Perfect World Announces Third Quarter 2009 Unaudited Financial Results

BEIJING, Nov. 16 /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 third quarter ended September 30, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20090416/CNTH023LOGO )

Third Quarter 2009 Highlights(1)
-- Total revenues were RMB590.0 million (USD86.4 million), an increase of
13.2% from 2Q09 and 54.5% from 3Q08
-- Gross profit was RMB495.0 million (USD72.5 million), an increase of
8.9% from 2Q09 and 48.0% from 3Q08
-- Operating profit was RMB297.7 million (USD43.6 million), an increase of
6.4% from 2Q09 and 48.8% from 3Q08. Non-GAAP operating profit(2) was
RMB317.9 million (USD46.6 million), an increase of 6.0% from 2Q09 and
49.0% from 3Q08
-- Net income attributable to the Company's shareholders was RMB288.3
million (USD42.2 million), an increase of 9.8% from 2Q09 and 45.0% from
3Q08. Non-GAAP net income attributable to the Company's
shareholders(2)
was RMB308.5 million (USD45.2 million), an increase of 9.1% from 2Q09
and 45.4% from 3Q08
-- Basic and diluted earnings per ADS(3) were RMB5.83 (USD0.85) and
RMB5.50 (USD0.81), respectively, as compared to RMB5.21 and RMB4.94,
respectively, in 2Q09, and RMB3.53 and RMB3.34, respectively, in 3Q08.
Non-GAAP basic and diluted earnings per ADS(2) were RMB6.24 (USD0.91)
and RMB5.88 (USD0.86), respectively, as compared to RMB5.61 and
RMB5.32,
respectively, in 2Q09, and RMB3.77 and RMB3.56, respectively, in 3Q08
-- Launched closed beta testing for "Fantasy Zhu Xian" on September 10,
2009
-- Released the Company's first movie "Sophie's Revenge" in August 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
September 30, 2009, which was RMB6.8262 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 attributable to the Company's shareholders and non-GAAP
earnings per ADS are defined to exclude share-based compensation
charge from operating profit, net income attributable to the
Company's shareholders 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 third quarter results which exceeded our
expectations," commented Mr. Michael Chi, Chairman and Chief Executive Officer
of Perfect World. "During the quarter, we launched a number of expansion
packs for our existing games. 'Zhu Xian 2.0 Special Edition' is an example of
a successful expansion pack that we launched, and we're optimistic about its
contribution to the business moving forward. We will continue to lengthen the
life cycle of our games by dedicating more resources to creating larger, more
innovative expansion packs."
"Shortly following the quarter end, we successfully launched our first 2D
turn-based MMORPG, 'Fantasy Zhu Xian.' 'Fantasy Zhu Xian' has drawn a lot of
interest since its launch and is a testament to our ability to leverage our
strong 3D development capabilities and operating platform to effectively
penetrate the 2D market. We believe its innovative features and the strong
branding of our 'Zhu Xian' franchise will help us successfully push this game
into lower tier cities."
"We keep strengthening our competitive advantages in our industry by
strategically crafting a highly diversified portfolio of truly differentiated
games. We have a rich pipeline of six games that span the 3D, 2.5D and 2D
market segments. By utilizing our specialized game engines and production
studios, we are building a variety of franchises that include flagship titles
in each of these individual market segments."
"We continue to make progress overseas and remain a leader in the Chinese
online game export market in terms of revenues and geographic coverage.
During the quarter, we successfully launched our first 2.5D mysterious
adventure MMORPG 'Battle of the Immortals' in Taiwan, Hong Kong and Macau,
through our overseas partner. We also launched some of our other games to
various international markets through several operators and signed new
licensing agreements with our overseas partners. We have been quite happy
with our progress in this area so far and we plan to continue to expand our
global network."
"This quarter, we also released the first movie that was produced by our
subsidiary, Beijing Perfect World Cultural Communication Co., Ltd. ('PW
Cultural'). The release was a success, and more importantly, it allowed us to
distinctively promote our corporate brand and co-promote our games. This was
a good start and we expect PW Cultural to capture the growth of the broader
entertainment industry, while generating valuable synergies with our core
business through content generation and co-promotion in the future."
"We are fully committed to producing differentiated games in the 3D, 2.5D
and 2D game markets. And we are confident in our ability to raise and
maintain our game players' interest in both new and existing games, thanks to
our proprietary technology, the creativity of our R&D team and our strong
operating platform. With our proven execution capabilities, we aim to sustain
the stable growth of our Company and maximize shareholder value."
Third Quarter 2009 Financial Results
Total Revenues
Total revenues were RMB590.0 million (USD86.4 million) in 3Q09, an
increase of 13.2%, or RMB68.7 million, from RMB521.3 million in 2Q09 and an
increase of 54.5%, or RMB208.2 million, from RMB381.8 million in 3Q08.
Online game operation revenues were RMB485.9 million (USD71.2 million) in
3Q09, as compared to RMB475.1 million in 2Q09 and RMB324.5 million in 3Q08.
The sequential growth in online game operation revenues was primarily
attributable to the successful release of expansion packs for some of the
Company's existing games and a series of successful marketing activities.
The aggregate average concurrent users (ACU) for games under operation in
mainland China was approximately 713,000 in 3Q09, as compared to 761,000 in
2Q09 and 717,000 in 3Q08. The active paying customers (APC) for games
operated in mainland China under the item-based revenue model was
approximately 1,643,000 in 3Q09, as compared to 1,877,000 in 2Q09 and
1,610,000 in 3Q08. The average revenue per active paying customer (ARPU) for
games operated in mainland China under the item-based revenue model was RMB266
in 3Q09, as compared to RMB237 in 2Q09 and RMB196 in 3Q08. While ACU and APC
decreased by 6.3% and 12.5% from 2Q09, which was mainly due to adverse
seasonality factors affecting certain games, the Company still managed to
increase ARPU by 12.2% from 2Q09 through a series of successful promotions and
the launch of new expansion packs.
Overseas licensing revenues were RMB58.8 million (USD8.6 million) in 3Q09,
as compared to RMB46.2 million in 2Q09 and RMB57.3 million in 3Q08. The
increase from 2Q09 was mainly due to the successful launch of "Battle of the
Immortals" and "Pocketpet Journey West" in Taiwan, Hong Kong and Macau through
local operators.
Film and television revenues were RMB45.3 million (USD6.6 million) in
3Q09,
as compared to Nil in 2Q09 and Nil in 3Q08. All the film and television
revenues recognized in 3Q09 were related to the movie "Sophie's Revenge" that
was released in August 2009.
Cost of Revenues
The cost of revenues was RMB95.0 million (USD13.9 million) in 3Q09, as
compared to RMB66.8 million in 2Q09 and RMB47.3 million in 3Q08.
The online game related cost was RMB68.0 million (USD10.0 million) in
3Q09,
as compared to RMB66.8 million in 2Q09 and RMB47.3 million in 3Q08. Starting
from August 2009, Beijing Perfect World Network Technology Co., Ltd. ("PW
Network"), the Company's controlled entity, is subject to a 5.5% business tax
and related tax in lieu of VAT. Previously, PW Network was subject to 17% VAT
for the revenues from online game business in the PRC and 10% surcharge of
payable VAT, and was entitled to a 14% VAT refund which expires at the end of
2010.
The film and television cost was RMB27.0 million (USD4.0 million) in 3Q09,
as compared to Nil in 2Q09 and Nil in 3Q08. All the film and television cost
recognized in 3Q09 was related to the movie "Sophie's Revenge."
Gross Profit and Gross Margin
Gross profit was RMB495.0 million (USD72.5 million) in 3Q09, an increase
of 8.9%, or RMB40.4 million, from RMB454.5 million in 2Q09, and an increase of
48.0%, or RMB160.4 million, from RMB334.5 million in 3Q08. Gross margin was
83.9% in 3Q09, as compared to 87.2% in 2Q09 and 87.6% in 3Q08.
Operating Expenses
Operating expenses were RMB197.3 million (USD28.9 million) in 3Q09, an
increase of 12.8%, or RMB22.4 million, from RMB174.9 million in 2Q09, and an
increase of 46.7%, or RMB62.8 million, from RMB134.5 million in 3Q08. The
increase in operating expenses from 2Q09 was mainly attributed to higher sales
and marketing expenses and R&D expenses.
Sales and marketing expenses increased by 21.0%, or RMB15.3 million, from
RMB72.7 million in 2Q09 to RMB88.0 million (USD12.9 million) in 3Q09. This
was largely due to an increase in advertising and promotional expenses
associated with the launch of "Zhu Xian 2.0 Special Edition" expansion pack,
expenses related to attending a nationwide industrial exhibition in 3Q09, and
the promotional expenses associated with the release of the movie "Sophie's
Revenge."
R&D expenses increased by 10.0%, or RMB6.5 million, from RMB65.0 million
in 2Q09 to RMB71.5 million (USD10.5 million) in 3Q09. The increase from 2Q09
was primarily due to an increase in staff costs.
General and administrative expenses increased by 1.8%, or RMB0.7 million,
from RMB37.2 million in 2Q09 to RMB37.8 million (USD5.5 million) in 3Q09.
Operating Profit
Operating profit was RMB297.7 million (USD43.6 million) in 3Q09, an
increase of 6.4%, or RMB18.0 million, from RMB279.7 million in 2Q09, and an
increase of 48.8%, or RMB97.7 million, from RMB200.0 million in 3Q08.
Non-GAAP operating profit was RMB317.9 million (USD46.6 million) in 3Q09, an
increase of 6.0%, or RMB17.9 million, from RMB300.0 million in 2Q09, and an
increase of 49.0%, or RMB104.5 million, from RMB213.4 million in 3Q08.
Income Tax Expense
Income tax expense was RMB11.1 million (USD1.6 million) in 3Q09, as
compared to RMB19.8 million in 2Q09 and RMB8.8 million in 3Q08. Upon the
expiration of the Company's authorized ADS repurchase program in October 2009,
the Board decided that the undistributed dividends of Beijing Perfect World
Software Co., Ltd. ("PW Software"), the Company's wholly-owned subsidiary,
will be re-invested and that PW Software will not declare or pay any dividends
in the foreseeable future. As such, the Company ceased the accrual of
withholding tax on earnings of PW Software. This caused a decrease of income
tax expense compared with 2Q09.
Net Income attributable to the Company's shareholders
Net income attributable to the Company's shareholders was RMB288.3 million
(USD42.2 million) in 3Q09, an increase of 9.8%, or RMB25.7 million, from
RMB262.6 million in 2Q09, and an increase of 45.0%, or RMB89.5 million, from
RMB198.8 million in 3Q08. Non-GAAP net income attributable to the Company's
shareholders was RMB308.5 million (USD45.2 million) in 3Q09, an increase of
9.1%, or RMB25.7 million, from RMB282.9 million in 2Q09, and an increase of
45.4%, or RMB96.4 million, from RMB212.2 million in 3Q08.
Basic and diluted earnings per ADS were RMB5.83(USD0.85) and
RMB5.50(USD0.81), respectively, in 3Q09, as compared to RMB5.21 and RMB4.94,
respectively, in 2Q09, and RMB3.53 and RMB3.34, respectively, in 3Q08.
Non-GAAP basic and diluted earnings per ADS were RMB6.24(USD0.91) and
RMB5.88(USD0.86), respectively, in 3Q09, as compared to RMB5.61 and RMB5.32,
respectively, in 2Q09, and RMB3.77 and RMB3.56, respectively, in 3Q08.
Cash and Cash Equivalents
As of September 30, 2009, the Company had RMB1,194.0 million (USD174.9
million) of cash and cash equivalents, as compared to RMB945.7 million as of
June 30, 2009. The increase was mainly due to net cash inflow generated from
the Company's online game operations.
Recent Development
Open Beta Testing for "Fantasy Zhu Xian"
The Company launched open beta testing for "Fantasy Zhu Xian," the
Company's first 2D turn-based MMORPG on October 22, 2009.
Business Outlook
Based on the Company's current operations, total revenues for the fourth
quarter of 2009 are expected to be between RMB578 million and RMB602 million,
representing a decline of 2% to an increase of 2% on a sequential basis and an
increase of 38% to 44% on a year-over-year basis. This reflects the expected
growth from the Company's existing games and the anticipated contribution from
the newly launched "Fantasy Zhu Xian." It also takes into consideration that
the Company does not expect to release any movie in 4Q09.
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 attributable
to the Company's shareholders and non-GAAP earnings per ADS by excluding
share-based compensation charge from operating profit, net income attributable
to the Company's shareholders 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
not expected to result in cash payments. 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 attributable to the Company's shareholders, 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 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 7:00 am
Eastern Standard Time (8:00 pm, Beijing time) on Monday, November 16, 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: 80-093-0346
-- 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 am Eastern Standard Time, November 23, 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 knowledge and experiences in the online game market, enable it
to frequently introduce popular games that are designed to cater to changing
customer preferences and market trends promptly. 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," "Battle of
the Immortals" and "Fantasy Zhu Xian;" 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 November 16,
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.
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

Perfect World Co., Ltd.
Consolidated Balance Sheets

Audited Unaudited Unaudited
December 31, September 30, September 30,
2008 2009 2009
RMB RMB USD
Assets
Current assets
Cash and cash equivalents 1,333,075,731 1,193,983,729 174,911,917
Restricted cash 150,361,200 5,020,173 735,427
Short-term investments 50,000,000 70,000,000 10,254,607
Accounts receivable, net 38,822,355 138,772,648 20,329,414
Due from related parties -- 3,780,000 553,749
Prepayment and other
assets 36,269,524 64,153,940 9,398,192
Deferred tax assets 1,734,207 1,598,053 234,106
Total current assets 1,610,263,017 1,477,308,543 216,417,412
Non current assets
Equity investments 22,559,975 31,750,999 4,651,345
Property, equipment, and
software, net 169,399,817 220,681,257 32,328,566
Construction in progress 714,083,386 756,833,799 110,871,905
Intangible assets, net 26,188,873 57,166,771 8,374,611
Goodwill -- 116,256,000 17,030,852
Prepayments and other
assets 18,702,700 37,106,247 5,435,857
Deferred tax assets 1,090,526 774,134 113,406
Total assets 2,562,288,294 2,697,877,750 395,223,954

Liabilities and
Shareholders' Equity
Current liabilities
Accounts payable 13,629,262 83,550,432 12,239,670
Advances from customers 78,388,312 115,086,018 16,859,456
Salary and welfare payable 61,907,164 77,983,829 11,424,193
Taxes payable 20,771,786 26,695,601 3,910,756
Accrued expenses and other
liabilities 24,813,169 41,198,349 6,035,327
Share repurchase liability 386,648,554 -- --
Due to related party -- 6,056,654 887,266
Deferred revenues 223,352,994 279,611,618 40,961,533
Deferred tax liabilities 26,000,000 19,747,245 2,892,861
Deferred government grants 620,000 1,450,000 212,417
Total current liabilities 836,131,241 651,379,746 95,423,479
Deferred revenues 32,554,670 26,199,864 3,838,133
Other long-term payable 28,000,000 -- --
Total liabilities 896,685,911 677,579,610 99,261,612

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, 49,171,190 Class A
ordinary shares issued and
outstanding, 199,615,320 Class
B ordinary shares issued and
outstanding as of September
30, 2009) 223,481 198,273 29,046
Additional paid-in capital 1,177,967,483 360,088,043 52,750,878
Treasury stock (391,224,203) -- --
Statutory reserves 94,945,533 94,945,533 13,908,988
Accumulated other
comprehensive loss (65,577,655) (65,604,264) (9,610,657)
Retained earnings 849,267,744 1,615,619,731 236,679,226
Total Perfect World
Shareholders' Equity 1,665,602,383 2,005,247,316 293,757,481
Non-controlling interests -- 15,050,824 2,204,861
Total Shareholders' Equity 1,665,602,383 2,020,298,140 295,962,342
Total Liabilities and
Shareholders' Equity 2,562,288,294 2,697,877,750 395,223,954

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

Three months ended
September 30, June 30, September 30, September 30,
2008 2009 2009 2009
RMB RMB RMB USD
Revenues
Online game
operation
revenues 324,484,312 475,110,023 485,875,480 71,178,032
Overseas
licensing
revenues 57,317,936 46,216,819 58,788,775 8,612,226
Film and
television
revenues -- -- 45,329,984 6,640,588
Total revenues 381,802,248 521,326,842 589,994,239 86,430,846
Cost of revenues
Online game
related cost (47,256,941) (66,788,320) (68,030,548) (9,966,094)
Film and
television
cost -- -- (26,982,463) (3,952,779)
Total cost of
revenues (47,256,941) (66,788,320) (95,013,011) (13,918,873)
Gross profit 334,545,307 454,538,522 494,981,228 72,511,973
Operating expenses
Research and
development
expenses (47,033,562) (64,980,240) (71,504,518) (10,475,011)
Sales and
marketing
expenses (61,371,931) (72,737,032) (87,999,196) (12,891,388)
General and
administrative
expenses (26,135,551) (37,153,341) (37,812,217) (5,539,278)
Total operating
expenses (134,541,044) (174,870,613)(197,315,931) (28,905,677)
Operating profit 200,004,263 279,667,909 297,665,297 43,606,296
Other income /
(expenses)
Investment loss (414,026) (1,072,144) (1,111,787) (162,871)
Interest income 7,724,046 3,622,913 3,338,023 489,002
Others, net 259,476 13,436 174,544 25,570
Total other income,
net 7,569,496 2,564,205 2,400,780 351,701
Profit before tax 207,573,759 282,232,114 300,066,077 43,957,997
Income tax expense (8,770,012) (19,752,495) (11,052,958) (1,619,196)
Net income 198,803,747 262,479,619 289,013,119 42,338,801
Less: Net (loss)/
income attributable
to non-controlling
interests -- (106,205) 692,008 101,375
Net income
attributable to
the Company's
shareholders 198,803,747 262,585,824 288,321,111 42,237,426
Net earnings per
share, basic 0.71 1.04 1.17 0.17
Net earnings per
share, diluted 0.67 0.99 1.10 0.16
Net earnings per
ADS, basic 3.53 5.21 5.83 0.85
Net earnings per
ADS, diluted 3.34 4.94 5.50 0.81

Shares used in
calculating basic
net earnings per
share 281,733,114 251,956,208 247,418,982 247,418,982
Shares used in
calculating
diluted net
earnings per
share 297,574,386 265,820,234 262,334,324 262,334,324

Total share-based
compensation cost
included in:
Cost of revenues (854,899) (1,342,444) (1,412,278) (206,891)
Research and
development
expenses (5,885,419) (9,548,455) (8,841,744) (1,295,266)
Sales and
marketing
expenses (1,315,404) (2,007,253) (2,085,910) (305,574)
General and
administrative
expenses (5,304,841) (7,391,936) (7,886,096) (1,155,269)

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

Three months ended
September 30, June 30, September 30, September
30,
2008 2009 2009 2009
RMB RMB RMB USD
Cash flows from
operating
activities:
Net income 198,803,747 262,479,619 289,013,119 42,338,801
Adjustments for:
Share-based
Compensation cost 13,360,563 20,290,088 20,226,028 2,963,000
Depreciation and
amortization
expense 5,989,719 11,075,334 12,165,961 1,782,245
Exchange loss 212,346 341,895 253,453 37,129
Investment loss 414,026 1,072,144 1,111,787 162,871
Loss / (gain)
from disposal of
property, equipment,
and software -- (16,603) 506,175 74,152
Changes in assets
and liabilities:
Accounts
receivable (15,080,639) (9,353,651)
(72,045,828)(10,554,309)
Current
Prepayments and
other assets 2,560,308 (14,924,272) (4,041,415)
(592,045)
Deferred tax
assets (107,018) 299,833 188,516 27,617
Film and television
cost -- (2,744,672) 18,334,598 2,685,916
Due from/to related
parties -- -- 2,129,054 311,894
Non-current
prepayments
and other assets 481,283 (2,682,710) 4,514,147 661,297
Accounts payable (9,795,333) 15,946,954 11,435,763 1,675,275
Advances from
customers 19,223,380 (687,123) 38,118,600 5,584,161
Salary and
welfare payable 18,471,056 15,996,722 24,638,316 3,609,375
Taxes payable 1,172,897 (22,815,018) (7,071,562)
(1,035,944)
Accrued expenses
and other
liabilities 3,573,703 29,482,061 (26,626,737)
(3,900,668)
Deferred
revenues 26,051,626 9,544,028 14,114,214 2,067,653
Deferred tax
liabilities -- 11,898,206 (11,869)
(1,739)
Deferred government
grants 150,000 1,450,000 (620,000)
(90,827)
Net cash provided
by operating
activities 265,481,664 326,652,835 326,332,320 47,805,854

Cash flows from
investing
activities:
Purchase of
property,
equipment,
and software (62,749,284) (41,752,492) (59,754,724) (8,753,732)
Purchase of
intangible
assets -- (3,515,920) -- --
Decrease of
restricted cash -- 9,990,524 -- --
Purchase of
short-term
investments -- -- (30,000,000) (4,394,832)
Cash paid for
equity
investments (3,000,000) (10,000,000) -- --
Cash paid for
business
acquisitions,
net of cash
acquired -- (17,645,707) -- --
(Increase) /
decrease in
loan receivable -- (3,000,000) 3,000,000 439,483
Proceeds from
short-term
investments -- 50,000,000 -- --
Cash received
from related
party loan -- 3,200,000 -- --
Net cash used in
investing
activities (65,749,284) (12,723,595) (86,754,724)(12,709,081)

Cash flows from
financing
activities:
Proceeds from
exercises of
share options 264,090 3,253,688 8,722,777 1,277,838
Repurchase of
Company shares -- (357,872,874) -- --
Net cash provided
by / (used
in) financing
activities 264,090 (354,619,186) 8,722,777 1,277,838

Effect of
exchange rate
changes on cash
and cash
equivalents (1,588,665) (28,237) (40,868) (5,987)
Net increase /
(decrease) in
cash 198,407,805 (40,718,183) 248,259,505 36,368,624

Cash and cash
equivalents,
beginning of
the period 1,131,400,752 986,442,407 945,724,224 138,543,293
Cash and cash
equivalents,
end of the
period 1,329,808,557 945,724,224 1,193,983,729 174,911,917

Supplemental
disclosures of
cash flow
information:
Cash paid during
the period
for income taxes (4,365,085) (31,554,325) (3,984,669) (583,732)

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

Three months ended
September 30, June 30, September 30, September
30,
2008 2009 2009 2009
RMB RMB RMB USD

GAAP operating
profit 200,004,263 279,667,909 297,665,297 43,606,296
Share based
compensation
charge 13,360,563 20,290,088 20,226,028 2,963,000
Non-GAAP
operating profit 213,364,826 299,957,997 317,891,325 46,569,296

GAAP net income
attributable
to the Company's
shareholders 198,803,747 262,585,824 288,321,111 42,237,426
Share based
compensation
charge 13,360,563 20,290,088 20,226,028 2,963,000
Non-GAAP net
income
attributable to
the Company's
shareholders 212,164,310 282,875,912 308,547,139 45,200,426

GAAP net earnings
per ADS
- Basic 3.53 5.21 5.83 0.85
- Diluted 3.34 4.94 5.50 0.81

Non-GAAP net
earnings per ADS
- Basic 3.77 5.61 6.24 0.91
- Diluted 3.56 5.32 5.88 0.86

ADSs used in
calculating net
earnings per ADS
- Basic 56,346,623 50,391,242 49,483,796 49,483,796
- Diluted 59,514,877 53,164,047 52,466,865 52,466,865

SOURCE Perfect World Co., Ltd.

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