CMGE Reports Third Quarter 2012 Unaudited Financial Results

CMGE Reports Third Quarter 2012 Unaudited Financial Results

HONG KONG, Nov. 28, 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 third quarter ended September 30, 2012.

Third Quarter Financial Highlights

  *Revenues were RMB43.6 million (US$6.9 million ^(1)), compared with RMB63.1
    million in the third quarter of 2011 and RMB60.7 million in the second
    quarter of 2012.
  *Net income was RMB1.6 million (US$0.3 million), which includes one-time
    listing expense of RMB18.1 million (US$2.9 million), compared with RMB24.2
    million in the third quarter of 2011 and RMB23.4 million in the second
    quarter of 2012.
  *Diluted earnings per American Depositary Share ^(2) ("ADS") were RMB0.04
    (US$0.01).
  *Cash and cash equivalents were RMB156.3 million (US$24.8 million) as of
    September 30, 2012.

Third Quarter Operating Metrics

  *Total paying user accounts ^(3) for feature phone single player games were
    9.8 million, compared with 11.7 million in the third quarter of 2011 and
    12.6 million in the second quarter of 2012, and average revenue per paying
    user account ("ARPU") was RMB2.92, compared with RMB2.94 in the third
    quarter of 2011 and RMB3.03 in the second quarter of 2012.
  *Total paying user accounts for feature phone social games were 37,638,
    compared with 16,593 in the third quarter of 2011 and 32,494 in the second
    quarter of 2012, and ARPU was RMB57.14, compared with RMB64.82 in the
    third quarter of 2011 and RMB57.76 in the second quarter of 2012.
  *Total subscriptions ^(4) for smartphone single player games were 1.2
    million in the third quarter of 2012, compared with 2.3 million in the
    third quarter of 2011 and 1.7 million in the second quarter of 2012, and
    average revenue per subscription was RMB4.06, compared with RMB4.73 in the
    third quarter of 2011 and RMB4.79 in the second quarter of 2012.
  *Total paying user accounts for smartphone social games were 30,357,
    compared with 216,423 in the third quarter of 2011 and 126,301 in the
    second quarter of 2012, and ARPU was RMB199.89, compared with RMB24.80 in
    the third quarter of 2011 and RMB80.12 in the second quarter of 2012.

Ken Jian Xiao, CMGE's chief executive officer, commented, "While our results
for the third quarter were somewhat lackluster, we are optimistic about our
prospects for 2013 as we believe we have been effectively positioning
ourselves for the anticipated strong growth in the smartphone game segment."

"Our performance during the third quarter largely reflects the reality of the
feature phone market environment and the transition in our business. The
feature phone market has been shrinking as users continue to transition from
feature phones to smartphones and a certain mobile operator continues to
enforce a strict policy to reduce the volume of promotional advertisements for
smartphone single-player games to which it exposes its users. In response to
these challenges and in order to ensure the sustainable growth of our business
over the long term, we have recently focused our efforts on developing new
high quality smartphone social games for Android and iOS, the expansion of
distribution channels and the development of third-party game operating and
publishing capabilities.

"On the game development side, we have been directing considerable resources
to the development of at least seven proprietary social games for Android and
iOS-based smartphones, and we are excited about their potential. Our social
games not only include traditional heavy online role-playing games, but also
lighter social games, such as card games. Currently, more than 80% of our team
is working on smartphone-related projects, up from 50% a year ago, and by the
end of 2013, we believe that smartphone games will likely account for more
than 80% of our total mobile game revenues.

"We plan to expand the distribution channels for our Android phone games
through several means, including further exploring pre-installation
opportunities with both mobile chipset manufacturers and more than 400 handset
manufacturers that are increasingly focused on smartphones, building strategic
relationships with leading app store promotion platforms in China, and
maintaining strong partnerships with mobile operators. We also intend to
expand cooperation with open platforms, strengthen cooperation and promotional
opportunities with third party app stores, and significantly build out our
Douwan social game platform.

"CMGE has also built a strong game operating and publishing team for
third-party games. We are recruiting game studios and other third party
developers to introduce their games to our platform, which we are doing on
both exclusive and non-exclusive bases. The Company has also set aside funds,
which it intends to use for investing in early stage companies that focus on
mobile game research and development, user traffic development and game
promotion. We have already invested in several projects and will continue to
seek out top teams and companies to help provide CMGE with high quality game
products and increased user traffic. Through initiatives such as these, we
believe we will be able to effectively navigate the current market conditions
and deliver value to our shareholders over the long term."

Ken Chang, CMGE's chief financial officer, added, "Operationally, we were
pleased to see ARPU for smartphone social games continue to increase in the
third quarter of 2012, compared to the second quarter of 2012. A one-off
expense of RMB18.1 million (US$2.9 million), related to CMGE's successful
listing on the Nasdaq Global Market on September 25, 2012, was expensed during
the third quarter, and we continue to operate our business without any bank
borrowings or other debt. Over the past year, we have invested heavily in
human resources and research and development for smartphone social games,
enhancements to our social game platform, as well as our mobile handset design
business. We believe we will start to see some initial returns from these
investments next year."

Third Quarter 2012 Results

Revenues

Total net revenues were RMB43.6 million (US$6.9 million), compared with
RMB63.1 million in the third quarter of 2011 and RMB60.7 million in the prior
quarter.

  *Feature phone game revenues were RMB30.7 million (US$4.9 million), a
    decrease of 13.6% from RMB35.5 million in the same period last year and a
    decrease of 23.8% from RMB40.3 million in the prior quarter. The decline
    was primarily because consumers in China continue to migrate from feature
    phones to smartphones.
  *Smartphone game revenues were RMB10.9 million (US$1.7 million), a decrease
    of 32.3% from RMB16.2 million in the same period last year and a decrease
    of 39.3% from RMB18.0 million in the prior quarter. China Mobile, the
    Company's service provider for all of its smartphone single-player game
    bundles, has continued to tighten its policy on the number of pop-up
    advertisements broadcast to its users. This has limited the promotion of
    the Company's game bundles on China Mobile's platform and has resulted in
    a decline in total subscriptions for CMGE's smartphone single-player
    games, despite that our smartphone game bundles ranked first on China
    Mobile's platform in terms of revenue from January to August 2012. In
    addition, the number of paying users in smartphone social games, largely
    for Paopao Xiyou and Dian Feng, has decreased because the Company decided
    not to update or further enhance these existing games. Instead, CMGE has
    been focusing research and development efforts on developing at least
    seven new smartphone social games, more cater for the growing interest of
    state-of-the-art quality social games, especially MMORPG games. The
    Company anticipates that two new light smartphone social games will launch
    in the fourth quarter of 2012 and another two new online smartphone social
    games will debut in the first quarter of 2013.
  *Handset design revenues were RMB2.0 million (US$0.3 million), which were
    mainly derived from feature phone design. This represented a 82.6%
    decrease from the corresponding period in 2011 and a 18.4% decrease from
    the prior quarter as market demand continues to shift strongly from
    feature phones to smartphones. The Company completed and delivered its
    first order from smartphone manufacturers in September 2012, which
    represented 22% of the revenue of the Company's mobile handset design
    business in the third quarter of 2012.

Cost of Revenues

Cost of revenues was RMB22.5 million (US$3.6 million) during the third quarter
of 2012, a decrease of 22.6% from RMB29.0 million in the third quarter of 2011
and a decrease of 6.4% from RMB24.0 million in the second quarter of 2012.
These declines were primarily due to a decrease in the amount paid to agents
who pre-install CMGE's feature phone games and a drop in handset design sales
volume, which resulted in lower component costs. The Company's overall gross
margin was 48.4% during the third quarter of 2012, compared with 54.0% in the
third quarter of 2011 and 60.4% in the second quarter of 2012.

Operating Expenses

Operating expenses were RMB40.6 million (US$6.4 million) during the third
quarter of 2012, compared with RMB13.0 million in the third quarter of 2011
and RMB19.3 million in the second quarter of 2012. Operating expenses
excluding share-based compensation (non-GAAP ^ (5)) were RMB35.5 million
(US$5.6 million), compared with RMB14.1 million in the third quarter of 2011
and RMB16.1 million in the second quarter of 2012. The increase in non-GAAP
operating expenses was primarily driven by one-off costs related to the
Company's listing on Nasdaq, which were RMB18.1 million during the third
quarter of 2012, and higher research and development expenses, which as a
percentage of net revenue increased to 21.3% in the third quarter of 2012,
from 11.0% in the third quarter of 2011 and 12.1% in the second quarter of
2012 as the Company recruited more software engineers for new game
development.

Share-based compensation expenses totaled RMB5.1 million (US$0.8 million)
during the third quarter of 2012, compared with a gain of RMB1.0 million in
the third quarter of 2011 and expenses of RMB3.2 million in the second quarter
of 2012.

Operating Loss

Operating loss was RMB19.5 million (US$3.1 million) during the third quarter
of 2012, compared with operating income of RMB21.0 million in the third
quarter of 2011 and operating income of RMB17.4 million in the second quarter
of 2012. The third quarter operating loss was primarily due to the decrease in
total net revenues, the increase in overall research and development expenses
and the one-time expenses related to the Company's Nasdaq listing.

Operating loss excluding share-based compensation (non-GAAP) was RMB14.4
million (US$2.3 million) during the third quarter of 2012, compared with
income of RMB20.0 million in the third quarter of 2011 and income of RMB20.6
million in the second quarter of 2012.

Contingently Returnable Consideration Assets

Changes in fair value of contingently returnable consideration assets resulted
in a gain of RMB20.6 million (US$3.3 million) during the third quarter of
2012, compared with a gain of RMB11.2 million in the third quarter of 2011 and
a loss of RMB3.2 million in the second quarter of 2012. The gain in the
current quarter was primarily due to an increase in the fair value of the
consideration shares to be returned to VODone pursuant to the contingent
conditions related to the acquisitions of the 3GUU Group and the OWX Holding
Group.

Income Tax

The Company had an income tax benefit of RMB0.2 million (US$28,000) during the
third quarter of 2012, compared with an income tax expense of RMB8.4 million
in the third quarter of 2011 and an income tax benefit of RMB8.8 million in
second quarter of 2012. The decline in income tax benefit in the third quarter
of 2012 compared to the second quarter of 2012 was primarily because certain
subsidiaries were granted tax exemptions for being new software development
enterprises which made retroactively effective to the beginning of 2011 and
recognized during the second quarter of 2012.

Net Income

Net income during the third quarter of 2012 was RMB1.6 million (US$0.3
million), compared with RMB24.2 million in the third quarter of 2011 and
RMB23.4 million in the second quarter of 2012.

Net income excluding share-based compensation (non-GAAP) was RMB6.7 million
(US$1.1 million) during the third quarter of 2012, compared with RMB23.1
million in the third quarter of 2011 and RMB26.6 million in the second quarter
of 2012.

Basic and Diluted Earnings per ADS

Basic and diluted earnings per ADS both were RMB0.04 (US$0.01). Basic and
diluted earnings per ADS excluding share-based compensation (non-GAAP) were
RMB0.26 (US$0.04) and RMB0.25 (US$0.04), respectively, during the third
quarter of 2012. The number of ADSs used in calculating both GAAP and non-GAAP
weighted average basic and diluted earnings per ADS was 21.6 million and 22.6
million, respectively. For the third quarter of 2012, the basic and diluted
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. The Company has allocated to
undistributed earnings to ordinary shares RMB1.0 million (US$0.2 million) for
calculating basic earnings per share and RMB5.6 million (US$0.9 million) for
calculating basic earnings per share excluding the impact of share-based
compensation (non-GAAP).

The effects of share options granted and restricted shares issued by the
Company were included in the calculation of diluted earnings per share for the
three months ended September 30, 2012.

Cash and Cash Equivalents

As of September30, 2012, the Company had cash and cash equivalents of
RMB156.3 million (US$24.8 million). Operating cash flow for the third quarter
of 2012 was a net outflow of RMB12.4 million (US$2.0 million).

Common Shares

CMGE had 331,074,551 common shares outstanding as of September30, 2012.

Recent Business Developments

As of September30, 2012, the Company's game portfolio included 490 mobile
games, of which 327 were smartphone games and 163 were feature phone games.

Conference Call

CMGE's management will host a conference call to discuss the results at 8:00
a.m. EasternStandard Time on November28, 2012 (9:00 p.m. Beijing time on the
same day).

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

U.S.TollFreeDial-In +1 855-500-8701
HongKongDial-In      +852 3051-2745
China Dial-In          4001-200-654
InternationalDial-In  +65 6723-9385
Conference ID          CMGE

A telephone replay of the call will be available after the conclusion of the
conference call at 11:00 a.m. Eastern Standard Time on November28, 2012
through 11:59 p.m. Eastern Standard Time on December4, 2012. The dial-in
details for the replay are:

U.S.TollFreeDial-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: The Company's growth strategies as well as business plans; future
development, results of operations and financial condition; ability to
continue to develop new and attractive products and services; ability to
continue to develop new technologies or upgrade existing technologies; ability
to attract and retain users and customers and further enhance 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 the Company's 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 CMGE's financial results presented in accordance with U.S. GAAP,
the Company uses non-GAAP financial measures, which are adjusted from results
based on U.S. GAAP to exclude share-based compensation expenses.
Reconciliations of non-GAAP financial measures to 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.

Non-GAAP financial information is provided as additional information to help
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 the Company's continuing
operations and prospects for the future. Non-GAAP financial information should
not be considered a substitute for or superior to U.S. GAAP results. In
addition, calculations of this non-GAAP financial information may be different
from calculations 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 RMB6.285 to US$1.00, the effective noon buying rate as of
September 28, 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 One ADS represents 14 Class A ordinary shares of the Company.

^3 Total paying user accounts 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.

^4 Represents the total number of monthly subscriptions to 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.

^5 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 this press release.

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares and share data )
                                                         
                                           As of
                                            December31,   As of September30,
                                           2011*          2012      2012
                                           RMB            RMB       US$
ASSETS                                                             
Current assets:                                                    
Cash and cash equivalents                   187,237       156,327   24,874
Short-term investments                      --           45,000   7,160
Accounts receivable                         56,121        47,259   7,520
Inventories                                 2,103         2,764    440
Prepayments and other current assets        24,966        82,036   13,053
Amounts due from related parties            1,349         6        1
Deferred tax assets                         1,491         212      34
Total current assets                        273,267       333,604   53,082
                                                                  
Non-current assets:                                                
Property and equipment, net                 5,435         4,884    777
Goodwill                                    598,358       598,358   95,207
Intangible assets, net                      70,101        58,342   9,283
Deferred initial public offering costs      2,010         --      --
Deferred tax assets                         916           106      17
Other non-current assets                    343           343      55
Total non-current assets                    677,163       662,033   105,339
TOTAL ASSETS                                950,430       995,637   158,421
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY                               
Current liabilities:                                               
Accounts payable                            9,150         1,606    256
Accrued expenses and other current          17,577        29,724   4,730
liabilities
Deferred revenue                            3,894         2,663    424
Income tax payable                          11,115        532      85
Dividends payable                           63,000        --      --
Amounts due to related parties              6,542         3,195    508
Total current liabilities                   111,278       37,720   6,003
                                                                  
Non-current liabilities:                                           
Unrecognized tax benefits                   27,844        20,729   3,298
Deferred tax liabilities                    12,580        10,378   1,651
Other non-current liabilities               2,550         2,150    342
Total non-current liabilities               42,974        33,257   5,291
Total liabilities                           154,252       70,977   11,294
                                                                  
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 December31,
2011 and September30, 2012, respectively.  --           76,961   12,246
As of September30, 2012, aggregate
liquidation preference and redemption
amount were RMB75,899 and RMB76,961,
respectively)
Shareholders' equity:                                              
Ordinary shares (US$0.001 par value,
1,000,000,000shares authorized;
302,729,550shares issued and outstanding   1,937         1,937    308
as of December31, 2011 and September30,
2012)
Additional paid-in capital                  709,815       722,265   114,923
Retained earnings                           84,853        123,881   19,711
Accumulated other comprehensive loss        (427)         (384)    (61)
Total shareholders' equity                  796,178       847,699   134,881
TOTAL LIABILITIES, CONTINGENTLY REDEEMABLE  950,430       995,637   158,421
ORDINARY SHARES AND SHAREHOLDERS' EQUITY
                                                                  
* Amounts for the year ended December31, 2011 were derived from December31,
2011 audited consolidated financial statements.



CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED INTERIM CONDENSED 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 ninemonthsended
              September30, June30, September30, September30, September30, September30, September30,
               2011          2012     2012          2012          2011          2012          2012
              RMB           RMB      RMB           USD           RMB           RMB           USD
Net revenues                                                                            
(a)
Feature phone  35,510       40,272  30,682       4,882        110,020      106,391      16,928
games
Smartphone     16,174       18,029  10,948       1,742        43,971       45,072       7,172
games
Handset design 11,409       2,430  1,983        316          29,524       7,214        1,148
Total net      63,093       60,731  43,613       6,940        183,515      158,677      25,248
revenues
                                                                                       
Cost of                                                                                 
revenues (b)
Feature phone  (15,091)     (17,688) (16,308)     (2,595)      (44,226)     (52,352)     (8,330)
games
Smartphone     (4,640)      (3,903) (3,598)      (573)        (12,626)     (10,696)     (1,702)
games
Handset design (9,301)      (2,444) (2,579)      (410)        (20,790)     (7,803)      (1,242)
Total cost of  (29,032)     (24,035) (22,485)     (3,578)      (77,642)     (70,851)     (11,274)
revenues
                                                                                       
Gross profit   34,061       36,696  21,128       3,362        105,873      87,826       13,974
Operating                                                                               
expenses:
Selling        (2,405)      (4,894) (3,992)      (636)        (5,141)      (11,046)     (1,758)
expenses
General and
administrative (3,651)      (7,068) (9,273)      (1,475)      (13,616)     (22,248)     (3,540)
expenses
Research and
development    (6,970)      (7,364) (9,270)      (1,475)      (15,077)     (25,231)     (4,014)
expenses
Listing        --          --    (18,053)     (2,872)      --          (18,053)     (2,872)
expenses
Total
operating      (13,026)     (19,326) (40,588)     (6,458)      (33,834)     (76,578)     (12,184)
expenses
                                                                                       
Operating      21,035       17,370  (19,460)     (3,096)      72,039       11,248       1,790
income
Interest       275          273    235          37           624          800          127
income
Other income   98           112    113          18           203          338          54
Changes in
fair value of
contingently   11,163       (3,161) 20,550       3,270        7,533        24,520       3,901
returnable
consideration
assets
                                                                                       
Income before
income taxes
and            32,571       14,594  1,438        229          80,399       36,906       5,872
noncontrolling
interests
Income tax
(expenses)     (8,411)      8,828  176          28           (25,446)     6,951        1,106
benefits
Net income     24,160       23,422  1,614        257          54,953       43,857       6,978
Accretion of
contingently
redeemable     --          (1,887) (576)        (92)         --          (2,463)      (392)
ordinary
shares
                                                                                       


CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (CONTINUED)
(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 ninemonthsended
              September30, June30,     September30, September30, September30, September30, September30,
               2011          2012         2012          2012          2011          2012          2012
              RMB           RMB          RMB           USD           RMB           RMB           USD
Net income
attributable   24,160       21,535      1,038        165          54,953       41,394       6,586
to
shareholders
                                                                                           
Net income
attributable
to             2,599        --         --          --          11,837       --          --
noncontrolling
interests
Net income
attributable
to China
Mobile Games
and            21,561       21,535      1,038        165          43,116       41,394       6,586
Entertainment
Group
Limited's
ordinary
shareholders
                                                                                           
Other
comprehensive                                                                               
(loss) income:
Foreign
currency       (346)        27          23           4            (615)        43           7
translation
adjustment
Total other
comprehensive  (346)        27          23           4            (615)        43           7
(loss) income
                                                                                           
Comprehensive  23,814       21,562      1,061        169          54,338       41,437       6,593
income
                                                                                           
Comprehensive
income
attributable   2,555        --     --      --      11,759       --      --
to
noncontrolling
interests
                                                                                           
Comprehensive
income
attributable
to China
Mobile Games
and            21,259       21,562      1,061        169          42,579       41,437       6,593
Entertainment
Group
Limited's
ordinary
shareholders
                                                                                           
Earnings per                                                                                
share:
Basic earnings 0.0862       0.0654      0.0032       0.0005       0.1916       0.1257       0.0200
per share
Diluted
earnings per   0.0861       0.0654      0.0030       0.0005       0.1915       0.1239       0.0197
share
                                                                                           
Weighted
average number
of ordinary                                                                                 
shares
outstanding in
computing:
Basic earnings 250,082,418  302,729,550 302,729,550  302,729,550  225,027,473  302,729,550  302,729,550
per share
Diluted
earnings per   250,082,418  302,729,550 316,228,294  316,228,294  225,027,473  307,229,131  307,229,131
share
(a) Net
revenues from                                                                               
related
parties
Feature phone  430          --      --       --      12,012       --      --
games
                                                                                           
(b) Cost of
revenues to                                                                                 
related
parties
Handset design (5)          --     --      --      (550)        --      --
                                                                                           


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 nine months ended
            September30, June30, September30, September30, September30, September30, September30,
            2011          2012     2012          2012          2011          2012          2012
            RMB           RMB      RMB           US$           RMB           RMB           US$
Net cash
provided by
(used in)    7,817        22,255  (12,405)     (1,974)      60,337       22,243       3,539
operating
activities
Net cash
provided by
(used in)    (1,579)      (29,461) (28,880)     (4,595)      (6,065)      (61,039)     (9,712)
investing
activities
Net cash
provided by
(used in)    --          72,881  (2,038)      (324)        --          7,843        1,248
financing
activities
Exchange
rate effect
on cash and  (417)        27      23           4            (693)        43           7
cash
equivalents
Net increase
(decrease)
in cash and  5,821        65,702  (43,300)     (6,889)      53,579       (30,910)     (4,918)
cash
equivalents
Cash and
cash
equivalents, 151,796      133,925 199,627      31,763       104,038      187,237      29,792
beginning of
the period
Cash and
cash
equivalents, 157,617      199,627 156,327      24,874       157,617      156,327      24,874
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)
                                                                                                                       
             Forthethreemonths ended                  Forthethreemonths ended                   Forthethreemonths ended
             September30,2011                           June30,2012                                September30,2012
                                           Non-                                       Non-                               
             GAAP        Adjustment(a)      GAAP         GAAP        Adjustment(a)       GAAP         GAAP      Adjustment(a) Non-GAAP
             RMB         RMB                 RMB          RMB         RMB                 RMB          RMB       RMB           RMB
Operating     13,026      1,034               14,060       19,326      (3,199)            16,127       40,588    (5,054)      35,534
expenses
Income/(loss)
from          21,035      (1,034)            20,001       17,370      3,199               20,569       (19,460) 5,054         (14,406)
operations
Operating     33.3%                          31.7%        28.6%                          33.9%        NM (c)                 NM (c)
margin
Net income    24,160      (1,034)            23,126       23,422      3,199               26,621       1,614     5,054         6,668
Net margin    38.3%                          36.7%        38.6%                          43.8%        3.7%                   15.3%
Net income
attributable  21,561      (1,034)            20,527       21,535      3,199               24,734       1,038     5,054         6,092
to CMGE
Net margin
attributable  34.2%                          32.5%        35.5%                          40.7%        2.4%                   14.0%
to CMGE
Diluted
earnings per  1.21                           1.15         0.92                           1.05         0.04                   0.25
ADS(b)
                                                                                                                       
             FortheninemonthsendedSeptember30,2011 FortheninemonthsendedSeptember30,2012                       
             GAAP        Adjustment(a)      Non-GAAP     GAAP        Adjustment(a)      Non-GAAP                           
             RMB         RMB                 RMB          RMB         RMB                 RMB                                
Operating     33,834      (937)              32,897       76,578      (10,144)           66,434                             
expenses
Income from   72,039      937                 72,976       11,248      10,144              21,392                             
operations
Operating     39.3%                          39.8%        7.1%                           13.5%                              
margin
Net income    54,953      937                 55,890       43,857      10,144              54,001                             
Net margin    29.9%                          30.5%        27.6%                          34.0%                              
Net income
attributable  43,116      937                 44,053       41,394      10,144              51,538                             
to CMGE
Net margin
attributable  23.5%                          24.0%        26.1%                          32.5%                              
to CMGE
Diluted
earnings per  2.68                           2.74         1.73                           2.16                               
ADS(b)
                                                                                                                       
(a) Adjustment to exclude the share-based compensation expense of each period.
(b) 1 ADS = 14 Ordinary Shares.
(C) Not Meaningful.

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: +86-10-5826-4939 (China)
         E-mail: carnell@ChristensenlR.com

         In the U.S.:
         Christensen
         Linda Bergkamp
         Tel: +1 480 614 3000
         E-mail: lbergkamp@ChristensenIR.com
 
Press spacebar to pause and continue. Press esc to stop.