Perfect World Announces First Quarter 2009 Unaudited Financial Results

BEIJING, May 18 /PRNewswire-Asia/ -- Perfect World Co., Ltd. (Nasdaq: PWRD)
("Perfect World" or the "Company"), a leading online game developer and
operator based in China, today announced its unaudited financial results for
the first quarter ended March 31, 2009.
First Quarter 2009 Highlights(1)

-- Total revenues were RMB425.1 million (USD62.2 million), an increase of
1.8% from 4Q08 and 40.2% from 1Q08
-- Gross profit was RMB368.7 million (USD54.0 million), an increase of
0.1% from 4Q08 and 38.8% from 1Q08
-- Operating profit was RMB230.4 million (USD33.7 million), an increase of
54.0% from 4Q08 and 42.6% from 1Q08. Non-GAAP operating profit(2) was
RMB245.8 million (USD36.0 million), an increase of 0.4% from 4Q08 and
45.0% from 1Q08
-- Net income was RMB215.4 million (USD31.5 million), an increase of 72.6%
from 4Q08 and 36.1% from 1Q08. Non-GAAP net income(2) was RMB230.9
million (USD33.8 million), an increase of 4.9% from 4Q08 and 38.8% from
1Q08
-- Basic and diluted earnings per ADS(3)were RMB4.14 (USD0.61) and
RMB3.96 (USD0.58), respectively, as compared to RMB2.22 and RMB2.12,
respectively, in 4Q08, and RMB2.83 and RMB2.67, respectively, in 1Q08.
Non-GAAP basic and diluted earnings per ADS(2) were RMB4.43 (USD0.65)
and RMB4.25 (USD0.62), respectively, as compared to RMB3.91 and
RMB3.74, respectively, in 4Q08, and RMB2.97 and RMB2.81, respectively,
in 1Q08
-- Rolled out the "Battle Song of the Elves" expansion pack for "Perfect
World II" on March 25, 2009
-- Entered into a licensing agreement in January 2009 with HI-WIN Co.,
Ltd. to license "Pocketpet Journey West" in Korea
-- Launched "Zhu Xian" in Thailand in January 2009 and in Vietnam in
February 2009 through Cubinet Interactive(s) Pte. Ltd.
-- Launched "Pocketpet Journey West" under the name "Ether Saga Online" in
North America in March 2009 through the Company's wholly owned U.S.
subsidiary, Perfect World Entertainment Inc.
-- Completed the acquisition of InterServ subsidiaries with research and
development capabilities located in Shanghai and Chengdu for a total
consideration of approximately USD23.2 million in February 2009

(1) The U.S. dollar (USD) amounts disclosed in this press release,
except for those transaction amounts that are actually settled in
U.S. dollars, are presented solely for the convenience of the
reader. The conversion of Renminbi (RMB) into USD in this release
is based on the Federal Reserve Board certified exchange rate on
March 31, 2009, which was RMB6.8329 to USD1.00. The percentages
stated are calculated based on RMB.
(2) As used in this press release, non-GAAP operating profit, non-GAAP
net income and non-GAAP earnings per ADS are defined to exclude
share-based compensation charge and a non-recurring charge related
to the InterServ acquisition in October 2008 (which was recorded
only in 4Q08) from operating profit, net income and earnings per
ADS, respectively. See "Non-GAAP Financial Measures" and
"Reconciliation of GAAP and Non-GAAP Results" at the end of this
press release.
(3) Each ADS represents five ordinary shares.

"We are pleased to announce our first quarter results," commented Mr.
Michael Chi, Chairman and Chief Executive Officer of Perfect World. "We were
faced with what we believed to be several operating challenges, such as the
initial stages of the implementation of our fine-tuned strategy and the
effects of the ongoing global economic slowdown. However, our strong
execution and effective in-game promotions helped us exceed our previous
expectations for the quarter."
"Diversification continues to be our key to mitigating the risks of
relying on a single game. Just a few weeks ago, we successfully launched our
first 2.5D MMORPG, 'Battle of the Immortals,' which helped to further
diversify our rich portfolio. We have a strong pipeline of in-house developed
MMORPGs for 2009 and beyond. We also obtained the license of 'Torchlight,' an
action-MMORPG that is being developed by Runic Games, Inc. ("Runic Games"), to
further enhance our pipeline. With our extensive MMORPG development
experience and strong marketing and operating capabilities, we aim to create a
'global title' through our collaboration with Runic Games."
"As a part of our stated strategy, we continuously monitor the market for
strategic acquisitions and alliance opportunities. I'm pleased to announce
that we recently made a minority investment of RMB15 million in Chengdu Ye Net
Science and Technology Development Co., Ltd. ("Ye Net"), a web game developer
and operator. Ye Net has a record of success in the emerging web game
business and has promising growth potential. I believe this strategic
investment will complement our core business. It will also help us grow our
online community and generate synergies with our existing business.
Meanwhile,
we will leverage our broad marketing channels and resources to boost Ye Net's
development in this up-and-coming market."
"I'm also pleased to announce that we recently invested an aggregate of
RMB70 million in Beijing Perfect World Cultural Communication Co., Ltd. ("PW
Cultural") to increase this company's registered capital and increase our
effective equity stake to 89%. After obtaining majority control of this media
and entertainment company, we believe we now have more flexibility in terms of
content generation and co-promotion. As the entertainment industry develops
in China, such investment will allow us to capture the growth of the broader
entertainment industry, while creating synergies with our core business."
"We will continue to execute our corporate strategy of enhancing the
sustainability of our business by devoting further resources to longer-term
projects. We think the steps we have taken over the past few months have
already given us a good start, and our deep and well planned pipeline will
allow us to roll out the newest games at a consistent pace, which should help
continue to drive the strong growth of our Company."
First Quarter 2009 Financial Results
Total Revenues
Total revenues were RMB425.1 million (USD62.2 million) in 1Q09, an
increase of 1.8%, or RMB7.3 million, from RMB417.8 million in 4Q08 and an
increase of 40.2%, or RMB122.0 million, from RMB303.2 million in 1Q08.
Online game operation revenues were RMB377.2 million (USD55.2 million) in
1Q09, an increase of 4.0%, or RMB14.6 million, from RMB362.6 million in 4Q08
and an increase of 42.6%, or RMB112.7 million, from RMB264.5 million in 1Q08.
Despite undergoing the transitional period to implement the fine-tuned
strategy and facing the adverse seasonality factors, the Company managed to
deliver sequential growth in online game operation revenues through a series
of successful marketing activities and in-game promotions.
The aggregate average concurrent users (ACU) for games under operation in
mainland China was approximately 615,000 in 1Q09, as compared to 690,000 in
4Q08 and 660,000 in 1Q08. The active paying customers (APC) for games
operated in mainland China under the item-based revenue model was
approximately 1,464,000 in 1Q09, as compared to 1,546,000 in 4Q08 and
1,701,000 in 1Q08. The average revenue per active paying customer (ARPU) for
games operated in mainland China under the item-based revenue model was RMB244
in 1Q09, an increase of 8.4%, or RMB19, from RMB225 in 4Q08 and an increase of
61.6%, or RMB93, from RMB151 in 1Q08. The increase in ARPU from 4Q08 was
mainly due to a series of successful promotions. The decrease in ACU and APC
from 4Q08 was mainly due to negative seasonality factors and the
underperformance of a newly launched game. The decrease in ACU and APC from
1Q08 was mainly due to more aggressive anti-cheating efforts.
Overseas licensing revenues were RMB48.0 million (USD7.0 million) in 1Q09,
a decrease of 13.1%, or RMB7.2 million, from RMB55.2 million in 4Q08 and an
increase of 24.0%, or RMB9.3 million, from RMB38.7 million in 1Q08. The
decrease from 4Q08 was mainly due to a decrease in initial license fees.
Cost of Revenues
The cost of revenues was RMB56.4 million (USD8.3 million) in 1Q09, an
increase of 14.4%, or RMB7.1 million, from RMB49.3 million in 4Q08 and an
increase of 50.3%, or RMB18.9 million, from RMB37.5 million in 1Q08. The
increase from 4Q08 was mainly due to an increase in staff costs.
Gross Profit and Gross Margin
Gross profit was RMB368.7 million (USD54.0 million) in 1Q09, an increase
of 0.1%, or RMB0.2 million, from RMB368.5 million in 4Q08, and an increase of
38.8%, or RMB103.1 million, from RMB265.6 million in 1Q08. Gross margin was
86.7% in 1Q09, as compared to 88.2% in 4Q08 and 87.6% in 1Q08.
Operating Expenses
Operating expenses were RMB138.3 million (USD20.2 million) in 1Q09, a
decrease of 36.8%, or RMB80.6 million, from RMB218.9 million in 4Q08, and an
increase of 33.0%, or RMB34.3 million, from RMB104.0 million in 1Q08. The
decrease from 4Q08 in operating expenses was mainly attributed to a decrease
in R&D expenses and sales and marketing expenses.
R&D expenses decreased by 54.7%, or RMB68.9 million, from RMB125.9 million
in 4Q08 to RMB57.0 million (USD8.3 million) in 1Q09. The decrease from 4Q08
was primarily due to the non-recurring charge of approximately RMB78.4 million
resulting from the October 2008 InterServ acquisition that was recorded in
4Q08.
Sales and marketing expenses decreased by 13.1%, or RMB7.7 million, from
RMB58.6 million in 4Q08 to RMB50.9 million (USD7.5 million) in 1Q09. This was
primarily attributable to a reduction in advertising and promotional expenses
associated with a more effective marketing strategy.
Operating Profit
Operating profit was RMB230.4 million (USD33.7 million) in 1Q09, an
increase of 54.0%, or RMB80.8 million, from RMB149.5 million in 4Q08, and an
increase of 42.6%, or RMB68.8 million, from RMB161.6 million in 1Q08.
Non-GAAP operating profit was RMB245.8 million (USD36.0 million) in 1Q09, an
increase of 0.4%, or RMB1.1 million, from RMB244.7 million in 4Q08, and an
increase of 45.0%, or RMB76.3 million, from RMB169.5 million in 1Q08.
Income Tax Expense
Income tax expense was RMB19.9 million (USD2.9 million) in 1Q09, as
compared to RMB33.6 million in 4Q08 and RMB5.6 million in 1Q08. Income tax
expense in 1Q09 was composed of three components. A withholding tax of RMB6.7
million (USD1.0 million) on overseas licensing revenues was recorded in 1Q09.
A withholding tax of 5%, or RMB7.9 million (USD1.2 million), on earnings made
in 1Q09 from Beijing Perfect World Software Co., Ltd. ("PW Software"), the
Company's wholly-owned subsidiary, was accrued, as all undistributed earnings
are presumed to be transferred to the parent company under U.S. GAAP and are
subject to withholding tax. Beijing Perfect World Network Technology Co.,
Ltd.
("PW Network"), the Company's controlled entity, started to enjoy a 50% tax
deduction starting from 2009, as such, an RMB5.4 million (USD0.8 million)
income tax was prepaid in 1Q09.
Net Income
Net income was RMB215.4 million (USD31.5 million) in 1Q09, an increase of
72.6%, or RMB90.6 million, from RMB124.8 million in 4Q08, and an increase of
36.1%, or RMB57.1 million, from RMB158.4 million in 1Q08. Non-GAAP net income
was RMB230.9 million (USD33.8 million) in 1Q09, an increase of 4.9%, or
RMB10.9 million, from RMB220.0 million in 4Q08, and an increase of 38.8%, or
RMB64.6 million, from RMB166.3 million in 1Q08.
Basic and diluted earnings per ADS were RMB4.14(USD0.61) and
RMB3.96(USD0.58), respectively, in 1Q09, as compared to RMB2.22 and RMB2.12,
respectively, in 4Q08, and RMB2.83 and RMB2.67, respectively, in 1Q08.
Non-GAAP basic and diluted earnings per ADS were RMB4.43(USD0.65) and
RMB4.25(USD0.62), respectively, in 1Q09, as compared to RMB3.91 and RMB3.74,
respectively, in 4Q08, and RMB2.97 and RMB2.81, respectively, in 1Q08.
Cash and Cash Equivalents
As of March 31, 2009, the Company had RMB986.4 million (USD144.4 million)
of cash and cash equivalents, as compared to RMB1.3 billion as of December 31,
2008. The decrease was mainly due to the payment to SB Asia Investment Fund
II, L.P. ("SAIF") and an affiliate of SAIF in January 2009 for the repurchase
of the Company's Class A ordinary shares, and to a lesser extent, the payment
for the repurchase of the Company's ADSs from the open market, partially
offset by the net cash inflow generated from the Company's online game
operations.
Restricted Cash
As of March 31, 2009, the Company had RMB15.0 million (USD2.2 million) of
restricted cash, as compared to RMB150.4 million as of December 31, 2008. The
decrease was mainly because a total of approximately USD22.0 million related
to the acquisition of InterServ's subsidiaries was paid to InterServ from the
escrow account upon the completion of the acquisition in February 2009. The
balance of restricted cash as of March 31, 2009 is related to the strategic
investment in Ye Net. RMB15.0 million related to this investment had been
deposited into an escrow account and recorded as restricted cash as of March
31, 2009.
Recent Developments
Open Beta Testing for "Battle of the Immortals"
The Company launched open beta testing for "Battle of the Immortals," a
2.5D mysterious adventure MMORPG on April 2, 2009.
New Expansion Pack
The Company rolled out "Hot Dance Party 3.0 - Baby Plan" expansion pack
for "Hot Dance Party" on April 7, 2009.
New Overseas Launches
The Company launched "Hot Dance Party" in Malaysia and Singapore through
Cubinet Interactive(s) Pte. Ltd. in April 2009.
Closed Beta Testing for "Zhu Xian" in North America
The Company scheduled to launch closed beta testing for "Zhu Xian" in
North America under the name "Jade Dynasty" through its wholly owned U.S.
subsidiary on May 26, 2009.
Publishing Agreement with Runic Games, Inc.
The Company entered into a publishing agreement with Runic Games, a
specialized developer of PC-based entertainment software in the United States,
for the exclusive license to publish, throughout the world, "Torchlight," an
action-MMORPG that's being developed.
Leveraging Runic Games professionals' expertise in designing high-quality
games and Perfect World's extensive R&D and operation experience with MMORPGs,
"Torchlight" is expected to cater to the tastes of both Western and Eastern
players and further diversify the Company's portfolio.
Investment in Chengdu Ye Net Science and Technology Development Co., Ltd.
Chengdu Perfect World Network Technology Co., Ltd. ("Chengdu PW Network"),
an entity controlled by the Company, made an RMB15.0 million strategic
investment in Ye Net and took a minority stake. Chengdu PW Network will have
an option to acquire an additional stake.
Ye Net is a web game developer and operator, and has successfully
developed a large platform for web games. Presently, Ye Net is operating a
number of classical web games, including "Wizard," "The Heroines" and "Guns
and Roses."
The Company will leverage its broad marketing channels and resources to
support Ye Net, while growing the online community and creating synergies with
its existing operations.
Investment in Beijing Perfect World Cultural Communication Co., Ltd.
PW Network, an entity controlled by the Company, invested an aggregate of
RMB70.0 million in PW Cultural, a media and entertainment company, to acquire
additional equity in and increase the registered capital of PW Cultural.
Following the completion of the transaction, PW Network holds 89% equity in PW
Cultural.
Such investment in PW Cultural provides the Company with enhanced control
and greater flexibility over content generation and co-promotion. It is also
expected to allow the Company to capture the growth of the broader
entertainment industry, while creating synergies with the core business.
ADS and Share Repurchases
In October 2008, the Company's Board authorized an ADS repurchase program
to repurchase up to USD100 million of the Company's ADSs from October 2008 to
October 2009. As of May 17, 2009, the Company had repurchased an aggregate of
1,683,192 ADSs on the open market.
In addition to and separate from the above ADS repurchase program, in
January 2009, the Company completed a repurchase of 18,750,000 shares of the
Company's Class A ordinary shares for approximately USD56.6 million from SAIF
and an affiliate of SAIF.
Additional updates on the preliminary results for the fourth quarter of 2008
and for the fiscal year of 2008
The Company's announcement on March 2, 2009 for its preliminary results for
the fourth quarter of 2008 and for fiscal year of 2008 included a disclosure
on commitment in connection with the agreement that the Company entered into
in December 2008 to repurchase a total of 18,750,000 shares of the Company's
Class A ordinary shares for approximately USD56.6 million from SAIF and an
affiliate of SAIF. The agreement was not accounted for as liability and equity
on the unaudited consolidated financial statements for the fourth quarter of
2008 and for the fiscal year of 2008. After further review of the agreement
and relevant supporting documents, the Company has recently determined that in
accordance with US GAAP, the agreement should be treated similar to an
executed treasure-stock purchase contract after the agreement was signed by
all the parties thereto on December 29, 2008 without closing conditions that
cannot be met by relevant parties. Accordingly, the unaudited consolidated
financial statements as of and for the three months ended December 31, 2008
have been adjusted to give effect to the agreement as a repurchase of
18,750,000 shares of the Company's Class A ordinary shares from SAIF and an
affiliate of SAIF as of December 29, 2008. As a result, basic and diluted
earnings per ADS of the Company for 4Q08 were RMB2.22 and RMB2.12,
respectively, as compared to RMB2.21 and RMB2.12, respectively, disclosed in
our prior earnings release on March 2, 2009.
Business Outlook
Based on the Company's current operations, total revenues for the second
quarter of 2009 are expected to be between RMB417 million and RMB434 million,
representing a decline of 2% to an increase of 2% compared to the first
quarter of 2009. This takes into consideration the additional revenue
contribution from the newly launched "Battle of the Immortals." However, in
order to lengthen the life cycle of the Company's existing games to maintain
sustainable growth, the Company decided to decelerate some of the in-game
promotions and monetization activities in the second quarter to further
nurture the games and grow user base.
In addition, the Company has incurred and expects to continue to incur
additional operating expenses in the second quarter of 2009, including
increase in operating expenses in connection with the integration of the newly
acquired InterServ subsidiaries and marketing expenses in connection with the
launch of "Battle of the Immortals," which will put pressure on operating
margin and net margin for the second quarter.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally
accepted accounting principals in the United States, or GAAP, this press
release presents non-GAAP operating profit, non-GAAP net income and non-GAAP
earnings per ADS by excluding share-based compensation charge and a
non-recurring charge related to the InterServ acquisition in October 2008
(which was recorded only in 4Q08) from operating profit, net income and
earnings per ADS, respectively. The Company believes these non-GAAP financial
measures are important to help investors understand the Company's operating
and financial performance, compare business trends among different reporting
periods on a consistent basis and access the Company's core operating results,
as they exclude certain expenses that are (i) not expected to result in cash
payments or (ii) non-recurring in nature. The use of the above non-GAAP
financial measures has certain limitations. Share-based compensation charge
has been and will be incurred and is not reflected in the presentation of the
non-GAAP financial measures. It should be considered in the overall
evaluation of our results. None of the non-GAAP measures is a measure of net
income, operating profit, operating performance or liquidity presented in
accordance with GAAP. We compensate for these limitations by providing the
relevant disclosure of our share-based compensation charge and a non-recurring
charge related to the InterServ acquisition in October 2008 in our
reconciliations to the GAAP financial measures, which should be considered
when evaluating our performance. These non-GAAP financial measures should be
considered in addition to financial measures prepared in accordance with GAAP,
but should not be considered a substitute for, or superior to, financial
measures prepared in accordance with GAAP. Reconciliation of each of these
non-GAAP financial measures to the most directly comparable GAAP financial
measure are set forth at the end of this release.
Conference Call
Perfect World will host a conference call and live webcast at 8:00 a.m.
Eastern Daylight Time (EDT) (8:00 p.m., Beijing time) on Monday, May 18, 2009.
The dial-in details for the live conference call are as follows:

- U.S. Toll Free Number: 1-866-519-4004
- International Dial-in Number: +65-6735-7955
- Mainland China Toll Free Number: 10-800-819-0121
- Hong Kong Toll Free Number: 80-093-3053
- U.K. Toll Free Number: 080-8234-6646
Conference ID: PWRD

A live and archived webcast of the conference call will be available on the
Investor Relations section of Perfect World's website at http://www.pwrd.com.
A telephone replay of the call will be available after the conclusion of
the conference call through 10:00 a.m. Eastern Daylight Time, May 25, 2009.
The dial-in details for the replay are as follows:

- U.S. Toll Free Number: 1-866-214-5335
- International Dial-in Number: +61-2-8235-5000
Conference ID: 7973 (PWRD)

About Perfect World Co., Ltd. (http://www.pwrd.com)
Perfect World Co., Ltd. (Nasdaq: PWRD) is a leading online game developer
and operator based in China. Perfect World primarily develops online games
based on proprietary game engines and game development platforms. The
Company's strong technology and creative game design capabilities, combined
with extensive local knowledge and experience, enable it to frequently and
rapidly introduce popular games that are designed to cater to changing
customer preferences and market trends in China. The Company's current
portfolio of self-developed online games includes massively multiplayer online
role playing games ("MMORPGs"): "Perfect World," "Legend of Martial Arts,"
"Perfect World II," "Zhu Xian," "Chi Bi," "Pocketpet Journey West" and "Battle
of the Immortals;" and an online casual game: "Hot Dance Party." While a
substantial portion of the revenues are generated in China, the Company's
games have been licensed to leading game operators in a number of countries
and regions in Asia, Europe and South America. The Company also generates
revenues from game operation in North America. The Company plans to continue
to explore new and innovative business models and remains deeply committed to
maximizing shareholder value over time.
Safe Harbor Statements
This press release contains forward-looking statements. These statements
constitute forward-looking statements under the U.S. 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. Among
other things, the management's quotations and "Business Outlook" contain
forward-looking statements. Such statements involve certain risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. Potential risks and uncertainties include,
but are not limited to, our limited operating history, our ability to develop
and operate new games that are commercially successful, the growth of the
online game market and the continuing market acceptance of our games and
in-game items in China and elsewhere, our ability to protect our intellectual
property rights, our ability to respond to competitive pressure, our ability
to maintain an effective system of internal control over financial reporting,
changes of the regulatory environment in China, and economic slowdown in China
and/or elsewhere. Further information regarding these and other risks is
included in Perfect World's filings with the U.S. Securities and Exchange
Commission, including its annual report on Form 20-F. All information
provided in this press release and in the attachments is as of May 18, 2009,
and Perfect World does not undertake any obligation to update any forward-
looking statement as a result of new information, future events or otherwise,
except as required under applicable law.

Perfect World Co., Ltd.
Unaudited Consolidated Balance Sheets

December 31, March 31, March 31,
2008 2009 2009
RMB RMB USD
Assets
Current assets
Cash and cash equivalents 1,333,075,731 986,442,407 144,366,580
Restricted cash 150,361,200 15,000,000 2,195,261
Short-term investments 50,000,000 90,000,000 13,171,567
Accounts receivable 38,822,355 57,699,369 8,444,346
Prepayment and other assets 36,269,524 43,629,315 6,385,183
Deferred tax assets 1,734,207 1,895,307 277,380
Total current assets 1,610,263,017 1,194,666,398 174,840,317
Non current assets
Equity investments 22,559,975 21,934,930 3,210,193
Property, equipment, and
software, net 169,399,817 178,525,653 26,127,362
Construction in progress 714,083,386 715,716,646 104,745,664
Intangible assets, net 26,188,873 63,535,931 9,298,531
Goodwill -- 110,606,000 16,187,270
Prepayments and other
assets 18,702,700 20,607,443 3,015,915
Deferred tax assets 1,090,526 977,337 143,034
Total assets 2,562,288,294 2,306,570,338 337,568,286

Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable 13,629,262 55,333,818 8,098,147
Advances from customers 78,388,312 76,054,541 11,130,639
Salary and welfare payable 61,907,164 37,351,728 5,466,453
Taxes payable 20,771,786 56,712,054 8,299,851
Accrued expenses and other
liabilities 24,813,169 30,757,690 4,501,411
Share repurchase liability 386,648,554 -- --
Deferred revenues 223,352,994 248,534,097 36,373,150
Deferred tax liabilities 26,000,000 7,860,908 1,150,450
Deferred government grants 620,000 620,000 90,737
Total current liabilities 836,131,241 513,224,836 75,110,838
Deferred revenues 32,554,670 33,751,751 4,939,594
Other long-term payable 28,000,000 -- --
Total liabilities 896,685,911 546,976,587 80,050,432

Commitments

Shareholders' Equity
Ordinary shares (US$0.0001 par
value, 10,000,000,000 shares
authorized, 72,385,480 Class A
ordinary shares issued and
outstanding, 210,350,565 Class
B ordinary shares issued and
210,147,840 Class B ordinary
shares outstanding as of
December 31, 2008;
10,000,000,000 shares
authorized, 51,921,193 Class A
ordinary shares issued and
outstanding, 203,764,842 Class
B ordinary shares issued and
outstanding as of March 31,
2009) 223,481 202,986 29,707
Additional paid-in capital 1,177,967,483 665,527,755 97,400,482
Treasury stock (391,224,203) -- --
Statutory reserves 94,945,533 94,945,533 13,895,349
Accumulated other comprehensive
loss (65,577,655) (65,795,319) (9,629,194)
Retained earnings 849,267,744 1,064,712,796 155,821,510
Total Shareholders' Equity 1,665,602,383 1,759,593,751 257,517,854
Total Liabilities and
Shareholders' Equity 2,562,288,294 2,306,570,338 337,568,286

Perfect World Co., Ltd.
Unaudited Consolidated Statements of Operations

Three months ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD

Revenues
Online game
operation
revenues 264,480,379 362,597,634 377,173,678 55,199,648
Overseas licensing
revenues 38,680,078 55,205,269 47,968,592 7,020,239
Total revenues 303,160,457 417,802,903 425,142,270 62,219,887
Cost of revenues (37,541,866) (49,344,155) (56,442,843) (8,260,452)
Gross profit 265,618,591 368,458,748 368,699,427 53,959,435
Operating expenses
Research and
development
expenses (23,418,800) (125,870,657) (56,958,268) (8,335,885)
Sales and marketing
expenses (60,666,589) (58,622,311) (50,924,583) (7,452,851)
General and
administrative
expenses (19,943,688) (34,416,638) (30,438,140) (4,454,644)
Total operating
expenses (104,029,077) (218,909,606) (138,320,991) (20,243,380)
Operating profit 161,589,514 149,549,142 230,378,436 33,716,055
Other income /
(expenses)
Investment loss -- (468,736) (625,045) (91,476)
Interest income 11,647,866 7,915,676 3,274,619 479,243
Others, net (9,236,970) 1,430,694 2,359,971 345,384
Total other income,
net 2,410,896 8,877,634 5,009,545 733,151
Profit before tax 164,000,410 158,426,776 235,387,981 34,449,206
Income tax expense (5,646,822) (33,617,364) (19,942,929) (2,918,663)
Net income 158,353,588 124,809,412 215,445,052 31,530,543
Net earnings per
share, basic 0.57 0.44 0.83 0.12
Net earnings per
share, diluted 0.53 0.42 0.79 0.12
Net earnings per
ADS, basic 2.83 2.22 4.14 0.61
Net earnings per
ADS, diluted 2.67 2.12 3.96 0.58

Shares used in
calculating basic
net earnings per
share 279,610,748 281,427,327 260,412,419 260,412,419
Shares used in
calculating
diluted net
earnings per share 296,103,511 293,724,147 271,768,450 271,768,450

Total share-based
compensation cost
included in:
Cost of revenues (388,707) (1,082,339) (1,079,899) (158,044)
Research and
development
expenses (2,840,305) (8,472,731) (6,976,521) (1,021,019)
Sales and marketing
expenses (729,651) (1,496,651) (1,595,196) (233,458)
General and
administrative
expenses (3,956,386) (5,717,413) (5,766,248) (843,895)

Perfect World Co., Ltd.
Unaudited Consolidated Statements of Cash Flows

Three months ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD

Cash flows from
operating
activities:
Net income 158,353,588 124,809,412 215,445,052 31,530,543
Adjustments for:
Share-based
compensation
cost 7,915,049 16,769,134 15,417,864 2,256,416
Depreciation and
amortization
expense 4,304,116 6,670,886 9,370,560 1,371,388
In-process
research and
development
acquired from
InterServ -- 78,417,506 -- --
Exchange loss /
(gain) 10,345,689 (114,698) 49,792 7,287
Investment loss -- 468,736 625,045 91,476
Loss from
disposal of
property,
equipment, and
software -- 176,354 67,569 9,889
Changes in
assets and
liabilities:
Accounts
receivable (1,268,558) (4,485,757) (19,038,659)
(2,786,321)
Current
prepayments and
other assets (2,070,147) 2,129,563 (6,622,458)
(969,202)
Deferred tax
assets (26,987) (569,103) (75,319)
(11,023)
Non-current
prepayments and
other assets (1,589,347) (16,217,564) 1,050,366 153,722
Accounts payable 13,281,828 5,912,994 11,651,065 1,705,142
Advances from
customers 66,227,911 2,280,085 (2,690,605)
(393,772)
Salary and
welfare payable (13,992,464) 18,314,010 (25,700,751)
(3,761,324)
Taxes payable 2,733,489 632,322 35,855,955 5,247,546
Accrued expenses
and other
liabilities 6,410,124 (4,410,129) 5,868,313 858,832
Deferred
revenues 45,138,179 23,553,120 26,784,532 3,919,936
Deferred tax
liabilities -- 26,000,000 (18,139,092)
(2,654,670)
Deferred
government
grants -- (980,000) -- --
Net cash
provided by
operating
activities 295,762,470 279,356,871 249,919,229 36,575,865

Cash flows from
investing
activities:
Purchase of
property,
equipment, and
software (166,168,554) (18,767,278) (14,221,383) (2,081,310)
Purchase of
intangible
assets -- (1,351,351) -- --
Cash paid for
the assets
acquired from
InterServ -- (102,852,002) -- --
(Increase) /
decrease of
restricted cash -- (150,361,200) 135,361,200 19,810,212
Purchase of
short-term
investments -- -- (40,000,000) (5,854,030)
Cash paid for
business
acquisitions,
net of cash
acquired -- -- (154,554,000)(22,619,093)
Net cash used in
investing
activities (166,168,554) (273,331,831) (73,414,183)(10,744,221)

Cash flows from
financing
activities:
Proceeds from
exercises of
share options 790,616 1,393,628 334,433 48,945
Repurchase of
Company shares -- (4,575,649) (523,583,215)(76,626,793)
Net cash provided by /
(used in) financing
activities 790,616 (3,182,021) (523,248,782)(76,577,848)

Effect of
exchange rate
changes on cash
and cash
equivalents (38,362,024) 424,155 110,412 16,159
Net increase /
(decrease) in
cash 92,022,508 3,267,174 (346,633,324)(50,730,045)

Cash and cash
equivalents,
beginning of
the period 1,496,032,993 1,329,808,557 1,333,075,731 195,096,625
Cash and cash
equivalents,
end of the
period 1,588,055,501 1,333,075,731 986,442,407 144,366,580

Supplemental
schedule of
non-cash
financing
activities:
Share repurchase
from SAIF -- (386,648,554) -- --

Supplemental
disclosures of
cash flow
information:
Cash paid during
the period for
income taxes (5,508,722) (7,814,467) (2,575,784) (376,968)

Perfect World Co., Ltd.
Reconciliation of unaudited GAAP and Non-GAAP Results

Three months ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD

GAAP operating profit 161,589,514 149,549,142 230,378,436 33,716,055
Share based
compensation charge 7,915,049 16,769,134 15,417,864 2,256,416
Non-recurring charge
related to the
InterServ acquisition
in October 2008 -- 78,417,506 -- --
Non-GAAP operating
profit 169,504,563 244,735,782 245,796,300 35,972,471

GAAP net income 158,353,588 124,809,412 215,445,052 31,530,543
Share based
compensation charge 7,915,049 16,769,134 15,417,864 2,256,416
Non-recurring charge
related to the
InterServ acquisition
in October 2008 -- 78,417,506 -- --
Non-GAAP net income 166,268,637 219,996,052 230,862,916 33,786,959

GAAP net earnings per
ADS
- Basic 2.83 2.22 4.14 0.61
- Diluted 2.67 2.12 3.96 0.58

Non-GAAP net earnings
per ADS
- Basic 2.97 3.91 4.43 0.65
- Diluted 2.81 3.74 4.25 0.62

ADSs used in
calculating net
earnings per ADS
- Basic 55,922,150 56,285,465 52,082,484 52,082,484
- Diluted 59,220,702 58,744,829 54,353,690 54,353,690

For further information, please contact

Perfect World Co., Ltd.
Vivien Wang
Investor Relations Officer
Tel: +86-10-5885-1813
Fax: +86-10-5885-6899
Email: ir@pwrd.com
http://www.pwrd.com

Christensen Investor Relations
Kathy Li
Tel: +1-480-614-3036
Fax: +1-480-614-3033
Email: kli@christensenir.com

Roger Hu
Tel: +852-2117-0861
Fax: +852-2117-0869
Email: rhu@christensenir.com

SOURCE Perfect World Co., Ltd.

Vivien Wang, Investor Relations Officer of Perfect World Co., Ltd.,
+86-10-5885-1813, or fax, +86-10-5885-6899, or ir@pwrd.com; Christensen
Investor Relations - Kathy Li, +1-480-614-3036, or fax, +1-480-614-3033, or
kli@christensenir.com; Or Roger Hu, +852-2117-0861, or fax, +852-2117-0869, or
rhu@christensenir.com