued                                                             
|                                                                                                       |  |                                                                                          
|•    Cancellation of ADSs                                                                              |  | Up to US$0.05 per ADS canceled                                                           
|                                                                                                       |  |                                                                                          
|•    Distribution of cash dividends or other cash distributions                                        |  | Up to US$0.05 per ADS held                                                               
|                                                                                                       |  |                                                                                          
|•    Distribution of ADSs pursuant to stock dividends, free stock distributions or exercise of rights. |  | Up to US$0.05 per ADS held                                                               
|                                                                                                       |  |                                                                                          
|•    Distribution of securities other than ADSs or rights to purchase additional ADSs                  |  | Up to US$0.05 per ADS held                                                               
|                                                                                                       |  |                                                                                          
|•    Depositary services                                                                               |  | Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary
|                                                                                                       |  |                                                                                          
|•    Transfer of ADSs                                                                                  |  | US$1.50 per certificate presented for transfer                                           



105







ADS holders will also be responsible to
pay certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:



| | · | fees for the transfer and registration of common shares charged by the registrar and transfer agent for the common shares in
the Cayman Islands (i.e., upon deposit and withdrawal of common shares);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | expenses incurred for converting foreign currency into U.S. dollars;
| | - | --------------------------------------------------------------------



| | · | expenses for cable, telex and fax transmissions and for delivery of securities;
| | - | -------------------------------------------------------------------------------



| | · | taxes and duties upon the transfer of securities (i.e., when common shares are deposited or withdrawn from deposit); and
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | fees and expenses incurred in connection with the delivery or servicing of common shares on deposit.
| | - | ----------------------------------------------------------------------------------------------------



Depositary fees payable upon the issuance
and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued
ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation.
The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities
to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable
ADS record date.



The depositary fees payable for cash distributions
are generally deducted from the cash being distributed. In the case of distributions other than cash (such as stock dividends and
rights distributions), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution.
In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the
depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts
(via DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder
of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold
their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.



In the event of refusal to pay the depositary
fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may
set off the amount of the depositary fees from any distribution to be made to the ADS holder.



The fees and charges that ADS holders may
be required to pay may vary over time and may be changed by us and by the depositary.



The depositary may reimburse us for certain
expenses incurred by us in respect of the ADR program established pursuant to the deposit agreement, by making available a portion
of the depositary fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary
may agree from time to time. As described in the deposit agreement, we or the depositary may withhold or deduct from any distributions
made in respect of common shares and may sell for the account of a holder any or all of the common shares and apply such distributions
and sale proceeds in payment of any taxes (including applicable interest and penalties) or charges that are or may be payable by
holders in respect of the ADSs.



Fees and Other Payments Made by the Depositary to Us



The depositary has agreed to reimburse us
for certain expenses we incur that are related to establishment and maintenance of the ADS program, including investor relations
expenses and exchange application and listing fees. There are limits on the amount of expenses for which the depositary will reimburse
us, but the amount of reimbursement available to us is not related to the amounts of fees the depositary collects from investors.
The depositary has reimbursed us for an expenses related to the establishment and maintenance of the ADS program in an amount of
US$0.4 million, after deduction of applicable U.S. taxes, as of December 31, 2014.



106







PART II





| | ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
| | -------- | -----------------------------------------------



Not Applicable.



| | ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
| | -------- | ----------------------------------------------------------------------------



A. – D. Material Modifications to the Rights of Security
Holders



None.



E.Use of
Proceeds



Not Applicable.



| | ITEM 15. | CONTROLS AND PROCEDURES
| | -------- | -----------------------



Evaluation of Disclosure Controls and Procedures



Our management, with the participation of
our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as
required by Rule 13a-15(b) under the Exchange Act.



Based upon that evaluation, our chief executive
officer and chief financial officer have concluded that, as of December 31, 2014, our disclosure controls and procedures
were not effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under
the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and
forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely
decisions regarding required disclosure.



Management’s Annual Report on Internal Control over
Financial Reporting and Attestation Report of the Independent Registered Public Accounting Firm



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections
of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures
may deteriorate.



Our management evaluated the effectiveness
of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based on criteria established
in the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our management’s assessment identified a material weakness related to the lack of oversight review due to the
short-term vacancy of chief financial officer, resulting from our ex-chief financial officer’s departure in November 2014.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be
prevented or detected on a timely basis.



Based on this assessment, and because of
the material weakness described above, our management concluded that our internal control over financial reporting was not effective
as of December 31, 2014.



We have taken the following measures
to address the material weakness identified above: (i) we assigned the relevant members of our management team, including our
financial controller, to assume and discharge the internal control responsibilities of our chief financial officer during the
vacancy, and (ii) we actively sought candidates and appointed a new chief financial officer experienced in U.S. GAAP and SEC
reporting in April 2015. Simultaneously, other well-established internal control measures were continuously followed and
enhanced. We believe the foregoing measures will remediate the identified material weakness in future periods.



107







Notwithstanding the conclusion that our
internal control over financial reporting was not effective as of December 31,2014, our management believe that the financial statements
and other information contained in this transition report present fairly, in all material respects, its business, financial condition
and results of operations. Nothing has come to the attention of management that causes them to believe that any material inaccuracies
or errors exist in our financial statements as of December, 2014.



Our independent registered public accounting
firm, Deloitte Touche Tohmatsu Certified Public Accountants LLP, has audited the effectiveness of our internal control over financial
reporting as of December 31, 2014, as stated in its report, which appears on page F-3 of this transition report on Form 20-F.



Changes in Internal Control over Financial Reporting



As
required by Rule 13a-15(d), under the Exchange Act, our management, including our chief executive officer and our chief financial
officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred
during the period covered by this report have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Based on that evaluation,other than as described above, there have not been any other
changes in our internal control over financial reporting during the period covered by this transition report, which have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting. As described above, we
plan to implement changes to our internal controls over financial reporting in 2015. We appointed a new chief financial officer
experienced in U.S. GAAP and SEC reporting in April 2015 and we are committed to monitoring the effectiveness of these measures
and making any changes that are necessary and appropriate in 2015.



ITEM 16A.AUDIT
COMMITTEE FINANCIAL EXPERT



Mr. Wei Zhou qualifies as an “audit
committee financial expert” as defined in Item 16A of Form 20-F. Mr. Zhou satisfies the independence requirements
of Rule 5605 of NASDAQ Stock Market, Marketplace Rules and Rule 10A-3 under the Exchange Act.



ITEM 16B.CODE
OF ETHICS



Our board of directors adopted a code of
business conduct and ethics that applies to our directors, officers and employees. We have filed our code of business conduct and
ethics as an exhibit to Exhibit 99.1 of our registration statement on Form F-1 (file No. 333-170707) filed with the Securities
and Exchange Commission on November 26, 2010 and posted a copy of our code of business conduct and ethics on our investor
relations website at http://ir.sky-mobi.com/governance.cfm. We hereby undertake to provide to any person without charge, upon a
written request, a copy of our code of business conduct and ethics.



ITEM 16C.PRINCIPAL
ACCOUNTANT FEES AND SERVICES



The following table sets forth the aggregate
fees by categories specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu Certified
Public Accountant LLP, our principal external auditors, for the periods indicated.



|                      |  | For the fiscal year ended March 31, 2014 |       |  | For the nine months ended December 31, 2014 | 
|--------------------- |  | ---------------------------------------- | ----- |  | ------------------------------------------- | 
|                      |  | RMB                                      |       |  | RMB                                         | 
|Audit fees(1)         |  |                                          | 4,689 |  |                                             | 
|Audit-related fees(2) |  |                                          | 844   |  |                                             | 
|Tax fees(3)           |  |                                          | 297   |  |                                             | 










| | (1) | “Audit fees” means the aggregate fees billed for professional services rendered in connection with the audit or
review of our financial statements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | “Audit-related fees” represents aggregate fees billed for professional services rendered in connection with the
assurance and related services.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | “Tax fees” represents the aggregated fees billed for professional services rendered in connection with tax compliance,
tax advice and tax planning.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



108







The policy of our audit committee is to
pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu Certified Public Accountants LLP, including audit
services, audit-related services, tax services and other services as described above, and the services provided by Ernst &
Young related to the internal controls over financial reporting for the nine months ended December 31, 2014, other than those
for de minimus services which are approved by our audit committee prior to the completion of the audit. Prior to our initial public
offering, all initial public offering related accountant fees were approved by the Board.



ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES



Not applicable.



ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE
ISSUER AND AFFILIATED PURCHASERS.



Below is a table containing information
about purchases made by us or by affiliated purchasers for the nine months ended December 31, 2014.



|Period                       |  | (a) Total Number of Common Shares Purchased |         |     | (b)AveragePrice PaidPer CommonShare(2) |   |       | (c) Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | (d) Maximum Approximate Dollar Value of Common Shares that May Yet Be Purchased Under the Plans or Programs | 
|---------------------------- |  | ------------------------------------------- | ------- | --- | -------------------------------------- | - | ----- | ------------------------------------------------------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------- | 
|                             |  |                                             |         |     |                                        |   |       |                                                                                             |  |  |                                                                                                             | 
|June 1, 2014 – June 30, 2014 |  |                                             | 877,304 | (1) |                                        | $ | 0.827 |                                                                                             |  |  | 877,304                                                                                                     | 



| | (1) | On August 13, 2012, we announced a share repurchase program to repurchase up to an aggregate
of $10 million of our issued and outstanding ADSs representing common shares from August 13, 2012 to August 11, 2014.
This share repurchase program complies with the conditions of Rule 10b-18 under the Exchange Act.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The average price paid per common share is calculated using the execution price for each repurchase
excluding commissions paid to brokers.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On May 26, 2014, we announced another share repurchase program to repurchase up to an aggregate
of $20 million of our issued and outstanding ADSs representing common shares from May 26, 2014 to May 25, 2015. This share repurchase
program complies with the conditions of Rule 10b-18 under the Exchange Act. As of the date of this transition report, no repurchase
has been made pursuant to this plan.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING
ACCOUNTANT



Not Applicable.



ITEM 16G.CORPORATE
GOVERNANCE



We are incorporated in the Cayman Islands
and our corporate governance practices are governed by applicable Cayman Islands law. In addition, because our ADSs are listed
on NASDAQ, we are subject to the corporate governance requirements of NASDAQ. However, NASDAQ Marketplace Rule 5615(a)(3) permits
foreign private issuers like us to follow “home country practice” with respect to certain corporate governance matters,
and we may decide to follow “home country practice” on a case-by-case basis.

In particular, we have elected to follow
“home country practice” with respect to the composition of our audit committee. In the opinion of Conyers Dill &
Pearman, under Cayman Islands law, our audit committee may comprise two directors rather than three as required under NASDAQ Marketplace
Rule 5605(c)(2). We are committed to a high standard of corporate governance. Accordingly, we endeavor to comply with most NASDAQ
corporate governance practices and believe that we are currently in compliance with the NASDAQ corporate governance practices applicable
to foreign private issuers.



Item 16H. MINE
SAFETY DISCLOSURE



Not applicable.



109







PART III



| | ITEM 17. | FINANCIAL STATEMENTS
| | -------- | --------------------



We have elected to provide financial statements
pursuant to Item 18.



| | ITEM 18. | FINANCIAL STATEMENTS
| | -------- | --------------------



The consolidated financial statements for
Sky-mobi Limited and its subsidiaries are included at the end of this transition report.



| | ITEM 19. | EXHIBITS
| | -------- | --------



|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|1.1           |  | Third Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2.1           |  | Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 99.A of our registration statement on Form F-6 (File No.  333-170849) filed with the Commission on November 26, 2010)                                                                                                                                                                                                                                                                                                                                                                         
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2.2           |  | Registrant’s Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                                                 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2.3           |  | Form of Deposit Agreement among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated by reference to Exhibit 99.A of our registration statement on Form F-6 (File No.  333-170849) filed with the Commission on November 26, 2010)                                                                                                                                                                                                                                                                                                             
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.1           |  | Amendment No. 1 to Series A Preferred Share and Warrant Purchase Agreement and Amendment No.  2 to Shareholders Agreement, dated as of March 1, 2010, among Profit Star Limited, Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd.  and certain other parties listed thereunder (incorporated by reference to Exhibit 4.5 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.2           |  | Shareholders Agreement, dated as of August 2, 2007, among Profit Star Limited, Sequoia Capital China II, L.P., Xplane Ltd., shareholders of Xplane Ltd.  and certain other parties listed thereunder (incorporated by reference to Exhibit 4.6 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.3           |  | Amendment to Shareholders Agreement, dated as of September 5, 2008, among Profit Star Limited, Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd.  and certain other parties listed thereunder (incorporated by reference to Exhibit 4.7 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.4           |  | Amended and Restated Warrant to Purchase Series A Preferred Shares, dated as of June 29, 2009, among Profit Star Limited, Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd.  and certain other parties listed thereunder (incorporated by reference to Exhibit 4.9 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                       
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.5           |  | 2010 Share Incentive Plan (incorporated by reference to Exhibit 10.1 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                                                                          
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.6           |  | Form of Indemnification Agreement with the Registrant’s directors and/or officers (incorporated by reference to Exhibit 10.2 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.7           |  | English translation of Form of Employment Agreement with the Registrant’s certain senior executives and its amendment (incorporated by reference to Exhibit 10.3 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                              



110







|4.8    |  | English translation of Form of Confidentiality Agreement with the Registrant’s certain senior executives (incorporated by reference to Exhibit 10.4 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 26, 2010)               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                           
|4.9    |  | English translation of Form of Employment Agreement with the Registrant’s certain senior executives and its amendment (incorporated by reference to Exhibit 10.5 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)  
|       |  |                                                                                                                                                                                                                                                                                                           
|4.10   |  | English translation of Form of Technical Support Service Agreement between the Registrant’s PRC subsidiary and each SPE (incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)                          
|       |  |                                                                                                                                                                                                                                                                                                           
|4.11   |  | English translation of Form of Strategy Consulting Service Agreement between the Registrant’s PRC subsidiary and each SPE (incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)                        
|       |  |                                                                                                                                                                                                                                                                                                           
|4.12   |  | English translation of Form of Intellectual Property License Agreement between the Registrant’s PRC subsidiary and each SPE (incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)                      
|       |  |                                                                                                                                                                                                                                                                                                           
|4.13   |  | English translation of Purchase Option and Cooperation Agreement among the Registrant’s PRC subsidiary, each SPE and the shareholders of each SPE( incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)
|       |  |                                                                                                                                                                                                                                                                                                           
|4.14   |  | English translation of Form of Power of Attorney issued by the shareholders of each SPE( incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)                                                          
|       |  |                                                                                                                                                                                                                                                                                                           
|4.15   |  | English translation of Form of Equity Pledge Agreement among the Registrant’s PRC subsidiary, each SPE and the shareholders of each SPE (incorporated by reference to Exhibit 4.10 of our annual report on Form 20-F (File No. 001-34988), initially filed with the Commission on July 30, 2014)          
|       |  |                                                                                                                                                                                                                                                                                                           
|4.16   |  | Form of Director Agreement with independent directors of the Registrant (incorporated by reference to Exhibit 10.33 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 19, 2010)                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|8.1*   |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                           
|11.1   |  | Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our registration statement on Form F-1 (File No.  333-170707), as amended, initially filed with the Commission on November 26, 2010)                                                                  
|       |  |                                                                                                                                                                                                                                                                                                           
|12.1*  |  | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|12.2*  |  | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|13.1** |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|13.2** |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                           
|15.1*  |  | Consent of  DaHui Lawyers                                                                                                                                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                           
|15.2*  |  | Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP                                                                                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                           
|15.3*  |  | Consent of Conyers Dill and Pearman                                                                                                                                                                                                                                                                       



| | * | Filed with this transition report on Form 20-F.
| | - | -----------------------------------------------

| | ** | Furnished with this transition report on Form 20-F.
| | -- | ---------------------------------------------------



111







SIGNATURES



The registrant hereby certifies that it
meets all of the requirements for filing its transition report on Form 20-F and that it has duly caused and authorized the undersigned
to sign this transition report on its behalf.



| | SKY-MOBI LIMITED
| | ----------------
| |                 
| | By:             
| |                 
| |                 
| |                 



Date: April 27, 2015





112









SKY-MOBI LIMITED



INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                                   | PAGE(S)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------
|                                                                                                                                                                   |        
|Reports of Independent Registered Public Accounting Firm                                                                                                           | F-2    
|Consolidated Statements of Profit or Loss and Other Comprehensive Income for the Years Ended March 31, 2013 and 2014 and Nine-month period ended December 31, 2014 | F-4    
|Consolidated Statements of Financial Position as of March 31, 2013 and 2014 and December 31, 2014                                                                  | F-5    
|Consolidated Statements of Changes in Equity for the Years Ended March 31, 2013 and 2014 and Nine-month period ended December 31, 2014                             | F-6    
|Consolidated Statements of Cash Flows for the Years Ended March 31, 2013 and 2014 and Nine-month period ended December 31, 2014                                    | F-7    
|Notes to the Consolidated Financial Statements                                                                                                                     | F-8    



F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors and Shareholders of

Sky-mobi Limited



We have audited the accompanying consolidated
statements of financial position of Sky-mobi Limited and subsidiaries (the “Group”) as of March 31, 2013 and 2014
and December 31, 2014, and the related consolidated statements of profit or loss and other comprehensive income, changes in equity,
and cash flows for each of the two years ended March 31, 2014 and nine-month period ended December 31, 2014. These financial statements
are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial
statements present fairly, in all material respects, the financial position of Sky-mobi Limited and subsidiaries as of March 31,
2013 and 2014 and December 31, 2014, and the related consolidated statements of profit or loss and other comprehensive income,
changes in equity, and cash flows for each of the two years ended March 31, 2014 and nine-month period ended December 31,2014,
in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.



We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting
as of December 31, 2014, based on the criteria established in Internal Control—Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 27, 2015 expressed an adverse
opinion on the Group’s internal control over financial reporting.



Our audits also comprehended the translation
of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the
basis stated in Note 2. Such United States dollar amounts are presented solely for the convenience of readers in the United
States of America.



/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP



Shanghai, China

April 27, 2015



F-2







REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of

Sky-mobi Limited



We have audited the internal control over financial
reporting of Sky-mobi Limited and subsidiaries (the “Group”) as of December 31, 2014, based on the criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Group’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal
control over financial reporting based on our audit.



We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.



A company’s internal control over financial
reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial
officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.



Because of the inherent limitations of internal
control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The following material
weakness has been identified and included in management’s assessment: the company lack of oversight review due to the vacancy
of chief financial officer as of December 31, 2014. This material weakness was considered in determining the nature, timing, and
extent of audit tests applied in our audit of the consolidated financial statements and the related financial statement schedule
as of and for the nine-month period ended December 31, 2014, of the Company and this report does not affect our report on such
financial statements and financial statement schedule.



In our opinion, because of the effect of the
material weakness identified above on the achievement of the objectives of the control criteria, the Company has not maintained
effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control
— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for
the nine-month period ended December 31, 2014 of the Group and our report dated April 27, 2015 expressed an unqualified opinion
on those financial statements and included an explanatory paragraph regarding the translation of Renmimbi amounts into United States
dollar amounts for the convenience of readers in the United States of America.



/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP



Shanghai, China

April 27, 2015



F-3







CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME



|                                                       |  |       |  | Year Ended |          |   | Year Ended |  |          | Nine months
 Ended |  |  | Nine months
Ended |  
|------------------------------------------------------ |  | ----- |  | ---------- | -------- | - | ---------- |  | -------- | ------------------ |  |  | ----------------- | -
|                                                       |  |       |  | March 31   |          |   | March 31   |  |          | December 31        |  |  | December 31       |  
|                                                       |  | NOTES |  | 2013       |          |   | 2014       |  |          | 2014               |  |  | 2014              |  
|                                                       |  |       |  | RMB’000    |          |   | RMB’000    |  |          | RMB’000            |  |  | US$’000           |  
|                                                       |  |       |  |            |          |   |            |  |          |                    |  |  | (Note 2)          |  
|Revenues                                               |  | 7     |  |            | 601,107  |   |            |  | 485,551  |                    |  |  | 586,033           |  
|Cost of revenues from third parties                    |  |       |  |            | (412,246 | ) |            |  | (339,982 | )                  |  |  | (437,919          | )
|Cost of revenues from related parties                  |  |       |  |            | (6,534   | ) |            |  | (24,453  | )                  |  |  | (26,519           | )
|Gross profit                                           |  |       |  |            | 182,327  |   |            |  | 121,116  |                    |  |  | 121,595           |  
|Research and development expenses                      |  |       |  |            | (73,027  | ) |            |  | (38,644  | )                  |  |  | (25,943           | )
|Sales and marketing expenses                           |  |       |  |            | (35,369  | ) |            |  | (36,351  | )                  |  |  | (31,219           | )
|General and administration expenses                    |  |       |  |            | (69,491  | ) |            |  | (58,401  | )                  |  |  | (46,966           | )
|Other income, net                                      |  | 8     |  |            | 2,320    |   |            |  | 5,772    |                    |  |  | 1,481             |  
|Profit (loss) from operations                          |  |       |  |            | 6,760    |   |            |  | (6,508   | )                  |  |  | 18,948            |  
|Other gains and losses                                 |  | 9     |  |            | 15,531   |   |            |  | 17,482   |                    |  |  | 17,741            |  
|Impairment of investment in associates                 |  | 20    |  |            | (1,367   | ) |            |  | (727     | )                  |  |  | (2,673            | )
|Impairment of an available-for-sale investment         |  |       |  |            | —        |   |            |  | (800     | )                  |  |  | —                 |  
|Share of results of associates                         |  | 20    |  |            | (935     | ) |            |  | 2,428    |                    |  |  | 8,510             |  
|Gain on disposal of associates                         |  | 21    |  |            | —        |   |            |  | —        |                    |  |  | 57,351            |  
|Profit before tax                                      |  | 10    |  |            | 19,989   |   |            |  | 11,875   |                    |  |  | 99,877            |  
|Income tax expense                                     |  | 11    |  |            | (2,733   | ) |            |  | (7,218   | )                  |  |  | (1,156            | )
|Profit for the year                                    |  |       |  |            | 17,256   |   |            |  | 4,657    |                    |  |  | 98,721            |  
|Total comprehensive income for the year                |  |       |  |            | 17,256   |   |            |  | 4,657    |                    |  |  | 98,721            |  
|Profit and total comprehensive income attributable to: |  |       |  |            |          |   |            |  |          |                    |  |  |                   |  
|Owners of the Company                                  |  |       |  |            | 17,112   |   |            |  | 5,251    |                    |  |  | 99,008            |  
|Non-controlling interests                              |  |       |  |            | 144      |   |            |  | (594     | )                  |  |  | (287              | )
|                                                       |  |       |  |            | 17,256   |   |            |  | 4,657    |                    |  |  | 98,721            |  
|                                                       |  |       |  |            |          |   |            |  |          |                    |  |  |                   |  
|Earnings per share:                                    |  |       |  |            |          |   |            |  |          |                    |  |  |                   |  
|Basic                                                  |  | 12    |  |            | 0.07     |   |            |  | 0.02     |                    |  |  | 0.42              |  
|Diluted                                                |  | 12    |  |            | 0.07     |   |            |  | 0.02     |                    |  |  | 0.42              |  



F-4







CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                                                                                                                                           |  |       |  | March 31 |          |   | March 31 |  |          | December 31 |  |  | December 31 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | -------- | -------- | - | -------- |  | -------- | ----------- |  |  | ----------- | -
|                                                                                                                                                                                                                                                           |  | NOTES |  | 2013     |          |   | 2014     |  |          | 2014        |  |  | 2014        |  
|                                                                                                                                                                                                                                                           |  |       |  | RMB’000  |          |   | RMB’000  |  |          | RMB’000     |  |  | US’$000     |  
|                                                                                                                                                                                                                                                           |  |       |  |          |          |   |          |  |          |             |  |  | (Note 2)    |  
|ASSETS                                                                                                                                                                                                                                                     |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Current assets                                                                                                                                                                                                                                             |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Cash and cash equivalents                                                                                                                                                                                                                                  |  |       |  |          | 135,025  |   |          |  | 79,057   |             |  |  | 204,967     |  
|Term deposits                                                                                                                                                                                                                                              |  | 14    |  |          | 473,277  |   |          |  | 295,804  |             |  |  | 282,383     |  
|Short-term investments                                                                                                                                                                                                                                     |  | 15    |  |          | —        |   |          |  | 52,569   |             |  |  | —           |  
|Investment at fair value through profit or loss ("FVTPL")                                                                                                                                                                                                  |  | 16    |  |          | —        |   |          |  | 166,073  |             |  |  | 21,373      |  
|Trade and other receivables                                                                                                                                                                                                                                |  | 18    |  |          | 80,274   |   |          |  | 95,499   |             |  |  | 234,962     |  
|Amounts due from related parties                                                                                                                                                                                                                           |  | 25    |  |          | 523      |   |          |  | 160      |             |  |  | 5,524       |  
|                                                                                                                                                                                                                                                           |  |       |  |          | 689,099  |   |          |  | 689,162  |             |  |  | 749,209     |  
|Assets classified as held for sale                                                                                                                                                                                                                         |  | 20    |  |          | —        |   |          |  | 35,274   |             |  |  | —           |  
|Total current assets                                                                                                                                                                                                                                       |  |       |  |          | 689,099  |   |          |  | 724,436  |             |  |  | 749,209     |  
|Non-current assets                                                                                                                                                                                                                                         |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Property and equipment                                                                                                                                                                                                                                     |  | 19    |  |          | 15,170   |   |          |  | 7,605    |             |  |  | 8,886       |  
|Interest in associates                                                                                                                                                                                                                                     |  | 20    |  |          | 22,371   |   |          |  | 41,339   |             |  |  | 105,486     |  
|Available-for-sale investments                                                                                                                                                                                                                             |  | 17    |  |          | 7,167    |   |          |  | 6,250    |             |  |  | 9,228       |  
|Other non-current assets                                                                                                                                                                                                                                   |  |       |  |          | 5,568    |   |          |  | 4,055    |             |  |  | 2,512       |  
|Deferred tax assets                                                                                                                                                                                                                                        |  | 11    |  |          | 1,765    |   |          |  | 1,968    |             |  |  | 2,746       |  
|Total non-current assets                                                                                                                                                                                                                                   |  |       |  |          | 52,041   |   |          |  | 61,217   |             |  |  | 128,858     |  
|Total assets                                                                                                                                                                                                                                               |  |       |  |          | 741,140  |   |          |  | 785,653  |             |  |  | 878,067     |  
|EQUITY AND LIABILITIES                                                                                                                                                                                                                                     |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Current liabilities                                                                                                                                                                                                                                        |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Trade and other payables (including trade and other payables of the consolidated SPEs without recourse to Sky-mobi Limited of RMB110,691,000, RMB92,924,000 and RMB221,488,000 as of March 31, 2013 and 2014 and December 31, 2014, respectively)          |  | 22    |  |          | 122,119  |   |          |  | 153,474  |             |  |  | 232,747     |  
|Income tax liabilities (including income tax liabilities of the consolidated SPEs without recourse to Sky-mobi Limited of RMB4,787,000, RMB10,699,000 and RMB7,029,000 as of March 31, 2013 and 2014 and December 31, 2014, respectively)                  |  |       |  |          | 4,787    |   |          |  | 10,699   |             |  |  | 7,029       |  
|Amounts due to related parties (including amounts due to related parties of the consolidated SPEs without recourse to Sky-mobi Limited of RMB4,054,000, RMB11,201,000 and RMB26,968,000 as of March 31, 2013 and 2014 and December 31, 2014, respectively) |  | 25    |  |          | 4,054    |   |          |  | 11,201   |             |  |  | 26,968      |  
|Deferred revenue (including deferred revenue of the consolidated SPEs without recourse to Sky-mobi Limited of RMB9,062,000, RMB6,350,000 and RMB3,767,000 as of March 31, 2013 and 2014 and December 31, 2014, respectively)                               |  |       |  |          | 9,062    |   |          |  | 6,350    |             |  |  | 3,767       |  
|Total current liabilities                                                                                                                                                                                                                                  |  |       |  |          | 140,022  |   |          |  | 181,724  |             |  |  | 270,511     |  
|Total liabilities                                                                                                                                                                                                                                          |  |       |  |          | 140,022  |   |          |  | 181,724  |             |  |  | 270,511     |  
|Equity                                                                                                                                                                                                                                                     |  |       |  |          |          |   |          |  |          |             |  |  |             |  
|Share capital (US$0.00005 par value, 937,857,200 shares authorized; 250,411,948, 239,461,886 and 222,266,678 shares issued and outstanding as of March 31, 2013 and  2014 and December 31, 2014, respectively)                                             |  | 23    |  |          | 89       |   |          |  | 86       |             |  |  | 81          |  
|Share premium                                                                                                                                                                                                                                              |  |       |  |          | 625,651  |   |          |  | 637,451  |             |  |  | 600,147     |  
|Reserves                                                                                                                                                                                                                                                   |  |       |  |          | 171,718  |   |          |  | 154,326  |             |  |  | 151,902     |  
|Statutory reserve                                                                                                                                                                                                                                          |  |       |  |          | 1,000    |   |          |  | 1,000    |             |  |  | 1,000       |  
|Accumulated deficit                                                                                                                                                                                                                                        |  |       |  |          | (197,826 | ) |          |  | (192,644 | )           |  |  | (149,653    | )
|Treasury stock                                                                                                                                                                                                                                             |  |       |  |          | (2       | ) |          |  | (1       | )           |  |  | —           |  
|Equity attributable to owners of the Company                                                                                                                                                                                                               |  |       |  |          | 600,630  |   |          |  | 600,218  |             |  |  | 603,477     |  
|Non-controlling interests                                                                                                                                                                                                                                  |  |       |  |          | 488      |   |          |  | 3,711    |             |  |  | 4,079       |  
|Total equity                                                                                                                                                                                                                                               |  |       |  |          | 601,118  |   |          |  | 603,929  |             |  |  | 607,556     |  
|Total equity and liabilities                                                                                                                                                                                                                               |  |       |  |          | 741,140  |   |          |  | 785,653  |             |  |  | 878,067     |  



F-5









CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY





|                                                          |  |         |    |   |          |  |    |         |  |  |                |   |  |           |         |   |              |  |       |             |  |  | Total equity    |   |  |             |          |   |         | 
|--------------------------------------------------------- |  | ------- | -- | - | -------- |  | -- | ------- |  |  | -------------- | - |  | --------- | ------- | - | ------------ |  | ----- | ----------- |  |  | --------------- | - |  | ----------- | -------- | - | ------- | 
|                                                          |  |         |    |   |          |  |    |         |  |  |                |   |  |           |         |   |              |  |       |             |  |  | attributable to |   |  | Non-        |          |   |         | 
|                                                          |  | Share   |    |   | Treasury |  |    | Share   |  |  |                |   |  | Statutory |         |   | Subscription |  |       | Accumulated |  |  | owners of       |   |  | controlling |          |   |         | 
|                                                          |  | capital |    |   | shares   |  |    | premium |  |  | Reserves
    * |   |  | reserve   |         |   | receivables  |  |       | deficit     |  |  | the
    Company |   |  | interests   |          |   | Total   | 
|                                                          |  | RMB’000 |    |   | RMB’000  |  |    | RMB’000 |  |  | RMB’000        |   |  | RMB’000   |         |   | RMB’000      |  |       | RMB’000     |  |  | RMB’000         |   |  | RMB’000     |          |   | RMB’000 | 
|                                                          |  |         |    |   |          |  |    |         |  |  |                |   |  |           |         |   |              |  |       |             |  |  |                 |   |  |             |          |   |         | 
|Balance at April 1, 2012                                  |  |         | 92 |   |          |  | —  |         |  |  | 642,495        |   |  |           | 152,526 |   |              |  | 1,000 |             |  |  | (1,284          | ) |  |             | (214,938 | ) |         | 
|Profit and total comprehensive
    profit for the year    |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | 17,112   |   |         | 
|Share-based compensation                                  |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | 24,457  |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Partial disposal of subsidiaries                          |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | 2,001   |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Exercise of share options                                 |  |         | —  |   |          |  | —  |         |  |  | 6,384          |   |  |           | (5,191  | ) |              |  | —     |             |  |  | 1,284           |   |  |             | —        |   |         | 
|Restricted share vested                                   |  |         | —  |   |          |  | —  |         |  |  | 2,075          |   |  |           | (2,075  | ) |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Repurchase of ordinary
    shares                         |  |         | (3 | ) |          |  | (2 | )       |  |  | (25,303        | ) |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Balance at March 31, 2013                                 |  |         | 89 |   |          |  | (2 | )       |  |  | 625,651        |   |  |           | 171,718 |   |              |  | 1,000 |             |  |  | —               |   |  |             | (197,826 | ) |         | 
|Profit and total comprehensive
    profit for the year    |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | 5,251    |   |         | 
|Share-based compensation                                  |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | 14,562  |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Derecognition of a subsidiary                             |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Capital injection from
    non-controlling shareholder    |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Exercise of share options                                 |  |         | 2  |   |          |  | —  |         |  |  | 37,590         |   |  |           | (30,456 | ) |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Restricted share vested                                   |  |         | —  |   |          |  | —  |         |  |  | 1,498          |   |  |           | (1,498  | ) |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Repurchase of ordinary shares                             |  |         | —  |   |          |  | (4 | )       |  |  | (27,288        | ) |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | (69      | ) |         | 
|Cancellation of repurchased
    shares                    |  |         | (5 | ) |          |  | 5  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Balance at March 31, 2014                                 |  |         | 86 |   |          |  | (1 | )       |  |  | 637,451        |   |  |           | 154,326 |   |              |  | 1,000 |             |  |  | —               |   |  |             | (192,644 | ) |         | 
|Profit and
    total comprehensive profit for the year    |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | 99,008   |   |         | 
|Share-based compensation                                  |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | 4,038   |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Partial disposal
    of a subsidiary                      |  |         | —  |   |          |  | —  |         |  |  | —              |   |  |           | 317     |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Exercise of share options                                 |  |         | —  |   |          |  | —  |         |  |  | 5,653          |   |  |           | (4,650  | ) |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Restricted share vested                                   |  |         | 1  |   |          |  | —  |         |  |  | 2,128          |   |  |           | (2,129  | ) |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Issue new shares to settle
    bonus accrual**            |  |         | —  |   |          |  | —  |         |  |  | 335            |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Repurchase of ordinary shares                             |  |         | —  |   |          |  | —  |         |  |  | (2,358         | ) |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | (2,120   | ) |         | 
|Repurchase of ordinary
    shares from Sequoia Capital*** |  |         | —  |   |          |  | (5 | )       |  |  | (43,062        | ) |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | (53,897  | ) |         | 
|Cancellation of repurchased
    shares                    |  |         | (6 | ) |          |  | 6  |         |  |  | —              |   |  |           | —       |   |              |  | —     |             |  |  | —               |   |  |             | —        |   |         | 
|Balance at December
    31, 2014                          |  |         | 81 |   |          |  | —  |         |  |  | 600,147        |   |  |           | 151,902 |   |              |  | 1,000 |             |  |  | —               |   |  |             | (149,653 | ) |         | 



| | * | Reserves include share-based compensation reserves, reserve
from the modification of convertible redeemable preferred shares, and reserve from partial disposal of subsidiaries that do not
result in the Group losing control. At the time when the share options are exercised, the amount previously recognized in reserves
will be transferred to share premium.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ** | During the nine-month period ended December 31, 2014,
the Company settled a bonus due to a senior management individual through the issuance of an aggregate 70,288 shares.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | *** | During the nine-month period ended December 31, 2014,
the Company repurchased an aggregate 16,000,000 common shares from its shareholders, Sequoia Capital China Partners Fund II, L.P.,
Sequoia Capital China Principals Fund II, L.P. and Sequoia Capital China II, L.P., of par value US$0.00005 per share at a purchase
price of US$0.985 per share, for a total consideration of RMB96,964,000 (US$15,760,000). All the 16,000,000 repurchased shares
were cancelled as of December 31, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-6







CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                          |  | Year Ended |          |   | Year Ended |  |          | Nine months
 Ended |  |  | Nine months 
Ended |  
|----------------------------------------------------------------------------------------- |  | ---------- | -------- | - | ---------- |  | -------- | ------------------ |  |  | ------------------ | -
|                                                                                          |  | March 31   |          |   | March 31   |  |          | December 31        |  |  | December 31        |  
|                                                                                          |  | 2013       |          |   | 2014       |  |          | 2014               |  |  | 2014               |  
|                                                                                          |  | RMB’000    |          |   | RMB’000    |  |          | RMB’000            |  |  | US$’000            |  
|                                                                                          |  |            |          |   |            |  |          |                    |  |  | (Note 2)           |  
|Operating activities                                                                      |  |            |          |   |            |  |          |                    |  |  |                    |  
|Profit before tax                                                                         |  |            | 19,989   |   |            |  | 11,875   |                    |  |  | 99,877             |  
|Adjustments for:                                                                          |  |            |          |   |            |  |          |                    |  |  |                    |  
|Share of results of associates                                                            |  |            | 935      |   |            |  | (2,428   | )                  |  |  | (8,510             | )
|Gain on disposal of associates                                                            |  |            | —        |   |            |  | —        |                    |  |  | (57,351            | )
|Net foreign exchange loss                                                                 |  |            | 429      |   |            |  | 2,061    |                    |  |  | 629                |  
|Interest income                                                                           |  |            | (16,209  | ) |            |  | (15,913  | )                  |  |  | (15,080            | )
|Amortization of government grant related to property and equipment                        |  |            | (489     | ) |            |  | —        |                    |  |  | —                  |  
|Loss (gain) on disposal of property and equipment                                         |  |            | 68       |   |            |  | (208     | )                  |  |  | (212               | )
|Depreciation                                                                              |  |            | 21,596   |   |            |  | 8,654    |                    |  |  | 3,631              |  
|Changes in fair value of investment at FVTPL                                              |  |            | —        |   |            |  | (1,073   | )                  |  |  | (3,778             | )
|Income on short-term investment and loan receivable                                       |  |            | —        |   |            |  | (2,569   | )                  |  |  | (74                | )
|Share-based compensation                                                                  |  |            | 24,457   |   |            |  | 17,478   |                    |  |  | 4,038              |  
|Impairment of investment in an associate                                                  |  |            | 1,367    |   |            |  | 727      |                    |  |  | 2,673              |  
|Impairment of an available-for-sale investment                                            |  |            | —        |   |            |  | 800      |                    |  |  | —                  |  
|Decrease (increase) in trade and other receivables                                        |  |            | 22,072   |   |            |  | (6,158   | )                  |  |  | (128,765           | )
|Increase in amounts due from related parties                                              |  |            | —        |   |            |  | (148     | )                  |  |  | (1,364             | )
|(Decrease) increase in trade and other payables                                           |  |            | (446     | ) |            |  | 31,822   |                    |  |  | 80,172             |  
|Increase in amounts due to related parties                                                |  |            | 3,183    |   |            |  | 7,147    |                    |  |  | 15,767             |  
|Decrease in deferred revenue                                                              |  |            | (487     | ) |            |  | (2,712   | )                  |  |  | (2,583             | )
|Cash generated from operations                                                            |  |            | 76,465   |   |            |  | 49,355   |                    |  |  | (10,930            | )
|Income tax paid                                                                           |  |            | (3,176   | ) |            |  | (1,509   | )                  |  |  | (5,604             | )
|Net cash from (used in) operating activities                                              |  |            | 73,289   |   |            |  | 47,846   |                    |  |  | (16,534            | )
|Investing activities                                                                      |  |            |          |   |            |  |          |                    |  |  |                    |  
|Interest income received                                                                  |  |            | 16,209   |   |            |  | 12,832   |                    |  |  | 7,315              |  
|Net cash outflow on derecognition of a subsidiary                                         |  |            | —        |   |            |  | (304     | )                  |  |  | —                  |  
|Purchase of term deposits                                                                 |  |            | (667,687 | ) |            |  | (330,804 | )                  |  |  | (432,383           | )
|Redemption of term deposits                                                               |  |            | 632,803  |   |            |  | 508,277  |                    |  |  | 445,804            |  
|Purchases of property and equipment                                                       |  |            | (3,424   | ) |            |  | (2,019   | )                  |  |  | (5,678             | )
|Proceeds from disposal of property and equipment                                          |  |            | 79       |   |            |  | 672      |                    |  |  | 413                |  
|Investments in associates (including down payment)                                        |  |            | (25,859  | ) |            |  | (50,216  | )                  |  |  | (64,475            | )
|Withdraw of investment in associates                                                      |  |            | —        |   |            |  | —        |                    |  |  | 5,390              |  
|Proceeds of disposal of an associate                                                      |  |            | —        |   |            |  | —        |                    |  |  | 92,225             |  
|Dividend received from an associate                                                       |  |            | —        |   |            |  | —        |                    |  |  | 1,500              |  
|Investments in available-for-sale investment                                              |  |            | (6,267   | ) |            |  | —        |                    |  |  | (3,085             | )
|Purchases of investment at FVTPL                                                          |  |            | —        |   |            |  | (165,000 | )                  |  |  | (594,600           | )
|Purchases of short-term investments                                                       |  |            | —        |   |            |  | (50,000  | )                  |  |  | —                  |  
|Redemption of short-term investments                                                      |  |            | —        |   |            |  | —        |                    |  |  | 50,000             |  
|Payment of loan receivable to related parties                                             |  |            | —        |   |            |  | —        |                    |  |  | (4,000             | )
|Proceeds from disposal of investments at FVTPL                                            |  |            | —        |   |            |  | —        |                    |  |  | 743,078            |  
|(Increase) decrease in amounts due from related parties                                   |  |            | (397     | ) |            |  | 511      |                    |  |  | —                  |  
|Investment income received                                                                |  |            | —        |   |            |  | —        |                    |  |  | 2,643              |  
|Net cash (used in) from investing activities                                              |  |            | (54,543  | ) |            |  | (76,051  | )                  |  |  | 244,147            |  
|Financing activities                                                                      |  |            |          |   |            |  |          |                    |  |  |                    |  
|Capital contribution from non-controlling shareholder                                     |  |            | —        |   |            |  | 1,205    |                    |  |  | —                  |  
|Proceeds from partial disposal of subsidiaries                                            |  |            | 2,001    |   |            |  | —        |                    |  |  | 972                |  
|Payments and advance payments for share repurchase                                        |  |            | (25,308  | ) |            |  | (34,159  | )                  |  |  | (103,107           | )
|Proceeds from exercise of share options                                                   |  |            | 2,477    |   |            |  | 7,136    |                    |  |  | 1,003              |  
|Net cash used in financing activities                                                     |  |            | (20,830  | ) |            |  | (25,818  | )                  |  |  | (101,132           | )
|                                                                                          |  |            |          |   |            |  |          |                    |  |  |                    |  
|Net (decrease) increase in cash and cash equivalents                                      |  |            | (2,084   | ) |            |  | (54,023  | )                  |  |  | 126,481            |  
|Cash and cash equivalents at beginning of year                                            |  |            | 137,538  |   |            |  | 135,025  |                    |  |  | 79,057             |  
|Effect of foreign exchange rate changes on the balance of cash held in foreign currencies |  |            | (429     | ) |            |  | (1,945   | )                  |  |  | (571               | )
|Cash and cash equivalents at end of year                                                  |  |            | 135,025  |   |            |  | 79,057   |                    |  |  | 204,967            |  



Supplemental information of non-cash transaction:



As of March 31, 2013 and 2014 and as of
December 31, 2014, acquisitions of property and equipment amounted to approximately RMB1,031,000, RMB565,000 and Nil, respectively,
were unsettled and included in other payables.



F-7







SKY-MOBI LIMITED



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| | 1. | ORGANIZATION
AND PRINCIPAL ACTIVITIES
| | -- | -------------------------------------



Sky-mobi Limited (the “Company”)
was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on April 20, 2007. The
Company through its subsidiaries (collectively referred to as the “Group”) is principally engaged in the operation
of a mobile application platform embedded on mobile phones to provide mobile application store and services in the People’s
Republic of China (the “PRC”). The address of the principal place of the Group’s business is 10/F, Building B,
United Building, No. 2 Zijinghua Road, Hangzhou, Zhejiang Province, PRC. The Company’s registered office is located
at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.



The consolidated financial statements of the
Group are presented in Renminbi (“RMB”), which is the functional currency of the Company.



The Company holds its interests in its operating
subsidiaries through Hangzhou Dianneng Technologies Co., Ltd. (“Dianneng”) (“PRC holding entity”), which
was established in the PRC on December 24, 2009. The Company does not conduct any substantive operations of its own, but conducts
its primary business operation through Hangzhou Sky Network Technologies Co., Ltd. (“Sky”), Hangzhou Mijia Technologies
Co., Ltd. (“Mijia”), Hangzhou Fanyi Technologies Co., Ltd. (“Fanyi”), Hangzhou Feineng Technologies Co.,
Ltd. (“Feineng”), Hangzhou Miyi Technologies Co., Ltd. (“Miyi”), Hangzhou Najia Technologies Co., Ltd.
(“Najia”), Hangzhou Tianchu Technologies Co., Ltd. (“Tianchu”), Nanjing Zunqi Network Information Technologies
Co., Ltd. (“Zunqi”), Nanjing Geyuan Information Technologies Co., Ltd. (“Geyuan”) , Hangzhou Dangyi Technologies
Co., Ltd. (“Dangyi”), Shanghai Mugu Business Information Consulting Co., Ltd. (“Mugu”), Shenzhen Feidong
Network Technologies Co., Ltd. (“Feidong”), and Hangzhou Fuyun Technologies Co.,Ltd. (“Fuyun”) (collectively
the “PRC Operational Entities”, or the “special purpose entities”), which are controlled by Dianneng through
certain contractual arrangements as of December 31, 2014. These special purpose entities ("SPEs") hold the requisite
licenses and permits necessary to conduct the telecommunication related business.



PRC laws and regulations restrict foreign
ownership of telecommunication businesses. To comply with these foreign ownership restrictions, Pusida (Beijing) Technologies
Co., Ltd. (“Pusida”) entered into certain exclusive agreements with the equity holders of Mijia and Sky on
August 1, 2007 and then Pusida transferred these exclusive agreements with the equity holders of Mijia and Sky to
Dianneng on July 1, 2010. In addition, Dianneng entered into certain exclusive agreements with the equity holders of
Fanyi, Feineng, Miyi, Najia, Tianchu, Zunqi, Geyuan, Dangyi, Mugu, Feidong, and Fuyun, on December 24, 2009,
December 3, 2010, November 30, 2012, November 30, 2012, December 6, 2012, June 26, 2013, October 29, 2013, March 3,
2014, March 25, 2014, May 16, 2014 and December 2, 2014, respectively. The exclusive agreements, namely, Exclusive Business
Cooperation or Services Agreements, Purchase Option Agreements, Equity Pledge Agreements and Power of Attorney Agreements,
taken as a whole, provide the Company with the rights to receive substantially all of the economic benefits from each of the
PRC Operational Entities. In addition, all the directors in each of the PRC Operational Entities shall be assigned by the
Company. Accordingly, the Company is able to monitor, supervise and effectively control the PRC Operational
Entities’ businesses, operations and financial policies so as to use its power to affect the amount of returns to the
Company. In addition, through such agreements, the Company is able to acquire the equity interests in the PRC Operational
Entities when permitted by PRC law.



In determining whether the Group has the control
over the SPEs, the Group believes the Group’s rights under the terms of the purchase option agreements provide it with a
substantive kick out right. More specifically, the Group believes the terms of the purchase option agreements are valid, binding
and enforceable under PRC laws and regulations currently in effect. A simple majority vote of the Group’s board of directors
is required to pass a resolution to exercise the Group’s rights under the purchase option agreements, for which consent of
the shareholders of the SPEs is not required. The Group’s rights under the purchase option agreements give the Group the
power to control the shareholders of the SPEs and thus the power to direct the activities that most significantly impact the SPEs’
economic performance. In addition, the Group’s rights under the powers of attorney also reinforce the Group’s abilities
to direct the activities that most significantly impact the SPEs' economic performance. The Group also believes that this ability
to exercise control ensures that the SPEs will continue to execute and renew Exclusive Business Cooperation or Services Agreements
and pay service fees to the Group. The Exclusive Business Cooperation or Services Agreements can be renewed and may only be terminated
at the Group’s sole discretion. The Group has the sole discretion to determine the amounts of the technical and consulting
service fees. As a result, the Group believes that it has the rights to receive substantially all of the economic benefits from
the SPEs.



F-8







Following is a summary of the material provisions
of the aforementioned agreements:



Exclusive Business Cooperation or Services
Agreements. The equity owners of the SPEs have entered into service agreements with the PRC holding entities under which
SPEs engage the relevant PRC holding entities as their exclusive providers of technical and business support and strategy consulting
services. SPEs shall pay to the relevant PRC holding entities service fees and royalties. The PRC holding entities have the sole
discretion to determine the amounts of the service fee. Each agreement has a term of 10 years or 20 years and is renewable at the
PRC holding entities’ sole discretion.



Purchase Option Agreements. The
equity owners of the relevant SPEs have granted the relevant PRC holding entities or their designees an exclusive option to purchase
all or part of their equity interests in the relevant SPEs, or all or part of the assets of the relevant SPEs, for a purchase price
equal to the registered capital of the relevant SPEs or such higher price as required under PRC law at the time of purchase, at
any time determined by the relevant PRC holding entities and to the extent permitted by PRC law. Also each relevant shareholder
has agreed not to transfer, assign, pledge or otherwise dispose of their interest in the relevant SPE without the prior written
consent of the relevant PRC holding entities. Except for the purchase option agreement for Fanyi which has a term of 10 years and
is renewable at Dianneng’s sole discretion, the purchase option agreements for other SPEs will terminate when the equity
interests in those SPEs are legally transferred to the relevant PRC holding entities or their designees.



Equity Pledge Agreements. The
equity owners of the SPEs pledge their respective equity interest in the relevant SPEs, to the relevant PRC holding entities to
secure their obligations under the respective Exclusive Business Cooperation or Services Agreements. The equity pledge agreements
are continuously effective until the full performance of the contractual obligations and the full repayment of the liabilities
under the Exclusive Cooperation or Services Agreements.



Power of Attorney. The equity
owners of the SPEs have executed a power of attorney to irrevocably grant to PRC holding entities or their designees the power
of attorney to exercise all of their rights as shareholders of SPEs, including the right to declare dividends, appoint and elect
board members and senior management members and other voting rights. The power of attorney for Fanyi does not contain any expiration
provision. Each power of attorney of the remaining SPEs has a term of 10 years or 20 years and is renewable at the relevant PRC
holding entities’ sole discretion.



Effective control over the PRC Operational
Entities’ businesses was transferred to the Company through the series of contractual arrangements without transferring legal
ownership in the PRC Operational Entities. As a result of these contractual arrangements, the Group has power over the PRC Operational
Entities, has rights to variable returns from its involvement with the PRC Operational Entities and has the ability to affect those
returns through its power over the PRC Operational Entities and is considered to have control over the PRC Operational Entities.
Accordingly, the Company consolidates the PRC Operational Entities.



Risks in relation to the SPE structure are
disclosed in Note 4.



F-9







The Company has the following major subsidiaries
and consolidated SPEs:



|                                                              |  | Place and date of            |  | Portion of economic ownership interest and voting power held at |     |   |          
|------------------------------------------------------------- |  | ---------------------------- |  | --------------------------------------------------------------- | --- | - | ---------
|                                                              |  | establishment/               |  | March 31,                                                       |     |   | March 31,
|Company name                                                  |  | incorporation                |  | 2013                                                            |     |   | 2014     
|                                                              |  |                              |  |                                                                 |     |   |          
|Subsidiaries:                                                 |  |                              |  |                                                                 |     |   |          
|Pusida                                                        |  | PRC August 1, 2007           |  |                                                                 | 100 | % |          
|Dianneng                                                      |  | PRC December 24, 2009        |  |                                                                 | 100 | % |          
|Profit Star Software (Hong Kong) Limited (“Profit Star HK”)   |  | Hong Kong May 25, 2010       |  |                                                                 | 100 | % |          
|Powerplay Technology Limited (“Powerplay”)                    |  | Hong Kong September 14, 2011 |  |                                                                 | 100 | % |          
|Tiandian                                                      |  | PRC December 6, 2011         |  |                                                                 | 100 | % |          
|Shanghai Texuan Information Technologies Co., Ltd. (“Texuan”) |  | PRC March 6, 2012            |  |                                                                 | 100 | % |          
|                                                              |  |                              |  |                                                                 |     |   |          
|Consolidated SPEs:                                            |  |                              |  |                                                                 |     |   |          
|Sky                                                           |  | PRC November 21, 2005        |  |                                                                 | 100 | % |          
|Mijia                                                         |  | PRC January 12, 2007         |  |                                                                 | 100 | % |          
|Fanyi                                                         |  | PRC December 24, 2009        |  |                                                                 | 100 | % |          
|Feineng                                                       |  | PRC December 3, 2010         |  |                                                                 | 100 | % |          
|Miyi                                                          |  | PRC November 30, 2012        |  |                                                                 | 100 | % |          
|Najia                                                         |  | PRC November 30, 2012        |  |                                                                 | 100 | % |          
|Tianchu                                                       |  | PRC December 6, 2012         |  |                                                                 | 100 | % |          



F-10







|Zunqi                                                     |  | PRC June 26, 2013    |  |  | Nil |  |  |  | 100   | % |  |  | 100   | % |  | Provision of mobile application services                   
|--------------------------------------------------------- |  | -------------------- |  |  | --- |  |  |  | ----- | - |  |  | ----- | - |  | -----------------------------------------------------------
|Geyuan                                                    |  | PRC October 29, 2013 |  |  | Nil |  |  |  | 100   | % |  |  | 100   | % |  | Provision of mobile application services                   
|Dangyi                                                    |  | PRC March 3, 2014    |  |  | Nil |  |  |  | 100   | % |  |  | 100   | % |  | Provision of mobile application services                   
|Mugu                                                      |  | PRC March 25, 2014   |  |  | Nil |  |  |  | 100   | % |  |  | 100   | % |  | Provision of information consultancy and technical services
|Feidong *                                                 |  | PRC May 16, 2014     |  |  | Nil |  |  |  | Nil   |   |  |  | 100   | % |  | Provision of mobile application services                   
|                                                          |  |                      |  |  |     |  |  |  |       |   |  |  |       |   |  |                                                            
|Subsidiary of consolidated SPEs:                          |  |                      |  |  |     |  |  |  |       |   |  |  |       |   |  |                                                            
|Hangzhou Mopin Technologies Co., Ltd. ("Mopin")           |  | PRC June 14, 2013    |  |  | Nil |  |  |  | 83.88 | % |  |  | 79.88 | % |  | Provision of mobile application services                   
|Hangzhou Shunwei Technologies Co.,Ltd. ("Shunwei") *      |  | PRC August 11, 2014  |  |  | Nil |  |  |  | Nil   |   |  |  | 100   | % |  | Provision of mobile application services                   
|Beijing Shishilian Technologies Co.,Ltd. ("Shishilian") * |  | PRC December 1, 2014 |  |  | Nil |  |  |  | Nil   |   |  |  | 100   | % |  | Provision of mobile application services                   





| | * | The group acquired these shell companies during the nine-month
period ended December 31, 2014 at the cost equal to the carrying amount. New business was commenced after the acquisition.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The above table lists the subsidiaries and
consolidated SPEs of the Group which, in the opinion of the Directors, principally affected the results or assets of the Group.
To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.



| | 2. | SIGNIFICANT
ACCOUNTING POLICIES
| | -- | -------------------------------



Statement of compliance



The Group’s consolidated financial statements
comply with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards
Board (“IASB”).



Basis of preparation



The Group’s consolidated financial statements
have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value as explained
in the accounting policies set out below. Historical cost is generally based on fair value of the consideration given in exchange
of assets, goods or services.



Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In
estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in the Financial Information is determined on such basis, except for share-based
payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope
of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realizable
value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.



F-11







In addition, for financial
reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the
fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:



| | · | Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level
2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level
3 inputs are unobservable inputs for asset or liability.
| | - | --------------------------------------------------------------



The principal accounting policies are set out
below.



Change in Fiscal Year-End



In May 2014, the Board of Directors of the
Company approved a change to the Company's fiscal year-end to December 31 from March 31, effective December 31, 2014 (the "Year-end
change"). As a result, the Company is presenting an 9 month period ended December 31, 2014 as its transition period (the "2014
Transition period") in this Form 20-F. Due to the Year-end change, many of the differences in comparisons of the Company's
results are impacted by the three-month difference between the 2014 Transition period and the full years. The Company believes
the Year-end change is important and useful to its financial statement users to allow for increased comparability of its performance
to its peers.



Basis of consolidation



The consolidated financial statements incorporate
the financial statements of the Company and entities, including SPEs, controlled by the Company (its subsidiaries). Control is
achieved where the Company



| | · | has power over the investee;
| | - | ----------------------------



| | · | is exposed, or has rights, to variable returns from its involvement with the investee; and
| | - | ------------------------------------------------------------------------------------------



| | · | has the ability to use its power to affect its returns.
| | - | -------------------------------------------------------



The Group reassesses whether or not it controls
an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.



Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses
of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss and other
comprehensive income from the date the Group gains control until the date when the Group ceased to control the subsidiary.



Profit or loss and each item of other comprehensive
income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries
is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests
having a deficit balance.



All intragroup assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.



Changes in the Group's ownership interests in
existing subsidiaries



Changes in the Group's ownership interests
in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions.
The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.



F-12







When the Group loses control of a subsidiary,
a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value
of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive
income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities
of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable
IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or,
when applicable, the cost on initial recognition of an investment in an associate or a joint venture.



Investments in associates



An associate is an entity over which the Group
has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power
to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.



The results and assets and liabilities of associates
are incorporated in the consolidated financial statements using the equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. Under the equity method, investments in associates are carried in the consolidated statements of financial position
at cost as adjusted for post-acquisition changes in the Group’s share of the profit or loss and other comprehensive income
of the associate, less any impairment in the value of the investment. When the Group’s share of the loss of an associate
equals or exceeds its interest in that associate, the Group discontinues recognizing its share of further losses. An additional
share of losses is provided for and a liability is recognized only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of that associate.



Any excess of the cost of the investment in
associates over the amount of the Group's share of net fair value of the net assets of the associates at the date of acquisition
is included in the carrying amount of the investment. The requirements of IAS 39 are applied to determine whether it is necessary
to recognize any impairment loss with respect to the Group’s investment in an associate. The Group assesses the impairment
of the investments in associates by considering factors including, but not limited to, current economic and market conditions,
operating performance of the associates, including current earnings trends and undiscounted cash flows, and other company-specific
information, such as recent financing rounds. When necessary, the entire carrying amount of the investment (including goodwill)
is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher
of value in use and fair value less costs of disposal) with its carrying amount. Any reversal of impairment loss is recognized
to the extent that the recoverable amount of the investment subsequently increases.



The Group discontinues the use of the equity
method from the date when the investment ceases to be an associate, or when the investment is classified as held for sale. The
difference between the carrying amount of the associate at the date the equity method was discontinued, and any proceeds from disposing
of an interest in the associate is included in the determination of the gain or loss on disposal of the associate.



When a group entity transacts with an associate
of the Group, profits and losses resulting from the transactions with the associates are recognized in the Group's consolidated
financial statements only to the extent of the Group’s interest in the relevant associate that are not related to the Group.



Non-current assets held for sale



Non-current assets and disposal groups are
classified as held for sale in current assets if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for
immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal
group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year from the date of classification.



When the Group is committed to a sale plan
involving disposal of an investment in an associate, the investment that will be disposed of is classified as held for sale when
the criteria described above are met, and the Group discontinues the use of the equity method in relation to the investment from
the time when the investment is classified as held for sale.



Non-current assets (and disposal groups) classified
as held for sale are measured at the lower of their previous carrying amount or fair value less costs of disposal.



F-13







Revenue recognition



Revenue is recognized when it is probable that
the economic benefits will flow to the Group, the revenue can be measured reliably and collectability is reasonably assured.



The Group evaluates agreements with the industry
participants including mobile service providers, mobile network operators, content providers, handset companies and independent
payment processing agents in order to determine whether or not it acts as the principal or as an agent in each arrangement, and
therefore the relevant revenues should be reported on a gross or net basis. The determination is based on an assessment of various
factors, including but not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has general inventory
risk; (iii) changes the product or performs part of the services; (iv) has latitude in establishing the selling price; (v) has
involvement in the determination of product and service specifications.



Single-player Game Revenue



The Group generates single-player game revenue
from sales of self-developed and licensed single-player games through Maopao Platform and other distribution channels. The Group
operates most of the single-player games under a free-to-play model. Under the free-to-play model, mobile game players can download
the games to their mobile devices free-of-charge, while they may also purchase in-game virtual item or premium features to enhance
game experience or enjoy additional functions of the game. The Group has cooperation agreements with handset companies to pre-install
the Maopao platform products on mobile handsets before they reach users. The applications and contents are predominantly delivered
to customers through mobile network operators in China. The Group contracts with mobile service providers, who further contract
with and utilize mobile network operators’ billing channels, as well as contracts directly with mobile network operators
to collect payment from the Group’s customers on behalf of the Group. Mobile service providers and mobile network operators
are entitled to commissions, which are a percentage of the gross fees collected from the Group’s customers by the mobile
network operators. The Group also pays content fees and service fees to content developers and handset companies respectively,
based on a prescribed percentage of the gross proceeds confirmed by the mobile network operators.



For revenues from the sale of in-app virtual
items, premium features and other contents from the Group’s application stores, the Group recognizes revenue on a gross basis
at the time when each purchase is successfully made and the collectability is reasonably assured. The Group acts as the primary
obligor and recognizes 1) the commissions retained by mobile service providers and mobile network operators and 2) content fees
and service fees mentioned above as cost of revenues in the consolidated statements of profit or loss and other comprehensive income.
As the virtual items are immediately consumed, revenue is recognized upon consumption.



In some instances, the Group acts as the agent
of content providers to facilitate the payment collection of certain single player games, as the Group is not involved in the operation
of the game whilst the content provider is the primary obligor in the arrangement. Therefore, the net proceeds after deducting
the amounts shared by the content providers represent the amount of revenue to be recognized by the Group. As the Group has no
further obligations to the content providers upon the completion of the in-game purchase, revenue is recognized upon the purchase
of in-game virtual items and premium features.



Multiplayer Game Revenue



The Group offers multiplayer games through
its Maopao Community and other distribution channels. Users can charge up with their accounts through a number of payment options,
including pre-paid phone cards, pre-paid game cards, bank debit cards and online payment solutions, to purchase virtual items and
premium features in the multiplayer games. The Group collects payment through payment processing agents or service providers, who
are entitled to a commission for processing customer prepayments. Customer accounts are charged up with cash credit and recorded
as advance payment first, which may be consumed to purchase in-game virtual items and recorded into deferred revenue later.



Multiplayer game revenues are derived from
the purchase of in-game virtual items having an unlimited life. Such revenues are initially deferred and are subsequently recognized
following the historical user retention pattern over the estimated consumption period of the durable virtual items, ranging from
one to 12 months. The user retention pattern and consumption period are estimated based on the historical data and log-in patterns
of paying users. The Group assesses these estimates on a regular basis to ensure the accuracy of the data.



In some instances, the Group acts as the agent
of content providers to facilitate the payment collection of certain multiplayer games, as the Group is not involved in the operation
of the game whilst the content provider is the primary obligor in the arrangement. Therefore, the net proceeds after deducting
the amounts shared by the content providers represent the amount of revenue to be recognized by the Group. As the Group has no
further obligations to the content providers upon the completion of the in-game purchase, revenue is recognized upon the purchase
of in-game virtual items and premium features.



F-14







Other Revenue



The Group also allows content providers, service
providers and mobile network operators to sell their mobile applications and other contents to mobile users through Maopao Platform,
for which the Group charges a commission based on a percentage of the revenue earned from those applications or number of active
users. The Group records such revenue as other revenues upon receipt of monthly statements from the content providers, service
providers and mobile network operators.



The Group also generates single-player game
revenues from overseas countries through overseas mobile service providers in the same way disclosed above. The Group recognizes
such revenue upon receipt of acknowledgement of successful downloads from these mobile service providers.



Cost of revenues



Cost of revenues primarily includes commissions
paid to mobile service providers, mobile network operators, content providers, handset companies and independent payment processing
agents. Cost of revenues also includes staff salaries, utilities, depreciation of equipment, and office expenses directly related
to the operation of the Maopao Platform. The Group usually pays content providers a percentage of the proceeds that are derived
from their content. For certain applications and content titles, the Group makes an insignificant one-time payment to the content
provider to acquire all associated rights, all of which are recorded as cost of revenues at the time of payment because such applications
and content titles usually have short life cycles and the acquisition cost for each application or content title is relatively
low.



Leases



Leases are classified as operating leases unless
the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, which would be classified as
finance leases.



The Group as lessee



Operating lease payments are recognized as
expenses on a straight-line basis over the lease term.



Foreign currencies



In preparing the financial statements of each
group entity, transactions in currencies other than the functional currency, which is the currency of the primary economic environment
in which the entity operates, of that entity, or foreign currency, are recorded in the respective entities’ functional currency
at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated
in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.



Exchange differences arising from the settlement
of monetary items, and the retranslation of monetary items are recognized in profit or loss in the period in which they arise.



Government grants



Government grants are not recognized until
there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.



Government grants are recognized in profit
or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants
are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct
or otherwise acquire non-current assets are recognized as deferred revenue in the consolidated statements of financial position
and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.



Government grants that are receivable as compensation
for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related
costs are recognized in profit or loss in the period in which they become receivable.



F-15







Share-based payments



The fair value of services received determined
by reference to the fair value of share options granted at the grant date is expensed on a graded basis over the vesting period
with a corresponding increase in equity.



The Group reviews its estimate of the number
of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any,
is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to reserves.



At the time when the share options are exercised,
the amount previously recognized in reserves will be transferred to share premium. When the share options are forfeited after the
vesting date or are still not exercised at the expiry date, the amount previously recognized in reserve will be transferred to
accumulated deficit.



Taxation



Income tax expense represents the sum of the
tax currently payable and deferred tax.



The tax currently payable is based on taxable
profit for the year. Taxable profit differs from profit before tax as reported in the consolidated statements of profit or loss
and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.



Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities
are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.



Deferred tax liabilities are recognized for
taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.



The carrying amount of deferred tax assets
is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.



Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on
tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.



Current and deferred tax are recognized in
profit or loss.



Research and development expenses



Expenditure on research activities is recognized
as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development, or from
the development phase of an internal project, is recognized if all of the following have been demonstrated:



| | • | the
technical feasibility of completing the intangible asset so that it will be available for use or sale;
| | - | ----------------------------------------------------------------------------------------------------------



| | • | the
intention to complete the intangible asset and use or sell it;
| | - | ------------------------------------------------------------------



| | • | the
ability to use or sell the intangible asset;
| | - | ------------------------------------------------



F-16







| | • | how the intangible asset will generate probable future economic benefits;
| | - | -------------------------------------------------------------------------
| |   |                                                                          

| | • | the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | • | the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
| | - | ------------------------------------------------------------------------------------------------------------



The amount initially recognized for an
internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets
the recognition criteria listed above.



Subsequent to initial recognition, an
internally-generated intangible asset is measured at cost less accumulated amortization and accumulated impairment losses (if any),
on the same basis as intangible assets acquired separately.



The Group currently expenses internal
and external development costs incurred as all current development costs do not fulfill the above conditions.



Property and equipment



Property and equipment are stated in
the consolidated statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses,
if any.



Depreciation is computed on a straight-line
basis over the following estimated useful lives:



|Electronic equipment   |  | 2-10 years                              
|---------------------- |  | ----------------------------------------
|Furniture              |  | 5 years                                 
|Office equipment       |  | 3 years                                 
|Leasehold improvements |  | the shorter of the lease term or 3 years
|Motor vehicles         |  | 5 years                                 

The useful lives of the property and
equipment are evaluated annually. An item of property and equipment is derecognized upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in
profit or loss in the period in which the item is derecognized.



Impairment of tangible assets



At the end of
the reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indicator exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if any. Recoverable amount is defined as the higher of an asset’s
fair value, less costs of disposal, and its value in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. An impairment loss is recognized as an expense immediately.



When an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for
the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.



F-17







Cash and cash equivalents/Term deposits



Cash and cash equivalents
include cash on hand and in banks and other short-term highly liquid investments with original maturities of three months or less
which are not restricted as to use. Term deposits represent bank deposits with original maturities of over three months but less
than two years when purchased. Such deposits are available for general use by the Company, which are unrestricted as to withdraw
and use.



Financial instruments



Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities, other than financial assets or financial liabilities
at fair value through profit or loss, are added to or deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognized immediately in profit or loss.



Financial assets



The Group’s financial assets
are classified into loans and receivables, financial assets at fair value through profit or loss (“FVTPL”) and available-for-sale
financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of
initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables, including cash and cash equivalents, term deposits, short-term investments,
loan receivable due from related parties, trade and other receivables (excluding prepayments) and amounts due from related parties,
are carried at amortized cost using the effective interest method, less any identified impairment, unless the effect of discounting
is not material, in which case they are carried at cost, less any identified impairment.



A financial asset may be designated as
FVTPL upon initial recognition if:



| | • | such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise; or
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                               

| | • | the financial asset forms part of a group of financial assets or financial liabilities or both,
which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management
or investment strategy, and information about the grouping is provided internally on that basis; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                       

| | • | it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the
entire combined contract (asset or liability) to be designated as FVTPL.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial assets at FVTPL are measured
at fair value, with changes in fair value recognized directly in profit or loss. The net gain or loss recognized in profit or loss
excludes any dividend or interest earned on the financial assets which is included in other gains and losses in the consolidated
statements of comprehensive income.



Available-for-sale financial assets



AFS equity investments that do not have
a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified
impairment losses at the end of each reporting period.



Dividends on AFS equity instruments are
recognized in profit or loss when the Group’s right to receive the dividends is established.



Impairment of financial assets



Financial assets, other than those
at FVTPL, are assessed for indicators of impairment at the end of the reporting period or when there is objective evidence that
an impairment may exist. Financial assets are considered to be impaired where there is objective evidence that, as a result of
one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial
assets have been affected. Objective evidence of impairment could include:



| | • | significant financial difficulty of the issuer or counterparty,
| | - | ---------------------------------------------------------------
| |   |                                                                

| | • | default or delinquency in interest or principal payments, or
| | - | ------------------------------------------------------------





| | • | it becoming probable that the borrower will enter bankruptcy or financial reorganization.
| | - | -----------------------------------------------------------------------------------------





For certain categories of financial assets,
such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on
a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience
of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days
and observable changes in national or local economic conditions that correlate with default on receivables.



F-18







For financial assets carried at amortized
cost, an impairment loss is recognized in profit or loss and is measured as the difference between the asset’s carrying amount
and the present value of the estimated future cash flows discounted at the financial asset's original effective interest rate.



The carrying amount of the financial
asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying
amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized
in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited to profit or loss.



For financial assets measured at amortized
cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss
to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost
would have been had the impairment not been recognized.



For financial assets carried at cost,
the amount of impairment loss is measured as the difference between the assets' carrying amount and the present value of the estimated
future cash flow, discounted at the current market rate of return for similar financial assets. Such impairment loss will not be
reversed in subsequent period.



Financial liabilities and equity instruments



Financial liabilities and equity instruments
issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions
of a financial liability and an equity instrument.



An equity instrument is any contract
that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued
by the Group are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company's own equity instruments
is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or
cancellation of the Company's own equity instruments.



Financial liabilities



Financial liabilities, including trade
and other payables and amounts due to related parties, are subsequently measured at amortized cost, using the effective interest
method unless the effect of discounting is not material, in which case, they are carried at cost.



Effective interest method



The effective interest method is a
method of calculating the amortized cost of a financial asset or financial liability and of allocating interest income or interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
or payments through the expected life of the financial asset or liability, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition



Interest income and expense is recognized
on an effective interest basis.



Derecognition



The Group derecognizes a financial asset
only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the
difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in
profit or loss.



Financial liabilities are derecognized
when the obligation is discharged, cancelled or expires. The difference between the carrying amount of the financial liability
derecognized and the consideration paid and payable is recognized in profit or loss.



F-19







Translation into United States Dollars



The consolidated financial statements
of the Group are stated in RMB. Translations of amounts from RMB into U.S. dollars are solely for the convenience of the reader
and were calculated at the rate of US$1.00 = RMB6.2046, on December 31, 2014, as set forth in the H.10 statistical release
of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted,
realized or settled into U.S. dollars at that rate on December 31, 2014, or at any other rate.



|3. | APPLICATION OF NEW INTERNATIONAL FINANCIAL REPORTING STANDARDS
|-- | --------------------------------------------------------------



In the current nine-month period ended December
31, 2014, the Group has applied the following new and revised IFRSs issued by the IASB for the first time.



|Amendments to IFRS 10, IFRS 12 and IAS 27 |  | Investment Entities                                         
|----------------------------------------- |  | ------------------------------------------------------------
|Amendments to IAS 32                      |  | Offsetting Financial Assets and Financial Liabilities       
|Amendments to IAS 36                      |  | Recoverable Amounts Disclosures for Non-Financial Assets    
|Amendments to IAS 39                      |  | Novation of Derivatives and Continuation of Hedge Accounting
|IFRIC 21                                  |  | Levies                                                      



Except
as described below, the application of the new and revised IFRSs in the current year has had no material impact on the Group's
financial performance and positions for the current period and prior years and/or disclosures set out in these consolidated financial
statements.



Impact of the Amendments
to IAS 32



The Group has applied the amendments
to IAS 32 Offsetting Financial Assets and Financial Liabilities for the first time in the current period. The amendments
to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments
clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and
settlement’.



The Group has assessed whether
certain of its financial assets and financial liabilities qualify for offset based on the criteria set out in the amendments and
concluded that the application of the amendments has had no impact on the amounts recognized in the Group’s consolidated
financial statements.



Impact of the Amendments
to IAS 36



The Group has applied the amendments
to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets for the first time in the current period. The amendments
to IAS 36 remove the requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other
intangible assets with indefinite useful lives had been allocated when there has been no impairment of reversal of impairment of
the related CGU. Furthermore, the amendments introduce additional disclosure requirements applicable to when the recoverable amount
of an asset or a CGU is measured at fair value less costs of disposal. These new disclosures include the fair value hierarchy.
Key assumptions and valuation techniques used which are in line with the disclosure required by IFRS 13 Fair Value Measurements.



The application of these amendments
has had no material impact on the disclosures in the Group’s consolidated financial statements.



IFRIC 21 Levies



The Group has applied IFRIC 21
Leviesfor the first time in the current period. IFRIC 21 addresses the issue as to when to recognize a liability to pay
a levy imposed by a government. The interpretation defines a levy, and specifies that the obligating event that gives rise to the
liability is the activity that triggers the payment of the levy, as identified by legislation. The Interpretation provides guidance
on how different levy arrangements should be accounted for, in particular, it clarifies that neither economic compulsion nor the
going concern basis of financial statements preparation implies that an entity has a present obligation to pay a levy that will
be triggered by operating in a future period.



IFRIC 21 has been applied retrospectively.
The application of this interpretation has had no material impact on the disclosures or on the amounts recognized in the Group’s
consolidated financial statements.



F-20







The Group has not early adopted
the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

|IFRS 9                                    | Financial Instruments1                                                                
|----------------------------------------- | --------------------------------------------------------------------------------------
|IFRS 14                                   | Regulatory Deferral Accounts2                                                         
|IFRS 15                                   | Revenue from Contracts with Customers3                                                
|Amendments to IFRS 11                     | Accounting for Acquisitions of Interests in Joint Operations5                         
|Amendments to IAS 1                       | Disclosure Initiative5                                                                
|Amendments to IAS 16 and IAS 38           | Clarification of Acceptable Methods of Depreciation and Amortisation5                 
|Amendments to IAS 19                      | Defined Benefit Plans: Employee Contributions4                                        
|Amendments to IFRSs                       | Annual Improvements to IFRSs 2010-2012 Cycle6                                         
|Amendments to IFRSs                       | Annual Improvements to IFRSs 2011-2013 Cycle4                                         
|Amendments to IFRSs                       | Annual Improvements to IFRSs 2012-2014 Cycle5                                         
|Amendments to IAS 16 and IAS 41           | Agriculture: Bearer Plants5                                                           
|Amendments to IAS 27                      | Equity Method in Separate Financial Statements5                                       
|Amendments to IFRS 10 and IAS 28          | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture5
|Amendments to IFRS 10, IFRS 12 and IAS 28 | Investment Entities: Applying the Consolidation Exception5                            



1Effective for annual periods beginning
on or after 1 January 2018

2Effective for first annual IFRS
financial statements beginning on or after 1 January 2016

3Effective for annual periods beginning
on or after 1 January 2017

4Effective for annual periods beginning
on or after 1 July 2014

5Effective for annual periods beginning
on or after 1 January 2016

6Effective for annual periods beginning
on or after 1 July 2014, with limited exceptions



Annual Improvements to IFRSs 2010 - 2012
Cycle



The Annual Improvements to IFRSs
2010 - 2012 Cycle include a number of amendments to various IFRSs, in which the relevant amendments are summarized below.



The amendments to IFRS 2 (i)
change the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add definitions for ‘performance
condition’ and ‘service condition’ which were previously included within the definition of ‘vesting condition’.
The amendments to IFRS 2 are effective for share-based payment transactions for which the grant date is on or after July 1, 2014.



The amendments to the basis
for conclusions of IFRS 13 clarify that the issue of IFRS 13 and consequential amendments to IAS 39 and IFRS 9 did not remove the
ability to measure short- term receivables and payables with no stated interest rate at their invoice amounts without discounting,
if the effect of discounting is immaterial.



The directors of the Company
anticipate that the application of the amendments included in the Annual Improvements to IFRSs 2010 – 2012 Cyclewill
have no material impact on the consolidated financial statements.



Annual Improvements to IFRSs 2011 - 2013
Cycle



The Annual Improvements to IFRSs
2011 - 2013 Cycle include a number of amendments to various IFRSs, in which the relevant amendments are summarized below.



The amendments to IFRS 13 clarify
that the scope of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities
on a net basis includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even
if those contracts do not meet the definitions of financial assets or financial liabilities within IAS32.



The amendments to IAS 40 clarify
that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required. Consequently, an entity acquiring
investment property must determine whether.



| | (a) | The property meets the definition of investment property in terms of IAS 40;
| | --- | ----------------------------------------------------------------------------



F-21







| | (b) | The transaction meets the definition of a business combination under IFRS 3.
| | --- | ----------------------------------------------------------------------------



The directors of the Company
anticipate that the application of the amendments included in the Annual Improvements to IFRSs 2011 – 2013 Cyclewill
have no material impact on the consolidated financial statements.



Annual Improvements to IFRSs 2012 - 2014
Cycle



The Annual Improvements to IFRSs
2012-2014 Cycle include a number of amendments to various IFRSs, which are summarised below.



The amendments to IFRS 5 introduce
specific guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution
to owners (or vice versa), or when held-for-distribution accounting is discontinued. The amendments apply prospectively.



The amendments to IFRS 7 provide
additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of
the disclosures required in relation to transferred assets and clarify that the offsetting disclosures (introduced in the amendments
to IFRS 7Disclosure – Offsetting Financial Assets and Financial Liabilities issued in December 2011 and effective
for periods beginning on or after 1 January 2013) are not explicitly required for all interim statements to comply with IAS 34
Interim Financial Reporting.



The amendment to IAS 19 clarify
that the high quality corporate bonds used to estimate the discount rate for post-employment benefits should be issued in the same
currency as the benefits to be paid. These amendments would result in the depth of the market for high quality corporate bonds
being assessed at currency level. The amendments apply from the beginning of the earliest comparative period presented in the financial
statements in which the amendments are first applied. Any initial adjustment arising should be recognised in retained earnings
at the beginning of that period.



The amendments to IAS 34 clarify
the requirements relating to information required by IAS 34 that is presented elsewhere within the interim financial report but
outside the interim financial statements. The amendments require that such information be incorporated by way of a cross-reference
from the interim financial statements to the other part of the interim financial report that is available to users on the same
terms and at the same item as the interim financial statements.



The directors of the Company do
not anticipate that the application of these will have a material effect on the Group's consolidated financial statements.



Amendments to IAS 16 and IAS
38: Clarification of Acceptable Methods of Depreciation and Amortisation



The amendments of IAS 16 prohibit
entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce
a rebuttable presumption that revenue is not an appropriate basis for amortization of an intangible asset. This presumption can
only be rebutted in the following two limited circumstances:



| | (a) | When the intangible asset is expressed as a measure of revenue; or
| | --- | ------------------------------------------------------------------

| | (b) | When it can be demonstrated that revenue and consumption of the economic benefits of the intangible assets are highly correlated.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



The amendments apply prospectively for annul
periods beginning on or after 1 January 2016. Currently, the Group uses the straight-line method for depreciation and amortization
for its property, plant and equipment, and intangible assets respectively. The directors of the Company believe that the straight-line
method is the most appropriate method to reflect the consumption of economic benefits inherent in the respective assets and accordingly,
the directors of the Company do not anticipate that the application of these amendments to IAS 16 and IAS 38 will have a material
impact on the Group’s consolidated financial statements.





F-22







IFRS 9 Financial Instruments



IFRS 9 issued in 2009 introduces
new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in 2010 to include
the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in
2013 to include the new requirements for hedge accounting.



Key requirements of IFRS 9 are described
as follows:



| | • | All recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurementare
subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose
objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal
and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods.
All other debt investments and equity investments are measured at their fair value at the end of subsequent reporting periods.
In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity
investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit
or loss.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that
liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s
credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value
of financial liabilities attributable to change in the financial liabilities’ credit risk are not subsequently reclassified
to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at
fair value through profit or loss was presented in profit or loss.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred
credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes
in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words,
it is no longer necessary for a credit event to have occurred before credit losses are recognized.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on the Group's financial
assets and financial liabilities as of December 31, 2014, the directors anticipate that the adoption of IFRS 9 in the future will
affect the classification and measurement of the Group's available-for-sale investments and is not likely to have significant impact
on the amounts of the Group's other financial assets and financial liabilities. Regarding the Group's available-for-sale investments,
it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.



IFRS 15Revenue from Contracts
with Customers



In May 2014, IFRS 15 was issued
which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue,IAS 11 Construction Contracts
and the related Interpretations when it becomes effective.



The core principle of IFRS 15 is
that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard
introduces a 5-step approach to revenue recognition:



Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the
contract.

Step 3: Determine the transaction prices.

Step 4: Allocate the transaction price to the performance
obligations in the contract.

Step 5: Recognise revenue when (or as) the entity
satisfies a performance obligation.

Under IFRS 15, an entity recognizes
revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying
the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15
to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.



F-23







The directors of the Company anticipate
that the application of IFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Group’s
consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until
the Group performs a detailed review.



The directors anticipate that the
application of the other new and revised IFRSs will have no material impact on the consolidated financial statements.



|4. | CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
|-- | ------------------------------------------------------------------------



In the application of the Group’s
accounting policies, which are described in Note 2, the Company is required to make judgments, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.



The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised
if the revision affects only that period or in the period of the revision and future periods if the revision affects both current
and future periods.



Critical judgments in applying the entity's
accounting policies



The following are the critical judgments
that the directors have made in the process of applying the entity's accounting policies and that have the most significant effect
in the amounts recognized in financial statements.



Contractual arrangements with SPEs



The Group considers that its contractual
arrangements with Sky, Mijia, Fanyi, Feineng, Miyi, Najia, Tianchu, Zunqi, Geyuan, Dangyi, Mugu, Feidong and Fuyun are in compliance
with PRC law and are legally enforceable. The shareholders of the consolidated SPEs are also shareholders or senior managements
of the Group and therefore the Group considers that under most circumstances they have no current interest in seeking to act contrary
to the contractual arrangements. However, the consolidated SPEs and their shareholders may fail to take certain actions required
for the Group’s business or to follow the Group’s instructions despite their contractual obligations to do so. Furthermore,
if the SPEs or their shareholders do not act in the best interests of the Group under the contractual arrangements and any dispute
relating to these contractual arrangements remains unresolved, the Group will have to enforce its rights under these contractual
arrangements through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system.
All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in
the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance
with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Group’s ability to enforce
these contractual arrangements, which may make it difficult to exert effective control over the Group’s consolidated SPEs,
and its ability to conduct the Group’s business may be adversely affected.



If the legal structure and contractual
arrangements were found to be in violation of PRC laws and regulations, the PRC government could:



| | • | Revoke the business and operating licenses of the PRC holding entities, SPEs and their subsidiaries;
| | - | ----------------------------------------------------------------------------------------------------



| | • | Discontinue or restrict the operations of any related-party transactions among the PRC holding
entities, SPEs and their subsidiaries;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | • | Impose fines or other requirements on the PRC holding entities, SPEs and their subsidiaries;
| | - | --------------------------------------------------------------------------------------------



| | • | Require the Company or PRC holding entities, SPEs and their subsidiaries to revise the relevant
ownership structure or restructure operations; and/or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------





| | • | Restrict or prohibit the Company’s use of the proceeds of the additional public offering
to finance the Group’s business and operations in China.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



The Company's ability to conduct its
business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result,
the Company may not be able to continue to consolidate the SPEs in its consolidated financial statements as it may lose the ability
to exert effective control over the SPEs and their shareholders, and it may lose the ability to receive economic benefits from
the SPEs.





F-24







Certain equity holders of the SPEs are
also shareholders of the Company. The interests of the equity holders of the SPEs may diverge from shareholders of the Company
and that may potentially increase the risk that they would seek to act contrary to the contractual terms, for example by influencing
the SPEs not to pay the service fees when required to do so. The Company cannot assure that when conflicts of interest arise, equity
holders of the SPEs will act in the best interests of the Company or that conflicts of interests will be resolved in the Company’s
favor. Currently, the Company does not have existing arrangements to address potential conflicts of interest the equity holders
of the SPEs may encounter in their capacity as beneficial owners and directors of the SPEs. The Company believes the equity holders
of the SPEs will not act contrary to any of the contractual arrangements which provide the Company with a mechanism to remove the
current equity holders of the SPEs as beneficial shareholders of the SPEs should they act to the detriment of the Company. The
Company relies on the current equity holders of SPEs, as directors and executive officers of the Company, to fulfill their fiduciary
duties and abide by laws of the PRC and Cayman Islands and act in the best interest of the Company. If the Company cannot resolve
any conflicts of interest or disputes between the Company and the equity holders of the SPEs, the Company would have to rely on
legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of
any such legal proceedings.



The Company’s ability to control
the SPEs also depends on the power of attorney that the PRC holding entities have to vote on all matters requiring shareholder
approval in the SPEs. As noted above, the Company believes this power of attorney is legally enforceable but may not be as effective
as direct equity ownership.



The following is the summarized financial
information of the Group’s SPEs which was included in the Company’s consolidated financial statements:



|                                             |  | At March 31, |         |   | At March 31, |  |         | At December 31,   | 
|-------------------------------------------- |  | ------------ | ------- | - | ------------ |  | ------- | ----------------- | 
|                                             |  | 2013         |         |   | 2014         |  |         | 2014              | 
|                                             |  | RMB’000      |         |   | RMB’000      |  |         | RMB’000           | 
|                                             |  |              |         |   |              |  |         |                   | 
|Total current assets                         |  |              | 442,741 |   |              |  | 463,224 |                   | 
|Total assets                                 |  |              | 516,174 |   |              |  | 585,490 |                   | 
|                                             |  |              |         |   |              |  |         |                   | 
|Total current liabilities                    |  |              | 128,594 |   |              |  | 121,174 |                   | 
|Total liabilities                            |  |              | 128,594 |   |              |  | 121,174 |                   | 
|                                             |  |              |         |   |              |  |         |                   | 
|                                             |  | Year Ended   |         |   | Year Ended   |  |         | Nine months Ended | 
|                                             |  | March 31     |         |   | March 31     |  |         | December 31       | 
|                                             |  | 2013         |         |   | 2014         |  |         | 2014              | 
|                                             |  | RMB’000      |         |   | RMB’000      |  |         | RMB’000           | 
|                                             |  |              |         |   |              |  |         |                   | 
|Revenues                                     |  |              | 576,060 |   |              |  | 444,709 |                   | 
|Net income                                   |  |              | 13,538  |   |              |  | 5,198   |                   | 
|                                             |  |              |         |   |              |  |         |                   | 
|Net cash from (used in) operating activities |  |              | 75,943  |   |              |  | 50,690  |                   | 
|Net cash (used in) from investing activities |  |              | (92,265 | ) |              |  | (73,607 | )                 | 
|Net cash (used in) from financing activities |  |              | —       |   |              |  | (69     | )                 | 

The SPEs contributed an aggregate of
95.8%, 91.6% and 97.1% of the consolidated revenues for the years ended March 31, 2013 and 2014 and for the nine-month period ended
December 31,2014, respectively. The Company’s operations not conducted through contractual arrangements with the SPEs primarily
consist of its overseas and promotion business. As of March 31, 2013 and 2014 and as of December 31, 2014, the SPEs accounted for
an aggregate of 69.6%, 74.5% and 93.9%, respectively, of the consolidated total assets, and 91.8%, 66.7% and 95.8%, respectively,
of the consolidated total liabilities. The assets not associated with the SPEs primarily consist of the cash and cash equivalents
held by the offshore companies and PRC holding entities.



Key sources of estimation uncertainty



Following are the key assumptions and
other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.





F-25







Multiplayer Game Revenues



Multiplayer
game revenues are derived from the purchase of in-game virtual items having an unlimited life. Such revenues are initially deferred
and are subsequently recognized following the historical user retention pattern over the estimated consumption period of the durable
virtual items, ranging from one to 12 months. The user retention pattern and consumption period
are estimated based on the historical data and log-in patterns of paying users. Future paying user usage patterns and behavior
may differ from the historical usage patterns and therefore the estimated average playing periods are assessed on a regular basis
and may change in the future.



Recognition of deferred tax assets



As of March 31, 2013 and 2014
and as of December 31, 2014, the carrying amount of deferred tax assets of the Group are approximately RMB1,765,000, RMB1,968,000
and RMB2,746,000, respectively. No deferred tax asset has been recognized in respect of tax losses of RMB37,008,000, RMB42,433,000
and RMB 32,910,000 as of March 31, 2013 and 2014 and as of December 31, 2014 due to the unpredictability of future profit
streams. The recognition of deferred tax assets is based upon whether it is more probable that sufficient taxable profit will be
available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves
estimation regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset
has been recognized. In cases where the actual future profits generated are less or more than expected, a material reversal or
recognition of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal
or recognition takes place.



|5. | FINANCIAL INSTRUMENTS
|-- | ---------------------



Capital risk management



The primary objective of the Group’s
capital management is to safeguard the Group’s ability to continue as a going concern, so that it can provide an adequate
return to shareholders by pricing its services commensurately with the level of risk. The Group’s overall strategy remains
unchanged during the reporting periods.



The capital structure of the Group consists
of equity attributable to owners of the Company, which includes share capital and reserves.



The Group reviews the capital structure
regularly and considers the cost of capital and the risks associated with each class of capital and, to the extent necessary,
balances its overall capital structure through the repurchase of share and issuance of new shares.



Categories of financial instruments



The carrying amounts of financial assets
and financial liabilities are as follows:



|                               |  | At March 31, |         |  | At March 31, |  |         | At December 31, | 
|------------------------------ |  | ------------ | ------- |  | ------------ |  | ------- | --------------- | 
|                               |  | 2013         |         |  | 2014         |  |         | 2014            | 
|                               |  | RMB’000      |         |  | RMB’000      |  |         | RMB’000         | 
|                               |  |              |         |  |              |  |         |                 | 
|Financial assets               |  |              |         |  |              |  |         |                 | 
|Amortized cost                 |  |              | 685,824 |  |              |  | 515,719 |                 | 
|Available-for-sale investments |  |              | 7,167   |  |              |  | 6,250   |                 | 
|Investment at FVTPL            |  |              | —       |  |              |  | 166,073 |                 | 
|                               |  |              |         |  |              |  |         |                 | 
|Financial liabilities          |  |              |         |  |              |  |         |                 | 
|Amortized cost                 |  |              | 82,289  |  |              |  | 117,692 |                 | 



Financial risk management objectives and policies



Foreign currency risk management



The Group mainly operates in the PRC
with most of its transactions settled in RMB. The foreign currency risk is mainly attributable to the Group’s U.S. dollar
(“US$”) bank account balances. The carrying amount of the US$ bank account balances was approximately RMB87,220,000
and RMB88,327,000 and RMB88,231,000 as of March 31, 2013 and 2014 and as of December 31, 2014, respectively. The Group has
not used any forward contracts, currency borrowings or other means to hedge its foreign currency risk exposure.





F-26







If the RMB exchange rate against the US$ had
strengthened or weakened by 5% with all other variables held constant, the carrying value of bank accounts denominated in US$ would
have decreased or increased by RMB3,765,000, RMB3,685,000 and RMB4,205,000 as of March 31, 2013 and 2014 and as of December
31, 2014, respectively, with a corresponding decrease or increase in net profit for the respective years. The sensitivity analysis
only details the Group’s sensitivity to a 5% appreciation and depreciation in RMB, against the foreign currency, US$. The
5% figure is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rate.



Interest rate risk management





The Group has exposure to cash flow
interest rate risk due to the fluctuation of the variable interest rates associated with its cash and cash equivalents which are
based on prevailing market interest rates. Currently, the Group does not have a specific policy to manage their interest rate risk.
The Group does not have significant exposure to cash flow interest rate risk as of March 31, 2013 and 2014 and as of December
31, 2014 as the interest rates have not fluctuated significantly in recent years.



Credit risk management





The Group’s maximum exposure
to credit risks is equivalent to the total carrying amount of trade and other receivables, amounts due from related parties, cash
and cash equivalents, short-term investments, term deposits, available-for-sale investments and investments at FVTPL of RMB692,991,000,
RMB688,042,000 and RMB745,560,000 as of March 31, 2013 and 2014 and as of December 31, 2014, respectively.



Collection of the Group’s revenues
is substantially done through mobile service providers with whom the Group has co-operative service agreements. The total carrying
amount of trade receivables from mobile service providers was RMB36,828,000, RMB22,302,000 and RMB64,418,000, respectively, as
of March 31, 2013 and 2014 and as of December 31, 2014. The Group also had RMB28,196,000, RMB38,669,000 and RMB132,336,000
trade receivables from mobile network operators as of March 31, 2013 and 2014 and as of December 31, 2014, respectively. In order
to minimize the credit risk of trade receivables from mobile service providers and mobile network operators, the Group assesses
the credit worthiness of the mobile service providers and mobile network operators prior to contracting with them. In addition,
the Group selects mobile service providers based on their payment history and the assessment of their relationship with the mobile
network operators which will impact the mobile service providers’ ability to pay. The Group further monitors the subsequent
performance of the mobile service providers and mobile network operators in order to mitigate collection risk going forward. In
addition, the Group reviews the recoverable amount of each individual trade receivable at the end of each reporting period to determine
if provision should be made for uncollectible amounts.



The Group has concentration of credit
risks with exposure limited to certain mobile service providers and mobile network operators. As of March 31, 2013 and 2014
and as of December 31, 2014, ten mobile service providers or mobile network operators accounted for approximately RMB51,892,000,
RMB47,361,000 and RMB 161,837,000, or 80%, 78% and 85% of the Group’s trade receivables, respectively. The Group closely
monitors the subsequent settlement of trade receivables and does not grant long credit periods to the counterparties.



The Group’s cash and cash equivalents,
term deposits and short investments are held by large banks established in the PRC and Hong Kong Special Administrative Region.
The Group's available-for-sale investments are mainly a limited partnership interest in a private equity fund, and the investment
at FVTPL are managed by a state owned fund company. The Group does not expect any losses arising from non-performance of these
financial institutions.



Liquidity risk



The Group monitors and attempts to
maintain a level of cash and cash equivalents adequate to finance the Group’s operations and mitigate the effects of fluctuations
in cash flows.



F-27







The following tables present the maturities
of the Group’s financial liabilities based upon the undiscounted cash flows of financial liabilities assuming payment on
the earliest date on which the Group can be required to pay. The table includes both interest, if any, and principal cash flows.



|                               |  | On demand or less than 1 month |         |  | Total undiscounted cash flow and carrying amount | 
|------------------------------ |  | ------------------------------ | ------- |  | ------------------------------------------------ | 
|                               |  | RMB’000                        |         |  | RMB’000                                          | 
|                               |  |                                |         |  |                                                  | 
|March 31, 2013                 |  |                                |         |  |                                                  | 
|Trade and other payables       |  |                                | 78,235  |  |                                                  | 
|Amounts due to related parties |  |                                | 4,054   |  |                                                  | 
|                               |  |                                | 82,289  |  |                                                  | 
|March 31, 2014                 |  |                                |         |  |                                                  | 
|Trade and other payables       |  |                                | 106,491 |  |                                                  | 
|Amounts due to related parties |  |                                | 11,201  |  |                                                  | 
|                               |  |                                | 117,692 |  |                                                  | 
|                               |  |                                |         |  |                                                  | 
|December 31, 2014              |  |                                |         |  |                                                  | 
|Trade and other payables       |  |                                | 183,671 |  |                                                  | 
|Amounts due to related parties |  |                                | 26,968  |  |                                                  | 
|                               |  |                                | 210,639 |  |                                                  | 

Fair value

(i) Fair value of the Group's financial
assets that are measured at fair value on a recurring basis

Some of the Group's financial assets
are measured at fair value at the end of each reporting period. The following table gives information about how the fair values
of these financial assets are determined (in particular, the valuation technique and inputs used).



|                     |  | At March 31, |   |  | At March 31, |  |         | At December 31, | 
|-------------------- |  | ------------ | - |  | ------------ |  | ------- | --------------- | 
|                     |  | 2013         |   |  | 2014         |  |         | 2014            | 
|                     |  | RMB’000      |   |  | RMB’000      |  |         | RMB’000         | 
|Financial assets     |  |              |   |  |              |  |         |                 | 
|Investment at FVTPL* |  |              | — |  |              |  | 166,073 |                 | 



* Investment at FVTPL is in Level 2 of Fair value Hierarchy
that is valued through discounted cash flow. Future cash flows are based on expected return and credit risks of investments underlying
the monetary fund.



The carrying amounts of all financial
assets (except for the AFS equity investments and investment at FVTPL) and financial liabilities as of March 31, 2013 and 2014
and as of December 31, 2014 are recorded at amortized cost, using the effective interest method unless the effect of discounting
is not material, in which case, they are carried at cost. Such amounts approximate their fair value.



|6. | UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
|-- | -------------------------------------------------

During the nine-month period ended December
31, 2014, the Group changed its fiscal year to end on December 31, effective December 31, 2014. The Group included in the transition
report the audited consolidated financial statements as of and for the nine-month period ended December 31, 2014 and as of and
for the years ended March 31, 2014 and 2013.

The consolidated financial statements
for the nine-month period ended December 31, 2014 is not comparable to that as of and for the years ended March 31, 2014 and 2013.
For comparison purposes, the Group also included in this transition report the unaudited condensed consolidated income statement
and net cash flows for the nine-month period ended December 31, 2013 as below:



F-28







|                                                       |  | Nine months
Ended |          |   | Nine months  Ended | 
|------------------------------------------------------ |  | ----------------- | -------- | - | ------------------ | 
|                                                       |  | December 31       |          |   | December 31        | 
|                                                       |  | 2014              |          |   | 2013               | 
|                                                       |  |                   |          |   | (Unaudited)        | 
|                                                       |  | RMB’000           |          |   | RMB’000            | 
|Revenues from third parties                            |  |                   | 586,033  |   |                    | 
|Cost of revenues from third parties                    |  |                   | (437,919 | ) |                    | 
|Cost of revenues from related parties                  |  |                   | (26,519  | ) |                    | 
|Gross profit                                           |  |                   | 121,595  |   |                    | 
|Research and development expenses                      |  |                   | (25,943  | ) |                    | 
|Sales and marketing expenses                           |  |                   | (31,219  | ) |                    | 
|General and administration expenses                    |  |                   | (46,966  | ) |                    | 
|Other operating income, net                            |  |                   | 1,481    |   |                    | 
|Profit (loss) from operations                          |  |                   | 18,948   |   |                    | 
|Other gains and losses                                 |  |                   | 17,741   |   |                    | 
|Impairment of investment in associates                 |  |                   | (2,673   | ) |                    | 
|Impairment of an available-for sale investment         |  |                   | —        |   |                    | 
|Share of results of associates                         |  |                   | 8,510    |   |                    | 
|Gain on disposal of associates                         |  |                   | 57,351   |   |                    | 
|Profit before tax                                      |  |                   | 99,877   |   |                    | 
|Income tax expense                                     |  |                   | (1,156   | ) |                    | 
|Profit for the year                                    |  |                   | 98,721   |   |                    | 
|Total comprehensive income for the year                |  |                   | 98,721   |   |                    | 
|Profit and total comprehensive income attributable to: |  |                   |          |   |                    | 
|Owners of the Company                                  |  |                   | 99,008   |   |                    | 
|Non-controlling interests                              |  |                   | (287     | ) |                    | 
|                                                       |  |                   | 98,721   |   |                    | 



|                                               |  | Nine months Ended December 31 2014 |          |   | Nine months Ended December 31 2013 | 
|---------------------------------------------- |  | ---------------------------------- | -------- | - | ---------------------------------- | 
|                                               |  |                                    |          |   | (Unaudited)                        | 
|                                               |  | RMB’000                            |          |   | RMB’000                            | 
|Net cash (used in) from operating activities   |  |                                    | (16,534  | ) |                                    | 
|Net cash from investing activities             |  |                                    | 244,147  |   |                                    | 
|Net cash used in financing activities          |  |                                    | (101,132 | ) |                                    | 
|Net decrease in cash and cash equivalents      |  |                                    | 126,481  |   |                                    | 
|Cash and cash equivalents at beginning of year |  |                                    | 79,057   |   |                                    | 
|Effect of foreign exchange rate changes        |  |                                    | (571     | ) |                                    | 
|Cash and cash equivalents at end of year       |  |                                    | 204,967  |   |                                    | 



F-29







|7. | REVENUES AND SEGMENT INFORMATION
|-- | --------------------------------



|                      |  | Years Ended |         |  | Years Ended |  |         | Nine months
 Ended | 
|--------------------- |  | ----------- | ------- |  | ----------- |  | ------- | ------------------ | 
|                      |  | March 31    |         |  | March 31    |  |         | December 31        | 
|                      |  | 2013        |         |  | 2014        |  |         | 2014               | 
|                      |  | RMB’000     |         |  | RMB’000     |  |         | RMB’000            | 
|                      |  |             |         |  |             |  |         |                    | 
|Single-player games   |  |             | 381,573 |  |             |  | 272,300 |                    | 
|Multiple-player games |  |             | 177,658 |  |             |  | 144,015 |                    | 
|Other revenues        |  |             | 41,876  |  |             |  | 69,236  |                    | 
|Total                 |  |             | 601,107 |  |             |  | 485,551 |                    | 



Segment information



The Group operates and manages its
business as a single segment. The Group’s chief operating decision maker has been identified as the Chief Executive Officer,
who reviews the revenue analysis by revenue driven from single-player games and multiple-player games and other revenues and the
profit from operation of the Group as a whole when making decisions about allocating resources and assessing performance of the
Group.



Geographical
information

All of the Group’s non-current
assets are located in the PRC. Revenues are primarily derived from the PRC, with minimal revenues derived from Indonesia and other
countries. The following table sets forth revenues by geographic area:



|        |  | Years Ended |         |  | Years Ended |  |         | Nine months Ended | 
|------- |  | ----------- | ------- |  | ----------- |  | ------- | ----------------- | 
|        |  | March 31    |         |  | March 31    |  |         | December 31       | 
|        |  | 2013        |         |  | 2014        |  |         | 2014              | 
|        |  | RMB’000     |         |  | RMB’000     |  |         | RMB’000           | 
|        |  |             |         |  |             |  |         |                   | 
|PRC     |  |             | 581,442 |  |             |  | 466,778 |                   | 
|Non-PRC |  |             | 19,665  |  |             |  | 18,773  |                   | 
|Total   |  |             | 601,107 |  |             |  | 485,551 |                   | 



Information about major customers



During the years ended March 31,
2013 and 2014 and the nine-month period ended December 31, 2014, there was no customer that individually accounted for over 10%
of the Group’s total revenue.



|8. | OTHER INCOME, NET
|-- | -----------------



|                                   |  | Years Ended |       |   | Years Ended |  |       | Nine months  Ended | 
|---------------------------------- |  | ----------- | ----- | - | ----------- |  | ----- | ------------------ | 
|                                   |  | March 31    |       |   | March 31    |  |       | December 31        | 
|                                   |  | 2013        |       |   | 2014        |  |       | 2014               | 
|                                   |  | RMB’000     |       |   | RMB’000     |  |       | RMB’000            | 
|                                   |  |             |       |   |             |  |       |                    | 
|Government grant                   |  |             | 2,931 |   |             |  | 4,030 |                    | 
|Reimbursement from depository bank |  |             | —     |   |             |  | 1,922 |                    | 
|Others                             |  |             | (611  | ) |             |  | (180  | )                  | 
|Total                              |  |             | 2,320 |   |             |  | 5,772 |                    | 



F-30







|9. | OTHER GAINS AND LOSSES
|-- | ----------------------



|                                            |  | Years Ended |        |   | Years Ended |  |        | Nine months  Ended | 
|------------------------------------------- |  | ----------- | ------ | - | ----------- |  | ------ | ------------------ | 
|                                            |  | March 31    |        |   | March 31    |  |        | December 31        | 
|                                            |  | 2013        |        |   | 2014        |  |        | 2014               | 
|                                            |  | RMB’000     |        |   | RMB’000     |  |        | RMB’000            | 
|                                            |  |             |        |   |             |  |        |                    | 
|Interest income                             |  |             | 16,209 |   |             |  | 15,913 |                    | 
|Income on short-term investments            |  |             | —      |   |             |  | 2,569  |                    | 
|Change in fair value of investment at FVTPL |  |             | —      |   |             |  | 1,073  |                    | 
|Exchange loss                               |  |             | (429   | ) |             |  | (2,061 | )                  | 
|Others                                      |  |             | (249   | ) |             |  | (12    | )                  | 
|Total                                       |  |             | 15,531 |   |             |  | 17,482 |                    | 



|10. | PROFIT BEFORE TAX
|--- | -----------------



|                                                                  |  | Years Ended |         |  | Years Ended |  |        | Nine months Ended | 
|----------------------------------------------------------------- |  | ----------- | ------- |  | ----------- |  | ------ | ----------------- | 
|                                                                  |  | March 31    |         |  | March 31    |  |        | December 31       | 
|                                                                  |  | 2013        |         |  | 2014        |  |        | 2014              | 
|                                                                  |  | RMB’000     |         |  | RMB’000     |  |        | RMB’000           | 
|                                                                  |  |             |         |  |             |  |        |                   | 
|Profit before tax has been arrived at after charging (crediting): |  |             |         |  |             |  |        |                   | 
|Staff salary and other benefits                                   |  |             | 100,106 |  |             |  | 74,147 |                   | 
|Retirement benefit scheme contributions                           |  |             | 2,095   |  |             |  | 1,668  |                   | 
|Share-based compensation (Note 24)                                |  |             | 24,457  |  |             |  | 17,478 |                   | 
|Total staff costs                                                 |  |             | 126,658 |  |             |  | 93,293 |                   | 
|Depreciation of property and equipment                            |  |             | 21,596  |  |             |  | 8,654  |                   | 
|Loss (gain) on disposal of property and equipment                 |  |             | 68      |  |             |  | (208   | )                 | 
|Operating lease rentals in respect of rented premises             |  |             | 10,192  |  |             |  | 9,273  |                   | 
|Operating lease rentals in respect of rented servers              |  |             | 9,523   |  |             |  | 9,904  |                   | 
|Bad debt written off (reversal)                                   |  |             | 3,693   |  |             |  | (541   | )                 | 



|11. | INCOME TAX
|--- | ----------



Cayman Islands



Under the current laws of the Cayman
Islands, the Company is not subject to Cayman Islands' income tax.



PRC



On January 1, 2008, a new Enterprise Income
Tax Law (the “New EIT Law”) in China took effect. The New EIT Law applies a uniform 25% enterprise income tax rate
to both foreign invested and domestic enterprises.



In 2007, Sky was granted the status
of Software Enterprise under the PRC tax laws that entitled it to a preferential Enterprise Income Tax ("EIT") rate of
two-year EIT exemption from its first year of profitable operation, after offsetting prior years’ tax losses, and a 50% reduction
of its applicable EIT rate for the succeeding three years. On April 24, 2009, the PRC government promulgated the Notice on
Several Issues Relevant to the Implementation of the Preferential Policies on EIT which allows Software Enterprises to continue
to enjoy their unexpired tax holiday under the old EIT Law. The first profit-making year of Sky was 2008. As a result, Sky was
subject to a tax rate of 12.5% for calendar year 2011 and 2012. In 2013, Sky obtained the “key software development enterprise”
(KSDE”) status under the New EIT Law. The KSDE status allows qualifying China-based enterprises to use a 10% tax rate for
two calendar years 2013 and 2014.



In 2009, Mijia was granted the status
of Software Enterprise under the PRC tax laws that entitled it to a preferential EIT rate of two-year EIT exemption from its first
year of profitable operation, after offsetting prior years’ tax losses, and a 50% reduction of its applicable EIT rate for
the succeeding three years. The first profit-making year of Mijia was 2010. As a result, Mijia’s EIT rates are 12.5% for
calendar year 2012, 2013 and 2014, respectively.



F-31







In 2013, Miyi and Najia were granted
the status of Software Enterprise under the PRC tax laws, respectively, that entitled them to a preferential EIT rate of two-year
EIT exemption from their first year of profitable operation, after offsetting prior years’ tax losses, and a 50% reduction
of their applicable EIT rate for the succeeding three years. The first profit-making year of Miyi and Najia was 2013. As a result,
Miyi and Najia’s EIT rates are 0% for calendar year 2013 and 2014, respectively.



In 2014, Mopin was granted the status
of Software Enterprise under the PRC tax laws, that entitled it to a preferential EIT rate of two-year EIT exemption from their
first year of profitable operation, after offsetting prior years’ tax losses, and a 50% reduction of their applicable EIT
rate for the succeeding three years. Mopin is still in accumulated loss as of December 31, 2014.



|                          |  | Years Ended |       |  | Years Ended |  |       | Nine months Ended | 
|------------------------- |  | ----------- | ----- |  | ----------- |  | ----- | ----------------- | 
|                          |  | March 31    |       |  | March 31    |  |       | December 31       | 
|                          |  | 2013        |       |  | 2014        |  |       | 2014              | 
|                          |  | RMB’000     |       |  | RMB’000     |  |       | RMB’000           | 
|Current tax expense:      |  |             |       |  |             |  |       |                   | 
|PRC enterprise income tax |  |             | 2,288 |  |             |  | 7,421 |                   | 
|Deferred tax              |  |             | 445   |  |             |  | (203  | )                 | 
|Total                     |  |             | 2,733 |  |             |  | 7,218 |                   | 



The tax expense can be reconciled to the profit per the
consolidated statements of profit or loss and other comprehensive income as follows:



|                                                                                                   |  | Years Ended |        |   | Years Ended |  |        | Nine months Ended | 
|-------------------------------------------------------------------------------------------------- |  | ----------- | ------ | - | ----------- |  | ------ | ----------------- | 
|                                                                                                   |  | March 31    |        |   | March 31    |  |        | December 31       | 
|                                                                                                   |  | 2013        |        |   | 2014        |  |        | 2014              | 
|                                                                                                   |  | RMB’000     |        |   | RMB’000     |  |        | RMB’000           | 
|Profit before tax                                                                                  |  |             | 19,989 |   |             |  | 11,875 |                   | 
|Income tax expense at PRC tax rate of 25% (i)                                                      |  |             | 4,997  |   |             |  | 2,969  |                   | 
|Tax effect of:                                                                                     |  |             |        |   |             |  |        |                   | 
|Non-deductible share-based compensation                                                            |  |             | 6,114  |   |             |  | 4,370  |                   | 
|Tax effect of shares of results of associates                                                      |  |             | 234    |   |             |  | (607   | )                 | 
|Other non-deductible expenses                                                                      |  |             | 1,723  |   |             |  | 916    |                   | 
|Tax incentives relating to research and development expenditures                                   |  |             | (6,470 | ) |             |  | (4,888 | )                 | 
|Tax exemption and concession to PRC subsidiaries                                                   |  |             | (2,747 | ) |             |  | (2,608 | )                 | 
|Tax effect of deferred tax assets not recognized from deductible temporary differences             |  |             | (831   | ) |             |  | 374    |                   | 
|Tax effect of utilization of tax loss not recognized previously and unused tax loss not recognized |  |             | (247   | ) |             |  | 1,442  |                   | 
|Tax effect of inter-group transfer of an associate (ii)                                            |  |             | —      |   |             |  | 5,250  |                   | 
|Others                                                                                             |  |             | (40    | ) |             |  | —      |                   | 
|Tax expense for the year                                                                           |  |             | 2,733  |   |             |  | 7,218  |                   | 



| | (i) | The
applicable PRC statutory income tax rate is used since the Group’s taxable income is generated in the PRC. The applicable
PRC income tax rate of 25% was used in the above computation for all reporting periods.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Due
to the Group's change of investment strategy, an equity investment was transferred from Sky Investment with 25% EIT rate to Miyi
with 0% EIT tax rate during year ended March 31, 2014. Income tax of RMB 5,250,000 calculated based on the transferred price was
accrued and paid to the relevant tax bureau in April, 2014 accordingly.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-32







Without tax exemption and tax concession,
PRC enterprise income taxes would have increased and basic and diluted earnings per share would have decreased by the following
amounts:



|                                                 |  | Years Ended |         |  | Years Ended |  |         | Nine months Ended | 
|------------------------------------------------ |  | ----------- | ------- |  | ----------- |  | ------- | ----------------- | 
|                                                 |  | March 31    |         |  | March 31    |  |         | December 31       | 
|                                                 |  | 2013        |         |  | 2014        |  |         | 2014              | 
|                                                 |  | RMB’000     |         |  | RMB’000     |  |         | RMB’000           | 
|Increase in PRC income tax                       |  |             | 2,747   |  |             |  | 2,608   |                   | 
|Increase (decrease) in deferred tax              |  |             | 445     |  |             |  | (93     | )                 | 
|Decrease in basic and diluted earnings per share |  |             | RMB0.01 |  |             |  | RMB0.01 |                   | 

As of March 31, 2013 and 2014 and
as of December 31,2014, the Group has unused tax losses of RMB37,008,000, RMB42,433,000 and RMB32,910,000 available for offset
against future profits that may be carried forward in following four years. No deferred tax asset has been recognized in respect
of the tax losses due to the unpredictability of future profit streams.



The following table reflects the movements
in deferred tax assets:



|                                                      |  | Accrued expenses |       |   | Tax losses |  |     | Total   | 
|----------------------------------------------------- |  | ---------------- | ----- | - | ---------- |  | --- | ------- | 
|                                                      |  | RMB’000          |       |   | RMB’000    |  |     | RMB’000 | 
|Balance at April 1, 2012                              |  |                  | 2,210 |   |            |  | —   |         | 
|Charge to profit or loss during the year              |  |                  | (445  | ) |            |  | —   |         | 
|Balance at March 31, 2013                             |  |                  | 1,765 |   |            |  | —   |         | 
|Credit to profit or loss during the year              |  |                  | 203   |   |            |  | —   |         | 
|Balance at March 31, 2014                             |  |                  | 1,968 |   |            |  | —   |         | 
|Credit to profit or loss during the nine-month period |  |                  | 517   |   |            |  | 261 |         | 
|Balance at December 31, 2014                          |  |                  | 2,485 |   |            |  | 261 |         | 



The Group declared dividends in March
2010 and May 2010, however, the Group has no plan to declare dividends in the foreseeable future. There were undistributed earnings
of the subsidiaries and consolidated SPEs of approximately RMB240,163,000, RMB267,622,000 and RMB355,632,000 as of March 31,
2013 and 2014 and December 31, 2014, respectively. As of March 31, 2013 and 2014 and December 31, 2014, deferred tax liability
has not been provided on the remaining undistributed earnings as the Group is able to control the timing of the reversal of the
temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.



|12. | EARNINGS PER SHARE
|--- | ------------------



Holders of the Group’s Restricted Shares (Note 24) are
entitled to participate in dividends on an equal basis with holders of the Group’s unrestricted common shares. As such dividends
are not subject to restriction as to use, the Restricted Shares are considered participating and basic earnings per share has been
computed using the two-class method as follows:



F-33







|                                                                  |  | Years Ended |             |   | Years Ended |  |             | Nine months Ended | 
|----------------------------------------------------------------- |  | ----------- | ----------- | - | ----------- |  | ----------- | ----------------- | 
|                                                                  |  | March 31    |             |   | March 31    |  |             | December 31       | 
|                                                                  |  | 2013        |             |   | 2014        |  |             | 2014              | 
|Profit for the year attributable to the owners of the Company     |  |             | 17,112      |   |             |  | 5,251       |                   | 
|Less: amount allocated to restricted shares (RMB’000)             |  |             | (221        | ) |             |  | (54         | )                 | 
|Profit for the year for the purpose of diluted earnings per share |  |             | 16,891      |   |             |  | 5,197       |                   | 
|                                                                  |  |             |             |   |             |  |             |                   | 
|Weighted average common shares outstanding - basic                |  |             | 255,983,883 |   |             |  | 244,460,993 |                   | 
|Share options                                                     |  |             | —           |   |             |  | 1,068,460   |                   | 
|Weighted average common shares outstanding - diluted              |  |             | 255,983,883 |   |             |  | 245,529,453 |                   | 
|Basic earnings per share                                          |  |             | 0.07        |   |             |  | 0.02        |                   | 
|Diluted earnings per share                                        |  |             | 0.07        |   |             |  | 0.02        |                   | 



The computation of diluted earnings
per share for the year ended March 31, 2013 does not assume the exercise of the Company’s options because the exercise price
of those options was higher than the average market price for shares.



|13. | DIVIDENDS
|--- | ---------



The Company did not pay or declare
any dividends on ordinary shares in the years ended March 31, 2013 and 2014 and in the nine-month period ended December 31, 2014.



|14. | TERM DEPOSITS
|--- | -------------



Term
deposits had an average interest rate of 3.12%, 3.84% and 3.48% per annum at March 31, 2013 and 2014 and nine-month period
ended December 31, 2014, respectively.



|15. | SHORT-TERM INVESTMENTS
|--- | ----------------------



Short-term investments consist primarily
of a financial product purchased from a bank. The maturity of the financial product is one year, with an interest rate of 5.3%
per annum. It is classified as short-term investments on the consolidated statements of financial position as its contractual maturity
date is equal to one year. The repayment of the financial product and its return is guaranteed by the bank from which the fixed-income
financial product was purchased. The Company has received the principal and interest in full upon maturity in April 2014.



The Company estimated that their fair
value as of March 31, 2014 approximate their amortized costs considering their short term maturities and high credit quality.



|16. | INVESTMENT AT FVTPL
|--- | -------------------

In the nine-month period ended December
31, 2014, the Group totally purchased and sold RMB594,600,000 and RMB743,078,000 of monetary fund, respectively. The fair value
of the monetary fund varies depending on the interest rates and credit risks of the underlying investments. As of December 31,
2014, the fair value of such monetary fund was RMB21,373,000. Gains from investment in monetary fund recognized in the consolidated
statement of profit or loss and other comprehensive income for the year ended March 31, 2014 and nine-month period ended December
31, 2014 were RMB1,073,000 and RMB3,778,000, respectively. The investment was classified as financial assets at FVTPL upon initial
recognition.



F-34







|17. | AVAILABLE-FOR-SALE INVESTMENTS
|--- | ------------------------------



The Group’s AFS financial assets
are equity investments in two unlisted companies, established in the PRC, with 5% (RMB800,000) interest in Shanghai Mokee Technology
Co., Ltd. (“Mokee”) and 1% (RMB100,000) interests in Beijing SFW Technology Co., Ltd. (“Beijing SFW”),
respectively, as of March 31, 2013 and 2014; and an investment in a limited partnership of venture capital fund with investment
amount of RMB6,267,000 (US$1,000,000) , RMB6,150,000 (US$1,000,000) and RMB9,179,000 (US$1,500,000), respectively, as of March
31, 2013 and 2014 and December 31, 2014.



During the nine-month period ended December
31, 2014, the Group further invested RMB6,000,000 and obtained additional 9.09% equity interest in Beijing SFW. After that, the
Group held 10% equity interest in Beijing SFW and can exercise significant influence over the financial and operational policies
of Beijing SFW, therefore, Beijing SFW is considered as an associate and accounted for using the equity method after the investment.



During the nine-month period ended December
31, 2014, the Group purchased 0.83% equity interest (RMB50,000) of an unlisted company, established in the PRC. This investment
is recorded in the Group's AFS financial assets as well.



During the year ended March 31, 2014,
the Group recognized an impairment of RMB800,000 in respect of its 5% interest in one of the two unlisted companies, due to its
poor business performance and negative discounted cash flow forecast.



|18. | TRADE AND OTHER RECEIVABLES
|--- | ---------------------------



|                               |  | At March 31, |        |  | At March 31, |  |        | At December 31, | 
|------------------------------ |  | ------------ | ------ |  | ------------ |  | ------ | --------------- | 
|                               |  | 2013         |        |  | 2014         |  |        | 2014            | 
|                               |  | RMB’000      |        |  | RMB’000      |  |        | RMB’000         | 
|Trade receivables              |  |              | 65,024 |  |              |  | 60,971 |                 | 
|Deposits and other receivables |  |              | 9,406  |  |              |  | 23,779 |                 | 
|Prepayments                    |  |              | 5,844  |  |              |  | 10,749 |                 | 
|Total                          |  |              | 80,274 |  |              |  | 95,499 |                 | 

The Group normally grants credit for
an average period of 90 days to its mobile service providers and mobile network operators.

Aging of trade receivables which are
not past due nor impaired:



|               |  | At March 31, |        |  | At March 31, |  |        | At December 31, | 
|-------------- |  | ------------ | ------ |  | ------------ |  | ------ | --------------- | 
|               |  | 2013         |        |  | 2014         |  |        | 2014            | 
|               |  | RMB’000      |        |  | RMB’000      |  |        | RMB’000         | 
|Within 90 days |  |              | 60,028 |  |              |  | 58,677 |                 | 

The group has not recognized an allowance
for receivables not past due because all amounts are considered recoverable.

Aging of trade receivables which are
past due but not impaired:



|             |  | At March 31, |       |  | At March 31, |  |       | At December 31, | 
|------------ |  | ------------ | ----- |  | ------------ |  | ----- | --------------- | 
|             |  | 2013         |       |  | 2014         |  |       | 2014            | 
|             |  | RMB’000      |       |  | RMB’000      |  |       | RMB’000         | 
|Over 90 days |  |              | 4,996 |  |              |  | 2,294 |                 | 



The Group has not recognized an allowance
for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered
recoverable. The Group does not hold any collateral or other credit enhancements over these balances. The Group wrote off RMB3,693,000,
Nil and RMB67,000 trade and other receivables during the year ended March 31, 2013 and 2014 and during the nine-month period
ended December 31, 2014, respectively, due to mobile network operators unilaterally terminating services provided by certain mobile
service providers. The Group does not believe in foreseeable future, such termination of services provided by mobile service providers
would occur.



F-35







| | 19. | PROPERTY
AND EQUIPMENT
| | --- | ----------------------



|                        |  | Electronic equipment |         |   | Furniture |  |        | Office equipment |  |  | Leasehold improvements |   |  | Motor vehicles |        |   | Total   | 
|----------------------- |  | -------------------- | ------- | - | --------- |  | ------ | ---------------- |  |  | ---------------------- | - |  | -------------- | ------ | - | ------- | 
|                        |  | RMB’000              |         |   | RMB’000   |  |        | RMB’000          |  |  | RMB’000                |   |  | RMB’000        |        |   | RMB’000 | 
|Cost:                   |  |                      |         |   |           |  |        |                  |  |  |                        |   |  |                |        |   |         | 
|At April 1, 2012        |  |                      | 64,067  |   |           |  | 1,896  |                  |  |  | 682                    |   |  |                | 4,507  |   |         | 
|Additions               |  |                      | 3,833   |   |           |  | 39     |                  |  |  | 146                    |   |  |                | 39     |   |         | 
|Disposals               |  |                      | (1,107  | ) |           |  | (48    | )                |  |  | (26                    | ) |  |                | —      |   |         | 
|At March 31, 2013       |  |                      | 66,793  |   |           |  | 1,887  |                  |  |  | 802                    |   |  |                | 4,546  |   |         | 
|Additions               |  |                      | 1,351   |   |           |  | 18     |                  |  |  | 39                     |   |  |                | 145    |   |         | 
|Disposals               |  |                      | (1,099  | ) |           |  | —      |                  |  |  | (10                    | ) |  |                | (419   | ) |         | 
|At March 31, 2014       |  |                      | 67,045  |   |           |  | 1,905  |                  |  |  | 831                    |   |  |                | 4,272  |   |         | 
|Additions               |  |                      | 4,076   |   |           |  | 51     |                  |  |  | 64                     |   |  |                | 713    |   |         | 
|Disposals               |  |                      | (2,316  | ) |           |  | (31    | )                |  |  | (33                    | ) |  |                | (113   | ) |         | 
|At December 31, 2014    |  |                      | 68,805  |   |           |  | 1,925  |                  |  |  | 862                    |   |  |                | 4,872  |   |         | 
|                        |  |                      |         |   |           |  |        |                  |  |  |                        |   |  |                |        |   |         | 
|Depreciation:           |  |                      |         |   |           |  |        |                  |  |  |                        |   |  |                |        |   |         | 
|At April 31, 2012       |  |                      | (34,640 | ) |           |  | (712   | )                |  |  | (457                   | ) |  |                | (2,949 | ) |         | 
|Charge for the year     |  |                      | (19,386 | ) |           |  | (376   | )                |  |  | (199                   | ) |  |                | (1,460 | ) |         | 
|Eliminated on disposals |  |                      | 994     |   |           |  | 18     |                  |  |  | 22                     |   |  |                | —      |   |         | 
|At March 31, 2013       |  |                      | (53,032 | ) |           |  | (1,070 | )                |  |  | (634                   | ) |  |                | (4,409 | ) |         | 
|Charge for the year     |  |                      | (7,883  | ) |           |  | (366   | )                |  |  | (72                    | ) |  |                | (171   | ) |         | 
|Eliminated on disposals |  |                      | 637     |   |           |  | —      |                  |  |  | 8                      |   |  |                | 419    |   |         | 
|At March 31, 2014       |  |                      | (60,278 | ) |           |  | (1,436 | )                |  |  | (698                   | ) |  |                | (4,161 | ) |         | 
|Charge for the year     |  |                      | (3,145  | ) |           |  | (273   | )                |  |  | (48                    | ) |  |                | (41    | ) |         | 
|Eliminated on disposals |  |                      | 2,251   |   |           |  | 6      |                  |  |  | 32                     |   |  |                | 3      |   |         | 
|At December 31, 2014    |  |                      | (61,172 | ) |           |  | (1,703 | )                |  |  | (714                   | ) |  |                | (4,199 | ) |         | 
|                        |  |                      |         |   |           |  |        |                  |  |  |                        |   |  |                |        |   |         | 
|Carrying values         |  |                      |         |   |           |  |        |                  |  |  |                        |   |  |                |        |   |         | 
|At March 31, 2013       |  |                      | 13,761  |   |           |  | 817    |                  |  |  | 168                    |   |  |                | 137    |   |         | 
|At March 31, 2014       |  |                      | 6,767   |   |           |  | 469    |                  |  |  | 133                    |   |  |                | 111    |   |         | 
|At December 31, 2014    |  |                      | 7,633   |   |           |  | 222    |                  |  |  | 148                    |   |  |                | 673    |   |         | 



| | 20. | INTEREST
IN ASSOCIATES
| | --- | ----------------------



|                                             |  | At March 31, |        |   | At March 31, |  |         | At December 31, | 
|-------------------------------------------- |  | ------------ | ------ | - | ------------ |  | ------- | --------------- | 
|                                             |  | 2013         |        |   | 2014         |  |         | 2014            | 
|                                             |  | RMB’000      |        |   | RMB’000      |  |         | RMB’000         | 
|                                             |  |              |        |   |              |  |         |                 | 
|Cumulative cost of investments in associates |  |              | 38,669 |   |              |  | 61,211  |                 | 
|Cumulative share of results of associates    |  |              | (9,171 | ) |              |  | (12,018 | )               | 
|Impairment of investment in associates (i)   |  |              | (7,127 | ) |              |  | (7,854  | )               | 
|                                             |  |              | 22,371 |   |              |  | 41,339  |                 | 







F-36







|(i) | The Group recognized impairment of RMB1,367,000 in respect of
        its investment in Beijing DigiMobi Studio Co., Ltd. (“DigiMobi”) during the year ended March 31, 2013, impairment of
        RMB727,000 in respect of its investment in Beijing Dream Sky Technology Co. Ltd., ("Dream Sky") during the year ended
        March 31, 2014, impairment of RMB765,000 in respect of its investment in Shanghai Mingyou Network Technologies Co.,Ltd. (“Mingyou”)
        and impairment of RMB1,908,000 in respect of its investment in Beijing Brtech Co., Ltd. ("Brtech")during the nine-month
        period ended December 31, 2014, respectively, due to the poor business performance and negative discounted cash flow forecast of
        the two investees. The investments in DigiMobi, Dream Sky, Mingyou and Brtech have then been fully impaired.
        
        The Group utilized the income approach valuation method to compute
        the recoverable amount of its reporting units. The key assumptions used in the income approach, requires significant management
        judgment on business forecast.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Particulars of the Group’s investments in associates are
as follows:





|                                                             |  | Issuedandpaid upcapital |            |  | Portion
    ofregistered capitalheld by the Group |  |      | Principal
    activities
|------------------------------------------------------------ |  | ----------------------- | ---------- |  | ------------------------------------------------- |  | ---- | ------------------------
|                                                             |  |                         |            |  | March 31                                          |  |      | March 31                
|Name
               of associates                            |  | RMB                     |            |  | 2013                                              |  |      | 2014                    
|                                                             |  |                         |            |  | %                                                 |  |      | %                       
|Zhang
    Xing Wu Xian Technologies (Beijing) Co., Ltd.      |  |                         | 500,000    |  |                                                   |  | 37   | %                       
|Hangzhou
    Sibi Technologies Co., Ltd.                     |  |                         | 300,000    |  |                                                   |  | 33.3 | %                       
|Hangzhou
    Guanzhun Technologies Co., Ltd.                 |  |                         | 15,000,000 |  |                                                   |  | 45   | %                       
|Shenzhen
    Heisha Technologies Co., Ltd. (a)               |  |                         | 11,445,878 |  |                                                   |  | 31   | %                       
|Brtech
    (b)                                               |  |                         | 1,176,500  |  |                                                   |  | 15   | %                       
|Shanghai
    Mihoyo Network Technology Co., Ltd. (c)         |  |                         | 1,070,000  |  |                                                   |  | 15   | %                       
|Shanghai
    Fangcun Information Technology Co., Ltd. (d)    |  |                         | 10,000,000 |  |                                                   |  | 20   | %                       
|DigiMobi
    (e)                                             |  |                         | 117,647    |  |                                                   |  | 15   | %                       
|Shanghai
    Gameba Co., Ltd. (f)                            |  |                         | 375,000    |  |                                                   |  | 15   | %                       
|Hangzhou
    Mr. Glee Tech. Co., Ltd. (g)                    |  |                         | 1,430,600  |  |                                                   |  | 10   | %                       
|Dream
    Sky (h)                                            |  |                         | 125,000    |  |                                                   |  | 20   | %                       
|Hangzhou
    Taiku Technologies Co., Ltd. (i)                |  |                         | 8,500,000  |  |                                                   |  | 65   | %                       
|Hangzhou
    Breaking Dawn Network Technologies Co. Ltd. (j) |  |                         | 10,000,000 |  |                                                   |  | 70   | %                       
|Hangzhou
    Quyuan Technologies Co., Ltd. (k)               |  |                         | 1,000,000  |  |                                                   |  | Nil  |                         
|Hangzhou
    Lonshin E-Commerce Co., Ltd. (l)                |  |                         | 1,111,111  |  |                                                   |  | Nil  |                         
|Shanghai
    Mingyou Network Technologies Co., Ltd. (m)      |  |                         | 1,250,000  |  |                                                   |  | Nil  |                         
|Hangzhou
    Qianlong Technologies Co., Ltd. (n)             |  |                         | 10,000,000 |  |                                                   |  | Nil  |                         
|Shanghai
    Vtime Information Technologies Co., Ltd. (o)    |  |                         | 166,668    |  |                                                   |  | Nil  |                         
|Shanghai
    Halfmeters Network Technologies Co., Ltd. (p)   |  |                         | 133,300    |  |                                                   |  | Nil  |                         
|Guangzhou
    Eyesblack Network Technologies Co., Ltd. (q)   |  |                         | 125,000    |  |                                                   |  | Nil  |                         
|Hangzhou
    Joyreach Technologies Co., Ltd. (r)             |  |                         | 1,291,445  |  |                                                   |  | Nil  |                         
|Beijing
    SFW (s)                                          |  |                         | 1,375,000  |  |                                                   |  | 1    | %                       
|Hangzhou
    Funyou Network Technology Co., Ltd. (t)         |  |                         | 1,000,000  |  |                                                   |  | Nil  |                         
|Shanghai
    Leyi Information Technology Co., Ltd. (u)       |  |                         | 75,000,000 |  |                                                   |  | Nil  |                         
|Beijing
    Jamo Games Technologies Co.,Ltd. (v)             |  |                         | 10,000,000 |  |                                                   |  | Nil  |                         
|Shanghai
    Tongyu Network Technology Co., Ltd. (w)         |  |                         | 3,000,000  |  |                                                   |  | Nil  |                         



F-37







All of the above associates are accounted for using the equity
method in the consolidated financial statements.



The financial year end date of all of the above associates is
December 31. This was the reporting date as required by the Company Law of PRC. For the purposes of applying the equity method
of accounting, the financial statements of the above associates for the years ended December 31, 2012, 2013 and 2014 have been
used, and appropriate adjustments have been made for the effects of significant transactions between those dates and March 31,
2013 and 2014 and December 31, 2014.



|(a) | The Group held 65% interest of Shenzhen Heisha Technologies Co., Ltd. (“Heisha”) and consolidated it before April 2011. In April 2011, the Group partially disposed its interests in Heisha and retained 31% equity interest, the fair value of the remaining 31% interest of Heisha was approximately RMB 1,600,000. The Group disposed the remaining 31% interest in Heisha for RMB1,000,000 during the nine-month period ended December 31, 2014 (Note 21).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | In April 2012, the Group acquired 15% of the equity interest in Brtech for a cash consideration of RMB2,200,000. One out of three directors of Brtech is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Brtech, therefore, Brtech is considered as an associate. The Group recognized full impairment in September 2014 in regards of the investment in Brtech due to its poor operating performance and negative discounted cash flow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(c) | In June 2012, the Group acquired 15% of the equity interest in Shanghai Mihoyo Network Technology Co., Ltd. (“Mihoyo”) for a cash consideration of RMB1,000,000. One out of three directors of Mihoyo is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Mihoyo, therefore, Mihoyo is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(d) | In July 2012, the Group acquired 12% of the equity interest
        in Shanghai Fangcun Information Technology Co., Ltd. (“Fangcun”) for a cash consideration of RMB2,500,000. In March
        2013, the Group further invested RMB2,500,000 and obtained 8% equity interest in Fangcun. In July 2013, the Group further acquired
        17.9% of the equity interest in Fangcun for a cash consideration of RMB 25,000,000. After that, the Group held 37.9% equity interest
        in Fangcun.
        
        One out of three directors is appointed by the Group and the
        Group can exercise significant influence over the financial and operational policies of Fangcun, therefore, Fangcun is considered
        as an associate.
        
        In late 2013, the Group and other shareholders of Fangcun signed
        the share transfer agreement with Guangdong Alpha Animation & Culture Co., Ltd. ("Alpha") and planned to sell 100%
        shares of Fangcun to Alpha at the consideration of approximately RMB250,000,000. The deal was approved by China Securities Regulatory
        Commission ("CSRC") in February 2014, investment in Fangcun was reclassified as asset held-for-sale after that. This
        transaction was completed in May 2014 and all the cash consideration of RMB91,625,000 was received (Note 21).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | In July 2012, the Group acquired 15% of the equity interest in DigiMobi for a cash consideration of RMB1,500,000. One out of three directors of DigiMobi is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of DigiMobi, therefore, DigiMobi is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(f) | In October 2012, the Group acquired 15% of the equity interest in Shanghai Gameba Co., Ltd. (“Gameba”) for a cash consideration of RMB1,125,000. One out of three directors of Gameba is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Gameba, therefore, Gameba is considered as an associate. In December 2013, the Group acquired 5% of the equity interest in Gameba from another investor for a cash consideration of RMB407,500. After that, the Group held 20% of the equity interest in Gameba.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



F-38







|(g) | In October 2012, the Group acquired 10% of the equity interest in Hangzhou Mr. Glee Tech. Co., Ltd. (“Mr. Glee”) for a cash consideration of RMB5,000,000. One out of three directors of Mr. Glee is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Mr. Glee, therefore, Mr. Glee is considered as an associate. In April 2014, the Group acquired 2% equity interest of Mr. Glee for a cash consideration of RMB1,000,000. After that, the Group held 12% of equity interest in Mr. Glee.                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(h) | In November 2012, the Group acquired 20% of the equity interest in Beijing Dream Sky Technology Ltd. (“Dream Sky”) for a cash consideration of RMB1,000,000. One out of three directors of Dream Sky is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Dream Sky, therefore, Dream Sky is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(i) | In January 2013, the Group, together with another two independent individuals, established Hangzhou Taiku Technologies Co., Ltd. (“Taiku”). The Group invested RMB5,525,000 and obtained a 65% equity interest in Taiku. Only one out of three directors of Taiku is appointed by the Group, while a valid board resolution requires half of the total votes. The Group does not have the power to control or jointly control the financial and operational policies of Taiku. Therefore, Taiku is considered as an associate.                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(j) | In January 2013, the Group, together with another two independent individuals, established Hangzhou Breaking Dawn Network Technologies Co. Ltd. (“Breaking Dawn”). The Group invested RMB1,610,000 and obtained a 70% equity interest in Breaking Dawn.Only one out of three directors of Breaking Dawn is appointed by the Group, while a valid board resolution requires half of the total votes. The Group does not have the power to control or jointly control the financial and operational policies of Breaking Dawn. Therefore, Breaking Dawn is considered as an associate. In September 2013, the Group further invested RMB5,390,000 while the other shareholders increased their investment proportionately. In April 2014, the Group withdrew RMB 5,390,000 while the other shareholders decreased their investment proportionately.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(k) | In April 2013, the Group acquired 20% of the equity interest in Hangzhou Quyuan Technologies Co., Ltd. (“Quyuan”) for a cash consideration of RMB3,000,000. One out of three directors of Quyuan is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Quyuan, therefore, Quyuan is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(l) | In June 2013, the Group acquired 10% of the equity interest in Hangzhou Lonshin E-Commerce Co., Ltd. (“Lonshin”) for a cash consideration of RMB2,500,000. One out of three directors of Lonshin is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Lonshin, therefore, Lonshin is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(m) | In August 2013, the Group acquired 13.3% of the equity interest in Shanghai Mingyou Network Technologies Co., Ltd. (“Mingyou”) for a cash consideration of RMB1,000,000. One out of three directors of Mingyou is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Mingyou, therefore, Mingyou is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(n) | In July 2013, the Group acquired 40% of the equity interest in Hangzhou Qianlong Technologies Co., Ltd. (“Qianlong”) for a cash consideration of RMB2,600,000. In September 2013, the Group further invested RMB1,400,000 while the other shareholders increased their investment proportionately. One out of three directors of Qianlong is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Qianlong, therefore, Qianlong is considered as an associate.                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(o) | In October 2013, the Group acquired 12.5% of the equity interest in Shanghai Vtime Information Technologies Co., Ltd. (“Vtime”) for a cash consideration of RMB750,000. One out of three directors of Vtime is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Vtime, therefore, Vtime is considered as an associate. Two new shareholders invested in Vtime in June 2014 and the paid-in capital increased accordingly to RMB166,668. After that, the Group held 10% equity interest in Vtime.                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(p) | In October 2013, the Group acquired 12.5% of the equity interest in Shanghai Halfmeters Network Technologies Co., Ltd. (“Halfmeters”) for a cash consideration of RMB700,000. One out of three directors of Halfmeters is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Halfmeters, therefore, Halfmeters is considered as an associate. In June 2014, one shareholder of Halfmeters voluntarily resigned and according to the investment agreement, his shares were transferred to the remaining shareholders unconditionally, which led to the Group's ownership increasing from 12.5% to 13.9%.                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(q) | In January 2014, the Group acquired 20% of the equity interest in Guangzhou Eyesblack Network Technologies Co., Ltd. (“Eyesblack”) for a cash consideration of RMB1,500,000. One out of three directors of Eyesblack is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Eyesblack, therefore, Eyesblack is considered as an associate.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(r) | In March 2014, the Group acquired 12% of the equity interest in Hangzhou Joyreach Technologies Co., Ltd. (“Joyreach”) for a cash consideration of RMB8,295,000. One out of four directors of Joyreach is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Joyreach, therefore, Joyreach is considered as an associate. Another shareholder invested in Joyreach in May, 2015, which increased the paid-in capital to RMB1,291,445. After that, the group held 10.1% equity interest in Joyreach.                                                                                                                                                                                                                                                                           



F-39







|(s) | In June 2014, the Group further invested RMB 6,000,000 and obtained 9.09% of the equity interest in Beijing SFW, after that, the Group held 10% of the equity interest in Beijing SFW. One out of five directors of Beijing SFW is appointed by the Group and the Group can exercise significant influence over financial and operational policies of Beijing SFW, therefore, Beijing SFW is considered as an associate.                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(t) | In May 2014, the Group acquired 24.1% of the equity interest in Hangzhou Funyou Network Technologies Co., Ltd. (“Funyou”) for a cash consideration of RMB 2,800,000. One out of three directors of Funyou is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Funyou, therefore, Funyou is considered as an associate.                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(u) | In May 2014, the Group acquired 66.5% of the equity interest in Shanghai Leyi Information Technology Co., Ltd ("Leyi") for a cash consideration of RMB 49,900,000. Leyi is an investment fund targeting PRC early stage companies in high technology industry or with new business models. The Group is a limited partner. One out of four member of investment decision committee is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Leyi, and therefore, Leyi is considered as an associate.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(v) | In August 2014, the Group acquired 20% of the equity interest in Beijing Jamo Games Technologies Co., Ltd. (“Jamo”) for a cash consideration of RMB 4,000,000. One out of four directors of Jamo is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Jamo, therefore, Jamo is considered as an associate.                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(w) | In October 2014, the Group acquired 20% of the equity interest in Shanghai Tongyu Network Technology Co., Ltd (“Tongyu”) for a cash consideration of RMB 1,400,000. One out of five directors of Tongyu is appointed by the Group and the Group can exercise significant influence over the financial and operational policies of Tongyu, therefore, Tongyu is considered as an associate.                                                                                                                                                                           



A summary of financial information in respect
of the Group’s associates is set out below:



|                                                                       |  | At March 31, |         |   | At March 31, |  |        | At December 31,   | 
|---------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ |  | ------ | ----------------- | 
|                                                                       |  | 2013         |         |   | 2014         |  |        | 2014              | 
|                                                                       |  | RMB’000      |         |   | RMB’000      |  |        | RMB’000           | 
|Total assets                                                           |  |              | 36,872  |   |              |  | 58,982 |                   | 
|Total liabilities                                                      |  |              | 12,072  |   |              |  | 14,865 |                   | 
|Net assets                                                             |  |              | 24,800  |   |              |  | 44,117 |                   | 
|Aggregate carrying amount of the Group's interests in these associates |  |              | 22,371  |   |              |  | 41,339 |                   | 
|                                                                       |  |              |         |   |              |  |        |                   | 
|                                                                       |  | Years Ended  |         |   | Years Ended  |  |        | Nine months Ended | 
|                                                                       |  | March 31,    |         |   | March 31,    |  |        | December  31,     | 
|                                                                       |  | 2013         |         |   | 2014         |  |        | 2014              | 
|                                                                       |  | RMB’000      |         |   | RMB’000      |  |        | RMB’000           | 
|Total revenue                                                          |  |              | 16,198  |   |              |  | 96,155 |                   | 
|(Loss) profit for the year                                             |  |              | (14,306 | ) |              |  | 14,206 |                   | 
|Group’s share of (loss) profit of associates                           |  |              | (935    | ) |              |  | 2,428  |                   | 



|21. | Gains on disposal of associates
|--- | -------------------------------



In May 2014, the Group completed
the disposal of its entire 37.9% equity interest in Fangcun and received the cash consideration of RMB91,625,000 (note 20). The
Group recognized RMB56,351,000 gain on disposal accordingly.



In August 2014, the Group sold
its remaining 31.0% equity interest in Heisha at a cash consideration of RMB1,000,000. The group recognized RMB1,000,000 gain on
disposal accordingly. RMB600,000 has been received by the end of December 31, 2014.



F-40







|22. | TRADE AND OTHER PAYABLES
|--- | ------------------------



|                                                  |  | At March 31, |         |  | At March 31, |  |         | At December31, | 
|------------------------------------------------- |  | ------------ | ------- |  | ------------ |  | ------- | -------------- | 
|                                                  |  | 2013         |         |  | 2014         |  |         | 2014           | 
|                                                  |  | RMB’000      |         |  | RMB’000      |  |         | RMB’000        | 
|Trade payable                                     |  |              | 70,571  |  |              |  | 94,994  |                | 
|Accrued payroll and employee welfare              |  |              | 10,621  |  |              |  | 14,062  |                | 
|Other taxes payable                               |  |              | 6,420   |  |              |  | 5,145   |                | 
|Payable for acquisition of property and equipment |  |              | 1,031   |  |              |  | 565     |                | 
|Accrued expenses                                  |  |              | 6,511   |  |              |  | 5,551   |                | 
|Advance from customers                            |  |              | 20,332  |  |              |  | 22,225  |                | 
|Other payables                                    |  |              | 6,633   |  |              |  | 10,932  |                | 
|Total                                             |  |              | 122,119 |  |              |  | 153,474 |                | 



|23. | SHARE CAPITAL
|--- | -------------



|                                                    |  | Number of shares |             |   |  |       | Amount
US$ |  |        | Amount
RMB’000 | 
|--------------------------------------------------- |  | ---------------- | ----------- | - |  | ----- | ---------- |  | ------ | -------------- | 
|Common shares                                       |  |                  |             |   |  |       |            |  |        |                | 
|Authorized:                                         |  |                  |             |   |  |       |            |  |        |                | 
|As of March 31, 2013 and 2014 and December 31, 2014 |  |                  | 937,857,200 |   |  |       |            |  | 46,893 |                | 
|Issued and fully paid:                              |  |                  |             |   |  |       |            |  |        |                | 
|At April 1, 2012 (of US$0.00005 each)               |  |                  | 258,174,600 |   |  |       |            |  | 12,908 |                | 
|Exercise of share options                           |  |                  | 732,248     |   |  | (i)   |            |  | 37     |                | 
|Restricted share vested                             |  |                  | 697,916     |   |  | (i)   |            |  | 35     |                | 
|Cancellation of repurchased shares                  |  |                  | (9,192,816  | ) |  | (ii)  |            |  | (460   | )              | 
|At March 31, 2013 (of US$0.00005 each)              |  |                  | 250,411,948 |   |  |       |            |  | 12,520 |                | 
|Exercise of share options                           |  |                  | 4,456,776   |   |  | (iii) |            |  | 223    |                | 
|Restricted share vested                             |  |                  | 549,146     |   |  | (iii) |            |  | 27     |                | 
|Cancellation of repurchased shares                  |  |                  | (15,955,984 | ) |  | (iv)  |            |  | (798   | )              | 
|At March 31, 2014 (of US$0.00005 each)              |  |                  | 239,461,886 |   |  |       |            |  | 11,972 |                | 
|Exercise of share options                           |  |                  | 627,520     |   |  | (v)   |            |  | 31     |                | 
|Restricted share vested                             |  |                  | 1,298,128   |   |  | (v)   |            |  | 65     |                | 
|Issue new shares to replace the payroll payable     |  |                  | 70,288      |   |  | (vi)  |            |  | 3      |                | 
|Cancellation of repurchased shares                  |  |                  | (19,191,144 | ) |  | (vii) |            |  | (960   | )              | 
|At December 31, 2014 (of US$0.00005 each)           |  |                  | 222,266,678 |   |  |       |            |  | 11,111 |                | 




|(i)  | During the year ended March 31, 2013, 732,248 fully vested options
        were exercised and converted into 732,248 common shares with a par value of US$0.00005 per share, and 697,916 fully vested restricted
        shares became unrestricted with a par value of US$0.00005 per share.                                                                                                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) | On August 12, 2012, the Board of Directors authorized the Company to repurchase up to US$10 million of its common shares on the open market during the period from August 13, 2012 to August 12, 2013. As of March 31, 2013, the Company has repurchased 15,173,920 common shares for a total consideration of RMB25,308,000 (US$4,086,010). The Company cancelled 9,192,816 common shares which were repurchased during the year ended March 31, 2013. The remaining 5,981,104 common shares repurchased were cancelled during the year ended March 31 2014.



|(iii) | During the year ended March 31, 2014, 4,456,776 fully vested
        options were exercised and converted into 4,456,776 common shares with a par value of US$0.00005 per share, and 549,146 fully vested
        restricted shares became unrestricted with a par value of US$0.00005 per share.                          
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(iv)  | During the year ended March 31, 2014, the Company repurchased 12,288,720 common shares for a total consideration of RMB27,361,000 (US$4,452,086) and cancelled 15,955,984 repurchased common shares. The remaining 2,313,840 common shares repurchased were cancelled during the nine-month period ended December 31, 2014.



F-41







|(v)   | During the nine-month period ended December 31, 2014, 627,520
        fully vested options were exercised and converted into 627,520 common shares with a par value of US$0.00005 per share, and 1,298,128
        fully vested restricted shares became unrestricted with a par value of US$0.00005 per share.                         
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(vi)  | During the nine-month period ended December 31, 2014, the Company issued 70,288 common shares with a par value of US$0.00005 per share to one senior management to replace the payroll payable of RMB335,000. The share numbers is calculated based on the carry amount of the payroll payable and the share price of the issuance date.
|      |                                                                                                                                                                                                                                                                                                                                         
|(vii) | During the nine-month period ended December 31, 2014, the Company repurchased 16,877,304 common shares for a total consideration of RMB101,442,000 (US$16,488,013) and all the outstanding repurchased 19,191,144 shares were cancelled as of December 31, 2014.                                                                        



|24. | SHARE-BASED PAYMENTS
|--- | --------------------



Employee Share Option Plan (the “Plan”)



On March 1, 2010, the Company approved
an ownership-based compensation scheme for executives and senior employees under which the Company could grant up to 15,000,000
shares.



In accordance with the terms of the Plan,
executives and senior employees may be granted options to purchase common shares at an exercise price approved by the shareholders
that should be no less than US$0.07 per common share of the Company. The option holders are not entitled to dividends nor do they
have voting rights. The number of options granted is calculated and approved by shareholders. Options have a life of 10 years
from the date of grant.



A summary of the option activity is as
follows:



|                                 |  | Number of options |            |   | Weighted average exercise prices |  |       | Weighted average remaining contractual Life
|-------------------------------- |  | ----------------- | ---------- | - | -------------------------------- |  | ----- | -------------------------------------------
|                                 |  |                   |            |   | RMB                              |  |       |                                            
|Outstanding on April 1, 2012     |  |                   | 8,521,650  |   |                                  |  | 1.907 |                                            
|Forfeited                        |  |                   | (1,101,967 | ) |                                  |  | 1.775 |                                            
|Exercised                        |  |                   | (732,248   | ) |                                  |  | 1.775 |                                            
|Outstanding on March 31, 2013    |  |                   | 6,687,435  |   |                                  |  | 1.993 |                                            
|Forfeited                        |  |                   | (189,881   | ) |                                  |  | 4.289 |                                            
|Exercised                        |  |                   | (4,456,776 | ) |                                  |  | 1.775 |                                            
|Outstanding on March 31, 2014    |  |                   | 2,040,778  |   |                                  |  | 2.009 |                                            
|Forfeited                        |  |                   | (19,065    | ) |                                  |  | 1.775 |                                            
|Exercised                        |  |                   | (627,520   | ) |                                  |  | 1.775 |                                            
|Outstanding on December 31, 2014 |  |                   | 1,394,193  |   |                                  |  | 2.118 |                                            



The Company recorded compensation expense
of RMB8,357,000, RMB4,537,000 and RMB106,000 for the years ended March 31, 2013 and 2014 and the nine-month period ended December
31, 2014, respectively.



Options exercisable were 3,385,035, 1,600,728
and 1,369,193 as of March 31, 2013 and 2014 and December 31, 2014, respectively.



In respect of the share options exercised
during the year ended March 31, 2013 and 2014 and the nine-month period ended December 31, 2014, the weighted average share price
at the dates of exercise was RMB1.849, RMB 4.404 and RMB5.918 per share, respectively.



F-42







Restricted Shares



On April 1,
2010, Xplane Ltd.(“Xplane”), the Company’s parent company, issued 493,400 of its restricted shares to its
shareholders, who are also employees of the Group. Of these shares, 40% vest on the second anniversary of the grant date and 20%
vest on the third, fourth and fifth anniversaries of the grant date, respectively. The Group measured the fair value of the restricted
shares based on the fair value of the Company’s shares, as Xplane has no other assets except for its investment in the Group.
The fair value of the restricted shares as of April 1, 2010 was RMB126 (US$19) per share. The Group recognized the total
amount of approximately RMB62,351,000 as compensation expense over the five year deemed service, or vesting, period with a corresponding
increase in reserve in the statement of changes in equity. During the years ended March 31, 2013 and 2014 and the nine-month
period ended December 31, 2014, the Group recognized RMB9,768,000, RMB5,612,000 and RMB1,871,000 as compensation expense, respectively.



On March 7, 2012,
the Group issued 4,038,176 restricted shares to its employees. At the same time, Xplane also granted 3,340,400 of Sky-mobi's
restricted shares to employees of the Group. The holders of these shares retain the voting and dividend rights of, but are restricted
from selling, such non-vested restricted shares. 25% of the total 7,378,576 restricted shares vest on each anniversary of the grant
date. The Group measured the fair value of the restricted shares based on the open market quote of the Company’s shares,
which was RMB2.88 (US$0.46). The Group recognizes the total amount of RMB21,327,000 as compensation expense over the four year
deemed service, or vesting, period with a corresponding increase in reserve in the consolidated statements of changes in equity.
During the years ended March 31, 2013 and 2014 and the nine-month period ended December 31, 2014, the Group recognized RMB6,332,000,
RMB2,977,000 and RMB725,000, respectively, as compensation expense. On October 23, 2014, as approved by the board, all the unvested
restricted shares to be granted by Xplane will be issued by the Group, with all the terms unchanged.



On April 15, October
30 and November 18, 2013, the Company issued 100,000, 1,600,000 and 40,000 restricted shares to the Group’s director and
senior management. The holders of these shares retain the voting and dividend rights of, but is restricted from selling, such non-vested
restricted shares. These shares vest one-fourth, one-third and one-fourth on each anniversary of the grant date respectively. The
Group measured the fair value of the restricted shares based on the open market quote of the Company’s shares, which was
RMB1.24 (US$0.20), RMB2.99 (US$0.49) and RMB2.61 (US$0.43), respectively. The Group will recognize the total amount of RMB5,008,000
as compensation expense over the deemed service years, or vesting period with a corresponding increase in reserve in the consolidated
statement of changes in equity. During the year ended March 31, 2014 and the nine-month period ended December 31, 2014, the Group
totally recognized RMB1,436,000 and RMB271,000 as compensation expense.



On April 21, April
29, May 8 and June 30, 2014, the Company issued 24,000, 120,000, 160,000 and 160,000 restricted shares to the Group’s director,
senior management and employees. The holders of these shares retain the voting and dividend rights of, but is restricted from selling,
such non-vested restricted shares. The shares granted on May 8 was immediately vested. The rest shares vest one-fourth on each
anniversary of the grant date or 30%, 30%, 40% on the first, second and third anniversaries of the grant date. The Group measured
the fair value of the restricted shares based on the open market quote of the Company’s shares, which was RMB5.91 (US$0.96),
RMB5.09 (US$0.83), RMB4.70 (US$0.76) and RMB6.37 (US$1.04), respectively. The Group will recognize the total amount of RMB2,523,000
as compensation expense over the deemed service years, or vesting period with a corresponding increase in reserve in the consolidated
statement of changes in equity. During the nine-month period ended December 31, 2014, the Group totally recognized RMB1,065,000
as compensation expense.



On
December 31, 2014, the Company issued 6,252,992 restricted shares to the Group’s senior management and employees. The holders
of these shares retain the voting and dividend rights of, but is restricted from selling such non-vested restricted shares. These
shares vest 20%, 20%, 30% and 30% at the end of 4 months, 12 months, 24 months and 36 months
of the grant date, respectively. The Group measured the fair value of the restricted shares based on the open market quote as of
grant date of the Company’s shares, which was RMB2.91 (US$0.48). The Group will recognize the total amount of RMB18,222,000
as compensation expense over the deemed service years, or vesting period with a corresponding increase in reserve in the consolidated
statement of changes in equity.



F-43







A summary of the restricted shares activity
is as follows:



|                                            |  | Number of Restricted Shares |           
|------------------------------------------- |  | --------------------------- | ----------
|                                            |  |                             |           
|Outstanding on April 1, 2012                |  |                             | 4,038,176 
|Forfeited                                   |  |                             | (1,349,768
|Vested                                      |  |                             | (697,916  
|Outstanding on March 31, 2013               |  |                             | 1,990,492 
|Granted on April 15, 2013                   |  |                             | 100,000   
|Granted on October 30, 2013                 |  |                             | 1,600,000 
|Granted on November 18, 2013                |  |                             | 40,000    
|Forfeited                                   |  |                             | (354,920  
|Vested                                      |  |                             | (549,146  
|Outstanding on March 31, 2014               |  |                             | 2,826,426 
|Granted on April 21, 2014                   |  |                             | 24,000    
|Granted on April 29, 2014                   |  |                             | 120,000   
|Granted on May 8, 2014                      |  |                             | 160,000   
|Granted on June 30, 2014                    |  |                             | 160,000   
|Granted on December 31, 2014                |  |                             | 6,252,992 
|Transferred from Xplane on October 23, 2014 |  |                             | 1,288,000 
|Forfeited                                   |  |                             | (1,500,144
|Vested                                      |  |                             | (1,298,128
|Outstanding on March 31, 2014               |  |                             | 8,033,146 



Other Equity Compensation



As an incentive to
the key management of Mopin, a subsidiary of the Group, the Group granted 12% equity interests of Mopin held by Sky-mobi to certain
key management in June 2013, without requiring future service. The Group measured the fair value of the shares of Mopin based on
the net asset value as Mopin was newly set up in June 2013. The Group recognized RMB2,916,000 compensation expense immediately.



|25. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

| | (a) | Related party balances
| | --- | ----------------------



|                                                        |  | At March 31, |     |  | At March 31, |  |     | At December 31, | 
|------------------------------------------------------- |  | ------------ | --- |  | ------------ |  | --- | --------------- | 
|                                                        |  | 2013         |     |  | 2014         |  |     | 2014            | 
|                                                        |  | RMB’000      |     |  | RMB’000      |  |     | RMB’000         | 
|Amounts due from related parties                        |  |              |     |  |              |  |     |                 | 
|Non-trade balances                                      |  |              |     |  |              |  |     |                 | 
|Amount due from associates                              |  |              |     |  |              |  |     |                 | 
|— Hangzhou TaiKu Technologies Co. Ltd.                  |  |              | 306 |  |              |  | 1   |                 | 
|— Hangzhou Breaking Dawn Network Technologies Co., Ltd. |  |              | 92  |  |              |  | 11  |                 | 
|— Hangzhou Qianlong Technologies Co., Ltd.              |  |              | —   |  |              |  | —   |                 | 
|                                                        |  |              |     |  |              |  |     |                 | 
|Amount due from a shareholder                           |  |              |     |  |              |  |     |                 | 
|Non-trade balances                                      |  |              |     |  |              |  |     |                 | 
|— Xplane Ltd.                                           |  |              | 125 |  |              |  | —   |                 | 
|Trade balances                                          |  |              |     |  |              |  |     |                 | 
|Amount due from associates                              |  |              |     |  |              |  |     |                 | 
|— Hangzhou TaiKu Technologies Co., Ltd.                 |  |              | —   |  |              |  | —   |                 | 
|— Hangzhou Qianlong Technologies Co., Ltd.              |  |              | —   |  |              |  | 148 |                 | 
|— Beijing Jamo Games Technologies Co., Ltd.             |  |              | —   |  |              |  | —   |                 | 
|                                                        |  |              | 523 |  |              |  | 160 |                 | 



F-44







|                                           |  | At March 31, |   |  | At March 31, |  |   | At December 31, | 
|------------------------------------------ |  | ------------ | - |  | ------------ |  | - | --------------- | 
|                                           |  | 2013         |   |  | 2014         |  |   | 2014            | 
|                                           |  | RMB’000      |   |  | RMB’000      |  |   | RMB’000         | 
|Loan receivable due from related parties   |  |              |   |  |              |  |   |                 | 
|Non-trade balances                         |  |              |   |  |              |  |   |                 | 
|Amounts due from associates                |  |              |   |  |              |  |   |                 | 
|— Hangzhou Qianlong Technologies Co., Ltd. |  |              | — |  |              |  | — |                 | 



The amounts due from related parties are
tading and non-trading in nature. The trade balances are unsecured, non-interest bearing and repayable on contract credit term
of 90 days. The non-trade balances are unsecured, non-interest bearing and repayable on demand.



During the nine-month period ended December
31, 2014, the Company granted loan of RMB4,000,000 to its investee, Qianlong to support its daily operation. The loan receivable
due from related parties is unsecured, with 3% interest rate and repayable on demand.



|                                                        |  | At March 31 |       |  | At March 31 |  |        | At December 31 | 
|------------------------------------------------------- |  | ----------- | ----- |  | ----------- |  | ------ | -------------- | 
|                                                        |  | 2013        |       |  | 2014        |  |        | 2014           | 
|                                                        |  | RMB’000     |       |  | RMB’000     |  |        | RMB’000        | 
|Amounts due to related parties                          |  |             |       |  |             |  |        |                | 
|Trade balances                                          |  |             |       |  |             |  |        |                | 
|Amounts due to associates                               |  |             | 577   |  |             |  | 604    |                | 
|— Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd.   |  |             | 426   |  |             |  | 211    |                | 
|— Hangzhou Sibi Technologies Co., Ltd.                  |  |             | 127   |  |             |  | 39     |                | 
|— Beijing Brtech Co., Ltd.                              |  |             | 2,924 |  |             |  | 4,662  |                | 
|— Hangzhou Breaking Dawn Network Technologies Co., Ltd. |  |             | —     |  |             |  | 587    |                | 
|— Hangzhou TaiKu Technologies Co., Ltd.                 |  |             | —     |  |             |  | 875    |                | 
|— Hangzhou Quyuan Technologies Co., Ltd.                |  |             | —     |  |             |  | 188    |                | 
|— Hangzhou Qianlong Technologies Co., Ltd.              |  |             | —     |  |             |  | 4,035  |                | 
|— Hangzhou Joyreach Technologies Co., Ltd.              |  |             | —     |  |             |  | —      |                | 
|— Shanghai Mihoyo Network Technology Co., Ltd.          |  |             | —     |  |             |  | —      |                | 
|— Shanghai Tongyu Network Technology Co., Ltd.          |  |             | 577   |  |             |  | 604    |                | 
|                                                        |  |             | 4,054 |  |             |  | 11,201 |                | 



The amounts due to associates are trading
in nature. The trade balances are unsecured, non-interest bearing and repayable on contract credit term of 90 days.



(b) Related party transactions



During the years ended March 31, 2013 and 2014 and the
nine-month period ended December 31, 2014, respectively, significant related party transactions were as follows:



|                                                       |  | Year Ended |       |  | Year Ended |  |        | Nine months
Ended | 
|------------------------------------------------------ |  | ---------- | ----- |  | ---------- |  | ------ | ----------------- | 
|                                                       |  | March 31   |       |  | March 31   |  |        | December 31       | 
|                                                       |  | 2013       |       |  | 2014       |  |        | 2014              | 
|                                                       |  | RMB’000    |       |  | RMB’000    |  |        | RMB’000           | 
|Cost of revenues (for content)                         |  |            |       |  |            |  |        |                   | 
|Associates                                             |  |            |       |  |            |  |        |                   | 
|— Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd.  |  |            | 357   |  |            |  | 81     |                   | 
|— Hangzhou Sibi Technologies Co., Ltd.                 |  |            | 2,271 |  |            |  | 1,545  |                   | 
|— Beijing Brtech Co., Ltd.                             |  |            | 982   |  |            |  | 349    |                   | 
|— Hangzhou Breaking Dawn Network Technologies Co. Ltd. |  |            | 2,924 |  |            |  | 12,137 |                   | 
|— Hangzhou TaiKu Technologies Co. Ltd.                 |  |            | —     |  |            |  | 1,178  |                   | 
|— Hangzhou Quyuan Technologies Co. Ltd.                |  |            | —     |  |            |  | 1,875  |                   | 
|— Hangzhou Qianlong Technologies Co. Ltd.              |  |            | —     |  |            |  | 7,288  |                   | 
|— Hangzhou Joyreach Technologies Co., Ltd.             |  |            | —     |  |            |  | —      |                   | 
|— Shanghai Mihoyo Network Technology Co. Ltd.          |  |            | —     |  |            |  | —      |                   | 
|— Shanghai Tongyu Network Technology Co., Ltd.         |  |            | —     |  |            |  | —      |                   | 
|— Beijing Jamo Games Technologies Co., Ltd.            |  |            | —     |  |            |  | —      |                   | 
|                                                       |  |            | 6,534 |  |            |  | 24,453 |                   | 



F-45







|                                            |  | Year Ended |   |  | Year Ended |  |       | Nine months
Ended | 
|------------------------------------------- |  | ---------- | - |  | ---------- |  | ----- | ----------------- | 
|                                            |  | March 31   |   |  | March 31   |  |       | December 31       | 
|                                            |  | 2013       |   |  | 2014       |  |       | 2014              | 
|                                            |  | RMB’000    |   |  | RMB’000    |  |       | RMB’000           | 
|Revenues                                    |  |            |   |  |            |  |       |                   | 
|Associates                                  |  |            |   |  |            |  |       |                   | 
|— Hangzhou Qianlong Technologies Co. Ltd.   |  |            | — |  |            |  | 2,830 |                   | 
|— Hangzhou TaiKu Technologies Co. Ltd.      |  |            | — |  |            |  | —     |                   | 
|— Beijing Jamo Games Technologies Co., Ltd. |  |            | — |  |            |  | —     |                   | 
|                                            |  |            | — |  |            |  | 2,830 |                   | 



During the nine-month period ended December
31, 2014, the Company repurchased an aggregate 16,000,000 common shares from its shareholders, Sequoia Capital China Partners Fund
II, L.P., Sequoia Capital China Principals Fund II, L.P. and Sequoia Capital China II, L.P., of par value US$0.00005 per share
at a purchase price of US$0.985 per share, for a total consideration of RMB97,784,500 (US$15,760,000).



(c) Key management compensation



The compensation of directors and other
key management during the years was as follows:



|                                |  | Year Ended |        |  | Year Ended |  |       | Nine months
Ended | 
|------------------------------- |  | ---------- | ------ |  | ---------- |  | ----- | ----------------- | 
|                                |  | March 31   |        |  | March 31   |  |       | December 31       | 
|                                |  | 2013       |        |  | 2014       |  |       | 2014              | 
|                                |  | RMB’000    |        |  | RMB’000    |  |       | RMB’000           | 
|Salary and other benefits       |  |            | 6,152  |  |            |  | 3,669 |                   | 
|Retirement benefit contribution |  |            | 22     |  |            |  | 10    |                   | 
|Share-based compensation        |  |            | 8,393  |  |            |  | 2,212 |                   | 
|                                |  |            | 14,567 |  |            |  | 5,891 |                   | 



|26. | PARTIAL DISPOSAL OF SUBSIDIARIES
|--- | --------------------------------



During the year ended March 31, 2013, the
Group disposed 12.5% equity interest in Sky Technologies International Limited ("Sky Tech") for a cash consideration
of RMB 2,001,000. After the sale, the Group still held 87.5% shares and retained control over Sky Tech. The transaction was accounted
for as an equity transaction. The carrying amounts of the Group's interests and the non-controlling interests were adjusted to
reflect the changes in their relative interests in this subsidiary. The difference between the amount by which the non-controlling
interests were adjusted and the fair value of the consideration received was recognized directly in equity.



During the fiscal year ended March 31,
2014, Sky Tech additionally issued 30,000,000 shares, that diluted the equity interest of non-controlling shareholders from 12.5%
to 10%. After that, the Group held 90% shares and retained control over Sky Tech.



During nine-month period ended December
31, 2014, the Group disposed 4% of equity interest in Mopin for a cash consideration of RMB972,000. After the sale, the Group held
79.88% shares and retained control over Mopin. The transaction was accounted for as an equity transaction. The carrying amounts
of the Group's interests and the non-controlling interests were adjusted to reflect the changes in their relative interests in
this subsidiary. The difference between the amount by which the non-controlling interests were adjusted and the fair value of the
consideration received was recognized directly in equity.



F-46







|27. | OPERATING LEASES
|--- | ----------------



The Group has operating lease agreements
principally for its office properties and servers in the PRC with lease terms between one to two years. These leases are renewable
upon negotiation.



The Group’s commitments for future
minimum lease payments under non-cancelable operating lease agreements are as follows:



|                                        |  | At March 31, 2013 |        |  | At March 31, 2014 |  |        | At December 31, 2014 | 
|--------------------------------------- |  | ----------------- | ------ |  | ----------------- |  | ------ | -------------------- | 
|                                        |  | RMB’000           |        |  | RMB’000           |  |        | RMB’000              | 
|Within one year                         |  |                   | 15,849 |  |                   |  | 9,767  |                      | 
|In the second to fifth years, inclusive |  |                   | 9,122  |  |                   |  | 924    |                      | 
|Total                                   |  |                   | 24,971 |  |                   |  | 10,691 |                      | 



|28. | CAPITAL COMMITMENTS
|--- | -------------------



The Group’s commitments for capital
injections contracted for but not provided in the consolidated financial statements in respect of investment in venture capital
fund and associate is RMB9,102,000 as of December 31, 2014, respectively.



|29. | PROFIT APPROPRIATION
|--- | --------------------



Pursuant to the relevant laws and regulations
in the PRC applicable to foreign-investment corporations, the Group’s PRC subsidiaries are required to maintain a statutory
reserve which is non-distributable. They are required to transfer 10% of their profit after taxation, as determined on a calendar
year basis and in accordance with relevant accounting principles and financial regulations applicable to enterprises established
in the PRC (“PRC GAAP”), if any, to the statutory reserve until the balance reaches 50% of their registered capital.
The amount of this statutory reserve is the same under both PRC GAAP and IFRS and is reflected as statutory reserve in the consolidated
statements of changes in equity. These reserves are not distributable as cash dividends. The difference between the net profit,
as determined under PRC GAAP, and the amount allocated to statutory reserve, for each of PRC subsidiaries represents amounts that
are free of restriction. Such amounts differ from the amounts under IFRS due to accounting differences between PRC GAAP and IFRS.



At their discretion, the PRC subsidiaries
may allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. PRC regulations
currently permit payment of dividends only out of the Group’s PRC subsidiaries’ accumulated profits as determined in
accordance with PRC accounting standards and regulations. The statutory reserve amounted to 1,000,000, RMB1,000,000 and RMB1,000,000
as of March 31, 2013 and 2014 and December 31, 2014, respectively. The Group’s PRC subsidiaries have not allocated any
of their after-tax profits to the staff welfare and bonus funds for any period presented.



In addition, the registered capital of
the Company’s PRC subsidiaries of RMB108,694,000 as of December 31, 2014 was considered restricted due to restrictions on
the distribution of registered share capital.



As a result of these PRC laws and regulations,
the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets, either in the form
of dividends, loans or advances. Such restricted portion amounted to RMB112,734,000, RMB111,618,000 and RMB123,971,000 as of March 31,
2013 and 2014 and December 31, 2014, respectively.



|30. | SUBSEQUENT EVENT
|--- | ----------------



In February 2015, the Group purchased 10%
of equity interest in Sky Tech from the non-controlling shareholder for a cash consideration of RMB2,000,000. As a result, the
group held 100% of equity interest in Sky Tech after this purchase.



|31. | APPROVAL OF FINANCIAL STATEMENTS
|--- | --------------------------------



The financial statements were approved
by the board of directors and authorized for issue on April 27, 2015.



* * * * *



F-47