CMGE Reports Second Quarter 2012 Unaudited Financial Results

CMGE Reports Second Quarter 2012 Unaudited Financial Results

HONG KONG, Oct. 25, 2012 (GLOBE NEWSWIRE) -- China Mobile Games and
Entertainment Group Limited ("CMGE" or the "Company") (Nasdaq:CMGE), a leading
mobile game company in China, today reported its unaudited financial results
for the second quarter ended June 30, 2012.

Second Quarter Financial Highlights

  *Revenues were RMB60.7 million (US$9.6 million^1), a slight decrease of
    3.2% from the second quarter of 2011 and an increase of 11.8% from the
    first quarter of 2012.
  *Net income was RMB23.4 million (US$3.7 million), an increase of 68.6% from
    the second quarter of 2011 and 24.4% from the first quarter of 2012.
  *Net income excluding share-based compensation (non-GAAP^2) was RMB26.6
    million (US$4.2 million), an increase of 82.6% from the second quarter of
    2011 and 28.5% from the first quarter of 2012.
  *Diluted earnings per American Depositary Share^3 ("ADS") were RMB0.92
    (US$0.14).
  *Diluted earnings per ADS excluding share-based compensation (non-GAAP)
    were RMB1.05 (US$0.17).
  *Cash and cash equivalents were RMB199.6 million (US$31.4 million).

Operating Metrics

  *Total paying user accounts^4 for our feature phone single player games
    were 12.6 million in the second quarter of 2012, compared to 12.7 million
    in the second quarter of 2011 and 12.1 million in the first quarter of
    2012, and average revenue per paying user account ("ARPU") in the second
    quarter of 2012 was RMB3.03, compared to RMB2.85 in the second quarter of
    2011 and RMB2.81 in the first quarter of 2012.
  *Total paying user accounts for our feature phone social games were 32,494
    in the second quarter of 2012, compared to 19,256 in the second quarter of
    2011 and 30,118 in the first quarter of 2012, and ARPU in the second
    quarter of 2012 was RMB57.76, compared to RMB50.40 in the second quarter
    of 2011 and RMB48.47 in the first quarter of 2012.
  *Total subscriptions^5 for our smartphone single player games were 1.7
    million in the second quarter of 2012, compared to 2.1 million in the
    second quarter of 2011 and 2.0 million in the first quarter of 2012, and
    average revenue per subscription in the second quarter of 2012 was
    RMB4.79, compared to RMB4.90 million in the second quarter of 2011 and
    RMB4.59 in the first quarter of 2012.
  *Total paying user accounts for our smartphone social games were 126,301 in
    the second quarter of 2012, compared to 259,622 in the second quarter of
    2011 and 133,912 in the first quarter of 2012, and ARPU in the second
    quarter of 2012 was RMB80.12, compared to RMB21.70 million in the second
    quarter of 2011 and RMB50.79in the first quarter of 2012.

"We are pleased with the financial results from the second quarter of 2012.
Our feature phone and smartphone game businesses are performing in line with
our expectations. Paying user numbers and ARPU for both our feature phone
single player and social games increased, whereas ARPU for smartphone social
games increased significantly compared to the first quarter of 2012 and the
second quarter of 2011 as our two newest games started to gain traction among
new users," said Ken Jian Xiao, the Company's chief executive officer.

"We have over 30 new feature phone and 40 new smartphone single player games
slated for launch later this year. We are also in the process of developing
seven Android/iOS mobile social games. Our partnerships with mobile chipset
manufacturers, handset design houses and mobile phones manufacturers ensure
that our award winning games will be accessible to consumers in many regions
of Greater China.

"While we remain the largest mobile games developer in China by a wide margin,
our market continues to evolve as Chinese users become more sophisticated.
User migration from feature phones to smartphones is accelerating and creating
new opportunities for us to build on our leading position, as well as
opportunities to further cooperate with our strategic partners."

Second Quarter 2012 Results

Revenues

Total net revenues were RMB60.7 million (US$9.6 million) during the second
quarter of 2012, representing a slight decrease of 3.2% from RMB62.7 million
in the second quarter of 2011, mainly due to a drop in revenues from our
handset design business, and an increase of 11.8% from RMB54.3 million in the
first quarter of 2012, due largely to an increase in revenues from the
Company's feature phone and smart phone games.

  *Feature phone game revenues were RMB40.3 million (US$6.4 million), an
    increase of 8.0% from the same period last year and 13.6% from the prior
    quarter, primarily due to an increase in both the total playing user
    accounts and ARPU as a result of the expanded game portfolio as well as
    effective pre-installing distribution channel.
    
  *Smartphone game revenues were RMB18.0 million (US$2.8 million), an
    increase of 12.4% from the same period last year and 12.0% from the prior
    quarter. The rise was primarily due to the Company's online massive
    multiplayer role playing games ("MMORPGs"), namely Paopao Xiyou and Dian
    Feng, which were introduced in the middle of 2011. In addition, the
    Android version of Paopao Xiyou was launched in February 2012, and
    contains additional in-game premium features. The introduction of these
    new games and features helped drive user interest, which resulted in an
    increase in ARPU for our smartphone mobile social games.Total
    subscriptions for smartphone single-player games were lower during the
    second quarter of 2012 as China Mobile, the Company's service provider for
    all of its smartphone single-player game bundles, altered its promotion
    policy by decreasing the amount of banner and pop-up advertisements it
    exposes its users to, resulting in a decrease in its promotion of the game
    bundle on its platform.
    
  *Handset design revenues were RMB2.4 million (US$0.4 million), which were
    derived exclusively from feature phone design. This represented a 74.1%
    decrease from the corresponding period in 2011 and a 13.2% decrease from
    the prior quarter as market demand shifted strongly from feature phones to
    smartphones. In July 2012, the Company completed an extensive one-year
    smartphone design development effort and began taking orders from
    smartphone manufacturers in August 2012.

Cost of Revenues

Cost of revenues was RMB24.0 million (US$3.8 million) during the second
quarter of 2012, a decrease of 8.3% from RMB26.2 million in the second quarter
of 2011 and a decrease of 1.2% from RMB24.3 million in the first quarter of
2012. These declines were primarily due to a decrease in handset design sales
volume, which resulted in lower component costs. As a result, the Company's
overall gross margin rose to 60.4% during the second quarter of 2012, from
58.2% in the second quarter of 2011 and 55.2% in the first quarter of 2012.

Operating Expenses

Operating expenses were RMB19.3 million (US$3.0 million) during the second
quarter of 2012, compared with RMB11.7 million in the second quarter of 2011
and RMB16.7 million in the first quarter of 2012. Operating expenses excluding
share-based compensation (non-GAAP) were RMB16.1 million (US$2.5 million),
compared with RMB11.0 million in the second quarter of 2011 and RMB14.8
million in the first quarter of 2012. The year-over-year increase in non-GAAP
operating expenses was primarily driven by higher research and development
expenses. Research and development expenses as a percentage of net revenue
increased to 12.1% in the second quarter of 2012, from 6.6% in the second
quarter of 2011 as the Company recruited more software engineers to develop
new games.

Share-based compensation was RMB3.2 million (US$0.5 million) during the second
quarter of 2012, compared with RMB0.7 million in the second quarter of 2011
and RMB1.9 million in the first quarter of 2012.

Operating Income

Operating income was RMB17.4 million (US$2.7 million) during the second
quarter of 2012, a decrease of 30.0% compared with RMB24.8 million in the
second quarter of 2011, primarily as a result of a decline in gross profit in
the handset design business, as well as an increase in overall research and
development expenses, and an increase of 30.2% from RMB13.3 million in the
first quarter of 2012, mainly due to an increase in gross profit from both
feature phone and smartphone games.

Operating income excluding share-based compensation (non-GAAP) was RMB20.6
million (US$3.2 million) during the second quarter of 2012, compared with
RMB25.5 million in the second quarter of 2011 and RMB15.2 million in the first
quarter of 2012.

Operating margin was 28.6% during the second quarter of 2012, compared with
39.6% in the second quarter of 2011 and 24.5% in the first quarter of 2012.

Contingently Returnable Consideration Assets

Changes in fair value of contingently returnable consideration assets resulted
in a loss of RMB3.2 million (US$0.5 million) during the second quarter of
2012, compared with a loss of RMB2.9 million in the second quarter of 2011 and
a gain of RMB7.1 million in the first quarter of 2012. The loss was primarily
due to a decrease in the fair value of the consideration shares to be returned
to VODone pursuant to the contingent conditions relating to the acquisition of
the 3GUU Group and OWX Holding Group.

Income Tax

CMGE received an income tax benefit of RMB8.8 million (US$1.4 million) during
the second quarter of 2012, compared with an income tax expense of RMB8.4
million in the second quarter of 2011 and an income tax expense of RMB2.1
million in first quarter of 2012. The income tax benefit in the second quarter
of 2012 was primarily due to a tax exemption that Guangzhou Yitongtianxia
Software Development Co., Ltd. ("Yitongtianxia"), one of our subsidiaries,
received for being recognized as a new software development enterprise.
Yitongtianxia's status as a new software development enterprise, which
provides tax benefits over a five-year period, was approved in April 2012 and
made retroactively effective to the beginning of 2011 .

Net Income

Net income during the second quarter of 2012 was RMB23.4 million (US$3.7
million), compared with RMB13.9 million in the second quarter of 2011 and
RMB18.8 million in the first quarter of 2012.

Net income excluding share-based compensation (non-GAAP) was RMB26.6 million
(US$4.2 million) during the second quarter of 2012, compared with RMB14.6
million in the second quarter of 2011 and RMB20.7 million in the first quarter
of 2012.

Net Margin

Net margin was 38.6% during the second quarter of 2012, compared with 22.1% in
second quarter of 2011 and 34.6% in the first quarter of 2012.

Net margin excluding share-based compensation (non-GAAP) was 43.8% during the
second quarter of 2012, compared with 23.2% in the second quarter of 2011 and
38.1% in the first quarter of 2012. The increase in net margin from the second
quarter of 2011 to the same period in 2012 was primarily due to the tax
benefit that was recognized in the second quarter of 2012. The increase in net
margin from the first to the second quarter of 2012 reflected the combined
impact of the tax benefit that was recognized, and the change in fair value of
contingently returnable assets in the second quarter.

Basic and Diluted Earnings per ADS

Basic and diluted earnings per ADS were RMB0.92 (US$0.14) and diluted earnings
per ADS excluding share-based compensation (non-GAAP) were RMB1.05 (US$0.17)
during the second quarter of 2012. Both GAAP and non-GAAP weighted average
ADSs used in calculating basic and diluted earnings per ADS were 21.6 million.
For the second quarter of 2012, the basic earnings per ordinary share were
calculated using the two-class method because the contingently redeemable
ordinary shares were participating securities. Since each contingently
redeemable ordinary share has the same participating right as each ordinary
share, the allocation of undistributed earnings was based on the proportionate
number of ordinary shares and contingently redeemable ordinary shares
outstanding. RMB19.8 million (US$3.1 million) and RMB22.7 million (US$3.6
million), respectively, has been allocated to undistributed earnings to
ordinary shares for calculating basic EPS and basic EPS exclusive the impact
of share-based compensation (non-GAAP).

All share options granted and contingently returnable ordinary shares issued
by the Company were excluded in the calculation of diluted earnings per share
because their effects would have been anti-dilutive. The restricted share
units granted by the Company were excluded from the calculation of diluted
earnings per share as the performance condition necessary to begin removing
the restrictions had not been achieved as of June 30, 2012.

Cash and Cash Equivalents

As of June 30, 2012, the Company had cash and cash equivalents of RMB199.6
million (US$31.4 million). Operating cash flow for the second quarter of 2012
was a net inflow of RMB22.3 million (US$3.5 million).

Recent Business Developments

As of June 30, 2012, the Company's game portfolio included 470 mobile games,
of which 160 were feature phone games and 310 were smartphone games. During
the second quarter of 2012, CMGE developed the Douwan Social Game Platform for
the Android operating systems. This platform provides a wide range of high
quality mobile social games to attract paying users, increase player's
stickiness and we anticipate that it will raise overall ARPU in our social
game offerings. Currently, CMGE is developing seven Android/iOS-based social
games.

To explore international opportunities for smartphone game distributions to
further grow its smartphone distribution platform, the Company recently began
cooperating with Taiwan Mobile to distribute mobile games on their
platforms.The Company will continue to look for partnership and growth
opportunities elsewhere around the world.

Conference Call

CMGE's management will host a conference call to discuss the results at 8:00
a.m. Eastern Daylight Time on October 25, 2012 (8:00 p.m. Beijing time on the
same day).

The dial-in details for the live conference call are:

U.S. Toll Free Dial-In +1 855-500-8701
Hong Kong Dial-In      +852 3051-2745
China Dial-In          4001-200-654
International Dial-In  +65 6723-9385
Conference ID          CMGE

A telephone replay of the call will be available after the conclusion of the
conference call at 10:00 a.m. Eastern Daylight Time on October 25, 2012
through 11:59 p.m. Eastern Daylight Time on October 31, 2012. The dial-in
details for the replay are:

U.S. Toll Free Dial-In +1 855-452-5696
International Dial In: +61 2-8199-0299
Conference ID          54142228

A live webcast of the conference call will be available on the investor
relations section of CMGE's website at: http://www.cmge.com/

About CMGE

CMGE is a leading mobile game company in China with the largest market share
among mobile game developers in terms of revenues in 2010 and 2011, according
to a report prepared in March 2012 by Analysys International, an independent
market research firm. CMGE has integrated capabilities in the development,
operation, sale and distribution of mobile games in China. Its mobile handset
design business complements its game development business as it pre-installs
CMGE's mobile games and game platforms in the handsets it designs, and
enhances CMGE's knowledge of user habits and preferences and industry trends.
CMGE has a large and diversified portfolio of games for feature phones and
smartphones, and has strong development capabilities, evidenced by the fact
that it develops single-player games and mobile social games for both types of
handsets.

Forward-looking Statements

This press release contains forward-looking statements. These statements are
made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates," "confident" and similar
statements. CMGE may also make written or oral forward-looking statements in
its periodic reports to the U.S. Securities and Exchange Commission, in its
annual report to shareholders, in press releases and other written materials
and in oral statements made by its officers, directors or employees to third
parties. Statements that are not historical facts, including statements about
CMGE's beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties. A number
of factors could cause actual results to differ materially from those
contained in any forward-looking statement, including but not limited to the
following: our growth strategies as well as our business plans; our future
development, results of operations and financial condition; our ability to
continue to develop new and attractive products and services; our ability to
continue to develop new technologies or upgrade our existing technologies; our
ability to attract and retain users and customers and further enhance our
brand recognition; the expected growth of and trends in the mobile game
industry in China; PRC governmental policies and regulations relating to the
mobile game industry in China; competition in the mobile game industry; and
general economic and business conditions in China. Further information
regarding these and other risks is included in our registration statement on
Form F-1 and other documents filed with the Securities and Exchange
Commission. CMGE does not undertake any obligation to update any
forward-looking statement, except as required under applicable law. All
information provided in this press release and in the attachments is as of the
date of the press release, and CMGE undertakes no duty to update such
information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement our financial results presented in accordance with U.S. GAAP, we
use non-GAAP financial measures, which are adjusted from results based on U.S.
GAAP to exclude share-based compensation expenses. Reconciliations of our
non-GAAP financial measures to our U.S. GAAP financial measures are set forth
in tables at the end of this earnings release, which provide more details on
the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to
help our investors compare business trends among different reporting periods
on a consistent basis and to enhance investors' overall understanding of the
historical and current financial performance of our continuing operations and
our prospects for the future. Our non-GAAP financial information should not be
considered a substitute for or superior to U.S. GAAP results. In addition, our
calculation of this non-GAAP financial information may be different from the
calculation used by other companies, and therefore comparability may be
limited.

^1 This announcement contains translations of certain Renminbi (RMB) amounts
into U.S. dollars (US$) at specified rates solely for the convenience of the
reader. Unless otherwise noted, all translations from RMB to U.S. dollars are
made at a rate of RMB6.353 to US$1.00, the effective noon buying rate as of
June 29, 2012 in The City of New York for cable transfers of RMB as set forth
in H.10 weekly statistical release of the Federal Reserve Board.

^2 Non-GAAP measures and related reconciliations to GAAP measures are
described in the accompanying sections titled "About Non-GAAP Financial
Measures" and "Reconciliations of Non-GAAP Financial Measures to Comparable
GAAP Measures" at the end of the press release.

^3 Our ADSs are traded on the Nasdaq Global Market. Every ADS represents 14
Class A ordinary shares of the Company.

^4 Represents the number of user accounts that have purchased in-game items
for the relevant period, adjusted to eliminate double-counting of the same
user accounts.

^5 Represents the total number of monthly subscriptions to our game bundles
offered through mobile network operators and the number of games downloaded
through application stores. A user who pays two subscription fees during one
month to subscribe to different game bundles, pays both a subscription fee and
a fee to download a game through an application store, or who pays to download
two games through an application store, would be counted as two subscriptions.

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares and per share data )
                                                                    
                                           As of December31, As of June 30,
                                           2011*              2012    2012
                                           RMB                RMB     US$
ASSETS                                                               
Current assets:                                                      
Cash and cash equivalents                  187,237            199,627 31,422
Short-term investments                     —                  20,500  3,227
Accounts receivable                        56,121             58,897  9,271
Inventories                                2,103              1,784   281
Prepayments and other current assets       24,966             33,641  5,295
Amounts due from related parties           1,349              2       —
Deferred tax assets                        1,491              170     27
Total current assets                        273,267            314,621 49,523
Non-current assets:                                                  
Property and equipment, net                5,435              5,018   790
Goodwill                                   598,358            598,358 94,185
Intangible assets, net                     70,101             64,502  10,153
Deferred initial public offering costs     2,010              2,147   338
Deferred tax assets                        916                128     20
Other non-current assets                   343                343     54
Total non-current assets                    677,163            670,496 105,540
TOTAL ASSETS                                950,430            985,117 155,063
LIABILITIES AND SHAREHOLDERS' EQUITY                                 
Current liabilities:                                                 
Accounts payable                           9,150              10,725  1,688
Accrued expenses and other current          17,577             15,135  2,383
liabilities
Deferred revenue                           3,894              5,688   895
Income tax payable                         11,115             761     120
Dividends payable                          63,000             —       —
Amounts due to related parties             6,542              1,726   272
Total current liabilities                   111,278            34,035  5,358
Non-current liabilities:                                             
Unrecognized tax benefits                  27,844             19,983  3,145
Deferred tax liabilities                   12,580             11,112  1,749
Other non-current liabilities              2,550              2,150   338
Total non-current liabilities               42,974             33,245  5,232
Total liabilities                           154,252            67,280  10,590
Commitments and contingencies                                        
Contingently redeemable ordinary shares                              
Contingently redeemable ordinary shares
(US$0.001 par value, 26,485,961 shares
authorized; nil and 26,485,961 shares
issued and outstanding as of December 31,   —                  76,192  11,993
2011 and June 30, 2012, respectively. As of
June 30, 2012, aggregate liquidation
preference and redemption amount were
RMB75,899 and RMB76,192,respectively)
Shareholders' equity:                                                
Ordinary shares (US$0.001 par value,
1,000,000,000shares authorized;            1,937              1,937   305
302,729,550shares issued and outstanding
as of December31, 2011 and June 30, 2012)
Additional paid-in capital                 709,815            717,221 112,895
Retained earnings                          84,853             122,894 19,344
Accumulated other comprehensive loss       (427)              (407)   (64)
Total shareholders' equity                  796,178            841,645 132,480
TOTAL LIABILITIES, CONTINGENTLY REDEEMABLE  950,430            985,117 155,063
ORDINARY SHARES AND SHAREHOLDERS' EQUITY
                                                                    
* Amounts for the year ended December 31, 2011 were derived from December 31,
2011 audited consolidated financial statements.



CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares and per share data)
                                                                             
                        For the threemonthsended            For the sixmonthsended
                        June30,  March31, June30,  June30, June30,  June30,  June30,
                         2011      2012      2012      2012     2011      2012      2012
                        RMB       RMB       RMB       US$      RMB       RMB       US$
Net revenues (a)                                                              
Feature phone games      37,300   35,437   40,272   6,339   74,510   75,709   11,918
Smartphone games         16,042   16,095   18,029   2,838   27,797   34,124   5,371
Handset design           9,397    2,801    2,430    382     18,115   5,231    823
Total net revenues       62,739   54,333   60,731   9,559   120,422  115,064  18,112
Cost of revenues (b)                                                          
Feature phone games      (15,401) (17,873) (17,688) (2,784) (29,135) (35,561) (5,598)
Smartphone games         (3,982)  (3,678)  (3,903)  (614)   (7,986)  (7,581)  (1,193)
Handset design           (6,829)  (2,780)  (2,444)  (385)   (11,489) (5,224)  (822)
Total cost of revenues   (26,212) (24,331) (24,035) (3,783) (48,610) (48,366) (7,613)
Gross profit             36,527   30,002   36,696   5,776   71,812   66,698   10,499
Operating expenses:                                                           
Selling expenses         (1,550)  (2,160)  (4,894)  (770)   (2,736)  (7,054)  (1,110)
General and              (5,991)  (5,907)  (7,068)  (1,113) (9,965)  (12,975) (2,042)
administrative expenses
Research and development (4,172)  (8,597)  (7,364)  (1,159) (8,107)  (15,961) (2,513)
expenses
Total operating expenses (11,713) (16,664) (19,326) (3,042) (20,808) (35,990) (5,665)
Operating income         24,814   13,338   17,370   2,734   51,004   30,708   4,834
Interest income          213      292      273      43      349      565      89
Other income             87       113      112      18      105      225      35
Changes in fair value of
contingently             (2,870)  7,131    (3,161)  (498)   (3,630)  3,970    625
returnableconsideration
assets
Income before income
taxes and                22,244   20,874   14,594   2,297   47,828   35,468   5,583
noncontrollinginterests
Income tax (expenses)    (8,353)  (2,053)  8,828    1,390   (17,035) 6,775    1,066
benefits
Net income               13,891   18,821   23,422   3,687   30,793   42,243   6,649
Accretion of
contingently redeemable  —       —       (1,887)  (297)   —       (1,887)  (297)
ordinaryshare


CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares and per share data)
                                                                                          
                  For the threemonthsended                         For the sixmonthsended
                  June30,     March31,    June30,     June30,     June30,     June30,     June30,
                   2011         2012         2012         2012         2011         2012         2012
                  RMB          RMB          RMB          US$          RMB          RMB          US$
Net income
attributable to    13,891      18,821      21,535      3,390       30,793      40,356      6,352
shareholders
Net income
attributable to    4,167       —          —          —          9,238       —          —
noncontrolling
interests
Net income
attributable to
China Mobile Games
and Entertainment  9,724       18,821      21,535      3,390       21,555      40,356      6,352
Group Limited's
ordinary
shareholders
Other
comprehensive                                                                              
(loss) income:
Foreign currency
translation        (147)       (7)         27          4           (276)       20          3
adjustment
Total other
comprehensive      (147)       (7)         27          4           (276)       20          3
(loss) income
Comprehensive      13,744      18,814      21,562      3,394       30,517      40,376      6,355
income
Comprehensive
income
attributable       4,123       —          —          —          9,155       —          —
tononcontrolling
interests
Comprehensive
income
attributable to
China MobileGames 9,621       18,814      21,562      3,394       21,362      40,376      6,355
and Entertainment
Group
Limited'sordinary
shareholders
                                                                                          
Earnings per                                                                               
share:
Basic earnings per 0.05         0.06         0.07         0.01         0.10         0.12         0.02
share
Diluted earnings   0.05         0.06         0.07         0.01         0.10         0.12         0.02
per share
                                                                                          
Weighted average
number of ordinary                                                                         
sharesoutstanding
in computing:
Basic earnings per 212,500,000 302,729,550 302,729,550 302,729,550 212,500,000 302,729,550 302,729,550
share
Diluted earnings   212,500,000 302,729,550 302,729,550 302,729,550 212,500,000 302,729,550 302,729,550
per share
                                                                                          
(a) Net revenues
from related       1,337       —          —          —          11,582      —          —
parties
Feature phone                                                                              
games
(b) Cost of
revenues to        (72)        —          —          —          545         —          —
related parties
Handset design                                                                             



CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"))
                                                               
            For the three months ended            For the six months ended
            June 30, March 31, June 30,  June 30, June 30, June 30,  June 30,
             2011     2012      2012      2012     2011     2012      2012
            RMB      RMB       RMB       US$      RMB      RMB       US$
Net cash
provided by  39,834  12,393   22,255   3,502   52,520  34,648   5,452
operating
activities
Net cash
used in      (2,466) (2,698)  (29,461) (4,637) (4,486) (32,159) (5,062)
investing
activities
Net cash
provided by
(used in)    —      (63,000) 72,881   11,472  —      9,881    1,555
financing
activities
Exchange
rate effect
on cash and  (147)   (7)      27       4       (276)   20       3
cash
equivalents
Net increase
(decrease)
in cash and  37,221  (53,312) 65,702   10,341  47,758  12,390   1,948
cash
equivalents
Cash and
cash
equivalents, 114,575 187,237  133,925  21,081  104,038 187,237  29,474
beginning of
the period
Cash and
cash
equivalents, 151,796 133,925  199,627  31,422  151,796 199,627  31,422
end of the
period



Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(Amounts in thousands of Renminbi ("RMB") except for per ADS data)

            For the                          For the three                  For the three
             threemonthsendedJune30,2011 monthsendedMarch31,2012    monthsendedJune30,2012
            GAAP     Adjustment(a)  Non-GAAP GAAP    Adjustment(a) Non-GAAP GAAP    Adjustment(a) Non-GAAP
            RMB      RMB            RMB      RMB     RMB           RMB      RMB     RMB           RMB
                                                                                          
Operating    11,713  (687)         11,026  16,664 (1,892)       14,772  19,326 (3,199)      16,127
expenses
                                                                                          
Income from  24,814  687           25,501  13,338 1,892         15,230  17,370 3,199        20,569
operations
                                                                                          
Operating    39.6%                  40.6%    24.5%                28.0%    28.6%                33.9%
margin
                                                                                          
Net income   13,891   687            14,578   18,821  1,892         20,713   23,422  3,199         26,621
                                                                                          
Net margin   22.1%                  23.2%    34.6%                38.1%    38.6%                43.8%
                                                                                          
Net income
attributable 9,724    687            10,411 18,821  1,892         20,713   21,535  3,199         24,734
to CMGE
                                                                                          
Net margin
attributable 15.5%                  16.6%    34.6%                38.1%    35.5%                40.7%
to CMGE
                                                                                          
Diluted
earnings per 0.64                   0.69     0.87                 0.96     0.92                 1.05
ADS(b)

                                              
                                              
             For the                           For the six
              sixmonthsendedJune30,2011    monthsendedJune30,2012
             GAAP     Adjustment(a)  Non-GAAP  GAAP    Adjustment(a) Non-GAAP
             RMB      RMB            RMB       RMB     RMB           RMB
Operating     20,808  (1,971)       18,837   35,990 (5,091)      30,899
expenses
                                                                
Income from   51,004  1,971         52,975   30,708 5,091        35,799
operations
                                                                
Operating     42.4%                  44.0%     26.7%                31.1%
margin
                                                                
Net income    30,793   1,971          32,764    42,243  5,091         47,334
                                                                
Net margin    25.6%                  27.2%     36.7%                41.1%
                                                                
Net income
attributable  21,555   1,971          23,526    40,356  5,091       45,447
to CMGE
                                                                
Net margin
attributable  17.9%                  19.5%     35.1%                39.5%
to CMGE
Diluted
earnings per  1.42                   1.55      1.71                 1.93
ADS(b)
                                                                
(a)Adjustment to exclude the share-based compensation expense of each period.

(b)1 ADS = 14 Ordinary Shares.

CONTACT: For investor and media inquiries, please contact:
        
         China Mobile Games and Entertainment Group Limited
         In China:
         Tel: +86 20-8561-3455
         E-mail: ir@cmge.com
        
         Christensen
         Christian Arnell
         Tel: +86 158 2133 0177
         E-mail: carnell@ChristensenIR.com
        
         In the U.S.:
         Christensen
         Linda Bergkamp
         Tel: +1 480 614 3000
         E-mail: lbergkamp@ChristensenIR.com