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Press release from PR Newswire

NetEase Reports Third Quarter 2012 Unaudited Financial Results

Wednesday, November 14, 2012

NetEase Reports Third Quarter 2012 Unaudited Financial Results18:00 EST Wednesday, November 14, 2012BEIJING, Nov. 14, 2012 /PRNewswire-FirstCall/ -- NetEase, Inc. (NASDAQ: NTES), one of China's leading Internet and online game services providers, today announced its unaudited financial results for the third quarter ended September 30, 2012.William Ding, Chief Executive Officer and Director of NetEase, stated, "For the third quarter, total online game revenues were RMB1.7 billion with increased revenue contribution from our self-developed games. We advanced our online game business by introducing new games, launching expansion packs and conducting key promotional activities. Most recently, we launched unlimited beta testing for our newest games, Soul of the Fighter and Kung Fu Master, in September and October, respectively. Both new games have received exceptionally positive reception among gamers in China, and we are delighted with the user feedback thus far. As a result of the promotional activities for our flagship games, Fantasy Westward Journey and its latest expansion pack, and Westward Journey Online II, these games achieved record-high PCU levels in August. We also introduced a new expansion pack for Westward Journey Online III in August, as well as a new 3DX expansion pack for Tianxia III in late September." "The October 2nd release of the highly anticipated fourth expansion pack of Blizzard Entertainment's World of Warcraft®: Mists of Pandaria? in mainland China was another important milestone during this period. With elements that appeal to Chinese culture, Mists of Pandaria has proven to be especially engaging, and we believe that it is being widely embraced by China's gaming community." "As we enter the remaining months of 2012 and move into 2013, we will focus on introducing new games and expansion packs that will build on the popularity of our existing games, and furthering our strategy of diversifying our portfolio offering. We plan to launch Heroes of Tang Dynasty II, a comprehensive update of Heroes of Tang Dynasty, on November 16, and in the coming months, we plan to introduce two new games, Heroes of Three Kingdoms, our 3D action real-time strategy game, and Dragon Sword, our next generation 3D MMORPG." "As one of the first and largest Internet companies in China, the popularity of our portal continues to drive our advertising services revenues. During the third quarter, our advertising services revenues grew 10.2% year-over-year and 19.0% quarter-over-quarter with automobile, fast moving consumer goods and financial services as the top performing sectors. Our advertising business benefited from the popularity of our leading mobile news application as well as our broadcast of the London Olympics. The coverage of the latter yielded an unprecedented number of downloads and portal activity that exceeded our results from the Beijing Olympics in 2008." "Our e-mail services also continued to grow, and as of September 30, 2012, we had approximately 510 million registered e-mail users. The integration of our traditional and mobile Internet services is continually being furthered and enhanced. We have more than 60 million registered mobile e-mail users and 27 million installations for our Mobile News application.""We are working to achieve healthy growth that furthers our leading position in China's thriving Internet community. Historically, we have developed some of the most long-lasting and popular online games in China, and our large community of loyal users is growing across our business segments. Focusing on premium quality remains our top goal as we further build and diversify our portfolio of online games and enhance our content and value added services for our leading portal and burgeoning mobile Internet businesses. In addition, we have always been committed to creating value for our shareholders. As our revenue continues to grow, generating strong free cash flow from operations, we are happy to announce that our board of directors has approved a special cash dividend of US$1.00 per ADS, along with a US$100 million share repurchase program. We believe that these actions reflect our sound financial position and will enhance our shareholders' return as we work to increase the value of our Company," concluded Mr. Ding.Third Quarter 2012 Financial ResultsRevenuesTotal revenues for the third quarter of 2012 were RMB2.0 billion (US$325.4 million), compared to RMB2.0 billion for both the preceding quarter and the third quarter of 2011.Revenues from online games were RMB1.7 billion (US$276.8 million) for the third quarter of 2012, compared to RMB1.7 billion and RMB1.8 billion for the preceding quarter and the third quarter of 2011, respectively.Revenues from advertising services were RMB243.0 million (US$38.7 million) for the third quarter of 2012, compared to RMB204.2 million and RMB220.5 million for the preceding quarter and the third quarter of 2011, respectively.Revenues from e-mail, wireless value-added services and others ("E-mail, WVAS and others") were RMB61.9 million (US$9.9 million) for the third quarter of 2012, compared to RMB51.4 million and RMB31.3 million for the preceding quarter and the third quarter of 2011, respectively.Gross ProfitGross profit for the third quarter of 2012 was RMB1.4 billion (US$216.7 million), compared to RMB1.3 billion for both the preceding quarter and the third quarter of 2011.The quarter-over-quarter increase in gross profit was primarily attributable to increased revenues from advertising services and NetEase's self-developed online games, which was partially offset by decreased revenue from Blizzard Entertainment's World of Warcraft. The quarter-over-quarter increase in gross profit from advertising services was primarily attributable to seasonality and our broadcast of the London Olympics. The increase in revenues from self-developed games was mainly attributable to Fantasy Westward Journey and Westward Journey Online II, as well as two new games: Kung Fu Master and Soul of the Fighter. The performances of Tianxia III and Ghost were steady in the third quarter of 2012.The year-over-year increase in gross profit was primarily attributable to increased revenues from NetEase's self-developed games, partially offset by the decreased revenue from Blizzard Entertainment's World of Warcraft and increased advertising costs, including headcount-related costs and video content costs. The increase in revenues from NetEase's self-developed games was mainly from Fantasy Westward Journey, Ghost, Tianxia III, Westward Journey Online II, as well as Kung Fu Master and Soul of the Fighter. Gross Profit (Loss) Margin Gross profit margin for the online game business for the third quarter of 2012 was 74.2%, compared to 73.3% and 71.5% for the preceding quarter and the third quarter of 2011, respectively. The improvement in gross profit margin was primarily attributable to the increased revenue contribution from NetEase's self-developed games as a percentage of NetEase's total online game revenues.Gross profit margin for the advertising business for the third quarter of 2012 was 36.2%, compared to 33.0% and 48.4% for the preceding quarter and the third quarter of 2011, respectively. The quarter-over-quarter increase in gross profit margin was primarily due to economies of scale as advertising revenue increased in the third quarter of 2012. The year-over-year decrease in gross profit margin was primarily due to increased headcount-related costs and content costs incurred for the London Olympics.Gross profit margin for the E-mail, WVAS and others business for the third quarter of 2012 was 6.0%, compared to gross loss margins of 11.6% and 13.2% for the preceding quarter and the third quarter of 2011, respectively. The improvement in gross margin was mainly due to increased sales of NetEase's game-related accessories, such as limited edition packages of several online games.Operating ExpensesTotal operating expenses for the third quarter of 2012 were RMB537.5 million (US$85.5 million), compared to RMB437.7 million and RMB408.2 million for the preceding quarter and the third quarter of 2011, respectively. The quarter-over-quarter and year-over-year increases in operating expenses were mainly due to increased selling and marketing promotional activities, higher staff-related costs due to increased headcount and increased investments in the Company's product development pipeline. Major marketing and promotional activities in the third quarter of 2012 included: the summer vacation promotion of Fantasy Westward Journey, the 10th anniversary ceremony of Westward Journey Online II, unlimited beta testing for Soul of the Fighter, and promotions for Blizzard Entertainment's World of Warcraft: Mists of Pandaria.  Net ProfitNet profit for the third quarter of 2012 totaled RMB811.9 million (US$129.2 million), compared to RMB875.3 million and RMB825.8 million for the preceding quarter and the third quarter of 2011, respectively. During the third quarter of 2012, the Company reported a net foreign exchange gain of RMB23.7 million (US$3.8 million), compared to a net foreign exchange loss of RMB36.0 million and RMB65.0 million for the preceding quarter and the third quarter of 2011, respectively. The quarter-over-quarter and year-over-year changes in foreign exchange gains or losses were mainly due to the translation gains or losses arising from the Company's Euro-denominated bank deposit balances as of the balance sheet date as the exchange rate of the Euro against the RMB fluctuated over the periods. NetEase reported basic and diluted earnings per ADS of US$0.98 each for the third quarter of 2012. The Company reported basic and diluted earnings per ADS of US$1.06 each for the preceding quarter and reported basic and diluted earnings per ADS of US$1.01 and US$1.00, respectively, for the third quarter of 2011. Basic and diluted earnings per ADS for the third quarter of 2012 reflect a one-time accrued withholding tax, as described below, which has the effect of reducing such earnings per ADS.Income TaxesThe Company recorded a net income tax charge of RMB194.8 million (US$31.0 million) for the third quarter of 2012, compared to RMB149.5 million and RMB140.5 million for the preceding quarter and the third quarter of 2011, respectively. The effective tax rate for the third quarter of 2012 was 19.9%, compared to 14.8% and 14.7% for the preceding quarter and the third quarter of 2011, respectively. The increase in net income tax charge was due to the occurrence of a one-time accrued withholding tax of RMB40.0 million associated with the offshore remittance of cash from China in anticipation of the declaration of a special cash dividend as described below.The Company's various principal subsidiaries renewed their qualifications as High and New Technology Enterprises in 2011 and receive the preferential enterprise income tax rate of 15% from 2011 to 2013, subject to annual review by the relevant tax authorities in China.Other InformationAs of September 30, 2012, the Company's total cash and time deposits balance was RMB14.9 billion (US$2.4 billion), compared to RMB11.9 billion as of December 31, 2011. Cash flow generated from operating activities was RMB670.1 million (US$106.6 million) for the third quarter of 2012, compared to RMB880.9 million and RMB864.9 million for the preceding quarter and the third quarter of 2011, respectively.   Special Cash Dividend The Company today announced that its board of directors declared a special cash dividend of US$0.04 per ordinary share, which is equivalent to US$1.00 per ADS (each ADS represents 25 ordinary shares). The special cash dividend is payable to shareholders of record as of January 15, 2013 and is expected to be paid on January 18, 2013. The board of directors declared this special cash dividend in order to give value back to shareholders, as the Company's revenues continue to grow, generating strong free cash flow from operations. The total amount of cash distributed is expected to be approximately US$131 million. Share Repurchase ProgramThe Company today announced that its board of directors approved a new share repurchase program of up to US$100 million of the Company's outstanding ADSs for a period not to exceed 12 months. Under the terms of the approved program, NetEase may repurchase its issued and outstanding ADSs in open-market transactions on the NASDAQ Global Select Market. The timing and dollar amount of repurchase transactions will be subject to Securities and Exchange Commission ("SEC") Rule 10b-18 requirements. It is also expected that such repurchases will be effected pursuant to a plan in conformity with SEC Rule 10b5-1. NetEase plans to fund repurchases made under this program from available working capital. ** The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into US$ were calculated at the noon buying rate of US$1.00 = RMB6.2848 on the last trading day of September 2012 (September 28, 2012) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on September 28, 2012, or at any other certain date. The percentages stated are calculated based on RMB.Conference CallNetEase's management team will host a conference call at 8:00 p.m. Eastern Time on Wednesday, November 14, 2012 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, November 15, 2012). NetEase's management will be on the call to discuss the quarterly results and answer questions.Interested parties may participate in the conference call by dialing 1-877-941-1427 (international: 1-480-629-9664), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-800-406-7325 (international: 1-303-590-3030), and entering passcode 4569784#. The replay will be available through November 29, 2012.The conference call will be webcast live and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at http://ir.netease.com.About NetEase, Inc.NetEase, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. NetEase's online communities and personalized premium services have established a large and stable user base for the NetEase websites, which are operated by its affiliates. In particular, NetEase provides online game services to Internet users, offering in-house developed games such as Fantasy Westward Journey, Westward Journey Online II, Westward Journey Online III, Tianxia III, Heroes of Tang Dynasty, Datang, Ghost, Soul of the Fighter and Kung Fu Master, as well as the licensed Blizzard Entertainment games World of Warcraft® and StarCraft® II.NetEase also offers online advertising on its websites, which enables advertisers to reach its substantial user base. In addition, NetEase has paid listings on its search engine and web directory and classified advertising services, as well as an online mall, which provides opportunities for e-commerce and traditional businesses to establish their own storefront on the Internet. NetEase also offers wireless value-added services such as news and information content, matchmaking services, music and photos from the web that are sent over SMS, MMS, WAP, IVR and Color Ring-back Tone technologies. Other community services that the NetEase websites offer include instant messaging, online personal advertisements, matchmaking, alumni clubs and community forums. The Company believes that it is also the largest provider of free e-mail services in China. Furthermore, the NetEase websites as well as its micro-blogging services provide various channels of content. NetEase aggregates news content on world events, sports, science and technology, and financial markets, as well as entertainment content such as cartoons, games, astrology and jokes, from over one hundred international and domestic content providers. Forward Looking StatementsThis press release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online game market will not continue to grow or that NetEase will not be able to maintain its leading position in that market, which could occur if, for example, its new online games such as Ghost, Tianxia III, Kung Fu Master and Soul of the Fighter or expansion packs and other improvements to its existing games, including its current and planned expansion packs for Heroes of Tang Dynasty, Warsong of Westward Journey, Westward Journey Online II and other games, do not become as popular as management anticipates; the ability of NetEase to effectively market its games and other services and achieve a positive return on its marketing expenditures; the risk that Shanghai EaseNet will not be able to continue operating World of Warcraft, StarCraft II or other games licensed by it for a period of time or permanently due to possible governmental actions or the risk that such games will not be popular with game players in China; the risk that changes in Chinese government regulation of the online game market may limit future growth of NetEase's revenue or cause revenue to decline; competition in the online advertising business and the risk that investments by NetEase in its content and services may not increase the appeal of the NetEase websites among Internet users or result in increased advertising revenue; the risk that NetEase may not be able to continuously develop new and creative online services, including its ability to maintain and enhance the popularity of its micro-blogging, e-mail and mobile services; the risk that NetEase will not be able to control its expenses in future periods; competition in NetEase's existing and potential markets; governmental uncertainties (including possible changes in the effective tax rates applicable to NetEase and its subsidiaries and affiliates and the ability of NetEase to receive and maintain approvals of the preferential tax treatments and general competition and price pressures in the marketplace); the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results; and other risks outlined in NetEase's filings with the Securities and Exchange Commission. NetEase does not undertake any obligation to update this forward-looking information, except as required under the applicable law.Contact for Media and Investors: Brandi PiacenteInvestor Relationsbrandi@corp.netease.comTel: (+1) 212-481-2050Cassia Curran NetEase, Inc.cassia@corp.netease.comTel: (+86) 571-8985-2076 NETEASE, INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(RMB and USD in thousands) December 31,  September 30,  September 30, 201120122012 RMB   RMB   USD (Note 1) AssetsCurrent assets:   Cash and cash equivalents2,214,6181,184,546188,478   Time deposits9,704,77713,129,7742,089,132   Restricted cash318,684469,18574,654   Accounts receivable, net230,047305,51048,611   Prepayments and other current assets900,4641,145,438182,255   Short-term investments993,606621,56398,899   Deferred tax assets111,990137,00821,800Total current assets14,474,18616,993,0242,703,829Non-current assets:   Property, equipment and software, net 848,469806,665128,352   Land use right, net11,78811,5941,845   License right, net48,962--   Deferred tax assets 2,5862,468393   Time deposits-540,00085,922   Other long-term assets58,94087,66013,948Total non-current assets970,7451,448,387230,460Total assets 15,444,93118,441,4112,934,289Liabilities and Shareholders' EquityCurrent liabilities:   Accounts payable 134,217124,22319,766   Salary and welfare payables244,398178,39928,386   Taxes payable391,769385,43361,328   Deferred revenue1,014,0731,156,554184,024   Accrued liabilities and other payables498,120693,305110,315Total current liabilities2,282,5772,537,914403,819Long-term payable:   Other long-term payable63,89092,41114,704Total liabilities2,346,4672,630,325418,523Total NetEase, Inc.'s equity13,126,70115,894,7362,529,076Noncontrolling interests(28,237)(83,650)(13,310)Total shareholders' equity13,098,46415,811,0862,515,766Total liabilities and shareholders' equity15,444,93118,441,4112,934,289The accompanying notes are an integral part of this press release.  NETEASE, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(RMB and USD in thousands, except per share data) Quarter Ended  September 30,   June 30,   September 30,   September 30,  2011201220122012 RMB  RMB  RMB  USD (Note 1) Revenues:Online game services1,755,7091,748,6951,739,922276,846Advertising services220,476204,179243,02738,669E-mail, WVAS and others31,30051,39661,9169,852Total revenues2,007,4852,004,2702,044,865325,367Sales taxes(49,583)(41,781)(42,901)(6,826)Total net revenues1,957,9021,962,4892,001,964318,541Total cost of revenues(630,456)(641,011)(640,049)(101,841)Gross profit1,327,4461,321,4781,361,915216,700Operating expenses:Selling and marketing expenses (225,282)(194,679)(259,947)(41,361)General and administrative expenses(61,263)(70,636)(75,851)(12,069)Research and development expenses (121,662)(172,348)(201,661)(32,087)Total operating expenses(408,207)(437,663)(537,459)(85,517)Operating profit919,239883,815824,456131,183Other income:Investment income3,69312,9689,3531,488Interest income68,647106,155115,45918,371Exchange (losses) gains (64,977)(36,028)23,6593,764Other, net28,15541,1945,087809Net income before tax954,7571,008,104978,014155,615Income tax(140,499)(149,544)(194,797)(30,995)Net income after tax814,258858,560783,217124,620Net loss attributable to noncontrolling interests11,49816,74228,7184,569Net income attributable to the Company's shareholders825,756875,302811,935129,189Comprehensive income814,258858,560783,217124,620Comprehensive loss attributable to noncontrolling interests11,49816,74228,7184,569Comprehensive income attributable to the      Company's shareholders825,756875,302811,935129,189Earnings per share, basic0.250.270.250.04Earnings per ADS, basic6.326.666.170.98Earnings per share, diluted0.250.270.250.04Earnings per ADS, diluted6.306.656.170.98Weighted average number of ordinary shares outstanding, basic3,268,6733,286,2393,287,3703,287,370Weighted average number of ADS outstanding, basic130,747131,450131,495131,495Weighted average number of ordinary shares outstanding, diluted3,277,6363,292,5183,292,4623,292,462Weighted average number of ADS outstanding, diluted131,105131,701131,698131,698The accompanying notes are an integral part of this press release.  NETEASE, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(RMB and USD in thousands)Quarter Ended September 30,   March 31,  June 30,   September 30,   September 30,  20112012201220122012 RMB   RMB   RMB   RMB   USD (Note 1) Cash flows from operating activities:Net income 814,258931,728858,560783,217124,620Adjustments to reconcile net profit to net cash     provided by operating activities:Depreciation and amortization75,31571,67771,87552,3108,323Share-based compensation cost22,94168,27357,90747,9697,633Allowance for (reversal of) provision for doubtful debts6,2069213,823(593)(94)Loss (gain) on disposal of property, equipment and software6(122)19014Unrealized exchange losses (gains) 67,314(18,719)35,893(27,330)(4,349)Deferred income taxes(22,665)(16,170)(16,624)7,8941,256Net equity share of loss (gain) from associated companies633256(622)(389)(62)Others(3,308)2,8945,53218,7392,982Changes in operating assets and liabilities:   Accounts receivable(51,205)20,720(79,010)(31,834)(5,065)   Prepayments and other current assets(343,763)180,825(8,557)(253,134)(40,277)   Accounts payable29,22214,857(40,641)26,7554,257   Salary and welfare payables38,150(64,930)28,478(29,563)(4,704)   Taxes payable62,553(19,620)(49,830)18,0962,879   Deferred revenue92,82271,37853,86217,2412,743   Accrued liabilities and other payables76,45892,897(39,741)40,6316,466            Net cash provided by operating activities864,9371,336,865880,906670,099106,622Cash flows from investing activities:      Purchase of property, equipment and software (61,411)(23,280)(48,915)(65,430)(10,411)      Proceeds from sale of property, equipment and software 170182654687      Net change in short-term investments with terms             of three months or less -(500,000)(200,000)150,00023,867      Purchase of short-term investments (423,163)(154,277)-(70,845)(11,273)      Proceeds from maturities of short-term investments -430,000360,000330,00052,508      Investment in an associated company ---(7,915)(1,259)      Transfer (to) from restricted cash (98,200)79,346(281,745)51,8998,258      Net change in time deposits with terms             of three months (438,342)117,997(86,538)(178,954)(28,474)      Placement/rollover of matured time deposits(2,702,844)(4,429,917)(2,989,388)(3,971,447)(631,913)      Proceeds from maturities of time deposits 2,941,2072,933,7751,437,5233,209,753510,717      Net change in other assets (1,673)(14,158)(5,565)(11,094)(1,765)            Net cash used in investing activities(784,256)(1,560,332)(1,814,622)(563,487)(89,658)Cash flows from financing activities:   Proceeds from employees exercising stock options 22,48021,0333,679--            Net cash  provided by financing activities22,48021,0333,679--   Effect of exchange rate changes on cash held in      foreign currencies(4,124)265(6,678)2,200350            Net increase (decrease) in cash and cash equivalents                     99,037(202,169)(936,715)108,81217,314Cash and cash equivalents, beginning of the period1,844,4922,214,6182,012,4491,075,734171,164Cash and cash equivalents, end of the period1,943,5292,012,4491,075,7341,184,546188,478Supplemental disclosures of cash flow information:         Cash paid for income tax, net of tax refund71,301145,625194,080148,75823,669Supplemental schedule of non-cash investing and     financing activities:        Fixed asset purchases financed by accounts payable            and accrued liabilities63,25435,39317,92014,0962,243The accompanying notes are an integral part of this press release. NETEASE, INC.UNAUDITED SEGMENT INFORMATION(RMB and USD in thousands, except percentages)Quarter Ended September 30,   June 30,   September 30,   September 30,  2011201220122012 RMB  RMB  RMB  USD (Note 1) Revenues:Online game services              1,755,7091,748,6951,739,922276,846Advertising services220,476204,179243,02738,669E-mail, WVAS and others31,30051,39661,9169,852Total revenues2,007,4852,004,2702,044,865325,367Sales taxes:  Online game services(27,704)(20,689)(17,053)(2,713)Advertising services(21,040)(19,869)(24,562)(3,908)E-mail, WVAS and others(839)(1,223)(1,286)(205)Total sales taxes(49,583)(41,781)(42,901)(6,826)Net revenues:Online game services1,728,0051,728,0061,722,869274,133Advertising services199,436184,310218,46534,761E-mail, WVAS and others30,46150,17360,6309,647Total net revenues1,957,9021,962,4892,001,964318,541Cost of revenues:Online game services(493,025)(461,538)(443,789)(70,613)Advertising services(102,958)(123,487)(139,296)(22,164)E-mail, WVAS and others(34,473)(55,986)(56,964)(9,064)Total cost of revenues(630,456)(641,011)(640,049)(101,841)Gross profit (loss):Online game services1,234,9801,266,4681,279,080203,520Advertising services96,47860,82379,16912,597E-mail, WVAS and others(4,012)(5,813)3,666583Total gross profit1,327,4461,321,4781,361,915216,700Gross profit (loss) margin:Online game services71.5%73.3%74.2%74.2%Advertising services48.4%33.0%36.2%36.2%E-mail, WVAS and others(13.2%)(11.6%)6.0%6.0%The accompanying notes are an integral part of this press release. NETEASE, INC.NOTES TO UNAUDITED FINANCIAL INFORMATIONNote 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB6.2848 on the last trading day of September 2012 (September 28, 2012) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands):  Quarter Ended  September 30,   June 30,   September 30,   September 30,  2011201220122012 RMB  RMB  RMB  USD (Note 1) Share-based compensation cost included in:Cost of revenue                                              11,12129,30525,0633,988Operating expenses- Selling and marketing expenses1,9893,3562,933467- General and administrative expenses3,5149,3597,8301,246- Research and development expenses6,31715,88712,1431,932SOURCE NetEase.com, Inc.