Kingsoft : ANNOUNCEMENT OF THE RESULTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2020

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Kingsoft Corporation Limited

金 山 軟 件 有 限 公 司

(Continued into the Cayman Islands with limited liability)

(Stock Code: 03888)

(Convertible Bonds Code: 40210)

ANNOUNCEMENT OF THE RESULTS

FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2020

The board ("Board") of directors (the "Directors") of Kingsoft Corporation Limited (the "Company") announces the unaudited results of the Company and its subsidiaries (the "Group" or "Kingsoft") for the three and six months ended 30 June 2020. These interim results have been reviewed by the audit committee of the Company (the "Audit Committee").

1

FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the three and six months ended 30 June 2020

			For the three months	For the six months
			ended 30 June	ended 30 June
			2020	2019	2020	2019
		Notes	RMB'000	RMB'000	RMB'000	RMB'000
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
					(Restated)			(Restated)
CONTINUING OPERATIONS
Revenue		869,162						1,649,901
	Online games			569,838					1,169,491
Office software and services and others		550,956		385,992				941,542		673,581
			1,420,118		955,830				2,591,443		1,843,072
Cost of revenue		(217,922)	(182,436)	(419,099)	(357,543)
Gross profit		1,202,196		773,394				2,172,344		1,485,529
Research and development costs, net		(390,265)	(375,083)	(745,289)	(744,417)
Selling and distribution expenses		(192,909)	(179,400)	(339,654)	(286,586)
Administrative expenses		(101,418)	(75,016)	(194,671)	(154,401)
Share-based compensation costs		(36,559)	(34,933)	(67,479)	(74,208)
Other income		65,979		54,034				112,860		109,627
Other expenses		1,705		2,045				(4,223)	1,332
Operating profit		548,729		165,041				933,888		336,876
Other losses, net		(104,743)	(1,287,947)	(101,425)	(1,289,278)
Finance income		110,400		51,421				208,089		100,587
Finance costs		(28,387)	(4,714)	(34,129)	(10,902)
Share of profits and losses of:		3,764						11,121
	Joint ventures			8,756					11,211
	Associates		(172,697)	(58,264)	(236,706)	(135,795)
Profit/(loss) before tax from continuing
	operations	4	357,066		(1,125,707)	780,838		(987,301)
Income tax expense	5	(83,121)	(5,065)	(147,176)	(48,240)
Profit/(loss) for the period from
	continuing operations		273,945		(1,130,772)	633,662		(1,035,541)
DISCONTINUED OPERATION
Profit/(loss) for the period from		8,927,436						8,446,504
	a discontinued operation			(417,814)		(713,359)
Profit/(loss) for the period		9,201,381		(1,548,586)	9,080,166		(1,748,900)
Attributable to:
	9,151,331						9,157,588
Owners of the parent			(1,415,205)		(1,482,969)
	Non-controlling interests		50,050		(133,381)	(77,422)	(265,931)
			9,201,381		(1,548,586)	9,080,166		(1,748,900)

2

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS (CONTINUED)

For the three and six months ended 30 June 2020

			For the three months	For the six months
			ended 30 June	ended 30 June
		2020	2019	2020	2019
			RMB	RMB	RMB	RMB
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
					(Restated)			(Restated)
Earnings/(loss) per share
	attributable to ordinary
	equity holders of the parent	7
	Basic
	- For profit/(loss) for the period	6.69		(1.04)	6.70		(1.09)
	- For profit/(loss) from
	continuing operations	0.10		(0.85)	0.29		(0.80)
	Diluted
	- For profit/(loss) for the period	6.67		(1.04)	6.67		(1.09)
	- For profit/(loss) from
	continuing operations	0.10		(0.85)	0.28		(0.80)

3

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the three and six months ended 30 June 2020

	For the three months	For the six months
	ended 30 June	ended 30 June
	2020	2019	2020	2019
	RMB'000	RMB'000	RMB'000	RMB'000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
PROFIT/(LOSS) FOR THE PERIOD	9,201,381	(1,548,586)	9,080,166	(1,748,900)

OTHER COMPREHENSIVE   INCOME/(LOSS)

Other comprehensive income/(loss) that

• may be reclassified to profit or loss in
• subsequent periods:

Exchange differences:
Exchange differences on translation	(17,555)		(6,633)
	of foreign operations	41,546	(6,889)
Reclassification adjustments for deemed	64,475			64,475
	disposal of a subsidiary		-		-
Share of other comprehensive	2,084			26,987
	income of associates		39,930		22,371
Net other comprehensive income
that may be reclassified to profit or
loss in subsequent periods	49,004		81,476	84,829		15,482

Other comprehensive income/(loss) that

• will not be reclassified to profit or
• loss in subsequent periods:

Equity investments designated at fair value
through other comprehensive income:	457,340				816,507
	Changes in fair value, net of tax	(65,510)	(95,855)
Share of other comprehensive	17,738				11,731
	income/(loss) of associates	(21,655)	(19,928)

Net other comprehensive income/(loss)

• that will not be reclassified to profit

or loss in subsequent periods	475,078	(87,165)	828,238	(115,783)

OTHER COMPREHENSIVE

	INCOME/(LOSS) FOR THE
	PERIOD, NET OF TAX	524,082	(5,689)	913,067		(100,301)
TOTAL COMPREHENSIVE INCOME/
	(LOSS) FOR THE PERIOD	9,725,463	(1,554,275)	9,993,233		(1,849,201)
Attributable to:
	Owners of the parent	9,669,404	(1,408,634)	10,086,254		(1,576,903)
	Non-controlling interests	56,059	(145,641)	(93,021)	(272,298)
		9,725,463	(1,554,275)	9,993,233		(1,849,201)

4

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2020

		As at		As at
		30 June		31 December
		2020	2019
	Notes	RMB'000		RMB'000
		(Unaudited)		(Audited)
NON-CURRENT ASSETS		1,160,035
Property, plant and equipment		2,913,460
Investment properties		64,769	62,504
Right-of-use assets		541,046	403,737
Other intangible assets		22,285	30,938
Investments in joint ventures		250,069	270,303
Investments in associates		12,940,477	2,437,522
Equity investments designated at fair value		1,015,751
through other comprehensive income		746,992
Financial assets at fair value through profit or loss		201,209	49,314
Deferred tax assets		126,899	107,038
Other non-current assets		9,164	47,276
Total non-current assets		16,331,704	7,069,084
CURRENT ASSETS
	16,381
Inventories		16,378
Trade receivables	8	704,191	2,059,031
Prepayments, other receivables and other assets		1,609,555	1,365,093
Equity investments designated at fair value through		10,000
other comprehensive income		10,000
Financial assets at fair value through profit or loss		268,840	89,920
Cash and bank deposits		14,788,526	13,792,117
Total current assets		17,397,493	17,332,539
CURRENT LIABILITIES
	303,563
Trade payables	9	1,501,604
Other payables and accruals		874,319	1,690,263
Interest-bearing bank loans		-	623,215
Lease liabilities		58,453	18,260
Deferred revenue		1,105,923	879,440
Income tax payable		143,757	93,430
Derivative financial instruments		-	128,236
Total current liabilities		2,486,015	4,934,448
NET CURRENT ASSETS		14,911,478	12,398,091
TOTAL ASSETS LESS CURRENT LIABILITIES		31,243,182	19,467,175

5

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

As at 30 June 2020

		As at	As at
		30 June	31 December
		2020		2019
	Notes	RMB'000	RMB'000
		(Unaudited)	(Audited)
NON-CURRENT LIABILITIES
Deferred revenue		113,029		51,944
Deferred tax liabilities		1,121,835		50,691
Interest-bearing bank loans		-	74,351
Lease liabilities		200,477		97,789
Liability component of convertible bonds	10	2,322,762		-
Liability component of redeemable convertible
preferred shares		-	3,583,019
Total non-current liabilities		3,758,103		3,857,794
NET ASSETS		27,485,079		15,609,381
EQUITY
Equity attributable to owners of the parent
Issued capital		5,316		5,316
Share premium account		2,747,644		2,995,605
Treasury shares		(13,543)	(14,631)
Equity component of convertible bonds	10	468,700		-
Other reserves		21,006,139		10,810,858
		24,214,256		13,797,148
Non-controlling interests		3,270,823	1,812,233
TOTAL EQUITY		27,485,079		15,609,381

6

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

											Attributable to owners of the parent
																		Fair value
																		reserve of
																		financial
																		assets
																		at fair
									Equity									value through	Foreign
					Share			component of				Share-based				other	currency						Non-
			Issued	premium	Treasury	convertible		Statutory	compensation	Other capital	comprehensive	translation	Retained				controlling	Total
			capital	account	share	bonds		reserves	reserve	reserve		income	reserve	profits	Total	interests	equity
			RMB'000	RMB'000	RMB'000	RMB'000		RMB'000	RMB'000	RMB'000		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
At 1 January 2020	5,316		2,995,605		(14,631)	-	348,987*	556,591*	4,008,820*	(1,072,927)*	391,892*	6,577,495*	13,797,148		1,812,233		15,609,381
Profit/(loss) for the period	-	-	-	-		-	-	-		-	-	9,157,588		9,157,588		(77,422)	9,080,166
Other comprehensive income/(loss) for the period:
Changes in fair value of equity
	investments designated at fair value through
	other comprehensive income, net of tax	-	-	-	-		-	-	-	816,507		-	-	816,507		-	816,507
Exchange differences on translation of
	foreign operations	-	-	-	-		-	-	-		-	8,966		-	8,966		(15,599)	(6,633)
Reclassification adjustments for deemed
	disposal of a subsidiary	-	-	-	-		-	-	-		-	64,475		-	64,475		-	64,475
Share of other comprehensive income
	of associates	-	-	-	-		-	-	-	11,731		26,987		-	38,718		-	38,718
Total comprehensive income/(loss) for the period	-	-	-	-		-	-	-	828,238	100,428		9,157,588	10,086,254		(93,021)	9,993,233
Dividends paid to non-controlling interests	-	-	-	-		-	-	-		-	-	-	-	(155,057)	(155,057)
Transfer of fair value reserve upon the
disposal of equity investments at fair
value through other comprehensive
	income	-	-	-	-		-	-	-	465,906		-	(465,906)	-	-	-
Final 2019 dividend declared	-	(124,861)	-	-		-	-	-		-	-	-	(124,861)	-	(124,861)
Distribution in specie	-	(130,033)	-	-		-	-	-		-	-	-	(130,033)	-	(130,033)
Issue of convertible bonds	-	-	-	468,700		-	-	-		-	-	-	468,700		-	468,700
Share-based compensation costs	-	-	-	-		-	91,920		-		-	-	-	91,920		37,582		129,502
Vesting and settlement of share-based awards	-	6,933		1,088		-		-	(24,004)	17,949			-	-	-	1,966		1,590		3,556
Share of reserves of associates	-	-	-	-		-	-	28,781			-	-	-	28,781		-	28,781
Changes in the ownership interests in
	subsidiaries	-	-	-	-		-	-	(5,619)		-	-	-	(5,619)	(26,351)	(31,970)
Deemed disposal of a subsidiary	-	-	-	-	(7,571)	(96,782)	(195,714)		-	-	300,067		-	1,693,847		1,693,847
At 30 June 2020	- 5,316		2,747,644		(13,543)	468,700	341,416*	527,725*	3,854,217*	221,217*	492,320*	15,569,244*	24,214,256		3,270,823		27,485,079

• These reserve accounts comprise the consolidated other reserves of RMB21,006,139,000 (31 December 2019: RMB10,810,858,000) in the condensed consolidated statement of financial position.

7

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

For the six months ended 30 June 2019

																	Attributable to owners of the parent
																											Fair value
																											reserve of
																										financial assets
													Equity													at fair value			Foreign
						Share					component of					Share-based				through other			currency										Non-
			Issued			premium			Treasury		convertible			Statutory	compensation	Other capital	comprehensive	translation			Retained						controlling
			capital			account			shares		bonds			reserves			reserve		reserve		income			reserve			profits			Total	interests	Total equity
			RMB'000			RMB'000			RMB'000		RMB'000			RMB'000			RMB'000		RMB'000		RMB'000			RMB'000			RMB'000			RMB'000	RMB'000	RMB'000
	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)			(Unaudited)		(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
At 31 December 2018	5,316	2,972,969		(18,089)	1,274		275,986		471,326		1,857,341		(1,044,690)	311,094		8,205,312		13,037,839		(116,240)	12,921,599
Effect of adoption of IFRS 16			-			-			-		-			-			-		-		-			-	(8,431)	(8,431)	-	(8,431)
At 1 January 2019 (restated)	5,316	2,972,969	(18,089)	1,274		275,986		471,326		1,857,341		(1,044,690)	311,094		8,196,881	13,029,408		(116,240)	12,913,168
Loss for the period			-			-			-		-			-			-		-		-			-	(1,482,969)	(1,482,969)	(265,931)	(1,748,900)
Other comprehensive income for the period:
Exchange differences on translation of foreign operations			-			-			-		-			-			-		-		-	(522)			-	(522)	(6,367)	(6,889)
Changes in fair value of equity investments designated at fair value through
other comprehensive income, net of tax			-			-			-		-			-			-		-	(95,855)			-			-	(95,855)	-	(95,855)
Share of other comprehensive income/(loss) of associates			-			-			-		-			-			-		-	(19,928)	22,371				-	2,443		-	2,443
Total comprehensive income/(loss) for the period			-			-			-		-			-			-		-	(115,783)	21,849		(1,482,969)	(1,576,903)	(272,298)	(1,849,201)
Share-based compensation costs			-			-			-		-			-	77,392			-		-			-			-	77,392		35,769		113,161
Vesting of awarded shares			-			-	1,163			-			-	(1,461)	298			-			-			-			-	-	-
Share of reserves of associates			-			-			-		-			-			-	(10,547)		-			-			-	(10,547)	-	(10,547)
Redemption of convertible bonds			-			-			-	(1,274)			-			-	1,446			-	(172)			-			-	-	-
Changes in the ownership interests in subsidiaries			-			-			-		-			-			-	(1,748)		-			-			-	(1,748)	(694)	(2,442)
At 30 June 2019
5,316	2,972,969	(16,926)		-	275,986		547,257		1,846,790		(1,160,473)	332,771		6,713,912	11,517,602		(353,463)	11,164,139

8

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2020

	For the six months
	ended 30 June
	2020		2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
Net cash flows from operating activities	1,308,058		244,205
Net cash flows (used in)/from investing activities	(6,276,640)	44,822
Net cash flows from/(used in) financing activities	1,954,215		(593,060)
Net decrease in cash and cash equivalents	(3,014,367)	(304,033)
Cash and cash equivalents at beginning of the period	7,329,845		4,544,784
Effect of foreign exchange rate changes, net	5,350		(3,978)
Cash and cash equivalents at end of the period	4,320,828		4,236,773
Non-pledged time deposits with original maturity
of over three months when acquired	2,476,926		1,150,772
Principal protected structure deposits with original maturity
of over three months when acquired	7,990,772		3,592,937
Cash and bank deposits as stated in the
condensed consolidated statement of financial position	14,788,526		8,980,482

9

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate information

The Company was incorporated under the Companies Act of the British Virgin Islands on 20 March 1998. On 15 November 2005, the Company was redomiciled to the Cayman Islands under the Company Law (2004 revision) of the Cayman Islands. The Company's shares (the "Shares") have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") since 9 October 2007.

During the six months ended 30 June 2020, there are no material changes in the principal activities of the Group, except that the operation of Kingsoft Cloud Holdings Limited ("Kingsoft Cloud") and its subsidiaries (collectively, "Kingsoft Cloud Group") before the deemed disposal is reclassified as a discontinued operation of the Group. The continuing operations of the Group were involved in the following principal activities:

• research and development of games, and provision of online games, mobile games and casual game services; and
• design, research and development and sales and marketing of the office software products and services of WPS Office.

The discontinued operation of the Group was involved in provision of cloud services including cloud computing, storage and delivery, and comprehensive cloud-based solutions through Kingsoft Cloud Group.

The interim condensed consolidated financial statements for the three months and six months ended 30 June 2020 were approved and authorized for issue in accordance with a resolution of the Board on 18 August 2020.

2. Basis of preparation and significant accounting policies Basis of preparation

The interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting, issued by International Accounting Standards Board ("IASB").

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.

Certain comparative amounts in the interim condensed consolidated financial statement have been reclassified to conform with the current period's presentation.

10

2. Basis of preparation and significant accounting policies (continued) Discontinued operation

On 20 March 2020, the shareholders of the Company approved the proposed spin-off and separate listing of Kingsoft Cloud. On 8 May 2020 (New York time), the listing was completed and the trading in the American depositary shares ("ADSs") of Kingsoft Cloud on National Association of Securities Dealers Automated Quotations commenced. As a result, the Group lost control over Kingsoft Cloud, which was changed from the subsidiary to the associate of the Company.

Kingsoft Cloud Group carries out the "cloud services segment" of the Group. In accordance with IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations, the operating results of Kingsoft Cloud Group before the deemed disposal have been presented as a discontinued operation in the interim condensed consolidated statement of profit or loss. The comparative figures for the interim condensed consolidated statement of profit or loss are restated to reflect the reclassification between continuing operations and a discontinued operation of the Group accordingly.

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those applied in the preparation of the Group's annual financial statements for the year ended 31 December 2019, except for the discontinued operation mentioned above and the adoption of the following revised International Financial Reporting Standards ("IFRSs") for the first time for the current period's financial information.

Amendments to IFRS 3	Definition of a Business
Amendments to IFRS 9, IAS 39 and IFRS 7	Interest Rate Benchmark Reform
Amendment to IFRS 16	Covid-19-Related Rent Concessions
	(early adopted)
Amendments to IAS 1 and IAS 8	Definition of Material

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

11

3. Operating segments

For management purposes, the Group is organised into business units based on their products and services, and has two reportable operating segments as follows:

1. the entertainment software segment engages in the research and development of games, and the provision of online games, mobile games and casual game services; and
2. the office software and services and others segment engages in the design, research and development and sales and marketing of the office software products and services of WPS Office.

Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/(loss), which is a measure of adjusted profit/(loss) before tax from continuing operations. The adjusted profit/(loss) before tax from continuing operations is measured consistently with the Group's profit/(loss) before tax from continuing operations except that administrative expenses, share-based compensation costs, other income, other expenses, net other losses, finance income, non-lease related finance costs as well as share of profits and losses of joint ventures and associates are excluded from such measurement.

The operating results of Kingsoft Cloud Group before the deemed disposal were classified as a discontinued operation of the Group and were excluded from the segment information for the six months ended 30 June 2020, the comparative figures of segment information for the six months ended 30 June 2019 were restated accordingly.

12

3. Operating segments (continued)
				Office software
		Entertainment	and services
		software	and others	Total
		RMB'000	RMB'000	RMB'000
		(Unaudited)	(Unaudited)	(Unaudited)
For the six months ended 30 June 2020
Segment revenue
Sales to external customers	1,649,901	941,542	2,591,443
Segment results	761,261		321,044		1,082,305
Reconciliation:
Administrative expenses					(194,671)
Share-based compensation costs					(67,479)
Other income					112,860
Other expenses					(4,223)
Other losses, net					(101,425)
Finance income					208,089
Finance costs (other than interest on
	lease liabilities)					(29,033)
Share of profits and losses of:
	Joint ventures					11,121
	Associates					(236,706)
Profit before tax from continuing
	operations					780,838

13

3. Operating segments (continued)
				Office software
		Entertainment	and services
		software	and others	Total
		RMB'000	RMB'000	RMB'000
		(Unaudited)	(Unaudited)	(Unaudited)
		(Restated)	(Restated)	(Restated)
For the six months ended 30 June 2019
Segment revenue
Sales to external customers	1,169,491	673,581	1,843,072
Segment results
302,038		152,115		454,153
Reconciliation:
Administrative expenses					(154,401)
Share-based compensation costs					(74,208)
Other income					109,627
Other expenses					1,332
Other losses, net					(1,289,278)
Finance income					100,587
Finance costs (other than interest on
	lease liabilities)					(10,529)
Share of profits and losses of:
	Joint ventures					11,211
	Associates					(135,795)
Loss before tax from continuing
	operations					(987,301)

14

3. Operating segments (continued) Geographical information

Revenue of continuing operations from external customers:

For the six months ended 30 June

20202019

RMB'000 RMB'000

(Unaudited) (Unaudited) (Restated)

Mainland China	2,487,178	1,757,396
Hong Kong	96,991	77,765
Other countries and regions	7,274	7,911
Total	2,591,443		1,843,072

The revenue information above is based on the locations of the Group's operations.

4. Profit/(loss) before tax from continuing operations

The Group's profit/(loss) before tax from continuing operations is arrived at after charging:

	For the six months
	ended 30 June
	2020	2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
		(Restated)
Employee benefit expenses	911,754	861,306
Depreciation of property, plant and equipment	53,442	45,209
Depreciation of investment properties	750	719
Depreciation of right-of-use assets	30,220	11,132
Amortisation of other intangible assets	6,273	10,280
Interest on bank loans, lease liabilities and
convertible bonds	34,129	10,902
Impairment of trade and other receivables	38	1,682
Impairment of investments in associates	3,932	1,300,000*
Impairment of loans to an associate	38,517	-

• As at 30 June 2019, the Group held certain ordinary shares in Cheetah Mobile Inc. ("Cheetah Mobile") which is listed on the New York Stock Exchange in the form of ADSs. As Cheetah Mobile's share price has been struggled with sluggish performance, the Group performed an impairment assessment and made an impairment loss of approximately RMB1,300 million, being the difference of carrying amount in excess of the fair value of the investment in Cheetah Mobile.

15

5. Income tax expense

The People's Republic of China (the "PRC") corporate income tax represents the tax charged on the estimated assessable profits arising in the Mainland China during the period. In general, the PRC subsidiaries of the Group are subject to the PRC corporate income tax rate of 25% except for certain PRC subsidiaries which are entitled to tax holidays and preferential tax rates.

Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong during the period, except for one subsidiary of the Group which is a qualifying entity under the two-tiered profits tax rates regime. The first HK$2,000,000 (2019: HK$2,000,000) of assessable profits of this subsidiary are taxed at 8.25% and the remaining assessable profits are taxed at 16.5%.

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates.

	For the six months
	ended 30 June
	2020		2019
	RMB'000	RMB'000
	(Unaudited)	(Unaudited)
			(Restated)
Current income tax	190,258		61,919
Deferred income tax	(43,082)	(13,679)
Total tax charge for the period from continuing
operations	147,176		48,240
Total tax charge for the period from a discontinued
operation	6,450		4,559
Total tax charge for deemed disposal of a subsidiary	1,070,135		-
	1,223,761		52,799

16

6. Dividends Final dividend

A final dividend of HK$0.10 per ordinary share for 2019 proposed by the Board was approved by the shareholders of the Company (the "Shareholders") on 27 May 2020. The actual 2019 final dividend paid was HK$136.7 million in July 2020.

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 June 2020 (six months ended 30 June 2019: nil).

Distribution in specie

In accordance with the requirements of Practice Note 15 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), the Company must give due regard to the interests of its existing shareholders by providing them with an assured entitlement to shares in Kingsoft Cloud, either by way of a distribution in specie of existing shares in Kingsoft Cloud or by way of preferred application in any offering of existing or new shares in Kingsoft Cloud.

The Company has provided the shareholders with choice of ADSs of Kingsoft Cloud, or cash payment in lieu, with value of each ADS to be HK$131.75, based on Kingsoft Cloud initial public offering price of US$17 per ADS translated into HK$ at the exchange rate of US$1 to HK$7.75.

According to the final record of the distribution in specie, total amount of cash payment distributed to the Company's shareholders electing to receive cash is HK$124.0 million, and total number of ADSs distributed to the Company's shareholders electing to receive ADSs is 110,265 ADSs. The cheques for cash payment were despatched on 16 June 2020 (Hong Kong time) and the distributing ADSs were despatched on 16 June 2020 (New York time).

17

7. Earnings/(loss) per share attributable to ordinary equity holders of the parent

The calculation of the basic earnings/(loss) per share amounts is based on the profit/(loss) for the period attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 1,366,890,596 (six months ended 30 June 2019: 1,365,424,321) in issue during the period.

The calculation of diluted earnings/(loss) per share amounts is based on the profit/(loss) for the period attributable to ordinary equity holders of the parent, adjusted to reflect the impact on earnings arising from the share option schemes and the award share schemes adopted by the Group's subsidiaries and associates. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares in issue during the period, as used in the basic earnings/(loss) per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares. No adjustment has been made to the basic earnings per share amounts presented for the period ended 30 June 2020 in respect of the convertible bonds outstanding as the impact was anti-dilutive.

The calculations of basic and diluted earnings/(loss) per share are based on:

		For the six months
		ended 30 June
		2020		2019
		RMB'000	RMB'000
		(Unaudited)	(Unaudited)
				(Restated)
Earnings/(loss)
Profit/(loss) attributable to ordinary equity holders of the
parent used in the basic earnings per share calculation:
	From continuing operations	392,889	(1,090,616)
From a discontinued operation	8,764,699	(392,353)
		9,157,588		(1,482,969)
Decrease in earnings adjusted for the share option schemes
and the share award schemes adopted by the Group's
	subsidiaries and associates	(10,790)	(5,685)
		9,146,798		(1,488,654)
Attributable to:
	Continuing operations	382,099		(1,096,301)
	Discontinued operation	8,764,699		(392,353)
		9,146,798		(1,488,654)

18

7. Earnings/(loss) per share attributable to ordinary equity holders of the parent (continued)

		Number of shares
		For the six months
		ended 30 June
		2020	2019
		(Unaudited)		(Unaudited)
Shares
Weighted average number of ordinary shares in issue less
shares held for the share award schemes during the
	period used in the basic earnings per share calculation	1,366,890,596	1,365,424,321
Effect of dilution - weighted average number of
	ordinary shares:
	Share options	834,941		-
	Awarded shares	2,994,821		-
		1,370,720,358	1,365,424,321

8. Trade receivables

An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

	30 June		31 December
	2020	2019
	RMB'000		RMB'000
	(Unaudited)		(Audited)
0-30 days	315,435	817,869
31-60 days	82,319	377,336
61-90 days	94,861	154,914
91-365 days	152,194	631,294
1 to 2 years	47,577	47,683
Over 2 years	11,805	29,935
	704,191	2,059,031

19

9. Trade payables

An ageing analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

	30 June	31 December
	2020		2019
	RMB'000	RMB'000
	(Unaudited)	(Audited)
0-30 days	129,078		829,998
31-60 days	31,462		295,064
61-90 days	41,868		106,092
91-365 days	89,424		167,157
Over one year	11,731		103,293
	303,563		1,501,604

10. Convertible bonds

On 29 April 2020, the Company issued five-year convertible bonds in the principal amount of HK$3,100 million which bear interest at a rate of 0.625% per annum payable semi-annually (the "2020 Convertible Bonds"). The 2020 Convertible Bonds are convertible at the option of the bondholders into Shares from 9 June 2020 to 3:00 p.m. on the date falling 10 days prior to the maturity date, at a price of HK$35.7637 per share, subject to adjustments. The Company may redeem under certain circumstances the outstanding 2020 Convertible Bonds at early redemption amount together with interest accrued by giving the bondholders not less than 30 nor more than 60 days' prior notice. On the maturity date, any 2020 Convertible Bonds not converted will be redeemed by the Company at 105.85% of the principal amount together with accrued and unpaid interest thereon. There was no conversion or redemption of the 2020 Convertible Bonds during the six months ended 30 June 2020.

The fair value of the liability component was estimated at the issuance date using an equivalent market interest rate for a similar bond without a conversion option. The residual amount is assigned as the equity component and is included in shareholders' equity.

20

OPERATIONAL HIGHLIGHTS

	In June	In March		In December	In September		In June
	2020		2020	2019		2019	2019
Office Software*
Monthly Active Users ("MAU") (Million)	454		447	411		382	348

• Office Software products include WPS Office and Kingsoft Powerword.

21

FINANCIAL HIGHLIGHTS

		For the three months ended
		30 June	30 June	31 March
		2020		2019		2020
		RMB'000	RMB'000	RMB'000
		(Unaudited)	(Unaudited)	(Unaudited)
				(Restated)
CONTINUING OPERATIONS
Revenue	869,162
	Online games		569,838		780,739
Office software and services and others	550,956		385,992		390,586
		1,420,118		955,830	1,171,325
Cost of revenue	(217,922)	(182,436)	(201,177)
Gross profit	1,202,196		773,394	970,148
Research and development costs, net	(390,265)	(375,083)	(355,024)
Selling and distribution expenses	(192,909)	(179,400)	(146,745)
Administrative expenses	(101,418)	(75,016)	(93,253)
Share-based compensation costs	(36,559)	(34,933)	(30,920)
Other income	65,979	54,034	46,881
Other expenses	1,705	2,045	(5,928)
Operating profit	548,729		165,041	385,159
Other gains/(losses), net	(104,743)	(1,287,947)	3,318
Finance income	110,400	51,421	97,689
Finance costs	(28,387)	(4,714)	(5,742)
Share of profits and losses of:	3,764
	Joint ventures	8,756	7,357
	Associates	(172,697)	(58,264)	(64,009)
Profit/(loss) before tax from continuing
	operations	357,066		(1,125,707)	423,772
Income tax expense	(83,121)	(5,065)	(64,055)
Profit/(loss) for the period from
	continuing operations	273,945		(1,130,772)	359,717
DISCONTINUED OPERATION
Profit/(loss) for the period from a	8,927,436
	discontinued operation		(417,814)	(480,932)
Profit/(loss) for the period	9,201,381		(1,548,586)	(121,215)
Attributable to:
9,151,331
Owners of the parent		(1,415,205)	6,257
	Non-controlling interests	50,050		(133,381)	(127,472)
		9,201,381		(1,548,586)	(121,215)

22

FINANCIAL HIGHLIGHTS (CONTINUED)

For the three months ended

30 June	30 June	31 March
2020	2019	2020
RMB	RMB	RMB
(Unaudited)	(Unaudited)	(Unaudited)
	(Restated)

Earnings/(loss) per share attributable to

• ordinary equity holders of the parent
• Basic

	- For profit/(loss) for the period	6.69	(1.04)	0.00
	- For profit/(loss) from continuing
0.10
				operations	(0.85)	0.19
	Diluted
6.67
	- For profit/(loss) for the period	(1.04)	0.00
	- For profit/(loss) from continuing
0.10
				operations	(0.85)	0.18

23

FINANCIAL HIGHLIGHTS (CONTINUED)

		For the six months ended
		30 June	30 June
		2020		2019
		RMB'000	RMB'000
		(Unaudited)	(Unaudited)
				(Restated)
CONTINUING OPERATIONS
Revenue	1,649,901
	Online games		1,169,491
Office software and services and others	941,542		673,581
		2,591,443		1,843,072
Cost of revenue	(419,099)	(357,543)
Gross profit	2,172,344		1,485,529
Research and development costs, net	(745,289)	(744,417)
Selling and distribution expenses	(339,654)	(286,586)
Administrative expenses	(194,671)	(154,401)
Share-based compensation costs	(67,479)	(74,208)
Other income	112,860	109,627
Other expenses	(4,223)	1,332
Operating profit	933,888		336,876
Other losses, net	(101,425)	(1,289,278)
Finance income	208,089	100,587
Finance costs	(34,129)	(10,902)
Share of profits and losses of:	11,121
	Joint ventures	11,211
	Associates	(236,706)	(135,795)
Profit/(loss) before tax from continuing operations	780,838		(987,301)
Income tax expense	(147,176)	(48,240)
Profit/(loss) for the period from continuing operations	633,662		(1,035,541)
DISCONTINUED OPERATION
8,446,504
Profit/(loss) for the period from a discontinued operation		(713,359)
Profit/(loss) for the period	9,080,166		(1,748,900)
Attributable to:
9,157,588
Owners of the parent		(1,482,969)
	Non-controlling interests	(77,422)	(265,931)
		9,080,166		(1,748,900)

24

FINANCIAL HIGHLIGHTS (CONTINUED)

For the six months ended

30 June	30 June
2020	2019
RMB	RMB
(Unaudited)	(Unaudited)
	(Restated)

Earnings/(loss) per share attributable to

• ordinary equity holders of the parent
• Basic

	- For profit/(loss) for the period	6.70	(1.09)
	- For profit/(loss) from continuing operations	0.29		(0.80)
	Diluted
6.67
		- For profit/(loss) for the period		(1.09)
		- For profit/(loss) from continuing operations	0.28		(0.80)

25

MANAGEMENT DISCUSSION AND ANALYSIS

Second Quarter of 2020 Compared to Second Quarter of 2019 and First Quarter of 2020

Revenue

Revenue for the second quarter of 2020 increased 49% year-on-year and 21% quarter-on-quarter to RMB1,420.1 million. Revenue from the online games, and office software and services and others represented 61% and 39% of the Group's total revenue for the second quarter of 2020. Revenue from these business lines is reported net of intra-group transactions.

Revenue from the online games business for the second quarter of 2020 increased 53% year-on- year and 11% quarter-on-quarter to RMB869.2 million. The increases were mainly attributable to impressive robust revenue growth from flagship game JX Online III, resulting from frequent content updates and operational innovations, partially offset by decreased revenue from certain existing mobile games as the natural declining life cycles.

Revenue from the office software and services and others for the second quarter of 2020 increased 43% year-on-year and 41% quarter-on-quarter to RMB551.0 million. The increases were largely due to sustainable growth from subscription services and licensing business of Beijing Kingsoft Office Software, Inc. ("Kingsoft Office") and its subsidiaries (collectively, "Kingsoft Office Group"), driven by increased paid users resulting from continuously improved products and services.

Cost of Revenue and Gross Profit

Cost of revenue for the second quarter of 2020 increased 19% year-on-year and 8% quarter-on- quarter to RMB217.9 million. The increases were mainly due to higher server and bandwidth service fees associated with increased user traffic, as well as greater content costs associated with increased personal subscription services of Kingsoft Office Group.

Gross profit for the second quarter of 2020 increased 55% year-on-year and 24% quarter-on-quarter to RMB1,202.2 million. The Group's gross profit margin increased by four percentage points year- on-year and two percentage points quarter-on-quarter to 85%. The increases of the Group's gross profit margin were mainly due to greater revenue contribution from self-developed games in this quarter, which have relatively higher gross profit margin, as well as improved gross profit margin of subscription services of Kingsoft Office Group.

Research and Development ("R&D") Costs, net

Net R&D costs for the second quarter of 2020 increased 4% year-on-year and 10% quarter-on- quarter to RMB390.3 million. The increases were mainly attributable to increased headcount as well as personnel related expenses, as we consistently focus on improving R&D capability and further developing and enhancing our products and services.

26

Selling and Distribution Expenses

Selling and distribution expenses for the second quarter of 2020 increased 8% year-on-year and 31% quarter-on-quarter to RMB192.9 million. The year-on-year increase was largely due to increased channel costs of Kingsoft Office Group aiming to expand and better serve governments and enterprises. The quarter-on-quarter increase was primarily due to higher marketing spending for online games.

Administrative Expenses

Administrative expenses for the second quarter of 2020 increased 35% year-on-year and 9% quarter-on-quarter to RMB101.4 million. The year-on-year increase was primarily due to increased staff-related costs and professional service fees. To accommodate for the rapid growth of our business, we moved to new office buildings in Beijing, which led to the increased rent expense.

Share-based Compensation Costs

Share-based compensation costs for the second quarter of 2020 increased 5% year-on-year and 18% quarter-on-quarter to RMB36.6 million. The increases primarily reflected the new grants of awarded shares to selected employees.

Operating Profit before Share-based Compensation Costs

Operating profit before share-based compensation costs for the second quarter of 2020 increased 193% year-on-year and 41% quarter-on-quarter to RMB585.3 million.

Finance costs

Finance costs for the second quarter of 2020 was RMB28.4 million, compared with finance costs of RMB4.7 million and RMB5.7 million for the second quarter of 2019 and first quarter of 2020. The increases were primarily due to newly issued convertible bonds with the interest rate of an equivalent market interest rate for a similar bond in the accounting treatment, which would not result in cash outflow, instead of the actual yield to maturity.

Other Gains/(Losses), net

Net other losses for the second quarter of 2020 were RMB104.7 million, compared with losses of RMB1,287.9 million in the corresponding period of last year, and gains of RMB3.3 million in the first quarter of 2020. The losses in the second quarter of 2020 were primarily due to loss on deemed disposal of an associate and impairment provisions of certain investee companies. The losses in the second quarter of 2019 were mainly due to provision for impairment on the carrying value of investments in Cheetah Mobile.

Share of Profits and Losses of Associates

We recorded share of losses of associates of RMB172.7 million for the second quarter of 2020, compared with share of losses of RMB58.3 million for the second quarter of 2019 and share of losses of RMB64.0 million for the first quarter of 2020. The losses in the second quarter of 2020 were mainly due to the losses recognized in Kingsoft Cloud, as it was changed from the subsidiary to the associate and recognized share of profit or loss using the equity method since 8 May 2020, partially offset by the profits recognized in Cheetah Mobile as it disposed shares in certain investee companies in this quarter. The losses in the second quarter of 2019 and first quarter of 2020 were mainly due to the losses recognized in Cheetah Mobile in these quarters.

27

Income Tax Expense

Income tax expense for the second quarter of 2020, the second quarter of 2019 and the first quarter of 2020 was RMB83.1 million, RMB5.1 million and RMB64.1 million respectively.

Profit/(Loss) for the period from a discontinued operation

Profit/(Loss) for the period from a discontinued operation reflected the combination of the net loss and net gain on deemed disposal from Kingsoft Cloud, which was profit of RMB8,927.4 million for the second quarter of 2020, compared to loss of RMB417.8 million for the second quarter of 2019 and loss of RMB480.9 million for the first quarter of 2020. The net gain on deemed disposal of Kingsoft Cloud was RMB9,096.4 million recognized in the second quarter of 2020, which arose from spin-off and separate listing of Kingsoft Cloud.

Profit/(Loss) Attributable to Owners of the Parent

As a result of the reasons discussed above, profit attributable to owners of the parent (including that from continuing operations and a discontinued operation) was RMB9,151.3 million for the three months ended 30 June 2020, compared with loss attributable to owners of the parent of RMB1,415.2 million and profit attributable to owners of the parent of RMB6.3 million for the three months ended 30 June 2019 and 31 March 2020, respectively.

Profit/(Loss) Attributable to Owners of the Parent before Share-based Compensation Costs

Profit/(loss) attributable to owners of the parent before share-based compensation costs is profit/(loss) attributable to owners of the parent excluding the effect of share-based compensation costs attributable to owners of the parent.

We believe that the profit/(loss) attributable to owners of the parent before share-based compensation costs will enable the investors to better understand the Group's overall operating performance. When assessing our operating performance, you should not consider this data in isolation or as a substitute for our profit/(loss) or any other operating performance measure that is calculated in accordance with IFRSs. In addition, our profit/(loss) attributable to owners of the parent before share-based compensation costs may not be comparable to similarly titled measures utilized by other companies.

Profit attributable to owners of the parent before share-based compensation costs (including that from continuing operations and a discontinued operation) was RMB9,193.7 million for the three months ended 30 June 2020, compared with loss of RMB1,372.4 million and profit of RMB55.2 million for the three months ended 30 June 2019 and 31 March 2020, respectively. The net profit/ (loss) margin excluding the effect of share-based compensation costs was 500%, (73%) and 2% for the three months ended 30 June 2020, 30 June 2019 and 31 March 2020, respectively.

28

First Half of 2020 Compared to First Half of 2019

Revenue

Revenue for the first half of 2020 increased 41% year-on-year to RMB2,591.4 million. Revenue from the online games and office software and services and others represented 64% and 36% of the Group's total revenue for the first half of 2020.

Revenue from the online games business for the first half of 2020 increased 41% year-on-year to RMB1,649.9 million. The increase was mainly due to strong performance of self-developed PC games, as well as an increase in certain existing mobile games.

Revenue from office software and services and others for the first half of 2020 increased 40% year- on-year to RMB941.5 million. The year-on-year increase was largely due to solid growth from subscription services and licensing business of Kingsoft Office Group, driven by fast growing paid users through offering new innovative content and features, and better user experience.

Cost of Revenue and Gross Profit

Cost of revenue for the first half of 2020 increased 17% year-on-year to RMB 419.1 million. The year-on-year increase was primarily due to higher server and bandwidth costs in line with increased user traffic, as well as greater content costs associated with increased personal subscription services of Kingsoft Office Group.

Gross profit for the first half of 2020 increased 46% year-on-year to RMB2,172.3 million. The Group's gross profit margin increased by three percentage points year-on-year to 84%.

R&D Costs, net

Net R&D costs for the first half of 2020 kept flat year-on-year to RMB745.3 million, as we benefited from temporary exemption or reduction of social and medical insurance premiums in the first half of 2020.

Selling and Distribution Expenses

Selling and distribution expenses for the first half of 2020 increased 19% year-on-year to RMB339.7 million. The increase was primarily due to: i) headcount growth of sales team to develop channels in enterprise and government market; and ii) greater marketing activities for Kingsoft Office Group and online games.

Administrative Expenses

Administrative expenses for the first half of 2020 increased 26% year-on-year to RMB194.7 million. The year-on-year increase was mainly due to increased staff-related costs and professional fees. To accommodate for the rapid growth of our business, we moved to new office buildings in Beijing, which led to the increased rent expense.

29

Share-based Compensation Costs

Share-based compensation costs for the first half of 2020 decreased 9% year-on-year to RMB67.5 million.

Operating Profit before Share-based Compensation Costs

Operating profit before share-based compensation costs for the first half of 2020 increased 144% to RMB1,001.4 million.

Finance costs

Finance costs for the first half of 2020 increased 213% to RMB34.1 million. The increase was due to newly issued convertible bonds with the interest rate of an equivalent market interest rate for a similar bond in the accounting treatment instead of the actual yield to maturity.

Other Losses, net

Net other losses for the first half of 2020 was RMB101.4 million, compared with losses of RMB1,289.3 million in the same period of last year. The losses in the first half of 2020 were mainly due to loss on deemed disposal of an associate and impairment provisions for investee companies. The losses in the first half of 2019 were mainly due to the provisions for impairment on the investments in Cheetah Mobile.

Share of Profits and Losses of Associates

We recorded share of losses of associates of RMB236.7 million for the first half of 2020, compared with share of losses of RMB135.8 million for the first half of 2019. The losses in the first half of 2020 were mainly due to the losses recognized in Kingsoft Cloud, which has been accounted as our associate since 8 May 2020, partially offset by the profits recognized in Cheetah Mobile with disposed shares in certain investee companies. The losses in the first half of 2019 were largely due to losses recognized in Cheetah Mobile.

Income Tax Expense

Income tax expense was RMB147.2 million and RMB48.2 million for the first half of 2020 and 2019 respectively.

Profit/(Loss) for the period from a discontinued operation

Profit/(Loss) for the period from a discontinued operation reflected the combination of the net loss and net gain on deemed disposal from Kingsoft Cloud, which was profit of RMB8,446.5 million for the first half of 2020, compared with loss of RMB713.4 million for the first half of 2019. The net gain on deemed disposal of Kingsoft Cloud was RMB9,096.4 million recognized in the first half of 2020, which arose from spin-off and separate listing of Kingsoft Cloud.

30

Profit/(Loss) Attributable to Owners of the Parent

As a result of the reasons discussed above, profit attributable to owners of the parent (including that from continuing operations and a discontinued operation) was RMB9,157.6 million for the first half of 2020, compared with loss of RMB1,483.0 million in the same period last year.

Profit/(Loss) Attributable to Owners of the Parent before Share-based Compensation Costs

Profit attributable to owners of the parent before share-based compensation costs for the first half of 2020 (including that from continuing operations and a discontinued operation) was RMB9,248.9 million, compared with loss of RMB1,405.7 million in the prior year period. The net profit/(loss) margin excluding the effect of share-based compensation costs was 211% and (39%) for the six months ended 30 June 2020 and 30 June 2019, respectively.

Liquidity and Financial Resource

The Group had a strong cash position towards the end of reporting period. As at 30 June 2020, the Group had major financial resources in the forms of cash and bank deposits amounting to RMB14,788.5 million, which totally represented 44% of the Group's total assets.

As at 30 June 2020, the Group's gearing ratio, which represents total liabilities divided by total assets, was 19%, compared to 36% as at 31 December 2019.

Foreign Currency Risk Management

As at 30 June 2020, RMB3,351.8 million of the Group's financial assets were held in deposits denominated in non-RMB currencies. As there are no cost-effective hedges against the fluctuation of RMB, there is a risk that we may experience a loss as a result of any foreign currency exchange rate fluctuation in connection with our deposits and investments.

Net Cash Generated from Operating Activities

Net cash generated from our operating activities reflected our profit/(loss) for the six months period, as the case may be, as adjusted for non-cash items, such as depreciation, amortization of intangible assets, and share-based compensation costs, as well as the effect of changes in certain items of statement of financial position, such as deferred revenue, other payables and accruals.

Net cash generated from operating activities (including that from continuing operations and a discontinued operation) was RMB1,308.1 million and RMB244.2 million for the six months ended 30 June 2020 and 30 June 2019, respectively.

Capital Expenditures

Capital expenditures represent cash payments for acquisition of business, fix assets and intangible assets. Cash used for capital expenditures (including that from continuing operations and a discontinued operation) was RMB404.4 million and RMB603.5 million for the six months ended 30 June 2020 and 30 June 2019, respectively.

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BUSINESS REVIEW AND OUTLOOK

Mr. Jun LEI, Chairman of the Company, commented, "The Company saw strong growth in the second quarter, driven by continued demand for subscription services and licensing business of Kingsoft Office Group, coupled with excellent performance by core online games. Kingsoft Office Group focused on product development, product rollout and exploration into complementary verticals to build its core competitiveness. In the online games sector, we continued to improve our ability to develop and operate premium games, while expanding into new game categories. On 8 May 2020 (New York time), Kingsoft Cloud was successfully listed on National Association of Securities Dealers Automated Quotations ("NASDAQ"). As the largest shareholder in Kingsoft Cloud, we are confident in its long-term development."

Mr. Tao ZOU, Chief Executive Officer of the Company, added, "Our revenue in the second quarter of 2020 was RMB1,420.1 million, up 49% year-on-year and 21% quarter-on-quarter. Our revenue in the first half of 2020 was RMB2,591.4 million, up 41% year-on-year. In the second quarter of the year, our online games business recorded a year-on-year growth of 53% and office software and services and others businesses grew 43% year-on-year, respectively.

For the second quarter of 2020, Kingsoft Office Group, as a beneficiary of increased demand in remote working, maintained stable and healthy development. Kingsoft Office Group's office software licensing business maintained its rapid growth. We continued to promote cloud office migration to our leading customers, further strengthening our market leadership in document and information processing. In the first half of 2020, Kingsoft Office Group launched new editions of WPS Office such as Integrated Edition, Business Edition and Graphics Edition, while establishing an open Application Program Interface (API) with developer partners in our ecosystem. As of June 2020, we have completed product adaptation with 190 developer partners, achieving integration in areas such as work collaboration, input method, mail, voice recognition, handwriting pad and tablet. As of 30 June 2020, over hundreds of thousands of micro, small and medium enterprises have used WPS+ cloud office services.

Kingsoft Office Group's personal subscription services continued to show robust growth, due to innovative content, rich features, as well as improved user outreach and experience via innovative channels such as live streaming sales. In addition to online document editing, WPS Docs provides collaborative office products such as spreadsheet, calendar, to-do list and meeting, enabling users to work together seamlessly via Kingsoft Office Group's cloud platform.

We continue to expand our partnerships and brand awareness. During this period, Kingsoft Office has become the official supplier of Beijing 2022 Winter Olympics. In addition, Kingsoft Office entered a strategic cooperation with the International Centre for Higher Education Innovation under the auspices of United Nations Educational, Scientific and Cultural Organization (UNESCO- ICHEI), providing WPS Office-related online courses to this global education resource platform. Forging ahead, we continue to adhere to our philosophy of technological empowerment, focusing our efforts on technological innovation and product optimization and continue to innovate the organizational structure and strengthen the R&D Center.

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In the second quarter, revenue from online games achieved significant year-on-year growth. Revenue and average daily active users of our flagship JX Online III PC game recorded year-on- year growth of 120% and 39% respectively, reflecting our track record in developing and operating blockbuster online games. In June, we launched a beta test for the JX Online III mobile game and received positive player response. In the same month, we also started the pre-registration for War of the Visions: Final Fantasy Brave Exvius. Meanwhile, the cloud version of JX Online III PC game has officially launched its testing version in July, becoming one of the first cloud games in China. We further strengthened our cooperation with Tencent and launched JX Online II mobile game on all platforms in August, which was ranked as the number one in the iOS top free charts on its debut.

In the coming quarters, we will continue to focus on new product development and operation optimization. We will celebrate the 11th anniversary of JX Online III PC game and launch a new

expansion pack to further strengthen the longevity and vitality of our core IP. During the year, JX Online I mobile game will be renamed as New JX Online I: Yuan Qi Wang You（新劍俠情緣 : 緣 起忘憂）with an all-new game appearance and experience for our players. Wo Long Yin 2（臥龍吟

2）will also be launched later this year."

Mr. Jun LEI concluded, "Our results were robust in the first half of 2020 despite the impact of COVID-19. Going forward, we remain confident in the resilience of our business model and the pace of our developments. We will continue to focus on optimizing our organizational structure, technological innovation and product enhancement, so as to provide our customers with the best user experiences. We strive to deliver sustainable business growth and bring solid returns to our shareholders and partners."

OTHER INFORMATION

Employee and Remuneration Policies

As at 30 June 2020, the Group had 5,543 full-time employees (30 June 2019: 6,486), inclusive of all its staff in Mainland China and overseas offices, most of whom are based in Beijing and Zhuhai, the PRC. Since Kingsoft Cloud ceased to be a subsidiary of the Company with effect on 8 May 2020, the number of full-time employees of the Group as at 30 June 2020 did not include the number of those of Kingsoft Cloud Group. The number of employees employed by the Group varies from time to time depending on business needs. Employee remuneration is determined in accordance with prevailing industry practice and employees' educational backgrounds, experiences and performance. The remuneration policy and package of the Group's employees are periodically reviewed. Apart from pension funds, in-house training programs, discretionary bonuses, medical insurance and mandatory provident fund, share awards and share options may be granted to employees according to the assessment of individual performance.

The total remuneration cost incurred by the Group for the six months ended 30 June 2020 was RMB911.8 million (for the six months ended 30 June 2019: RMB861.3 million (restated)).

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Purchase, Sale and Redemption of the Company's Listed Securities

None of the Company and its subsidiaries had purchased, sold or redeemed any of the Company's listed securities (whether on the Stock Exchange or otherwise) during the six months ended 30 June 2020.

Review by Audit Committee

The Audit Committee of the Company has been established since year 2007 with responsibility of assisting the Board in providing an independent review of the financial statements and internal control system. It acts in accordance with its terms of reference which clearly defines its membership, authority, duties and frequency of meetings. It meets regularly with our management, external auditor and internal audit personnel to discuss accounting principles and practices adopted by the Group and internal control and financial reporting matters. The Audit Committee is comprised of three independent non-executive Directors, namely Ms. Wenjie WU (chairman), Mr. Shun Tak WONG and Mr. David Yuen Kwan TANG.

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters. The Audit Committee has reviewed the Group's unaudited interim financial information for the six months ended 30 June 2020.

Compliance with Model Code for Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 of the Listing Rules as its own code of conduct regarding securities transactions by Directors. Having made specific enquiry to all Directors, all Directors confirmed that they had complied with the required standards set out in the Model Code throughout the six months ended 30 June 2020.

Corporate Governance Code

The Directors, having reviewed the corporate governance practices of the Company, confirm that the Company has complied with all the applicable code provisions as set out in the Corporate Governance Code contained in Appendix 14 to the Listing Rules except for the code provisions A.6.7 and C.1.2 of the Corporate Governance Code.

The code provision A.6.7 of the Corporate Governance Code is regarding non-executive directors' attendance at general meetings. Non-executive Director Mr. Chi Ping LAU did not attend the annual general meeting of the Company held on 27 May 2020 due to pre-arranged engagements. The code provision C.1.2 of the Corporate Governance Code requires management to provide all members of the board with monthly updates on the issuer's business. The management of the Company currently reports to the Board quarterly on the Group's performance, position and prospects. The Board believes that with the executive Directors overseeing the daily operation of the Group and the effective communication among the executive Directors, the management and the non-executive Directors (including the independent non-executive Directors) on the Group's affairs, the current practice is sufficient enough for the members of the Board to discharge their duties. The Board will continue to review this practice and shall make necessary changes when appropriate and report to the shareholders accordingly.

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Appreciation

On behalf of the Board, I would like to express our sincere thanks to our shareholders and investors for their continuous support and confidence in us. I would like to thank our employees for their hard work and valuable contributions which are the core elements of the Company's success.

By Order of the Board

Kingsoft Corporation Limited

Jun Lei

Chairman

Hong Kong, 18 August 2020

As at the date of this announcement, the Executive Directors are Messrs. Tao ZOU and Yuk Keung NG; the Non- executive Directors are Messrs. Jun LEI, Pak Kwan KAU and Chi Ping LAU; the Independent Non-executive Directors are Messrs. Shun Tak WONG, David Yuen Kwan TANG and Ms. Wenjie WU.

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