Transition-Market risks

Assessment：Uncertainties in energy procurement, such as rising prices of electricity and other energy, could lead to an increase in the Company's operating costs.

Our responses：Incorporate climate change considerations into supplier admission standards, select electronic equipment with higher energy efficiency and lower energy consumption, and encourage existing suppliers to use clean energy to reduce the Company's market risk arising from fluctuations in electricity prices；Carry out more elaborate energy management, establish specific requirements for the use of air conditioners, lighting fixtures and other electric equipment in workplace, and advocate green office among employees to reduce the energy consumption in the workplace.

Acute physical risks

Assessment：Extreme weather such as typhoons, droughts, floods, extreme cold or heat caused by climate change may threaten our normal operation,resulting in higher energy consumption and operating costs.

Our responses：Pay close attention to the early warning of extreme weather events, formulate the Explosion Prevention Plan, the Typhoon Emergency Plan, the Comprehensive Safety Emergency Plan and other safety-related plans,and equip all workplaces with fire-fighting facilities and equipment to ensure the safety of people and properties；Establish mechanisms for rapid and effective disaster relief, rescue and emergency response. Organize all employees to conduct fire drills, typhoon drills, violent and terrorist attack drills and other activities. Engage external professional institutions to assist the Company in on-site safety management and safety record management at least once a year in an effort to ensure the safety of people and IT infrastructures and minimize the losses caused by accidents.

Chronic physical risk

Assessment：Sea level rise may increase the asset risk of the company's IT infrastructure in coastal areas such as Xiamen and Shenzhen, which may lead to an increase in capital expenditure due to maintenance, repair or replacement of IT equipment.

Our responses：Regularly inspect the use of equipment, and deploy and maintain facilities to grapple with extreme weather, such as backup power supply；ncrease the proportion of cloud services,and protect important data through off-site backup and cross-device backup.

Energy opportunity

Assessment：The application of energy-saving measures/technologies enables the Company to lower energy consumption in the course of  operation as well as operating costs.

Our responses：Actively carry out distributed energy projects to increase the use of clean energy；Lease data centers with low power usage effectiveness (PUE) to increase electricity effectiveness per unit time and minimize energy consumption in the course of operation.

Reducing energy consumption

Promoting energy conservation awareness： Being aware of the importance of energy conservation and emissions reduction, G-bits pays close attention to electricity consumption data and employees' electricity-consuming activities in a timely manner, periodically conducts electricity- saving campaigns, and places electricity-saving reminders on switches of air conditioners and lighting fixtures.

Monitoring energy conservation practices： The Company actively enforces accountability, and exercises fine management of resources and energy-consuming equipment. To this end, G-bits has established requirements for the Company's air conditioners, lighting fixtures and production equipment.

Selecting energy-efficient equipment： The Company saves energy and reduces emissions through collaboration with cloud service providers, and operates business swiftly and flexibly by leveraging cloud services provided by Amazon, Alibaba and Tencent. the PUE of Tencent cloud servers adopted by the Company was below 1.20, and that of Alibaba cloud servers was 1.09, far lower than the average of the global data center industry in 2023.

Advocating green office

G-bits actively builds a safe, green, and low-carbon workplace for employees by advocating low-carbon travel, electronic office and the use of environmentally friendly materials.

Recycling

G-bits has integrated resource recycling into normal operations, and takes multiple measures such as promoting reusable tableware, reusing idle items to extend the lifecycle of waste and reduce emissions.

Environmental key performance indicators

The Company's GHG emissions and resource consumption during 2023 are presented below：

Mangrove Planting Activities

On the occasion of the 2023 Arbor Day, the Company, in collaboration with the Putian Lumeng Coastal Wetland Research Center and the Shenzhen Green Source Environmental Protection Volunteer Association, has undertaken mangrove planting activities in Xiamen and Shenzhen. A total of 73 employees and their family members actively participated in the initiative, collectively planting 610 mangrove seedlings.

Employees participated in mangrove tree planting activities

Voluntary beach cleaning activity

On the occasion of the World Ocean Conservation Week, the  Company organized  15 employees  in Shenzhen to carry out voluntary   beach cleaning activities in Shenzhen Bay Park, cleaning up about 21.19 kg of garbage.

Employees participated in beach cleaning activity

Ecological Bird-watching Activity

In collaboration with the Shenzhen Mangrove Foundation, the Company organized an ecological bird-watching activity in the Shenzhen Bay Nature Education Center in December 2023. Attended by 20 employees from the Shenzhen office, this initiative encourages employees to engage in biodiversity conservation.

Employee participation in ecological bird watching

Earthquake relief assistanc

In December 2023, a 6.2-magnitude earthquake struck Jishishan County, Linxia Prefecture, Gansu Province, resulting in severe casualties and property losses. Following the earthquake, the Company promptly donated a total of RMB 2 million in cash and materials through the Xiamen Charity Federation, Shenzhen Charity Association, and Shenzhen One Foundation. This contribution was dedicated to supporting the rescue efforts and post- disaster reconstruction in the earthquake-affected areas of Gansu.

All donated materials have been successfully distributed to the local residents, aiding them in overcoming the challenges brought about by the disaster.

Distribution of Disaster Relief Supplies

YiNian XiaoYao "Qingyun Project" Public Welfare Scholarship Initiative for rural education

In 2022, the project team of the Company's gaming product YiNian XiaoYao initiated the "Qingyun Project " in alignment with the game's philosophy. The initiative aims to provide better education for children and contribute to their healthy growth. During the Reporting Period, the Company introduced the "1 RMB Qingyun Scholarship Package" in the game, allowing players to participate in the "Qingyun Project" by purchasing the package and contributing to the scholarship fund for public welfare education.

In 2023, YiNian XiaoYao project team of the Company donated and built a sports field for the Fayi Primary School in Yunnan Province, addressing the issue of insufficient sports facilities for rural schools. After the completion of the playground, the children gained a safer and more comprehensive sports environment. The total investment in the project for building the football field is 470.9 thousand yuan, with 454.5 thousand yuan paid in 2023.

Yunnan Province Fayi Primary School Sports Field Donation Charity Event

YiNian XiaoYao "Qingyun Project" Public Welfare Scholarship Initiative for special children care

Caring for Children with Autism

The Company's game project team engaged in visits to children with autism, entering Xiamen's Tongan District Love and Crystal Baby Parent-Child Kindergarten to play with autistic children, providing care and companionship to warm the hearts of each child. Additionally, the Company's employees diligently captured precious moments, depicted the daily lives of children, and produced public service videos. Through social media, they shared the innocent smiles and heartwarming scenes of autistic children with a broader audience, fostering increased societal awareness and care for this group of children with autism.

Engaging in "caring for children with autism" activity and illustrate daily life scenes of children

At the same time, the Company's game project team donated RMB 100 thousand to the Xiamen's Tongan District Love and Crystal Baby Parent-Child Kindergarten, to assist in renovating the long-neglected park and maintaining a well-kept park environment.

Comparison before and after the renovation of the park

Caring for children with visual impairment

In October 2023, the Company's game project team donated RMB 100 thousand to the Tianjin School for the Visually Impaired to support the purchase of ethnic musical instruments and enhance the school's facilities and equipment. The Company assisted in establishing a traditional Chinese music classroom, providing music courses to offer students a more extensive artistic experience and an enhanced learning environment.

Chinese Traditional Music classroom event

Child-care education

In October 2023, the Company launched 200 sessions of "Girl Protection" child sexual abuse prevention courses in Chongqing, Sichuan, and Guizhou, employing various forms such as text and illustrations to strengthen children's awareness of safety.

Child sexual abuse prevention series "Girls Protection" courses

Multi-region consumer support for agricultural development

In May and September 2023, the Company conducted consumer support activities to boost the development of rural characteristic industries and increase income for farmers in various regions, including  Yanyuan County, Liangshan Yi Autonomous  Prefecture of Sichuan Province, Shanwei City of Guangdong  Province, Qiannan Buyi and Miao Autonomous Prefecture of Guizhou Province,  Hechi City in Guangxi Zhuang Autonomous Region, Xunwu County of Jiangxi Province and other regions. These efforts aim to promote overall prosperity in these areas.

Enhancing the system for minors protection in online games

The Company takes proactive steps to establish and refine the protection system for minors in online games. In 2023, the Company conducted 4 special clean-up initiatives focusing on topics such as student vacations, online hostility, and cyberbullying. Furthermore, seven sessions were dedicated to optimize the strategies for enhancing the protection system for minors.

Optimize the real-name authentication and anti-addiction system of the operation platform

Enhancing the Parental guardian Platform

The Company continues to enhancing the development of a the parental guardian platform, ensuring the supervision of minors'gaming behavior. Upon linking a minor's gaming account, parents will receive real-time SMS notifications for the minor's  logins  and  in-game transactions . , Additionally, they can easily enforce restrictions on the minor's account, preventing gameplay and restricting top-up activities. Concurrently, the Company is refining the customer service infrastructure, addressing parental inquiries promptly. This initiative aims to acquaint parents with the platform's operational procedures and assist them in configuring the minor mode across various mobile devices, fostering the healthy growth of minors.

Unobstructed Channels for Minor Complaints and Reports

The Company consistently intensifies efforts in safeguarding minors, further refining the development of user service areas, and the mechanisms for complaints and reports. Dedicated channels have been established to facilitate minors' complaints and reports. The Company has made public a specific email address for complaints and reports related to minors (gmweicn@ieeeutsa.com) on the Leiting game website. Additionally, a designated "Reports Involving Minors" page/menu option has been set up on the official account of the Leiting Game Service Center on WeChat. This underscores our unwavering commitment to a "zero-tolerance" stance against issues that compromise the legitimate rights and interests of minors.

G-bits Game Developer Contes

Since 2019, the Company has consecutively organized the G-bits Game Developer Contest for five years. The competition invites more than 10 experienced R&D professionals from the industry to serve as mentors, guiding young game developers from universities in designing and developing game projects. This support aims to help them realize their game creation dreams and incubate high-quality creative products. The competition attracted over 470 universities from both domestic and international locations, with more than 1,760 participants. The competition adopted a format combining both online and offline elements, as well as a structure that emphasized differentiation and systematization. After a 70-day online preliminary round with unrestricted topics, over 1,760 participants competed, leading to the selection of the top 10 teams. These teams then engaged in a face-to-face Game Jam  challenge with their mentors, completing the task within a 48-hour timeframe.

G-bits Game Developer Contest Site

The First G-bits College Game Art Concept Competition

In September 2023, the Company held the first G-bits College Game Art Concept Competition. The competition featured diverse tracks, including 2D and 3D scene and characters, game illustrations and promotion, providing a platform for college students to explore and create in the realm of game art.

Prior to the competition, the Company conducted free live game art series courses, where frontline artistic talents from the Company, outstanding college professors, and renowned freelance artists shared their expertise with students. The courses garnered a total participation of 1,843 individuals and received high praise from the student community.

Excerpt of Excellent Entries

G-bits & University Game Development Alliance

Since 2021, G-bits has established the G-bits & University Game Development Alliance, an organization for learning and exchanging among college game development enthusiasts. It provides students with systematic learning resources and professional guidance in game development, helping those who are passionate about game creation enhance their professional skills and industry awareness.

In 2023, the G-bits & University Game Development Alliance has organized over 60 live course broadcasts and conducted various game education-related activities, including summer game development training for college students and a 48-hour Game Jam challenge for universities. As of the end of the Reporting  Period, the alliance has nearly 3,000 members, spanning across almost 500 universities and  involving 90  university game development societies.

G-bits & University Game Development Alliance Game Education Campaign

(2023 Summer Game Development Practical Training Student Work)

G-bits & University Game Developer Salon

In December 2023, the Company held a game developer salon in Guangzhou to build an offline learning platform for game developers. The event exhibits new games and excellent works of high school students and provides trial play opportunities. Developers exchange experience with each other and give feedback on the experience. The event also invited front-line producers and senior R&D staff to share their expertise and R&D experience. Talents in the game industry communicated with each other to burst into fresh inspiration and creativity.

Game Developer Salon Scene

The Company strictly abides by anti-unfair competition, anti-bribery and anti-corruption laws and regulations of the places where the Company operates, including but not limited to the Anti-Unfair Competition Law of the People's Republic of China and the Interim Provisions on Banning Commercial Bribery. The Company also formulates internal policies and management systems based on business ethics standards and keeps refining the business ethics management system, so as to create a sound business environment.

The Company has developed and released the Code of Ethical Business Conduct for G-bits Network Technology (Xiamen) Co., Ltd (hereinafter referred to as "Code of Ethical Business Conduct"), which covers anti-corruption and anti-bribery, intellectual property rights and information privacy, conflicts of interest, anti-fraud, fair employment, discrimination and harassment, anti-unfair competition, and the prohibition of insider trading, etc.. The Code of Ethical Business Conduct is applicable to all directors, management and employees (full-time and part-time employees, consultants or those working for the Company on a temporary basis including contractors and interns) of the Company, all subsidiaries and related entities. Besides, our suppliers, contractors and other business partners must comply with the Code of Ethical Business Conduct when providing goods and services to the Company or conducting businesses (such as business negotiation and contract signing) on behalf of the Company.

A robust supervision mechanism is necessary for the effective enforcement of the Code of Ethical Business Conduct to address business ethics risks. The Company's Audit Department regularly reviews compliance operations and fulfilment of the Code of Ethical Business Conduct under the guidance of the Audit Committee, and performs business ethics audits of the Company and all its subsidiaries once every three years, which covers all business operations.

Data security management mechanism

The Company has set up a special security leadership team for network security, headed by the CEO, with relevant business leaders and senior technical engineers tasked with guiding and coordinating data security work under him. Staff from the Security Department, Operation and Maintenance Department, Platform R&D Center and Information Technology Center comprise the Network Security Execution Management Department, working together to develop and implement data security control strategies and protect the Company's data security. The team members are highly professional and hold authoritative certifications in the information security sector such as Certified Information Security Professional (CISP), Certified Information Security Assurance Worker (CISAW) and Network Communications Security Administrator.

A holistic approach to data security

The Company manages data by its category and materiality, and stipulates security strategy on specific data group. The Company encrypts the operational data of games, including the private data of players, the business data of games; and strengthens authorizing management of office operational data, including game code data and general office data. And the code data of core projects is confined within the production of the Internet R&D. In addition, the Company has stepped further to improve the safety management throughout the data lifecycle. Through this holistic approach, G-bits has managed to decrease the safety risks of the internet information by strictly standardizing the data management in all sectors including data collection, transmission, processing, storage, usage and destruction.

Data Collection

The Company rigorously adheres to the national standard of Information Security Technology - Basic Requirements for Personal Information Collection in Mobile Internet Applications (Apps)(GB/T 41391-2022), and strictly prohibits any collection of service-irrelevant data resources and private information. The company formulates and publishes the License and User Agreement for G-bits Games , Before collecting any user's personal privacy data, clear notification is provided, specifying the data type, purpose, and destruction method. Additionally, users are granted the right to independently access, modify, or delete their personal information. Adhering to the principle of collecting user information on a legal, open and minimal basis, the Company minimizes the data collection and storage.

Data Transmission

G-bits attaches great importance to the confidentiality of the transmission. The Company has deployed anti-DDos servers and WAP on the core systems and set flow surveillance and the early warning at the entry of the system. Once the warning is triggered, the system will identify it is caused by a hacker attack and intercept accordingly. The Company ensures data safety, intactness and confidentiality by encrypting the transmission channels and restricting accesses when uploading the users' private data.

Data Storage

Taking seriously the encrypted transmission, storage of sensitive personal information and access control, the Company adopted different storage strategies for different information based on types and privacy levels. To better encrypt and store user data, the Company has adopted the secure encryption algorithm and the key mechanism. The encryption algorithm and keys are managed separately by different departments to ensure that the data cannot be decrypted and analyzed by any single party.

The Company discloses the use purpose and method of the user's personal information in the user privacy policy, limits the use to the scope necessary for the operation of the product, and obtains the consent of the player. At the same time, the internal personnel of the Company must comply with the relevant rules when accessing data, as follows:

· Strictly controlling the retrieval and analysis of plaintext data, a implementing a secondary encryption and obfuscation process to reduce data identifiability;

· Restricting data access rights, and keeping records of data access and data manipulation;

· Separating the code from on-line environment by encrypting and storing all data in the database, which is only available at G-bits;

· Separating the data logic from keys by setting access limits according to positions and retraining the R&D staff from accessing the on-line database;

· All transmission of sensitive data require approval from the superior leader.

Data Destruction

The Company complies with the process, technical methods, authority and retention of destruction records clarified in laws and regulations. For processed data, the Company conducts regular checks, destroys and anonymizes if necessary, securing the holistic approach for data security management.

Protection of employee rights and  interests

Employee recruitment： The Company always upholds the principle of fair and just employment when recruiting talent. In particular, the Company does not tolerate any form of discrimination in employment, and is committed to creating an inclusive and fair workplace for employees regardless of gender, nationality, age, race, ethnicity, religion, sexual orientation, family status and disability.

Anti-discrimination and unfair competition: Following a zero-tolerance attitude for discrimination and unfair competition in any form, G-bits is committed to creating a safe, equal and diversified working environment for all employees.

Anti-harassment: The Company has a zero-tolerance policy towards workplace harassment in any form, including but not limited to offenses, abuse, gender-based or race-based disparagement and sexual harassment.

Maintenance of smooth communication channels

G-bits strives to establish diversified communication channels for employees. Any employee can give feedback on management opinions and suggestions at any time, which will be followed up and resolved by the human resource management personnel in time.

"Founder Meetup" events： All employees can ask questions that they are interested in, give opinions or make suggestions confidentially or in their real names. See below for a list of events held in 2023：

"Little G Listening" cultural interview activities： The Company regularly organizes "Little G Listening" interview activities. By listening to the employees' voices, the Company understands their opinions and concerns, and strives to develop an open and free culture for employees. The Company adopts an "Active + Passive" approach to build multiple channels at different levels and in all aspects, enabling employees to give voice to their thoughts and participate in management. Employees are encouraged to communicate sincerely with the Company, and put forward reasonable suggestions for the Company's management and development. During the Reporting Period, the Company organized a total of 4 batches of "Little G Listening" cultural interviews, with the participation of 48 employees.

Corporate culture group meetings： The Company regularly holds corporate culture group meetings to convey the connotation of corporate culture, and allow employees to have a clearer understanding of the values advocated by corporate culture and the way of doing things through the display and discussion of typical cases. During the Reporting Period, the Company organized a total of 11 corporate culture group meetings, with 321 participants.

Employee benefits

We provide all employees with benefits and care in respect of health, life and financial support to help them maintain better work-life balance. We accompany employees and their families in different stages of life, so as to enhance employees' sense of happiness, achievement and belonging.

Talent cultivation

G-bits places significant emphasis on the development of each employee, continually  refining  its training  mechanisms . We have different types of training for employees like professional competence training, fresh graduate training, leadership training, among others. Such training may take various forms, such as a combination of "Internal + External" and "Online + Offline" courses. In 2023, the Company carried out a total of 168 training sessions with 504 training hours, and a total training investment of RMB 3,526.8 thousand.