UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM 20-F/A
(Mark One)
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to _________.
Commission file number: 333-11724
NETEASE.COM, INC.
------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
N/A
------------------------------------------------------------------
(Translation of Registrant's name into English)
Cayman Islands
------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
Suite 1901, Tower E3
The Towers, Oriental Plaza, Dong Cheng District
Beijing 100738, People's Republic of China
------------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
NONE
------------------------------------------------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Name of each exchange and Title of each class on which registered:
American Depositary Shares, each representing 100 ordinary shares, par value
US$0.0001 per share, Nasdaq National Market
------------------------------------------------------------------
(Title of Class)
------------------------------------------------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
------------------------------------------------------------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report: 3,100,162,536 ordinary shares, par value US$0.0001 per share.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [_] No
Indicate by check mark which financial statement item the registrant
has elected to follow:
[_] Item 17 [X] Item 18
EXPLANATORY NOTE
This amendment no. 1 on Form 20-F/A hereby amends Item 4 of
NetEase.com, Inc.'s annual report on Form 20-F for the fiscal year ended
December 31, 2002, which was filed on June 27, 2003. This amendment no. 1 is
being filed for the purpose of providing additional details to our disclosures
in the original report pursuant to comments we received from the Staff of the
U.S. Securities and Exchange Commission in connection with its review of our
periodic filings. This amendment no. 1 is not intended to revise other
information presented in our annual report on Form 20-F for the fiscal year
ended December 31, 2002 as originally filed and all such other information in
the original filing, which remains unchanged.
This amendment no. 1 on Form 20-F/A does not reflect events occurring
after the filing of the original Form 20-F and does not modify or update the
disclosure therein in any way other than as required to reflect the amendments
discussed above. As a result, this amendment no. 1 to the annual report on Form
20-F continues to speak as of June 27, 2003.
2
TABLE OF CONTENTS
INTRODUCTION
Item 4. Information on the Company
Item 19. Exhibits
FORWARD-LOOKING INFORMATION
This amendment no. 1 on Form 20-F/A 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 we will not be able to continue to successfully
monetize the user base of the NetEase Web sites and that our
e-commerce and other fee-based services revenues will not
continue to grow;
. the risk that the current popularity of short messaging services
(SMS) in China will not continue for whatever reason, including
SMS being superseded by other technologies for which we are
unable to offer attractive products and services;
. the risk that we may not be able to continuously develop new and
creative online services;
. the risk that the online game market will not continue to grow or
that we will not be able to maintain our position in that market;
. the risk that the online advertising market in China will not
continue to grow and will remain subject to intense competition;
. the impact of the outbreak in China of severe acute respiratory
syndrome, or SARS, on our business and results of operations;
. the risk that we will not be able to control our expenses in
future periods;
. the possibility that our company and our board of directors have
not implemented effective or complete steps to ensure that the
circumstances which led to the restatement of our financial
statements for the year ended December 31, 2000 will not recur;
. our ability to develop and implement additional operational and
financial systems to manage our operations;
. governmental uncertainties, general competition and price
pressures in the marketplace;
. uncertainty as to future profitability and the risk that
security, reliability and confidentiality concerns may impede
broad use of the Internet and e-commerce and other services; and
. other risks outlined in our filings with the Securities and
Exchange Commission, including our registration statement on Form
F-1, as amended.
All forward-looking statements in this amendment no. 1 on Form 20-F/A
are made as of the date of the filing of the original Form 20-F, based on
information available to us as of that date, and we assume no obligation to
update or revise any of these forward-looking statements even if experience or
future changes show that the indicated results or events will not be realized.
1
PART I
Item 4. Information on the Company
A. History and Development of the Company
Our business was founded in June 1997, and we began offering search
services and free Web-based e-mail starting mid-1997 and early-1998,
respectively. In mid-1998, we changed our business model from a software
developer to an Internet technology company and commenced developing the NetEase
Web sites. In July 1999, we began to offer e-commerce platforms and to provide
online shopping mall and other e-commerce services in China through Guangzhou
NetEase Computer System Co., Ltd. ("Guangzhou NetEase"), a related party. In
2001, we also began focusing on fee-based premium services and online
entertainment services, including wireless value-added services, online games,
premium e-mail services and other subscription-type products. Our focus on these
services continued throughout 2002.
In connection with the restructuring of our operations which is
discussed in Item 7.B. "Major Shareholders and Related Party
Transactions--Related Party Transactions" of our annual report on Form 20-F,
NetEase.com, Inc. was incorporated in the Cayman Islands on July 6, 1999 and
operates under the Cayman Islands Companies Law (2003 Revision). Our principal
place of business was 15th Floor, North Tower, Beijing Kerry Centre, No. 1 Guang
Hua Road, Chao Yang District, Beijing, People's Republic of China until January
13, 2003 when we moved to Suite 1901, Tower E3, The Towers, Oriental Plaza, Dong
Cheng District, Beijing, People's Republic of China. Our telephone number is
(86-10) 8518-0163. Our agent for service of process in the United States is CT
Corporation System, 111 Eighth Avenue, New York, New York 10011.
In July 2000, we completed the initial public offering of our American
Depositary Shares, representing our ordinary shares, and listed those securities
on the Nasdaq National Market.
Our principal capital expenditures for 2002 consisted of computer
equipment as well as software for a total of approximately RMB12.6 million
(US$1.5 million). Our principal capital expenditures for 2000 and 2001 also
consisted of computer equipment as well as software for a total of RMB34.0
million (US$4.1 million) and RMB21.1 million (US$2.5 million), respectively.
We have spent approximately RMB4.3 million (US$0.5 million) from
January 1, 2003 until March 31, 2003, principally for purchases of additional
computer equipment in order to accommodate the expected increase in traffic on
the NetEase Web sites and our online game servers. Our capital expenditure plans
for the remainder of 2003 have not yet been fixed, but we expect to spend an
additional approximately RMB16.4 million (US$2.0 million), primarily for further
purchases of additional computer equipment in order to accommodate the expected
increase in traffic on the NetEase Web sites and our online game servers.
Capital expenditures in 2003 have been, and are expected to continue to be,
funded through operating cash flows and through our existing capital resources.
B. Business Overview
Through our subsidiaries and contracts with our affiliates Guangzhou
NetEase and Beijing Guangyitong Advertising Co., Ltd. ("Guangyitong
Advertising"), we operate a leading interactive online and wireless community in
China and are a major provider of Chinese language content and services through
our Internet Portal, Wireless Business and Online Games offerings.
2
Our business was founded by William Lei Ding, our Chief Architect and one
of our directors, in June 1997. Mr. Ding owns 100% of our largest shareholder,
Shining Globe International Limited, and 80% of Guangzhou NetEase. The other 20%
of Guangzhou NetEase is owned by Bo Ding, the brother of William Lei Ding.
Guangzhou NetEase has obtained approval from the Guangzhou telecommunications
administrative authorities to provide Internet content services, and its 80%
owned subsidiary, Guangyitong Advertising, holds a license to operate an
advertising business. The other 20% of Guangyitong Advertising is owned by Bo
Ding.
We conduct our business in China solely through our wholly owned
subsidiaries, NetEase Information Technology (Beijing) Co., Ltd. ("NetEase
Beijing"), NetEase Information Technology (Shanghai) Co., Ltd. ("NetEase
Shanghai"), NetEase Interactive Entertainment Ltd. and Guangzhou NetEase
Interactive Entertainment Limited.
Under current Chinese regulations, there are limitations on the percentage
interest foreign companies may have in value-added telecommunications businesses
in China, which include the operation of Internet content provision businesses
and wireless value-added services such as SMS. In addition, the operation by
foreign or foreign-invested companies of advertising businesses in China is
subject to government approval. Because of these restrictions, NetEase.com is
not permitted directly to wholly own an Internet content provider, wireless
value-added services provider or advertising business. NetEase.com has therefore
entered into a series of agreements with Guangzhou NetEase and Guangyitong
Advertising. Under these contracts, we provide our Internet and wireless
value-added applications, services and technologies and advertising services to
Guangzhou NetEase and Guangyitong Advertising, and they operate the NetEase Web
sites and the online advertising business. For more information on these
agreements, see the section entitled "Related Party Transactions" of our annual
report on Form 20-F. We do not have any direct ownership interest in Guangzhou
NetEase or Guangyitong Advertising.
Under our agreements with Guangzhou NetEase, we have agreed to pay the
operating costs of Guangzhou NetEase. Under our agreements with Guangyitong
Advertising, we have agreed to provide performance guarantees and guarantee
loans for working capital purposes to the extent required by Guangyitong
Advertising for its operations. Both Guangzhou NetEase and Guangyitong
Advertising are prohibited from incurring any debt without our prior approval.
The following diagram shows the current group structure of our
subsidiaries and affiliated companies:
3
[Diagram illustrating ownership structure of NetEase.com and contractual
relationships among NetEase.com's subsidiaries and affiliates]
Our innovative communities and personalized premium services, which
allow users to interact with other community members, have established a large
and stable user base for our Internet portal business, and more recently, for
our wireless value-added services and online games businesses.
The Internet portal business, which is conducted through the NetEase
Web sites, provides Internet users with Chinese language online services
centered around content, community and e-commerce. In particular, the NetEase
content channels offer users an extensive range of local, regional and
international Chinese language content, Web-based communication services and
sophisticated search capabilities and provide a destination for Chinese Internet
users to identify and access resources, services, content and information on the
Internet. Registered community members can personalize their online experience
by publishing their own content and interacting with other users that have
similar interests. Under the NetEase and 163.com brands, we provide various free
services, including Chinese language-based e-mail, online chat rooms and
discussion forums.
In addition, the NetEase wireless value-added services offer users
timely information (such as
4
news and stock quotes), community interaction and games via SMS. Our online
games provide community and entertainment via multi-player online role-playing
games, in which users can simultaneously connect and interact on a massive
scale.
We believe that demand for our services is growing as the number of
users of Internet portals, wireless value-added services and online games in
China increases. Furthermore, the NetEase Web sites' market position as one of
the leading destinations for such users offers our online advertisers,
e-commerce vendors and other partners such as mobile phone operators,
value-added service providers and online game operators a strong marketing
platform and access to this large and growing market of Chinese online
consumers. The monthly average daily page views of the NetEase Web sites for the
month ended May 31, 2003 exceeded 280 million, and as of May 31, 2003, those
sites had registered approximately 120 million registered accounts.
Generally, we price our services as follows:
-------------------------------------------------------------------------------------------------------------
Service Pricing
------- -------
-------------------------------------------------------------------------------------------------------------
Basic Services, including: Free of charge
. content services (such as news, local
information, finance and weather);
. chat rooms;
. basic e-mail services;
. instant messaging;
. classified ads;
. Web directories;
. Web searching; and
. online shopping services.
-------------------------------------------------------------------------------------------------------------
Wireless Value-Added Services, including: Per use basis (ranges from RMB0.10 to RMB2.00 per
. news and information; use)
. community; or
. multi-media downloads; and Monthly subscription basis (ranges from RMB5.00 to
. Internet related services. RMB30.00 per month)
-------------------------------------------------------------------------------------------------------------
Other Fee-Based Premium Services, including: Monthly subscription basis (ranges from RMB6.00 to
. premium e-mail services; RMB45.00 per month)
. premium personals;
. premium matchmaking;
. premium clubs;
. personal homepages; and
. electronic greeting cards.
-------------------------------------------------------------------------------------------------------------
Online Games, including: Per hour basis (ranges from RMB0.40 to RMB0.50)
. Westward Journey Online 2.0; and
. PristonTale 2.0.
-------------------------------------------------------------------------------------------------------------
Advertising Services, including: Varies depending on service. Basis includes time
. banner advertising; the advertisement appears on the Web page; number
. direct e-mail; and of times it appears in Web pages viewed by users;
. special events. and number of users that perform a specific action
through the advertisement.
-------------------------------------------------------------------------------------------------------------
5
Our Business Strategy
With our strong focus on the Chinese domestic market, we aim to have
the NetEase Web sites become the leading online network in China. Key strategies
for achieving our goal are to:
Expand Our Fee-Based Value-Added Services. We believe that Chinese
Internet users have started to understand the benefits of fee-based value-added
services. Accordingly, we have introduced a wide variety of such services,
including wireless value-added services, online games and premium e-mail, many
of which are targeted at the large portion of our registered user base which is
under the age of 25. We believe that our concerted effort to capture a portion
of this market as it first emerges, combined with our strong background in
developing Internet technologies, will enable us to offer services which are
valued by our users and establish our company as a reliable, secure and
innovative online value-added service provider in the minds of China's Internet
users. Moreover, we intend to continuously refine and improve these services,
while at the same time looking for additional market opportunities and
developing new services to address them. We will also strive to quickly
familiarize the large user base of the NetEase Web sites with each of these
services as they are introduced through outdoor advertising, notices on the
NetEase Web sites and other promotional activities and thereby attempt to
achieve a critical mass of users which we hope will create significant economies
of scale.
Continue to Develop User-Friendly Internet Applications, Services and
Technologies for the Chinese Market. We intend to continue our focus on
developing user-friendly technologies for the Internet industry in China. We
will adapt and modify existing technologies for Chinese language-based Internet
applications as well as develop our own proprietary Chinese language Internet
applications, such as our online games. We plan to continue to enhance our
platforms with user-friendly interfaces and with easy to understand user
instructions. While the market in China is not yet mature enough to allow the
widespread adoption of broadband Internet services and next generation wireless
technologies, we continue to explore ways in which we can utilize these
technologies to increase the number of our users. We employed approximately 220
technology and product development professionals as of May 31, 2003.
Enrich, Expand and Personalize NetEase Content. The NetEase Web sites
contain content from approximately 100 local and international content
providers, including Xinhua News Agency, Chinanews.com, Beijing Daily, Nanfang
Weekend, Yangcheng Night Newspaper, Guangzhou Daily, China Daily, People's
Daily, China Youth Daily, and Reuters. To expand our channel offerings, we are
working with vertical portal developers and purchasing or licensing existing
content from traditional media providers. We intend to continue to offer content
that will be more tailored for and relevant to our users' daily lives. We
believe this will:
. further differentiate the NetEase Web sites from competing Web
sites and enhance our competitive position;
. provide users with a more customized, comprehensive and
satisfying Internet experience; and
. increase the number of visits to the NetEase Web sites and the
length of time each user stays on those sites.
6
Expand the Number of Our Registered Users and Registered Community
Members. We believe that a Web site must maintain a critical mass of users in
order to generate online advertising, e-commerce and fee-based services
revenues. Therefore, we strive to keep the NetEase Web sites in their position
as one of the top three Web sites in China in order to achieve our goal of
converting our registered users into paying customers. To expand the number of
registered community members, we plan to enhance the quality of our community
services and introduce new applications, services and technology for our online
community that will make the Internet in China an increasingly important medium
for exchanging ideas. We plan to leverage our technology and Web-based products
to increase the NetEase community.
Expand Our E-commerce Services. We believe that a growing number of
consumers in China will look to the Internet as an alternative source of
commerce in the future. We have established an online shopping mall with 13
merchants as of May 31, 2003. We will build upon this experience and our
registered users and registered community members to actively develop and pursue
e-commerce opportunities. We intend to continue partnering with e-commerce
merchants by leveraging our user profile information, which allows them to
market products to specific demographic groups, and using our registered user
database to develop direct marketing opportunities.
Expand the Base of Online Advertisers on Our Network. Online
advertisers on the NetEase Web sites have traditionally consisted primarily of
merchants from the information technology and telecommunications industries as
well as an increasing number of advertisers from "traditional" industries such
as consumer products and media. However, in recent quarters, advertisers in a
broader range of industries have begun to advertise online, and we intend to
encourage this trend by attracting premier online advertisers through promoting
our brand name and providing attractive solutions to online advertisers. We will
continue to promote the Internet as an alternative method for advertisers to
reach end users through integrated marketing campaigns using banner advertising,
direct e-mail, interactive media-rich Web sites, special events, games and
contests and other formats and techniques. In addition, we intend to continue to
use third party advertising networks to increase the NetEase online advertiser
base and improve our ability to collect and correlate information regarding our
users and their habits, interests and related items to the extent permitted by
law.
Our Products and Services
As discussed above, our basic service offerings on the NetEase Web sites
include:
. content services (such as news, local information, online
entertainment, finance and weather);
. chat rooms;
. basic e-mail services;
. instant messaging;
. community forums;
. basic matchmaking;
. basic personals;
. basic alumni directory;
. basic clubs;
. classified ads;
. Web directories;
. Web searching; and
. online shopping services.
These basic services are available without charge to our users. We
generate revenue from our:
7
. wireless value-added services and other premium value-added services,
such as Web page hosting, premium email services, premium personals, premium
matchmaking, premium alumni directories, premium clubs, personal homepages, and
electronic greeting cards;
. online games; and
. advertising services.
The NetEase Web Sites
The Internet portal business, which is conducted through the NetEase Web
sites, offers Chinese Internet users a network of Chinese language-based online
content channels, community products, e-commerce services and other Web-based
applications and services to enhance their Internet experience. The NetEase Web
sites offer content channels, a full text Chinese language search engine, a Web
directory, e-mail, Web hosting, electronic greeting cards, dating services and
community tools. We also provide e-commerce services that allow vendors to sell
their products online through our online shopping mall. Our content, community
and e-commerce services are all designed with user friendly interfaces and easy
to understand instructions.
Our Members
The NetEase Web sites have registered and unregistered users. Any user may
visit the NetEase Web sites without registering. Only registered users can use
our personalized services such as our free e-mail system and instant messaging,
our fee-based premium services such as our premium e-mail and dating services.
The NetEase users provide us with valuable demographic and preference
information that will allow us to target audiences with relevant online
advertising.
Our Content
The NetEase Web sites' homepage provides a destination for Chinese
Internet users to identify and access resources, services, content and
information on the Internet. The NetEase Web sites aggregate, organize and
deliver information to meet the needs of Internet users in China. Our media
channels provide users with an efficient and easy way to explore and utilize a
wealth of information and content organized around a variety of topics. Our
content distribution platform enables the NetEase Web sites to offer in-depth
local content as well as a variety of locally relevant regional and
international content. We do not produce our own content for the NetEase Web
sites, but rather obtain content from our content partners. See page 13 of this
amendment no. 1 to our annual report on Form 20-F for a discussion of the terms
of the agreement with our content providers.
We believe that our broad and relevant content offering increases the
number of visits and the amount of time our users spend on the NetEase Web
sites. We adopt a significant amount of user-generated content from the
community forums on the NetEase Web sites. We believe that this user-generated
content is highly effective in maintaining user interest and ensuring repeat
visits to the NetEase Web sites.
The NetEase Web sites currently include 18 media channels in the following
categories:
. News . Jobs and careers . Information technology
. Sports . Culture . Education
. Games . Female . Travel
8
. Finance . Entertainment . Mobile phone
. Real estate . Automobiles . Guangdong Local
. Health . Lifestyle . Shanghai Local
The NetEase Web sites also include several specialty content channels such
as Astrology, Jokes, Flash Cartoons and mini-sites for Movies and Concerts which
provide even more variety of content to our users.
Our Community
The NetEase Web sites have established a large online community member base
as a result of our leading online community technology. We launched what we
believe to be one of the first online communities in China in December 1998.
Users can register with us online to interact with other registered community
members. We believe that as users become more involved with our online
community, they will return to the NetEase Web sites frequently.
NetEase users can interact through a variety of community products and
services. We offer many products and services free of charge. They include:
. E-mail. Our technology and services provide registered users with a
free Web-based e-mail service which supports both the Chinese and
English languages. Registered users can access and send e-mail through
their Web browsers or through the POP3 and SMTP standards, which allow
users to handle e-mails on their own e-mail applications without
opening their browsers. The free Web-based e-mail service also
includes the convenience of an address book to maintain user contact
lists online, and by paying a fee, users can upgrade this service and
receive anti-virus and anti-spam protections and extra memory storage.
We also offer a separate fee-based premium e-mail service which is
described below.
. Online Community. We offer NetEase registered community members over
2,000 community forums where they can post messages and articles for
viewing by other registered community members and other users. Due to
regulatory issues, we no longer allow users to create their own forums
in addition to the ones we offer. The NetEase online communities are
hosted by volunteers, who are chosen by us based on their
contributions to the communities. The NetEase community volunteers
monitor our community forums and select appropriate articles for
posting. In addition, they monitor the personal homepages hosted by
the NetEase Web sites.
. Instant Messaging. We offer NetEase registered users a communications
platform to notify their online friends and other users with similar
interests when they are online and to send and receive text messages
seen by both parties nearly instantaneously, allowing NetEase
registered users to participate in real-time dialogues.
. Chat. Our chat services allow NetEase registered users to interact in
real-time groups or one-on-one discussions. Unlike hyper text markup
language, or HTML, our Java-based chat technology allows users to
participate in chats without downloading chat software. The NetEase
chat rooms are arranged around topics of interest including, among
others, relationships and dating, campus life and technology.
Registered users can also create their own personal chat rooms.
9
. Voting System. We conduct numerous polls on various social, cultural
and other topics to provide our registered users with the opportunity
to express their views and also to learn about the opinions of other
Internet users.
We also offer these additional fee-based services:
. Premium E-mail Service. In November 2001, we began offering
value-added e-mail services for both individuals, known as VIP, and
corporations which provide subscribers with the latest anti-virus and
anti-spam filtering capabilities. The VIP e-mail service also includes
enhanced security features as well as several convenient online and
offline payment methods and 24-hour customer support. As of May 31,
2003, we had more than 190,000 VIP e-mail subscribers. In response to
limited market interest, we discontinued our premium corporate e-mail
activities in October 2002.
. Web Page Hosting. In March 2001, we introduced a fee-based premium Web
page hosting service which allows subscribers to create and maintain
personal homepages. This service was re-launched in March 2002 with
enhanced features and, thereafter, renamed "Personal Space." The
NetEase personal homepages create a Web-based community for Internet
users to express themselves, to share ideas, interests and expertise,
and to publish personal content accessible by other users with common
interests. While we believe most of the NetEase personal homepages are
of interest to a small circle of friends and families, there is a core
group of users who create homepages with content having broader
appeal. Traffic comes from both inside our network of Web sites and
from non-registered users visiting from outside. Non-registered users
typically find registered users' personal homepages through search
engines. With this fee-based premium service, individual users are
able to choose from service packages available at different rates to
improve the overall quality of their personal homepages.
Until December 2001, we also offered free computer storage space for
personal homepages. We have allowed free personal homepages which were
established before that date to remain in existence, though we actively
encourage those users to transition their homepages to our premium service.
Our premium Web page hosting service provides a more reliable platform as
well as improved customer service in comparison to our prior free service.
Users of our premium Web page hosting service also benefit from greater
storage space, a more secure and faster server, and 24-hour customer
support. As of May 31, 2003, we had approximately 27,000 personal homepages
which were established under our non-fee based service and more than 74,000
personal homepages which were established under our premium service.
. Love. Love is an online friend-finder, and we believe it is one of the
largest in China with more than 7 million registered members and more
than 200,000 paid subscribers. With this service, registered users
post their own profiles for periods of two years or more, including
photos, background, interests and contact details, and interested
parties contact them directly. Our "V member" service provides
enhanced features such as complete member profile access and search
capability, customizable personal homepage design, front-page photo
postings and publishing of detailed friend-find requirements.
. Dating. A portion of the NetEase Web sites serves as a dedicated
dating center where subscribers can make new friends and find someone
to go out on dates or do other social activities, such as hiking,
sports, games and movies. With this service, registered users post
10
their dating announcements, along with their background and other
information, and interested parties can either search online or
contact our company through our SMS service to obtain more details
about the user. We will then send an SMS message to the user to
confirm that they want to have a date with the interested party. We
charge a fee for each posting by a male user, but female users may
post messages for free. During May 2003, the dating service attracted
more than 200,000 new registered users.
. Premium Electronic Greeting Cards. We believe that we were the first
Internet company to offer Chinese Internet users free online greeting
cards in Chinese. Subsequently, we began offering premium fee-based
electronic greeting cards with enhanced features and no advertisements
in March 2002, and we ceased offering free electronic greeting cards.
Our greeting cards have different designs for various occasions,
including New Year's Day, Chinese New Year, Christmas, birthdays,
Valentine's Day, and other celebrations. We make new designs available
on a regular basis. Users pay a monthly membership fee for this
service of RMB10 which entitles them to send an unlimited number of
cards per month. As of May 31, 2003, we had over 125,000 electronic
greeting card subscribers.
Our E-commerce Services
We believe e-commerce will become a rapidly growing sub-sector of China's
Internet market, despite the fact that there are a number of obstacles that need
to be overcome. These obstacles include a low credit card penetration rate,
perceived lack of secure online payment systems and the lack of reliable and
efficient product distribution networks. However, we believe that these
obstacles will be overcome in time, and that e-commerce will generate
significant revenues in the future. For example, as discussed below in "Online
Games," we introduced a prepaid debit point card in connection with the
introduction of our first massively multi-player online game, which we expect
will facilitate the usability and growth of all of our fee-based premium
services.
Our e-commerce services focus on partnering with quality vendors to provide
the convenience of online shopping to users. Currently, those vendors support
their own e-commerce platforms which appear on the NetEase online shopping mall
Web site that we maintain. Previously, we also helped those vendors with their
e-commerce platforms. As of May 31, 2003, the mall hosted 13 vendors.
Our co-branded auction and trading Web site with EachNet terminated in July
2002. Subsequently, we offered free auction services on the NetEase Web sites
but discontinued those services in June 2003.
Web Directory, Web Search and Classified Ads
The NetEase Web sites also provide a Web directory, Web search and
classified ad services. Our Web directory is based on an open architecture
system with over 3,000 volunteer editors working to build a categorized
directory of Chinese Web sites. Our Web search is now powered by Baidu, a local
Chinese search technology provider. We currently sell classified advertisements
and key words exclusively through various local agents throughout China.
Wireless Value-added Services
SMS. In conjunction with China Mobile, in January 2001, we began offering
value-added services through short messaging services (SMS) to allow users to
send and receive messages from the Internet. Subsequently, we entered into a
similar arrangement with China Unicom. We charge a fee for these services which
are added onto the user's China Mobile or China Unicom bill and subsequently
11
collected from the user and paid to us by the applicable wireless operator.
These new services have experienced strong growth since their launch. At
December 31, 2002, we had more than 17 million registered accounts and sent more
than 1.6 billion short messages for the year. We expect that the usage of this
service will continue to increase in the near term as the popularity of SMS
increases but that there will be a transition to next generation technologies
such as multi-media messaging services as they become more widely available, as
discussed in next subsection below.
Currently, most of our wireless value-added services are provided to users
in the form of SMS. NetEase offers over 200 different SMS and subscription
packages with pricing between RMB0.10 to RMB2.00 per SMS message or between
RMB5.00 to RMB30.00 per subscription per month. We, through Guangzhou NetEase,
receive a percentage of this amount from China Mobile and China Unicom, which
they bill and collect on our behalf. During the first nine months of 2003 we
received between 72% and 79% of the amounts collected each month by China Mobile
and China Unicom from mobile phone users for our wireless value-added services.
Our SMS services and subscription packages allow users, for example, to
receive news and information such as stock quotes and e-mails, download ring
tones and logos for their mobile phones and participate in matchmaking
communities and interactive games. We utilize content from our Internet portal
(both user-generated and from our content partners) with our applications
developed in-house to offer this wide variety of products and services. Our
products and services can be generally classified into four main categories,
namely, news and information subscription, community, Internet-related products
and services and multi-media downloading:
News and Information Multi-Media
Subscription Community Internet-related Downloading
------------ --------- ---------------- -----------
. Current news . Matchmaking . E-mail notification . Ring tones
. Financial news . SMS girlfriend . E-card notification . Logos
. Sports news . SMS pet . Instant messaging . Screensavers
. TV guide . Educational products
. Weather forecast . Games & quizzes
WAP and Other Emerging Mobile Phone Technologies. We are also focusing on
developing products and services that can be utilized in emerging mobile phone
technologies. For example, beginning in late 2002, Guangzhou NetEase derived
wireless value-added services revenue under separate cooperative arrangements
with China Mobile and China Unicom by providing wireless application protocol
(known as WAP) services to mobile users with phones using the GPRS (General
Packet Radio Service) and CDMA1X technology standards. More recently, in April
2003, we started to derive revenue from activities related to multi-media
messaging services (known as MMS) under a cooperative agreement with China
Mobile. We expect that our revenue derived from new services we develop that are
compatible with these and other new mobile phone technologies will represent a
larger portion of our wireless value-added services revenue in the future as
these new technologies becomes more widely available.
12
Online Games
Massively Multi-player Online Role-Playing Games. In 2001, we began
offering massively multi-player online role-playing games. As part of this
initiative, we acquired technology assets from Guangzhou Tianxia Technology Co.
Ltd., a China-based game software developer which we believe was the first
company to introduce a domestically developed massively multi-player online
role-playing game to the China market. We launched our first massively
multi-player online role-playing game, "Westward Journey Online," in December
2001. In connection with the introduction of this game, we introduced a prepaid
debit point card which has facilitated the usability and growth of our online
game services and, to a lesser extent, of our other fee-based value-added
services. To address the difficulty of making online payments in China, users
can buy this card at local stores and other locations in China. The points
contained in the card can then be used to pay for our online services, such as
playing time for online games. Subsequently, we launched "Westward Journey
Online Version 2.0" and a massively multi-player online role-playing game
licensed from a Korean company, "PristonTale," in August 2002. For the month of
March 31, 2003, our online games had an average of 85,000 concurrent users and a
total of 890,000 unique users.
Partnerships and Strategic Alliances
We have entered into partnerships and strategic alliances with companies
that complement our products and services in a number of areas.
Content Partnerships and Alliances
With our content partnerships, our users have access to a broad offering of
Chinese language content through the NetEase Web sites and our wireless
value-added services. Our content partners display their content on one or more
of the NetEase Web sites and media channels free of charge or in exchange for a
share of revenue, a licensing fee, online advertising, access to original
content produced by the NetEase community or a combination of these
arrangements. We distribute this content through our content distribution system
to Guangzhou NetEase, which determines the appropriate content to publish on the
NetEase Web sites and to distribute to users of our wireless value-added
services. Our content alliances are generally non-exclusive.
13
Payment Solutions
We have partnered with several domestic companies to facilitate e-commerce
transactions, including China Merchants Bank, Capinfo (formerly China
Information Highway Corporation), iPayment and ChinaPay. Through these
partnerships, we can provide secure and reliable online payment solutions.
The News Corporation
In connection with the issuance of our Series B preference shares, we
entered into an agreement with News Digital Ventures, an affiliate of The News
Corporation Limited, which provided for cooperation between us and The News
Corporation. As part of the consideration for the issuance of our Series B
preference shares, The News Corporation and its affiliates have agreed to
provide us with on-air advertising and promotional inventory with a value of
US$5 million on The News Corporation's media properties, including Channel [V],
ESPN Star Sports, Phoenix TV and STAR TV. As of May 31, 2003, we had used US$3
million of the inventory and agreed to use the remaining inventory by March 28,
2004. In addition, The News Corporation and its affiliates have agreed to spend
US$5 million on online advertising on the NetEase Web sites. As of May 31, 2003,
The News Corporation had used approximately US$1 million of this advertising
inventory and agreed to use the remaining amount by March 28, 2004. All other
aspects of our strategic cooperation agreement with The News Corporation
terminated in March 2003.
Sales and Marketing
Sales Organization
We believe the growing number of Internet users in China represents an
attractive demographic target for advertisers because it represents an affluent,
educated and technically sophisticated market. To capitalize on this advertising
opportunity, we established an advertising sales force in May 1999.
Guangyitong Advertising sells banner advertisements on the NetEase Web
sites, including animated and interactive banner advertisements, button
advertisements, sponsorships, text links as well as advertising on our
electronic newsletters. In addition, we have been appointed by Guangzhou NetEase
to solicit advertising customers outside of China for the NetEase Web sites.
Together with Guangyitong Advertising, we had 49 advertising sales professionals
located in Beijing, Shanghai and Guangzhou as of May 31, 2003. In addition,
online advertising on the NetEase Web sites is also sold through online
advertising sales networks and advertising agencies. We believe that our focus
on widely-used services that are designed to appeal to a broad base of Internet
users attracts a variety of blue chip advertisers, ranging from technology
products to consumer brands (including increasingly Chinese companies). We
intend to continue to attract online advertisers by promoting the NetEase brand
name to potential advertisers. We also engage in providing cooperative
promotional advertising solutions in which we act as the official sponsor or
co-sponsor of special events or online content, such as Web sites that feature
movies or television series, athletic events, music awards, charity concerts and
industry exhibitions.
Furthermore, we perform analyses of our registered users' habits and
preferences on a frequent basis and have used that information to tailor our
advertising services. For example, we can deliver advertisements via electronic
greeting cards to users who fit within certain criteria based on their user
profile. By developing user profiles and user behavior analyses, we intend to
increase our ability to target specific user groups and thereby identify users
who are attractive to online advertisers.
14
Marketing
We employ a variety of traditional and online marketing programs and
promotional activities to build our brand as part of our overall marketing
strategy. In an effort to control our costs, we reduced the financial and other
resources devoted to our marketing and branding efforts in 2001. However, we
continue to build brand awareness through proactive public relations and
traditional and online advertising, and during 2002, we conducted an increasing
number of traditional marketing events promoting specific products and services,
such as wireless value-added services, online games and other fee-based premium
services. We plan to continue investing in various forms of marketing to further
build awareness of our brand.
Research and Development
We believe that an integral part of our future success will depend on our
ability to develop and enhance our products and services. Our product
development efforts and strategies consist of incorporating new technologies
from third parties as well as continuing to develop our own proprietary
technology in order to produce user-friendly Internet applications, services and
technologies for the Chinese market.
We have utilized and will continue to utilize the products and services of
third parties to enhance our platform of technologies and services to provide
competitive and diverse Internet services to our users. We also have utilized
and will continue to utilize third-party advertisement serving technologies in
conjunction with our own proprietary software. In addition, we plan to continue
to expand our technologies, products and services and registered user base
through diverse online products and services developed internally. We will seek
to continually improve and enhance our existing products and services to respond
to rapidly evolving competitive and technological conditions. Two areas of
particular focus are the development of our proprietary online games and our
wireless value-added services.
Infrastructure and Technology
Our infrastructure and technology have been designed for reliability,
scalability and flexibility and are administered by our technical staff. The
NetEase Web sites are made available primarily through network servers
co-located in the facilities of China Netcom's Beijing affiliate (this was an
affiliate of China Telecom until its reorganization) and China Telecom's
Changzhou affiliate. As of May 31, 2003, there were 1,056 such co-located
servers, operating with Web server software from Apache and Netscape. We lease
dedicated lines with 900 megabits per second capacity from China Netcom's
Beijing affiliate as well as shared lines from China Telecom's Changzhou
affiliate.
We license and optimize StoryServer from Vignette Corporation to provide
efficient and responsive management of the content on www.163.com, the main
homepage of the NetEase Web sites. We also license NetGravity's advertisement
serving technology to provide internal advertising inventory management, and we
have developed our own advertisement tracking system.
Our Web directory is based on an open architecture system with over 3,000
volunteer editors. We use Oracle's database systems to manage our registered
user database. NetEase has established a comprehensive user profile system, and
we analyze user information on a weekly basis. We also deploy a single sign-on
system that allows users to access all services within the NetEase Web sites. We
intend to continue to use a combination of internally developed software
products as well as third party products to enhance our Internet media services
in the future.
15
Seasonality
Historically, advertising and e-commerce revenues followed the same general
seasonal trend throughout each year with the first quarter of the year being the
weakest quarter due to the Chinese New Year holiday and the traditional close of
advertisers' annual budgets and the fourth quarter as the strongest. Although we
have only limited historical data, usage of our wireless value-added services
and online games has typically increased around the Chinese New Year holiday and
other Chinese holidays, in particular winter and summer school holidays. Our
holiday-related electronic greeting cards have been especially popular during
those periods.
Competition
A number of companies offer competitive products or services in China, our
main operating market. These include Sina, Sohu, Tom.com, 263.net, Chinadotcom
and 21cn.com.
We also face competition from U.S.-based portals such as Yahoo! and Yahoo!
Chinese which have translated some of their content from the English language to
the Chinese language. We expect that China's entry into the World Trade
Organization, and the resulting gradual opening of its telecommunications
sector, may facilitate more foreign participation in the Chinese Internet
market. Many of these Internet companies have longer operating histories in the
Internet market, greater name and brand recognition, larger customer bases and
databases and significantly greater financial, technical and marketing resources
than we have. The entry of additional, highly competitive Internet companies
into the Chinese market would further heighten competition. Finally, we face
competition from Web sites that operate outside our market and offer content in
the English language, which may be attractive to a portion of Chinese Internet
users.
Further, we face competition from other Web sites that offer online
community products and from other e-commerce service providers servicing our
market including Sina, Sohu, Tom.com and Tencent.com. Moreover, Sina, Sohu and
Tom.com are major providers of wireless value-added services in the China
market, and like our company, they also have partnership arrangements with both
China Mobile and China Unicom, the two current mobile phone operators in China.
Although the number of competitors for SMS services did not grow materially in
2002, there has been a recent consolidation in the industry, resulting in an
overall strengthening of competition in 2003.
We are also encountering competition from companies offering massively
multi-player online role-playing games that target the China market, such as
Shanda Networking, Softworld, Joypark and Waei International (with whom we had a
strategic partnership until March 2002). Additionally, the producers of
traditional video game consoles, such as Sony's Play Station 2 and Microsoft's
Xbox, offer massively multi-player games to their users, although the consoles
and games have not yet been released in China. Some of our existing and
potential competitors in these areas have significantly greater financial and
marketing resources than we do.
In the future, we expect to face increased competition from new Internet
media companies that choose to target general, special interest and/or
demographic markets (such as vertical portals). We may encounter indirect
competition from providers of Web-based software and other Internet related
products. We also compete with traditional forms of media for
advertising-related revenue. Further, we compete with domestic and
multi-national Internet solutions providers. There can be no assurance that we
will be able to compete successfully against our current or future competitors
or that competition will not have a material adverse effect on our business,
results of operations and financial condition.
We believe the principal competitive factors in the Internet market in
China are:
16
. brand recognition;
. user-friendliness;
. focus on Internet users in China;
. development of technology tailored for the Chinese Internet industry;
. comprehensiveness, quality and responsiveness of products and
services;
. availability of targeted content; and
. personalized experience and online community applications, services
and technologies.
Governmental Regulations
The telecommunications industry, including computer information and
Internet access services, is highly regulated by the Chinese government.
Regulations issued or implemented by the State Council, the Ministry of
Information Industry, or the MII, and other relevant government authorities
cover virtually every aspect of telecommunications network operation, including
entry into the telecommunications industry, the scope of permissible business
activities, interconnection and transmission line arrangements, tariff policy
and foreign investment.
In March 1998, the National People's Congress approved a government
restructuring plan that directed the MII to assume, among other things, the
regulatory, administrative and other responsibilities of, and rights previously
exercised by, the former Ministry of Posts and Telecommunications.
The MII, under the leadership of the State Council, is responsible for,
among other things:
. formulating and enforcing telecommunications industry policy,
standards and regulations;
. granting licenses to provide telecommunications and Internet access
services;
. formulating tariff and service charge policies for telecommunications
and Internet access services;
. supervising operations of telecommunications and Internet access
service providers;
. maintaining fair and orderly market competition among operators; and
. managing the day-to-day administration of the national
telecommunications sector.
In September 2000, China's State Council promulgated the Telecommunications
Regulations, or the Telecom Regulations. The Telecom Regulations categorize all
telecommunications businesses in China as either infrastructure
telecommunications businesses or value-added telecommunications businesses, with
Internet content provider (ICP) services and e-mail services classified as
value-added telecommunications businesses. According to the Telecom Regulations,
the commercial operator of such services must obtain an operating license. The
Telecom Regulations also set forth extensive guidelines with respect to
different aspects of telecommunications operations in China.
17
In December 2001, in order to comply with China's commitments with respect
to its entry into the WTO, the State Council promulgated the Administrative
Rules for Foreign Investments in Telecommunications Enterprises, or the Telecom
FIE Rules. The Telecom FIE Rules set forth detailed requirements with respect to
capitalization, investor qualifications and application procedures in connection
with the establishment of a foreign invested telecom enterprise. Pursuant to the
Telecom FIE Rules, foreign investors may now hold an aggregate of no more than
49% of the total equity in any value-added telecommunications business in China,
subject to certain geographic limitations. This percentage ceiling is to be
increased to 50% by the second anniversary of China's entry into the WTO.
In addition to the regulations promulgated by the central Chinese
government, some local governments have also promulgated local rules applicable
to Internet companies operating within their respective jurisdictions. In
Beijing, where our head office is located, the Beijing Municipal Administrative
Bureau of Industry and Commerce, or the Beijing AIC, has promulgated a number of
Internet-related rules. In September 2000, the Beijing AIC invalidated a
previously issued circular and adopted a new set of rules requiring owners of
the domain names of commercial Web sites located within Beijing to conduct both
a Web site name registration and a commercial Web site registration with the
Beijing AIC. In March 2001, the Beijing AIC also promulgated the Online
Advertising Tentative Administrative Measures requiring all ICPs within Beijing
which provide online advertising services to obtain an advertising operating
license. In addition, the Beijing AIC issued a circular requiring bulletin board
services (BBS) providers to obtain approval from the Beijing AIC. Since these
local rules or circulars promulgated by the Beijing AIC do not explicitly
require a non-Beijing registered Internet company or a non-ICP company to comply
with these rules or circulars and it is not clear under the rules that the
NetEase Web sites are "located within Beijing," we believe that these local
rules do not apply to Guangzhou NetEase and NetEase Beijing.
Regulation of Internet Content Services; Publications
Subsequent to the State Council's promulgation of the Telecom Regulations
in September 2000, MII formulated and implemented a number of Internet-related
regulations, including but not limited to the Internet Information Service
Administrative Measures, or the ICP Measures, the Internet Electronic Bulletin
Board Service Administrative Measures, or the BBS Measures, and the Tentative
Administrative Measures Concerning Internet Portals Carrying on the News
Displaying Business, or the Internet News Measures. The ICP Measures require
that commercial ICP operators must obtain an ICP license from the appropriate
telecommunications authorities in order to carry on any commercial ICP
operations within China. In addition, the ICP Measures also provide that ICP
operators which operate in sensitive and strategic sectors, including news,
publishing, education, health care, medicine and medical devices, must obtain
additional approvals from the relevant authorities in charge of those sectors as
well. The BBS Measures provide that any ICP operator engaged in providing online
bulletin board services is subject to a special approval and filing process with
the relevant government telecommunications authorities. The Internet News
Measures require that any ICP operator engaging in any news displaying services
must obtain approval for those services from the appropriate government news
department.
The Ministry of Health and the State Drug Administration have also adopted
regulations regarding the online dissemination of online health- or drug-related
information. These regulations require that, among other things, medical, health
and drug information must be scientific and accurate and the sources of the
information must be identified. Web sites which have received approval to
disseminate such information must also publish or reprint health policies,
information on epidemics and major health-related incidents and other
information in this area in accordance with law. Medical and drug-related
advertisements published by such Web sites are also prohibited from exaggerating
the efficacy or promoting the medical uses of the advertised products.
18
In addition, the State News and Publication Bureau, or SNPB, is the
government agency responsible for regulating publishing activities in China. On
June 27, 2002, MII and SNPB jointly promulgated the Internet Publishing
Tentative Administrative Measures, or the Internet Publishing Measures, which
took effect on August 1, 2002. The Internet Publishing Measures require Internet
publishers to secure approval from SNPB. The term "Internet publishing" is
defined as an act of online dissemination whereby Internet information service
providers select, edit and process works created by themselves or others
(including content from books, newspapers, periodicals, audio and video
products, electronic publications, etc. that have already been formally
published or works that have been made public in other media) and subsequently
post the same on the Internet or transmit the same to users via the Internet for
browsing, use or downloading by the public.
Currently, the NetEase Web sites are operated by our affiliated company,
Guangzhou NetEase Computer System Co., Ltd., or Guangzhou NetEase. To operate
the NetEase Web sites in compliance with all the relevant ICP-related Chinese
regulations, Guangzhou NetEase has successfully obtained an ICP license issued
by the Guangdong Provincial Telecommunications Bureau dated as of December 14,
2000. On February 15, 2001, the News Office of the Beijing Municipal People's
Government approved Guangzhou NetEase's application in respect of its news
displaying services on the NetEase Web sites. Our current ICP license also
authorizes Guangzhou NetEase to provide bulletin board services. As for special
approvals for other online services, Guangzhou NetEase has submitted
applications for online dissemination of health- and drug-related information
and Internet publishing.
Under the relevant regulations, ICP operators and Internet publishers are
prohibited from posting or displaying any content that:
. opposes the fundamental principles determined in China's Constitution;
. compromises state security, divulges state secrets, subverts state
power or damages national unity;
. harms the dignity or interests of the state;
. incites ethnic hatred or racial discrimination or damages inter-ethnic
unity;
. sabotages China's religious policy or propagates heretical teachings
or feudal superstitions;
. disseminates rumors, disturbs social order or disrupts social
stability;
. propagates obscenity, pornography, gambling, violence, murder or fear
or incites the commission of crimes;
. insults or slanders a third party or infringes upon the lawful rights
and interests of a third party; or
. includes other content prohibited by laws or administrative
regulations.
Failure to comply with this content censorship requirement may result in
the revocation of ICP licenses and the closing down of the concerned Web sites.
To ensure compliance with this regulatory requirement, Guangzhou NetEase has
taken all reasonable steps to avoid displaying any of the prohibited content on
the NetEase Web sites.
19
Regulation of Advertisements
The State Administration of Industry and Commerce, or the SAIC, is the
government agency responsible for regulating advertising activities in China.
While there are no nation-wide uniform laws or regulations in China specifically
governing online advertising businesses, certain local government authorities,
such as the Beijing AIC, have issued a number of regulations governing online
advertising businesses. The SAIC has not expressly asserted or issued any
regulatory documents stating that the Internet is considered an advertising
medium under its rules, nor has the SAIC extended its jurisdiction to online
advertisements. However, we cannot predict what stance the SAIC or any other
Chinese governmental agencies may adopt in the future.
Guangyitong Advertising holds an advertising operating license and operates
our online advertising business on an exclusive basis. If the SAIC were to treat
our current technological service to Guangyitong Advertising as being an online
"Advertisement Publisher", we would need to apply to the local SAIC to amend our
business license to authorize us to conduct an online advertising business in
accordance with the Administrative Regulations on Advertising and the Detailed
Implementing Rules thereof. We cannot assure you that such application would be
approved by the SAIC. Failure to obtain such approval may result in penalties
including:
. being banned from engaging in online advertising activities,
. confiscation of illegal earnings and
. fines.
On the other hand, if an application were approved by the SAIC and we were
deemed to be an online "Advertisement Publisher," we would be held responsible
for examining relevant documents and verifying the content of advertisements we
post online.
Regulation of E-Commerce
At present, there are no specific Chinese laws at the national level
governing e-commerce or defining e-commerce activities, and no Chinese
government authority has been designated to regulate e-commerce. There are
existing regulations governing retail and auction businesses which require
companies to obtain licenses in order to engage in these businesses. However, it
is unclear whether these existing regulations will be applied to e-commerce.
There is no assurance that the Chinese government will not, in the future,
promulgate specific regulations governing e-commerce, designate a government
agency to regulate e-commerce activities or apply existing retail and auction
regulations to e-commerce activities, any of which events could restrict our
business activities.
In addition, at least one provincial government has adopted regulations in
this area, and other provincial or local governmental agencies may do so in the
future. Specifically, in December 2002, Guangdong Province promulgated the
Electronic Transactions Regulations which require electronic transaction service
providers to obtain governmental approval and regulate electronic signatures,
records and contracts. It is not entirely clear whether these regulations apply
to Guangzhou NetEase, and, accordingly, we have not sought any approvals under
these regulations. However, our ability to operate our business may be adversely
affected if the Guangdong provincial authorities determine that the regulations
are applicable to Guangzhou NetEase. Further, the adoption of multiple
e-commerce regulations by different provincial or local agencies could have a
material adverse effect on our business, particularly if such regulations are
inconsistent with each other.
20
Regulation of Wireless Value-Added Services
Similar to e-commerce activities, there are no specific Chinese laws at the
national level governing wireless value-added services, such as our services
related to SMS, and no Chinese government authority has been designated to
regulate these services. At the moment, most, if not all, providers of
SMS-related services have obtained ICP licenses such as the ICP license which
our affiliate, Guangzhou NetEase, possesses. However, we cannot be certain that
an ICP license will be deemed sufficient by the relevant governmental
authorities for the provision of this category of service, and it is possible
that new national legislation might be adopted to regulate such services.
Moreover, one province has adopted regulations on a trial basis that
require SMS providers to obtain licenses from or register with the local MII
branch office before conducting SMS operations in that province. Due to the
uncertainty surrounding the applicability of these regulations, we have not
applied for such provincial license. If these regulations are determined to be
applicable to our business and/or additional provincial or local regulations
arise in this area, our business could be adversely affected, particularly if
such regulations are inconsistent with each other or we cannot obtain the
requisite approvals.
Regulation of Online Games
On May 10, 2003, the Ministry of Culture promulgated the Internet Culture
Administration Tentative Measures, or Internet Culture Measures, which will come
into effect on July 1, 2003. The Internet Culture Measures require Internet
content providers which engage in "Internet Culture Activities" to submit an
application for approval by the Ministry of Culture by September 1, 2003. The
term "Internet Culture Activities" includes, among other things, acts of online
dissemination of "Internet Cultural Products," such as audio-visual products,
gaming products, performances of plays or programs, works of art and cartoons,
and the production, reproduction, importation, sale (wholesale or retail),
leasing and broadcasting of Internet Cultural Products. In addition, these
regulations require a separate review of the content of any online games which
are imported into China.
We believe that our provision of online games will necessitate obtaining
approval from the Ministry of Culture under the Internet Culture Measures and
that any games which we import, such as PristonTale, will have to be reviewed.
Because the Internet Culture Measures are so new and have yet to be implemented,
we cannot be certain whether we can obtain such approvals or how long the
application process will take. In addition, it has been reported that the SNPB
will be adopting regulations affecting online games, and we cannot be certain
when these regulations will become effective, what form they will take or how
they will affect our business.
Foreign Exchange Controls
Our Chinese subsidiaries are subject to various foreign exchange controls
which are discussed in Item 10 in this Form 20-F.
Intellectual Property and Proprietary Rights
We rely primarily on a combination of copyright laws and contractual
restrictions to establish and protect our intellectual property rights. We
require our employees to enter into agreements requiring them to keep
confidential all information relating to our customers, methods, business and
trade secrets during and after their employment with us. Our employees are
required to acknowledge and recognize that all inventions, trade secrets, works
of authorship, developments and other processes, whether or not
21
patentable or copyrightable, made by them during their employment are our
property. They also sign all necessary documents to substantiate our sole and
exclusive right to those works and to transfer any ownership that they may claim
in those works to us.
While we actively take steps to protect our proprietary rights, such steps
may not be adequate to prevent the infringement or misappropriation of our
intellectual property. Infringement or misappropriation of our intellectual
property could materially harm our business. We own the intellectual property
(other than the content) relating to the NetEase Web sites and the technology
that enables on-line community, personalization and e-commerce services on those
sites. We license content from various freelance providers and other content
providers.
We have full legal rights over and have registered the following domain
names with Network Solutions, Inc.:
. www.netease.com;
. www.163.com;
. www.yeah.net;
. www.126.com; and
. www.nease.net.
China's trademark law adopts a "first-to-file" system for obtaining
trademark rights. As a result, the first applicant to file an application for
registration of a mark will preempt all other applicants. Prior use of an
unregistered mark is generally irrelevant except for "well known" marks.
Guangzhou NetEase and NetEase Beijing have successfully registered numerous
trademarks with China's Trademark Office, including marks incorporating the
words "NetEase" and "Yeah" in English and for marks for "NetEase" as written in
Chinese in traditional and simplified Chinese characters. In addition, they have
registered trademarks involving Chinese characters and phrases that have
meanings relating to our Web pages, products and services, including our travel
Web page, dating and friends matching services, chat services, online gaming and
our search engine. Guangzhou NetEase has transferred all but two of those marks
to us, and we will cause the remaining two marks to be transferred to us
shortly. Guangzhou NetEase and NetEase Beijing also have applications pending
for several other trademarks, and we will cause Guangzhou NetEase to transfer to
us any of its newly registered trademarks. We may not be able to successfully
defend or claim any legal rights in those trademarks that Guangzhou NetEase has
registered but not yet transferred to us, and those trademarks for which
applications have been made but for which the Trademark Office has not issued a
registration certificate.
We have also registered a number of trademarks in Hong Kong incorporating
the words "NetEase" in English and the marks for "NetEase" as written in Chinese
in traditional and simplified Chinese characters. In addition, we have also
filed similar trademark applications in the United States.
Many parties are actively developing and seeking patent protection for
community, e-commerce and related Web technologies. We expect these parties to
continue to take steps to protect these technologies, including seeking patent
protection. There may be patents issued or pending that are held by others and
that cover significant parts of our technology, business methods or services.
For example, we are aware that a number of patents have been issued in areas of
e-commerce, Web-based information indexing and retrieval and online direct
marketing. Disputes over rights to these technologies are likely to
22
arise in the future. We cannot be certain that our products do not or will not
infringe valid patents, copyrights or other intellectual property rights held by
third parties. We may be subject to legal proceedings and claims from time to
time relating to the intellectual property of others.
Legal Proceedings
Beginning in October 2001, four substantially identical purported class
action complaints alleging violations of the federal securities laws were filed
in the United States District Court for the Southern District of New York naming
our company, certain of our current and former officers and directors, and the
underwriters of our initial public offering as defendants. In general, the
complaints alleged, among other things, that (i) our initial public offering
violated the U.S. securities laws because the financial statements accompanying
the offering's registration statement misstated our revenue; and (ii) we
committed securities fraud by materially misstating our revenue in our 2000
financial statements.
The parties to this litigation entered into a definitive settlement
agreement to settle all claims, which was approved and declared final by the
District Court on May 16, 2003. The aggregate settlement amount, which was paid
to those persons who purchased our American Depositary Shares during the period
from July 3, 2000 to August 31, 2001, was US$4.35 million. This settlement has
been reflect in our third quarter and full-year financial statements for 2002 as
a one-time charge.
C. Organizational Structure
The following table sets out the details of our subsidiaries:
Country of Ownership
Name Incorporation Interest
---- ------------- --------
NetEase Information Technology (Beijing) Co., Ltd. China 100%
NetEase Information Technology (Shanghai) Co., Ltd. China 100%
NetEase (U.S.) Inc. U.S. 100%
NetEase Interactive Entertainment Ltd. British Virgin 100%
Islands
NetEase Interactive Entertainment Limited also has a wholly owned
subsidiary, Guangzhou NetEase Interactive Entertainment Limited.
Beijing NetEase Interactive Network Technology Co., Ltd., an 80% owned
subsidiary, remained dormant since its establishment and was dissolved on
October 11, 2002. In addition, NetEase (U.S.) Inc. was dormant in 2002, and we
expect that it will remain so in the near-term.
D. Property, Plant and Equipment
Our principal executive offices are currently located at Suite 1901, Tower
E3, The Towers, Oriental Plaza, Dong Cheng District, Beijing, People's Republic
of China 100738. We lease our principal executive offices at an effective annual
rent of approximately US$0.4 million (RMB2.9 million), including management
fees, for 1,592 square meters under a lease that expires in May 2006. We also
occupy 756 square meters under a lease in Shanghai that expires in December
2004. Guangzhou NetEase occupies a total of 2,200 square meters under leases
that expire in February 2005 and February 2006, respectively. We also have a
lease for an office in the United States located in Newark, California. This
lease expires in October 2005, but we are negotiating with the landlord for an
early termination of it. We believe that we will be able to obtain adequate
facilities, principally through the leasing of appropriate properties, to
accommodate our future expansion plans.
23
We lease dedicated lines with a total capacity of approximately 900
megabits per second from China Netcom's Beijing affiliate under a contract
expiring in September 2003. In addition, we lease shared lines from China
Telecom's Changzhou affiliate under contracts expiring in June 2003, January
2004 and March 2004. Our bandwidth fees were approximately US$1.9 million for
the year ended December 31, 2002 and approximately US$0.5 million for the first
quarter of 2003.
24
PART III
Item 19. Exhibits
Exhibit
Number Document
------ --------
1.1* Amended and Restated Memorandum of Association of NetEase.com, Inc.
(incorporated by reference to Exhibit 3.1 from Amendment No. 1 to the
company's Registration Statement on Form F-1 (file no. 333-11724) filed
with the Securities and Exchange Commission on May 15, 2000)
1.2* Amended and Restated Articles of Association of NetEase.com, Inc.
(incorporated by reference to Exhibit 3.2 from Amendment No. 1 to the
company's Registration Statement on Form F-1 (file no. 333-11724) filed
with the Securities and Exchange Commission on May 15, 2000)
1.3* Amendment to Amended and Restated Articles of Association of
NetEase.com, Inc. dated as of June 5, 2003 (incorporated by reference
to Exhibit 1.3 from the company's Annual Report on Form 20-F for the
year ended December 31, 2002 filed with the Securities and Exchange
Commission on June 27, 2003)
2.1* Specimen American Depositary Receipt of NetEase.com, Inc. (incorporated
by reference to Exhibit 4.1 from Amendment No. 1 to the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on May 15, 2000)
2.2* Specimen Stock Certificate of NetEase.com, Inc. (incorporated by
reference to Exhibit 4.2 from Amendment No. 1 to the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on May 15, 2000)
3.1* Shareholder Voting Rights Trust Agreement dated May 12, 2000 among
William Lei Ding, Bo Ding and NetEase Information Technology (Beijing)
Co., Ltd. (incorporated by reference to Exhibit 10.40 from Amendment
No. 1 to the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on May 15,
2000)
4.1* 1999 Stock Incentive Plan and Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.1 from the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on March 27, 2000)
4.2* Amended and Restated 2000 Stock Incentive Plan and Form of Stock Option
Agreement (including standard and non-standard form) (incorporated by
reference to Exhibit 4.2 from the company's Annual Report on Form 20-F
for the year ended December 31, 2000 filed with the Securities and
Exchange Commission on August 31, 2001)
4.3* Employment Agreement dated August 13, 1999 between NetEase.com, Inc.
and William Lei Ding (incorporated by reference to Exhibit 10.2 from
the company's Registration Statement on Form F-1 (file no. 333-11724)
filed with the Securities and Exchange Commission on March 27, 2000)
4.4* Addendum to Employment Agreement between NetEase.com, Inc. and William
Ding dated May 1, 2003(incorporated by reference to Exhibit 4.4 from
the company's Annual Report on Form 20-F for the year ended December
31, 2002 filed with the Securities and Exchange Commission on June 27,
2003)
4.5* Employment Agreement dated April 1, 2002 between NetEase.com, Inc. and
Denny Lee (incorporated by reference to Exhibit 4.5 from the company's
Annual Report on Form 20-F
25
for the year ended December 31, 2002 filed with the Securities and
Exchange Commission on June 27, 2003)
4.6* Employment Agreement dated September 11, 2001 between NetEase.com, Inc.
and Ted Sun (incorporated by reference to Exhibit 4.6 from the
company's Annual Report on Form 20-F for the year ended December 31,
2001 filed with the Securities and Exchange Commission on June 21,
2002)
4.7* Employment Agreement dated June 25, 2003 between NetEase.com, Inc. and
Michael Tong (incorporated by reference to Exhibit 4.7 from the
company's Annual Report on Form 20-F for the year ended December 31,
2002 filed with the Securities and Exchange Commission on June 27,
2003)
4.8* Asset Purchase Agreement dated September 1, 1999 between Guangzhou
NetEase Computer System Co., Ltd. and NetEase Information Technology
(Beijing) Co., Ltd. (incorporated by reference to Exhibit 10.4 from the
company's Registration Statement on Form F-1 (file no. 333-11724) filed
with the Securities and Exchange Commission on March 27, 2000)
4.9* Supplemental Agreement to Asset Purchase Agreement dated as of
September 24, 1999 between Guangzhou NetEase Computer System Co., Ltd.
and NetEase Information Technology (Beijing) Co., Ltd. (incorporated by
reference to Exhibit 10.5 from the company's Registration Statement on
Form F-1 (file no. 333-11724) filed with the Securities and Exchange
Commission on March 27, 2000)
4.10* Domain Name License Agreement dated February 3, 2000 between
NetEase.com, Inc. and Guangzhou NetEase Computer System Co., Ltd.
(incorporated by reference to Exhibit 10.7 from the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on March 27, 2000)
4.11* Copyright License Agreement dated February 3, 2000 between NetEase
Information Technology (Beijing) Co., Ltd. and Guangzhou NetEase
Computer System Co., Ltd. (incorporated by reference to Exhibit 10.8
from the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on March
27, 2000)
4.12* Trademark License Agreement dated February 3, 2000 between NetEase
Information Technology (Beijing) Co., Ltd. and Guangzhou NetEase
Computer System Co., Ltd. (incorporated by reference to Exhibit 10.9
from the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on March
27, 2000)
4.13* Supplemental Agreement (to Copyright License Agreement, Domain Name
License Agreement and Exclusive Technical Services Master Agreement)
dated April 27, 2000 between NetEase Information Technology (Beijing)
Co., Ltd. and Guangzhou NetEase Computer System Co., Ltd. (incorporated
by reference to Exhibit 10.10 from Amendment No. 1 to the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on May 15, 2000)
4.14* Exclusive Technical Services Master Agreement dated February 3, 2000
between NetEase Information Technology (Beijing) Co., Ltd. and
Guangzhou NetEase Computer System Co., Ltd. (incorporated by reference
to Exhibit 10.11 from the company's Registration Statement on Form F-1
(file no. 333-11724) filed with the Securities and Exchange Commission
on March 27, 2000)
4.15* Notice of Renewal dated April 2, 2001 relating to the Copyright License
Agreement, the Trademark License Agreement and the Exclusive Technical
Services Master Agreement,
26
each dated February 3, 2000 and made between NetEase Information
Technology (Beijing) Co., Ltd. and Guangzhou NetEase Computer System
Co., Ltd. (incorporated by reference to Exhibit 4.14 from the
company's Annual Report on Form 20-F for the year ended December 31,
2000 filed with the Securities and Exchange Commission on August 31,
2001)
4.16* Exclusive Consulting and Services Agreement dated February 3, 2000
between NetEase Information Technology (Beijing) Co., Ltd. and Beijing
Guangyitong Advertising Co., Ltd. (incorporated by reference to Exhibit
10.12 from the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on March
27, 2000)
4.17* Notice of Renewal dated April 2, 2001 relating to the Exclusive
Consulting and Services Agreement dated February 3, 2000 and made
between NetEase Information Technology (Beijing) Co., Ltd. and Beijing
Guangyitong Advertising Co., Ltd. (incorporated by reference to Exhibit
4.16 from the company's Annual Report on Form 20-F for the year ended
December 31, 2000 filed with the Securities and Exchange Commission on
August 31, 2001)
4.18* Exclusive Advertising Agency Agreement dated February 3, 2000 between
Guangzhou NetEase Computer System Co., Ltd. and NetEase.com, Inc.
(incorporated by reference to Exhibit 10.13 from the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on March 27, 2000)
4.19* Notice of Renewal dated April 2, 2001 relating to the Exclusive
Advertising Agency Agreement dated February 3, 2000 between Guangzhou
NetEase Computer System Co., Ltd. and NetEase.com, Inc. (incorporated
by reference to Exhibit 4.18 from the company's Annual Report on Form
20-F for the year ended December 31, 2000 filed with the Securities and
Exchange Commission on August 31, 2001)
4.20* Trademark Transfer Agreement dated March 29, 2000 between Guangzhou
NetEase Computer System Co., Ltd. and NetEase Information Technology
(Beijing) Co., Ltd. (incorporated by reference to Exhibit 10.14 from
Amendment No. 1 to the company's Registration Statement on Form F-1
(file no. 333-11724) filed with the Securities and Exchange Commission
on May 15, 2000)
4.21* Online Advertising Agreement dated February 15, 2000 between Guangzhou
NetEase Computer System Co., Ltd. and Beijing Guangyitong Advertising
Co., Ltd. (incorporated by reference to Exhibit 10.15 from the
company's Registration Statement on Form F-1 (file no. 333-11724) filed
with the Securities and Exchange Commission on March 27, 2000)
4.22* Notice of Renewal dated April 2, 2001 relating to the Online
Advertising Agreement dated February 15, 2000 and made between
Guangzhou NetEase Computer System Co., Ltd. and Beijing Guangyitong
Advertising Co., Ltd. (incorporated by reference to Exhibit 4.21 from
the company's Annual Report on Form 20-F for the year ended December
31, 2000 filed with the Securities and Exchange Commission on August
31, 2001)
4.23* Amended and Restated Investors' Rights Agreement, dated March 28, 2000
among NetEase.com, Inc., Baring Asia Private Equity Investments XI
Limited, The Goldman Sachs Group, Inc., Softbank China Venture
Investments No. 1 Limited, Best Alliance Profits Limited and Shining
Globe International Limited (incorporated by reference to Exhibit 10.16
from the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on March
27, 2000)
4.24* Tenancy Agreement dated October 31, 2002 between NetEase Information
Technology (Beijing) Co., Ltd. and Beijing Oriental Plaza Co., Ltd.
(incorporated by reference to Exhibit 4.24 from the company's Annual
Report on Form 20-F for the year ended December 31,
27
2002 filed with the Securities and Exchange Commission on June 27,
2003)
4.25* Strategic Cooperation Agreement dated March 23, 2000 between
NetEase.com, Inc. and News Digital Ventures (incorporated by reference
to Exhibit 10.23 from the company's Registration Statement on Form F-1
(file no. 333-11724) filed with the Securities and Exchange Commission
on March 27, 2000)
4.26* Amendment No. 1 dated June 22, 2000 to the Strategic Cooperation
Agreement between NetEase.com, Inc. and News Digital Ventures
(incorporated by reference to Exhibit 4.26 from the company's Annual
Report on Form 20-F for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on August 31, 2001)
4.27* Amendment No. 2 dated September 1, 2000 to the Strategic Cooperation
Agreement between NetEase.com, Inc. and News Digital Ventures
(incorporated by reference to Exhibit 4.27 from the company's Annual
Report on Form 20-F for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on August 31, 2001)
4.28* Letter Agreement dated as of February 24, 2003 regarding the Strategic
Cooperation Agreement between NetEase.com, Inc. and News Digital
Ventures (incorporated by reference to Exhibit 4.28 from the company's
Annual Report on Form 20-F for the year ended December 31, 2002 filed
with the Securities and Exchange Commission on June 27, 2003)
4.29* Supplemental Agreement dated May 10, 2000 (amending the Domain Name
License Agreement) between NetEase.com, Inc. and Guangzhou NetEase
Computer System Co., Ltd. (incorporated by reference to Exhibit 10.37
from Amendment No. 1 to the company's Registration Statement on Form
F-1 (file no. 333-11724) filed with the Securities and Exchange
Commission on May 15, 2000)
4.30* Agreement dated May 11, 2000 between NetEase Information Technology
(Beijing) Co., Ltd. and Guangzhou NetEase Computer System Co., Ltd.
(incorporated by reference to Exhibit 10.41 from Amendment No. 1 to the
company's Registration Statement on Form F-1 (file no. 333-11724) filed
with the Securities and Exchange Commission on May 15, 2000)
4.31* Operating Agreement dated May 10, 2000 among NetEase Information
Technology (Beijing) Co., Ltd., Beijing Guangyitong Advertising Co.,
Ltd., Bo Ding and William Lei Ding (incorporated by reference to
Exhibit 10.42 from Amendment No. 1 to the company's Registration
Statement on Form F-1 (file no. 333-11724) filed with the Securities
and Exchange Commission on May 15, 2000)
4.32* Supplemental Agreement dated May 12, 2000 (supplementing the Online
Advertising Agreement dated February 15, 2000) between Guangzhou
NetEase Computer System Co., Ltd. and Beijing Guangyitong Advertising
Co., Ltd. (incorporated by reference to Exhibit 10.47 from Amendment
No. 1 to the company's Registration Statement on Form F-1 (file no.
333-11724) filed with the Securities and Exchange Commission on May 15,
2000)
4.33* Supplemental Agreement dated May 15, 2000 (supplementing the Domain
Name License Agreement dated February 3, 2000) between NetEase.com,
Inc. and Guangzhou NetEase Computer System Co., Ltd. (incorporated by
reference to Exhibit 10.48 from Amendment No. 1 to the company's
Registration Statement on Form F-1 (file no. 333-11724) filed with the
Securities and Exchange Commission on May 15, 2000)
4.34* Letter of Agreement, dated June 6, 2000, among William Lei Ding, Bo
Ding and NetEase.com, Inc. (incorporated by reference to Exhibit 10.49
from Amendment No. 2 to the company's Registration Statement on Form
F-1 (file no. 333-11724) filed with the Securities and Exchange
Commission on June 15, 2000)
28
4.35* Supplemental Agreement dated June 15, 2000 (supplementing the Online
Advertising Agreement dated February 15, 2000), between Beijing
Guangyitong Advertising Co., Ltd. and Guangzhou NetEase Computer
System Co., Ltd. (incorporated by reference to Exhibit 10.50 from
Amendment No. 2 to the company's Registration Statement on Form F-1
(file no. 333-11724) filed with the Securities and Exchange Commission
on June 15, 2000)
4.36* Supplemental Agreement dated June 15, 2000 (supplementing the
Exclusive Consulting and Services Agreement dated February 3, 2000),
between NetEase Information Technology (Beijing) Co., Ltd. and Beijing
Guangyitong Advertising Co., Ltd. (incorporated by reference to
Exhibit 10.51 from Amendment No. 2 to the company's Registration
Statement on Form F-1 (file no. 333-11724) filed with the Securities
and Exchange Commission on June 15, 2000)
4.37* Trademark Assignment Agreement dated August 17, 2001 between Guangzhou
NetEase Computer System Co., Ltd. and NetEase Information Technology
(Beijing) Co., Ltd and its Supplemental Agreement dated August 27,
2001 (incorporated by reference to Exhibit 4.53 from the company's
Annual Report on Form 20-F for the year ended December 31, 2000 filed
with the Securities and Exchange Commission on August 31, 2001)
8.1* Subsidiaries of NetEase.com, Inc. (incorporated by reference to
Exhibit 8.1 from the company's Annual Report on Form 20-F for the year
ended December 31, 2002 filed with the Securities and Exchange
Commission on June 27, 2003)
10.1* Consent of PricewaterhouseCoopers, Independent Public Accountants
10.2* Consent of Maples and Calder Asia
10.3* Consent of Commerce & Finance Law Office
12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
99.1* CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.2* CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
* Previously filed
29
SIGNATURES
The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F/A and that it has duly caused and authorized the
undersigned to sign this amendment no. 1 to the annual report on its behalf.
NETEASE.COM, INC.
Date: December 29, 2003 By: /s/ Ted Sun
-------------------------------
Ted Sun
Acting Chief Executive Officer
30