Ladies and gentlemen, welcome to the NetEase third quarter fiscal 2009 earnings conference call. (Operator instructions) I would now like to turn the conference over to Brandi Piacente, Investor Relations for NetEase. Please go ahead, Madam.

Thanks, operator. Please note that the discussion today will contain forward-looking statements relating to future performance of the company and are intended to qualify for the Safe Harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company’s control and could cause actual results to differ materially from those mentioned in today’s press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results are included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F. The company does not undertake any obligation to update this forward-looking information except as required by law. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on the NetEase corporate website at corp.netease.com. I will now turn the conference call over to Onward Choi, Acting Chief Financial Officer, who will read the prepared remarks on behalf of Mr. William Ding, Chief Executive Officer of NetEase.

Thank you, Brandi. Total revenues for the third quarter of 2009 increased to $128.8 million, compared to $127.8 million in the prior quarter and $118.2 million in the third quarter of 2008. Revenues for our online games business totalled $113.6 million for the third quarter of 2009, compared to $114.5 million in the second quarter and $98.9 for the third quarter of 2008. An outstanding performance highlight for the quarter was Fantasy Westward Journey's record peak concurrent users of 2.5 million on August the 2nd, up from peak concurrent users of 1.7 million in the second quarter and compared to our previous PCU record of 2.3 million achieved in August of last year. Daily ACUs were 575,000, compared with the same number in the second quarter and new registered users increased 5% quarter over quarter. Fantasy Westward Journey's recent performance is a clear testament to the ongoing popularity and longevity of this iconic game. We believe that the longstanding success of Fantasy Westward Journey and our other leading self-developed games is due to our strong and talented research and development team who continually provide superior gaming experiences to the growing dynamic user community in China. We increased the size of our R&D team by approximately 10% during the third quarter to 1,100 game developers. PCUs and ACUs for Westward Journey II were 547,000 and 199,000 in the third quarter respectively, compared with 591,000 and 207,000 in the second quarter respectively. The newest expansion pack for this game, [inaudible], was released in August. On September the 19th, 2009, our [inaudible], Shanghai EaseNet, commenced the commercial operations in China of World of Warcraft, a game licensed from Blizzard Entertainment, after receiving the necessary approvals from appropriate government authorities. We are pleased to report that the World of Warcraft player response has been…

(Operator Instructions) Our first question comes from the line of Richard Ji. Richard Ji – Morgan Stanley: I have two questions -- first, let me start with World of Warcraft and this is obviously the key focus for [inaudible] and can you share with us an incremental development on the regulatory front and given this is a big overhang. And the second -- secondly, can you also give us some color on the performance metrics and for World of Warcraft after commercialization.

To answer your questions on World of Warcraft regarding the regulatory development, from the company's point of view, we will always follow the prevailing rules and regulations in doing the relevant and appropriate applications and approvals and to make sure that we would be in compliance in making sure that our operations or the launch of the product or the game itself should be fine. And regarding the performance metrics by now, since the launch of the games, from the company's perspective we are quite satisfied with the -- with its performance so far. Richard Ji – Morgan Stanley: Thank you and let me ask another question and clearly you have a very deep self-developed pipeline and especially Tianxia 2 has recently turned into a blockbuster. And can you share with us some of the so-called performance metrics, as well as the outlook and your expectation for Tianxia 2 going forward? And also among your new games, which ones would you expect they may have a chance to turn into a new blockbuster? Thank you.

Regarding your first questions about the performance of Tianxia 2, so far the company's view is that our -- the market performance is quite -- we are quite satisfied with its market performance and with regarding the company's strategies or the wishes going forward to further develop this game, we will continue to add in more new content and more new game plays to attract players. And also both the management and also the game developers also set very high expectations in making sure that through the various efforts in bringing up the operations of this game, we aim to make this game to be one of the most popular 3D MMORPG games in the China market. And regarding our new game pipeline development, I think towards the end of 2009 and up to -- or early 2010, what we are currently doing, we will still continue to proceed on and say, for example, the [inaudible], one of our new games are still under the testing phase and we will still proceed to move on and making sure that it will be another new and popular games to the market. Richard Ji – Morgan Stanley: Thank you.

Your next question comes from the line of Wallace Cheung. Wallace Cheung – Credit Suisse: Just quickly on the cost side, can you give us a bit more color in terms of the cost of goods sold as well as the operating expenses, how much has been contributed from the World of Warcraft? Thank you.

I think for the third quarter, basically we have launched the game since the 19th of September and we are already taking in the revenues of this game and for the cost of this game, I think by now it would include both the IDC cost, the server depreciation charges, and the royalties and such that we have already stated and discussed in the release. And I think this would also be the profile that we would be continuing to move on going forward. Wallace Cheung – Credit Suisse: And another question is regarding the wireless and other subscription business. We are seeing both the revenue lines and cost of goods sold line actually increase and also [inaudible] the server cost for the [inaudible] [servers to increase], is there any indication that the user level on the [email servers] is increasing and potential monetization of the email is actually improving as well?

We believe so because we are continuing -- this is a continued effort for us to develop our existing email services and from time to time, we would also try to build up our server facilities to cope with the demands or the usage of our users. And so we are still quite satisfied with its performance by now. Wallace Cheung – Credit Suisse: How much of the revenue in this line is coming from the email related services?

In terms of the email services, I think -- just a moment. (Translation not provided) Wallace Cheung – Credit Suisse: Okay. Thank you.

Your next question comes from the line of Dick Wei. Dick Wei – JPMorgan: My question is, the first one, is for the pipeline in 2010, can you talk about which one or two will be kind of the key gains for the -- or have the highest expectation by the company?

Basically the company will take a very serious approach in for whatever new game is being developed and for all the new games that are due to go out to the market in the upcoming years, for each of those games we also have high expectations of them and we believe that they would also perform well, because there will be various kinds of games that we put out in the market, including 2D and 3D and different game types, including those like the role playing games and some other casual games and things like that. Dick Wei – JPMorgan: Great, just two more questions on the financial side. First one is on the cash flow statement, the prepayment and other current assets, about RMB248 million. Is that mainly related to some payment to Blizzard?

Correct. Dick Wei – JPMorgan: And then, as far as the deferred revenue is concerned, I think that the Q-over-Q increase, was it mainly due -- I mean, I don’t know if you are able to comment how much has come from typical higher seasonality around October 1st and how much is from the Warcraft? Thanks.

I think basically the increase in our deferred revenues for the third quarter mainly come from two areas. One of those would be from the launch of the World of Warcraft where the players would also buy more points to play the games and the other parts would definitely come to the fact that in anticipation of the coming national holidays and the [distributors] usually buying more [inaudible] to reach the demands during the national holidays. Dick Wei – JPMorgan: Okay, great. Thanks a lot.

Your next question comes from the line of Alicia Yap. Alicia Yap – Citigroup: Good morning. I have two questions. First of all, can you comment on the competitive dynamic for the 2D turn-based game? As there have been some newly launched 2D games in the market, have you seen any impact, especially to your Fantasy Westward Journey? If so, what will be your strategies to defend your market-leading position?

Basically from the [macro world], we believe that the whole industry is getting more and more competition and the competition is getting more intense and the expectations from the players are also higher and higher. But having said that, whether this would -- whether the game itself is 2D or 3D is not that important. What is more important is how well we could really deliver in the games because we always believed that even for the 2D games, we can also do it in a very nice manger by having very good game play and very good content therein in order to attract the players and to making sure that they would continue their interest to play the games. And so this would just be a matter to prove that it would continue to be a success. Alicia Yap – Citigroup: Thank you. My second question is regarding the advertising business. So have you seen meaningful uptake from the demand environment after the Golden Week holiday? And particularly which sectors have the most potential to experience highest growth in the fourth quarter and into 2010?

I think basically for the advertising business, we have seen that for 2009, it has been a very challenging year and in the past three quarters, we have seen that the development has been progressing well and especially you will see that in both the second quarters and the third quarters, there has been an increase or a growth in terms of our advertising revenues. And so far from what the company has observed and recorded, we believe that the top three vertical industries would be the automobiles, the Internet services, and also the communication services industries. Alicia Yap – Citigroup: That was three categories in the third quarter. Would that be similar for the fourth quarter and 2010 in your expectation?

I think for the quarters going forward, I think at this stage we wouldn’t be able to give you a very concrete answer but basically from what we have seen so far, we still see that those industry verticals will still have a good room to develop. Alicia Yap – Citigroup: Okay. Thank you so much.

Your next question comes from the line of Ming Zhao. Ming Zhao – SIG: Thanks for taking my question. Just two quick number questions -- Onward, can you tell us if you have recognized any deferred revenue from those dormant accounts this quarter? My second question is if we look at sales and marketing expense, how much of that was due to launching Tianxia 2 and how much of that due to World of Warcraft and how should we look at this line in the fourth quarter? Those are my questions. Thank you.

Sorry, Ming, for the first question regarding deferred revenue, can you repeat again what exactly that you would like to ask about? Ming Zhao – SIG: I think last quarter you recognized $12 million of --

For the dormant accounts -- you mean the dormant accounts? Ming Zhao – SIG: Yeah, how much did you do this quarter?

I think the company -- we didn’t disclose this number for this quarter but because for the second quarter, this would be our first-time doing the clean-up for those dormant accounts and in lieu of the fact that the dollar amount is relatively more material and significant and so we will give you a sense but what we can share with you is that for this quarter, the amount of deferred revenues coming from those dormant accounts wouldn’t be that bad. Ming Zhao – SIG: Okay. And then the second question about the sales and marketing expense -- how much of that is due to World of Warcraft and how much is due to Tianxia 2? And is there going to be a significant reduction in the fourth quarter?

Maybe I will just answer you from different angles -- for the third quarter, the sales and marketing expenses, the increase would mainly be come into two areas. One would be on our existing self-developed games on our various game titles because starting from the third quarter, we have started to carry out more marketing and promotional activities for various of our game titles. And the other area that we have increased our marketing and selling expenses is that we have also do more brand activities to promote the company's brand names and things like that. And for the third quarter, I think the contribution with regard of the World of Warcraft wouldn’t be that significant, only to the effect that you would realize that we only just launched the games on the 19th of September. But going forward, we would still believe that the companies would continue to put in more efforts in doing the selling and marketing activities. Ming Zhao – SIG: All right, great. Thank you.

Your next question comes from the line of Gary Ngan.

I have a couple of questions. Firstly, on the increase in cost of revenues in Q3, as you mentioned, those -- the increases from depreciation, amortization, and royalty, so I looked at it, depreciation increased by RMB22 million while the cost of revenues increased by RMB63 million, so the difference is -- it's 40 million, so what exactly is in that 40 million and how much of that is start-up costs? Can you give us a [sense of that]?

I think we wouldn’t give out a further breakdown but basically you are right that the increase in the cost of revenue would be mainly comprised of the server depreciation charges for this quarter and also the custody fees and royalties, and things like that.

Thanks. So my next question is I guess Shanghai EaseNet is an affiliate of the company and I actually don’t really see that line being captured in the financial statement. Can you tell us where exactly it would be?

I think basically because this is one of our affiliate companies and just as what we have catered for, our other companies in our group, this would be considered on a consolidated basis and so there wouldn’t be any separate lines that we are going to show.

Okay, so would I be correct to assume that actually the 50% joint venture profit that goes to your partner actually will be captured in the minority line?

I think we wouldn’t make further comments on this kind of question. Sorry for that.

Thanks. My final question is the Ministry of Culture announced a new rule on the games regulation and particularly they said they will have to make a more stringent control on the PK system, [wedding] system, and also the levelling mode of the games, so what do you think the impact would be to our games?

(Translation not provided)

Just one second, maybe we can translate that.

Sure. I think basically the companies would like to reiterate that at all times for an online game company in China, what we have done would be in full compliance with the relevant rules and regulations and this is what we have always been doing and would be doing going forward.

Your next question comes from the line of Kathy Chen. Kathy Chen – Goldman Sachs: Thanks for taking my question. I just have one question regarding the Fantasy Westward Journey and Westward Journey II trends during the quarter -- it looks like the Fantasy Westward Journey ACU as flat quarter on quarter and down about 15% year-on-year, while the Westward Journey II ACU is down about 4% quarter on quarter. Can you explain the weakness in the quarterly trend, given I think that third quarter is usually a seasonally stronger quarter for you. Are you seeing these gains reach a more mature stage or is it due to higher competition from some new games during the quarter? Thanks.

Thank you for your questions, Kathy. I think basically for the third quarter, traditionally this would be our highest season because of the summer holidays. Even though from the ACU numbers that you have just mentioned doing some sort of comparison, but we still see that the overall performance of the games themselves is quite good. And especially through our launch of some promotional activities and the launch of some new expansion packs to the games. And at all times, we don’t believe that the games themselves have come to a point where it was because from time to time, we would always launch out some new expansion packs to enrich the content inside the games and also to enrich the game play and features of the games in order to making sure that the interest of the players can sustain and would sustain, continue to play the games with us. Kathy Chen – Goldman Sachs: Thanks. If I could just add a follow-up, can you remind us whether there was an expansion pack launch for both games in the third quarter and whether there will be any expansion packs to be launched in the fourth quarter?

If you are talking about the launch of the expansion packs for the Fantasy Westward Journey, in fact we have already launched another new one on the -- in mid-October, whereas for the Westward Journey II, we have already launched another new expansion pack in mid-August this year. Kathy Chen – Goldman Sachs: Thank you.

Your next question comes from the line of Eddie Leung. Eddie Leung – Bank of America/Merrill Lynch: Just one question -- is there any plans to increase item selling in the two old blockbusters, the [inaudible] and Fantasy Westward Journey? Thank you.

Right now, we don’t have any plans of doing the item sellings in our existing time-based games, mainly for the Fantasy Westward Journey or the Westward Journey II. Eddie Leung – Bank of America/Merrill Lynch: Thank you.

Thank you. Ladies and gentlemen, that does conclude our question-and-answer session for this conference. I would now like to turn the conference back over to management for any closing statements.

Thank you once again for joining us today. Please feel free to contact us if you have further questions. Have a great day.

Ladies and gentlemen, this concludes the NetEase third quarter 2009 earnings conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 303-590-3030 with the pass code 4175189. Thank you and you may now disconnect.