Giant Interactive Announces Second Quarter 2008 Results

SHANGHAI, China, Aug. 27 /Xinhua-PRNewswire/ -- Giant Interactive Group
Inc. (NYSE: GA) ("Giant" or the "Company"), one of China's leading online game
developers and operators, announced today its unaudited financial results for
the second quarter ended June 30, 2008.
Second Quarter 2008 Highlights:

-- Net revenue was RMB504.8 million (US$73.6 million), an increase of
36.3% over the second quarter 2007 and an increase of 7.0% over the
first quarter 2008.

-- Gross profit was RMB447.0 million (US$65.2 million), an increase of
34.8% over the second quarter 2007 and an increase of 6.2% over the
first quarter 2008. Gross profit margin for the second quarter 2008
was 88.6%.

-- Net income was RMB350.6 million (US$51.1 million), an increase of
32.7% over the second quarter 2007 and an increase of 3.5% over the
first quarter 2008. Net income margin for the second quarter 2008 was
69.5%.

-- Basic and diluted net income per American Depositary Share ("ADS")
were RMB1.45 (US$0.21) and RMB1.40 (US$0.20) respectively, compared to
basic and diluted net income per ADS of RMB1.32 and RMB1.32
respectively for the second quarter 2007, as well as basic and diluted
net income per ADS of RMB1.38 and RMB1.33 respectively for the first
quarter 2008. Each ADS represents one ordinary share.

-- Non-GAAP net income excluding non-cash share-based compensation for
the second quarter 2008 was RMB362.5 million (US$52.8 million), an
increase of 34.9% over the second quarter 2007 and an increase of 3.3%
over the first quarter 2008. Non-GAAP net income margin excluding non-
cash share-based compensation was 71.8%.

-- Basic and diluted non-GAAP net income excluding non-cash share-based
compensation per ADS were RMB1.50 (US$0.22) and RMB1.45 (US$0.21)
respectively, compared to basic and diluted non-GAAP net income per ADS
of RMB1.34 and RMB1.34 respectively for the second quarter 2007, as
well as basic and diluted non-GAAP net income per ADS of RMB1.43 and
RMB1.38 respectively for the first quarter 2008.

-- Active Paying Accounts ("APA") for online games(1) in the second
quarter 2008 reached 1,760,000, an increase of 41.0% from the second
quarter 2007 and an increase of 21.7% from the first quarter 2008.

-- Average Revenue Per User ("ARPU") for online games(1) was RMB285.9, a
decrease of 3.2% from the second quarter 2007 and a decrease of 12.1%
from the first quarter 2008.

-- Average Concurrent Users ("ACU") for online games(1) was 620,000, an
increase of 20.3% from the second quarter 2007 and an increase of 13.4%
from the first quarter 2008.

-- Peak Concurrent Users ("PCU") for online games(1) was 2,339,000, an
increase of 118.1% from the second quarter 2007 and an increase of
42.1% from the first quarter 2008.

(1) Online games include ZT Online, ZT Online PTP and Giant Online.

Commenting on the second quarter 2008 results, Mr. Yuzhu Shi, the Chairman
and Chief Executive Officer of Giant said, "We overcame difficulties caused by
the Sichuan earthquake and we made significant progress in the second quarter,
with net revenues, gross profit and net income all increasing more than 30%
year-over-year. We continue to expand our business, yet place a strong
emphasis on operational efficiency and the maintenance of robust margins."
"On the operational front, we maintained the positive momentum of our
flagship game ZT Online, which reached 2.1 million Peak Concurrent Users on
April 26, 2008, the highest PCU recorded within the industry at the time. The
sustained popularity of this game is a testimony to the strength of our
strategy, which takes a focused approach towards developing and marketing hit
games. Moving forward, we believe this strategy will help our current and
pipeline games, including Giant Online, achieve similar success. Throughout
the second quarter, our extensive marketing efforts proved successful as
consolidated Active Paying Accounts grew 41% year-over-year and Average
Concurrent Users rose more than 20% over the same period."
"As we continuously enhance our game content, we remain focused on
building our in-game community size and enhancing player loyalty. We recently
invested approximately US$51 million for a 25% stake in Five One Network
Development Co., Ltd ("51.com"), the largest independent social network
service provider in China. We believe 51.com's large user base and fast
growing social networking business will help us grow our games, attract new
users, and increase the loyalty, or 'stickiness' of our games."
"Lastly, our recently announced US$150 million share repurchase program
not only reaffirms our confidence and optimism in the long-term potential of
Giant, but also reflects our ongoing commitment to increasing shareholder
value."
Second Quarter 2008 Unaudited Financial Results
Net revenues. Net revenues for the second quarter 2008 were RMB504.8
million (US$73.6 million), representing a 7.0% increase compared to RMB471.6
million in the first quarter 2008, and a 36.3% increase compared to RMB370.2
million in the second quarter 2007.
Online game net revenues were RMB503.3 million (US$73.4 million), an
increase of 7.0% from RMB470.2 million in the first quarter 2008, and an
increase of 36.6% from RMB368.4 million in the second quarter 2007. The
sequential rise in online game net revenues was primarily attributable to the
growth in player base achieved by ZT Online, as well as contributions from the
game Giant Online.
ACU for online games(1) in the second quarter 2008 reached 620,000, an
increase of 13.4% over the first quarter 2008 and 20.3% over the second
quarter 2007. PCU for online games(1) in the second quarter 2008 was
2,339,000, representing a 42.1% increase from the first quarter 2008 and a
118.1% increase over the second quarter 2007. The year-over-year increases
resulted from successful in-game marketing programs for both ZT Online and
Giant Online, which continue to attract new players through constant updates,
allowing for increased interactivity among players, which encourages in-game
community cohesion. APA for online games(1) in the second quarter 2008 grew
21.7% from the first quarter 2008 and 41.0% over the second quarter 2007, to
1,760,000. The significant year-over-year growth in APA is primarily
attributable to the increased size and scope of our games and player base in
general. The sequential growth in APA resulted from the realization of new
paying accounts driven by the rapid build-up in ACU and PCU beginning in the
first quarter 2008.
ARPU for online games(1) in the second quarter 2008 decreased 12.1% from
the first quarter 2008 and 3.2% from the second quarter 2007 to RMB285.9. The
year-over-year and sequential decreases resulted from APA growing faster than
revenues; however, we believe the strong growth in APA is an important
component of ensuring long-term, sustainable growth.
Cost of Services. Cost of services was RMB57.8 million (US$8.4 million),
representing a 49.6% increase over the same period last year, and an increase
of 13.7% from the first quarter 2008. The quarter-over-quarter increase in
cost of services was mainly due to a RMB2.0 million rise in internet data
center cost and a RMB0.8 million increase in the depreciation of our servers,
as we continue to invest in our infrastructure and capabilities to provide
better services and a high quality gaming experience to our gamers, as well as
to support the stable growth of ACU and PCU of our games. Additionally, more
efforts have been made to maintain and expand our game operations team, which
led to an increase in staff salaries of RMB2.9 million. The year-over-year
increase in cost of services was mainly a result of the rapid expansion of our
business, including the purchase of more servers and hiring of staff to
support our game operations.
Gross Profit and Gross Margin. Gross profit increased sequentially by
RMB26.2 million and year-over-year by RMB115.4 million to RMB447.0 million
(US$65.2 million). Gross margin for the second quarter 2008 was 88.6%, down
slightly from 89.6% in the second quarter 2007 and down 0.6% over the first
quarter 2008. The slight decrease in gross margin quarter-over-quarter was
mainly due to the increase in cost of services.
Operating Expenses. Total operating expenses of RMB118.8 million (US$17.3
million) represented an increase of 19.0% from RMB99.8 million in the first
quarter 2008, and an increase of 75.0% from RMB67.9 million in the second
quarter 2007. The sequential increase in operating expenses was primarily
driven by the increase in sales and marketing and R&D expenses, while the
year-over-year increase in operating expenses was primarily impacted by
continued R&D and sales and marketing infrastructure expansion to accelerate
our business growth.
Research and product development expenses for the second quarter 2008 were
RMB19.9 million (US$2.9 million), an increase of 68.1% from RMB11.8 million in
the previous quarter, and up 502.8% from RMB3.3 million in the second quarter
2007. The significant sequential increase in R&D expenses is mainly
attributable to an increase in staff salary and compensation as we look to
retain our current talent base and hire additional game architects with great
potential in the gaming industry. The Company has also rented a new building
for the R&D department at our Shanghai headquarters, resulting in an increase
of rental expenses. The year-over-year increase resulted from the hiring of
additional senior game architects and engineers to further strengthen our R&D
capabilities to enrich our game designs and generate innovative game ideas.
Sales and marketing expenses were RMB83.6 million (US$12.2 million), an
increase of 28.9% from RMB64.9 million in the previous quarter and up 88.3%
from RMB44.4 million in the second quarter 2007. The significant increase in
our sales and marketing expenses was mainly attributable to our efforts to
promote the open beta launch of our game, Giant Online, throughout the
country,
as well as to facilitate further penetration of ZT Online, which included the
production of additional banners, posters and giveaways in addition to the
hiring of temporary sales and marketing personnel.
General and administrative expenses for the quarter were RMB30.3 million
(US$4.4 million), representing a sequential increase of 7.9% from RMB28.1
million and a 50.1% year-over-year increase from RMB20.2 million. The
sequential rise was due to the increase of consulting and professional fees to
further improve our management's efficiency. The year-over-year increase of
general and administrative expenses was mainly attributable to the expansion
of managerial size and functionality.
Financial Incentive. The financial incentive received in the second
quarter, which represents a sales tax refund from the municipal government,
was RMB15.0 million. This refund relates to the sales tax accounted for in
our cost of services and is treated as a deduction in operating expenses.
Interest Income. Interest income declined sequentially to RMB43.4 million
(US$6.3 million) from RMB53.8 million due to a decline in interest rates and a
decrease in cash and cash equivalents as we paid a previously declared
dividend of US$81.4 million.
Income Tax Expense. Income tax expense for the second quarter 2008 was
RMB17.5 million (US$2.5 million), which decreased substantially compared with
last quarter. This decrease was mainly the result of the release of valuation
allowance.
Net Income. Net income for the second quarter 2008 was RMB350.6 million
(US$51.1 million), a year-over-year increase of 32.7% from RMB264.2 million,
and a sequential increase of 3.5% from RMB338.7 million. Net income margin
was down slightly to 69.5% for the second quarter 2008, as compared to 71.4%
in the second quarter 2007 and 71.8% in the preceding quarter. The decrease
in net margin was mainly attributed to the increase of operating expenses.
Cash, Cash Equivalents and Short-Term Investments. As of June 30, 2008,
Giant's cash, cash equivalents and short-term investments totaled RMB5,729.6
million, compared to RMB6,045.5 million as of March 31, 2008. This decrease
was mainly attributable to a previously declared dividend during the second
quarter 2008 in the amount of US$81.4 million, as disclosed in our IPO
prospectus and in our annual report for the year 2007.
Business Highlights and Outlook
ZT Online - Our first internally developed and flagship game, ZT Online,
has continued to remain successful, having reached a new industry record PCU
at the time of 2.1 million on April 26, 2008. During the second quarter we
were able to launch in-game features and promotions that were successful in
gathering gamers online while simultaneously raising the level of fun and
interaction. To keep players engaged, in the second quarter our development
team added multiple new features to ZT Online's already robust content set,
including two new professions and a duplicate map system, which allows players
to join together and combat enemy bosses. As part of our market segmentation
strategy, we recently launched ZT Online Classic Edition, which is aimed at
winning back users who preferred the monetization features of ZT Online in
2006 and stopped playing the game over a year ago. We are also currently
testing a new expansion pack that will bring real-time strategy features,
which are typically only available within console games, to ZT Online gamers.
As a testament to the strength of our server-side engine technology, in the
second quarter we exceeded 40,000 concurrent users in a single shard, a major
milestone considering most Chinese online games only allow several thousand
concurrent users per shard. We have also granted an exclusive license to
VinaGame to operate ZT Online in Vietnam. We expect to begin beta testing in
Vietnam in late September 2008.
Giant Online - We launched open beta testing of Giant Online, the
Company's second internally developed game, at the end of the first quarter
2008. The game reached a PCU of over 237,000 on the first day of its open
beta launch on March 28, 2008, making it one of the best-performing open beta
launches by PCU thus far in 2008. Soon afterwards, Giant Online went on to
reach a PCU of over 344,000 on May 3, 2008. Since then, we have been
collecting and thoroughly analyzing feedback from gamers, in order to continue
to improve the game and optimize features according to player requests. Over
the next several months, we plan to launch the final open beta version of
Giant Online, which will contain new gameplay features constructed from the
feedback we have gathered during the open beta process in the past few months.
These features will include country vs. country battles, army base invasions,
casual-themed tasks, and prix-fixe equipment sets.
Empire of Sports - Empire of Sports is a 3D massively multiplayer online,
or MMO, game, featuring a wide range of sporting events. At the end of the
first quarter 2008, the developers, Switzerland-based Empire of Sports Ltd.,
began a European Private Launch initially limited to 5,000 players. The
developers have since enlarged the number of players to 15,000 and continue to
unlock additional features on a regular basis. Empire of Sports is planned
for full release in Europe in late 2008. We are currently in the process of
localizing the game for the Chinese market and have developed anti-cheating
and anti-fatigue systems to best suit our players' needs. We expect Empire of
Sports to begin closed beta testing in China in the first quarter 2009.
King of Kings III - King of Kings III is a 3D free-to-play medieval
magical MMO game. Our newly formed in-house development team and high level
managers in Shanghai have been optimizing the game and making recommendations
to the developers at Taiwan Lager Network Technology Co., Ltd., or Lager
Network, to localize the game for mainland China. Our team has also been
enhancing the graphics and adding additional community features to the game's
content. We have also decided to shift King of Kings III from Lager Network's
server platform to our proprietary, China-based server engines, whose
technology platform is derived from that of ZT Online and Giant Online. As a
result of this migration, which will increase the number of concurrent users
allowed on a single shard and provide gamers with optimal graphics and an
overall improved gaming experience, we now expect to commence closed beta
testing of King of Kings III in the first quarter of 2009.
51.com Strategic Investment - Giant has entered into a definitive
agreement to purchase approximately US$51 million in redeemable convertible
preferred shares of Five One Network Development Co., Ltd ("51.com"), a
leading Chinese online social networking service provider, representing a 25%
interest in 51.com. Through this transaction, which closed on July 14, 2008,
Giant expects to leverage 51.com's large community base in order to broaden
Giant's player base, expand the community-building opportunities, reinforce
user stickiness, and extend the lifecycles of Giant's games in the long term.
Third Quarter 2008 Guidance - In July, we adjusted ZT Online's revenue
model by reducing the scope of in-game monetization features. Although this
will affect our revenue in the near-term, we believe this will help us to
continue to grow our player base and active paying accounts in the long run.
To date, most ZT Online players have accepted these new changes. As part of
the revenue model adjustments, we have also initiated our segmentation
strategy by launching ZT Online Classic Edition into closed beta at the end of
July. Thus far, the market reaction to ZT Online Classic Edition has exceeded
our expectations. We plan to launch ZT Online Classic Edition into open beta
at the end of September. Considering that these changes are taking place in
the third quarter, it is difficult for us to have clear visibility into their
potential financial impact. As a result, we will not be providing top-line
revenue guidance for the third quarter 2008. However, the Company remains
fundamentally sound and we believe our sequential growth in the fourth quarter
2008 will be more in line with our historic track record.
Conference Call
Giant's senior management will host a conference call on Thursday, August
28, 2008 at 8:00 am (US Eastern Daylight Time) / 5:00 am (US Pacific Daylight
Time) / 8:00 pm (Beijing Time) to discuss its 2008 second quarter financial
results and recent business activity. The conference call may be accessed by
calling +1-866-362-4820 (for callers in the US), +86-10-800-130-0399 (for
callers in China) or +1-617-597-5345 (for callers outside of the US and China)
and entering pass code 71418887.
A live webcast of the conference call and replay will be available on the
investor relations page of Giant Interactive Group's website at
http://www.ga-me.com/earningsannouncements.php .
Currency Convenience Translation
This release contains translations of certain Renminbi (RMB) amounts into
US dollars (US$) at the rate of US$1.00 to RMB6.859, which was the noon buying
rate as of June 30, 2008 in the City of New York for cable transfers in
Renminbi per US dollar as certified for customs purposes by the Federal
Reserve Bank of New York. We make no representation that the Renminbi or US
dollar amounts referred to in this release could have been, or could be,
converted into US dollars at such rate or at all.
Use of Non-GAAP Financial Measures
Giant has reported for the second quarter 2008 net income on a non-GAAP
basis excluding non-cash share-based compensation. Giant believes that both
management and investors benefit from referring to these non-GAAP financial
measures in assessing the performance of Giant and when planning and
forecasting future periods. Giant computes its non-GAAP financial measures
using the same consistent method from quarter to quarter.
Readers are cautioned not to view non-GAAP results on a stand-alone basis
or as a substitute for results under GAAP, or as being comparable to results
reported or forecasted by other companies, and should refer to the
reconciliation of GAAP results with non-GAAP results in the attached financial
information.
The table below sets forth the reconciliation of GAAP measures to non-GAAP
measures for the indicated periods:

Giant Interactive Group, Inc.
Reconciliation of GAAP to Non-GAAP (Unaudited)

Three months ended
June 30, March 31, June 30, June 30,
2007 2008 2008 2008
(RMB) (RMB) (RMB) (US$)

GAAP net income: 264,247,780 338,652,208 350,581,570 51,111,891

Share-based
compensation 4,485,585 12,164,018 11,880,964 1,732,146

Non-GAAP net income: 268,733,365 350,816,226 362,462,534 52,844,037

Non-GAAP earnings per
share:

Basic 1.34 1.43 1.50 0.22
Diluted 1.34 1.38 1.45 0.21

Weighted average
ordinary shares:

Basic 200,000,000 244,556,746 241,522,046 241,522,046
Diluted 200,589,316 253,845,788 250,669,716 250,669,716

Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and
subject to adjustments. Adjustments to the financial statements may be
identified when audit work is performed for the year-end audit, which could
result in significant differences from this preliminary unaudited financial
information.
About Giant Interactive Group Inc.
Giant Interactive Group Inc. (NYSE: GA) is one of China's leading online
game developers and operators in terms of revenues, focusing on massively
multiplayer online role playing games. Giant's first game, ZT Online, was
voted the most popular online game in China in 2006 according to the
International Data Corporation. The Company's second game, Giant Online,
entered into open beta testing on March 28, 2008. Giant has two additional
online games that it intends to launch, including King of Kings III and Empire
of Sports. Giant has built a nationwide distribution network to sell the
prepaid game cards and game points required to play its games, which as of
June 30, 2008 consisted of over 270 distributors, and reached over 116,500
retail outlets, including internet cafes, software stores, supermarkets,
bookstores, newspaper stands, and convenience stores located throughout China.
For more information, please visit Giant Interactive Group on the web at
http://www.ga-me.com .
Safe Harbor Statement
Statements in this release contain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and as defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates" and
similar statements and among others, include our anticipated revenue for the
third quarter 2008, our continued efforts to successfully develop and launch
our new games and expand our distribution and marketing network, anticipated
benefits of our investment in 51.com, our ability to successfully operate our
existing online games, commercially launch and operate King of Kings III and
Empire of Sports and our ability to continue to grow our business and build
long-term shareholder value. These forward-looking statements are not
historical facts but instead represent only our belief regarding future
events,
many of which, by their nature, are inherently uncertain and outside of our
control. Our actual results and financial condition and other circumstances
may differ, possibly materially, from the anticipated results and financial
condition indicated in these forward-looking statements. Among the factors
that could cause our actual results to differ from what we currently
anticipate may include our ability to develop, purchase or license additional
online games that are attractive to our players, our ability to develop and
successfully launch expansion packs for our online games, our dependence on
one online game, which currently accounts for the majority of our historical
net revenues, our ability to respond to competition, our need to implement and
maintain effective internal control over financial reporting, our limited
operating history and unproven long-term potential of our online game business
model and our uncertainties with respect to the PRC legal and regulatory
environments. The financial information contained in this release should be
read in conjunction with the consolidated financial statements and notes
thereto included in our annual report on Form 20F for the fiscal year 2007, as
filed with the Securities and Exchange Commission on June 18, 2008, and is
available on the Securities and Exchange Commission's website at
http://www.sec.gov . For additional information on these and other important
factors that could adversely affect our business, financial condition, results
of operations and prospects, see "Risk Factors" beginning on page 7 of our
annual report for fiscal year 2007. Our actual results of operations for the
second quarter 2008 are not necessarily indicative of our operating results
for any future periods. Any projections in this release are based on limited
information currently available to us, which is subject to change. Although
such projections and the factors influencing them will likely change, we
undertake no obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise, after the
date of this press release. Such information speaks only as of the date of
this release.
For more information, please contact:

Investor Contact:
Rich Chiang, IR Manager
Giant Interactive Group Inc.
Tel: +86-21-6451-1258

Investor Relations (US):
Mahmoud Siddig, Director
Taylor Rafferty
Tel: +1-212-889-4350

Investor Relations (HK):
Ruby Yim, Managing Director
Taylor Rafferty
Tel: +852-3196-3712

Media Contact:
John Dudzinsky, Director
Taylor Rafferty
Tel: +1-212-889-4350

GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

Audited Unaudited Unaudited Unaudited
December 31 March 31 June 30 June 30
2007 2008 2008 2008
(RMB) (RMB) (RMB) (US$)
ASSETS
Current
assets:
Cash and cash
equivalents 7,295,469,843 5,834,952,767 1,834,175,667 267,407,629
Prepayments
and other
current
assets 40,721,896 53,169,914 91,577,935 13,351,305
Due from
related
parties 6,005,661 6,329,175 6,744,530 983,297
Inventories 385,876 633,452 1,163,390 169,612
Deferred tax
assets 30,911,888 44,510,716 68,707,325 10,016,959
Short-term
investment -- 210,570,000 3,895,399,859 567,917,053
Secured
promissory
note -- -- 34,295,500 5,000,000

Total current
assets 7,373,495,164 6,150,166,024 5,932,064,206 864,845,855

Non-current
assets:
Property and
equipment,
net 127,631,269 139,395,182 180,565,890 26,325,012
Intangible
assets, net 86,589,305 86,544,887 87,576,747 12,767,965
Long-term
deposits 7,600 -- -- --

Total non-
current
assets 214,228,174 225,940,069 268,142,637 39,092,977

Total assets 7,587,723,338 6,376,106,093 6,200,206,843 903,938,832

LIABILITIES AND
SHAREHOLDERS' EQUITY
Current
liabilities:
Payables and
accrued
expenses 191,301,964 71,648,711 159,717,408 23,285,476
Due to a
related
party 13,710,697 -- -- --
Tax payable -- 52,872,231 65,988,462 9,620,572
Advance from
distributors 127,805,262 74,783,911 58,990,575 8,600,337
Deferred
revenue 324,970,643 399,712,872 419,776,021 61,199,869
Dividends
payable 593,498,287 571,075,107 -- --
Unrecognized
tax benefits 30,911,888 30,911,888 30,911,888 4,506,697

Total current
liabilities 1,282,198,741 1,201,004,720 735,384,354 107,212,951

Total
liabilities 1,282,198,741 1,201,004,720 735,384,354 107,212,951

Commitments and
contingencies

Shareholders' equity
Ordinary shares 411 411 416 61
(par value
US$0.0000002
per share;
258,670,626
shares issued
and 257,241,526
shares outstanding
at December 31,
2007 and
261,110,626 shares
issued and
241,899,526 shares
outstanding at
June 30, 2008)
Additional
paid-in
capital 5,928,533,055 5,940,697,073 5,962,424,775 869,272,175
Statutory
reserves 43,890,273 43,890,273 43,890,273 6,398,838
Accumulated
other
comprehensive
income (51,781,427) (212,947,338) (295,535,499) (43,086,629)
Retained
earnings 511,416,766 850,068,974 1,200,650,544 175,044,910
Treasury
stock (126,534,481) (1,446,608,020) (1,446,608,020) (210,903,474)

Total
shareholders'
equity 6,305,524,597 5,175,101,373 5,464,822,489 796,725,881

Total
liabilities
and
shareholders'
equity 7,587,723,338 6,376,106,093 6,200,206,843 903,938,832

GIANT INTERACTIVE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

Three months ended
June 30 March 31 June 30 June 30
2007 2008 2008 2008
(RMB) (RMB) (RMB) (US$)
Net revenue:
Online game 368,446,793 470,222,925 503,270,285 73,372,641
Overseas licensing
revenue 1,775,855 1,367,439 963,175 140,423
Other revenue, net -- -- 534,849 77,977

Total net revenue 370,222,648 471,590,364 504,768,309 73,591,041

Cost of services (38,617,474) (50,799,032) (57,760,390) (8,420,987)

Gross profit 331,605,174 420,791,332 447,007,919 65,170,054

Operating (expenses)
income:
Research and product
development
expenses (3,297,974) (11,828,715) (19,879,930) (2,898,329)
Sales and marketing
expenses (44,393,221) (64,871,743) (83,589,894) (12,186,715)
General and
administrative
expenses (20,209,385) (28,114,689) (30,340,315) (4,423,367)
Government financial
incentives -- 5,000,000 15,000,000 2,186,877

Total operating
expenses (67,900,580) (99,815,147) (118,810,139) (17,321,534)

Income from
operations 263,704,594 320,976,185 328,197,780 47,848,520

Interest income 599,849 53,763,142 43,382,988 6,324,880
Other (expenses)
income (56,663) 2,602,967 (3,537,388) (515,722)
Investment income -- 1,171,241 -- --

Income before income
tax expenses 264,247,780 378,513,535 368,043,380 53,657,678

Income tax expenses -- (39,861,327) (17,461,810) (2,545,787)

Net income 264,247,780 338,652,208 350,581,570 51,111,891

Other comprehensive
income
Foreign currency
translation 248,880 (161,165,911) (82,588,161) (12,040,670)

Comprehensive income 264,496,660 177,486,297 267,993,409 39,071,221

Earnings per share:

Basic 1.32 1.38 1.45 0.21
Diluted 1.32 1.33 1.40 0.20

Weighted average
ordinary shares:

Basic 200,000,000 244,556,746 241,522,046 241,522,046
Diluted 200,589,316 253,845,788 250,669,716 250,669,716

SOURCE Giant Interactive Group Inc.

Investor Contact: Rich Chiang, IR Manager, Giant Interactive Group Inc. at
+86-21-6451-1258; Investor Relations (HK): Ruby Yim at +852- 3196-3712;
Investor Relations (US): Mahmoud Siddig at +1-212-889-4350; Media Contact:
John Dudzinsky at +1-212-889-4350, all three at Taylor Rafferty for Giant
Interactive Group