CMGE Reports First Quarter 2013 Unaudited Financial Results

CMGE Reports First Quarter 2013 Unaudited Financial Results

HONG KONG, May 31, 2013 (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 first quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights

  *Revenues were RMB36.5 million (US$5.9 million^1), compared with RMB54.3
    million in the first quarter of 2012 and RMB28.9 million in the fourth
    quarter of 2012. The sequential quarterly growth in revenue is largely a
    result of increased revenue from social games and single player games and
    an increase in the number of subscriptions of the Company's single-player
    game bundles.
  *Net loss was RMB21.6 million (US$3.5 million), compared with net income of
    RMB18.8 million in the first quarter of 2012 and net loss of RMB58.3
    million in the fourth quarter of 2012.
  *Non-GAAP^2 net loss, excluding (1) share-based compensation expenses and
    (2) goodwill and intangible assets impairment loss, was RMB13.2 million
    (US$2.1 million), compared with non-GAAP net income of RMB20.7 million in
    the first quarter of 2012 and non-GAAP net loss of RMB10.0 million in the
    fourth quarter of 2012.
  *Basic and diluted loss per American Depositary Share^3 ("ADS") was RMB1.01
    (US$0.16), compared with an earning of RMB0.87 in the first quarter of
    2012 and a loss of RMB2.71 in the fourth quarter of 2012.

First Quarter Select Operating Data

  *Total paying user accounts^4 for single-player games (excluding
    single-player game bundles) were 4.3 million, compared with 12.1 million
    in the first quarter of 2012 and 5.0 million in the fourth quarter of
    2012. Average revenue per paying user account ("ARPU") for single-player
    games (excluding single-player game bundles) was RMB3.38, compared with
    RMB2.81 in the first quarter of 2012 and RMB2.37 in the fourth quarter of
    2012.
  *Total subscriptions^5 for single-player game bundles were 1.5 million in
    the first quarter of 2013, compared with 2.0 million in the first quarter
    of 2012 and 1.1 million in the fourth quarter of 2012. Average revenue per
    subscription for single-player game bundles was RMB4.73, compared with
    RMB4.59 in the first quarter of 2012 and RMB4.01 in the fourth quarter of
    2012.
  *Total paying user accounts for social games were 308,039, compared with
    164,030 in the first quarter of 2012 and 48,235 in the fourth quarter of
    2012. ARPU for social games was RMB23.81, compared with RMB50.36 in the
    first quarter of 2012 and RMB92.47 in the fourth quarter of 2012.

^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 RMB6.2108 to US$1.00, the effective noon buying rate as of
March 29, 2013 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 this press release.

^3 One ADS represents 14 Class A ordinary shares of the Company.

^4 Total paying user accounts represents (i) 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, and (ii) the total number of games
downloaded through application stores.

^5 Total subscriptions represents the total number of monthly subscriptions to
our game bundles offered through mobile network operators. A user who pays two
subscription fees during one month to subscribe to different game bundles
would be counted as two subscriptions.

"We were pleased to see a strong increase in revenue and an overall
improvement in our financial and operational performance during the first
quarter. We have begun to pick up momentum following the implementation last
year of our long-term strategy of focusing on developing and publishing
smartphone games," commented Mr. Ken Jian Xiao, CMGE's Chief Executive
Officer. "We have been working diligently to enhance and adjust our
distribution channels and our technology and development teams to take
advantage of the significant growth opportunities in China's smartphone game
business. On top of our existing game portfolio of 510 games, we recently
announced the upcoming launch of our newest games, War Valley, Xiang Mo Shen
Hua, and Immortal Wind, which are all self-developed social games for both
Android and iOS-based platforms. In a demonstration of its potential, the
Company received three national mobile game awards in 2013. Among these, War
Valley was awarded the Online Game Award for Excellence by the Global Mobile
Game Confederation and was named a Top 10 Mobile Game at the Global Mobile
Internet Conference. In addition, the Golden Apple Award for Best Game was
presented to Joyful Zha Jin Hua. We also significantly expanded our game
publishing operations. In particular, we recently published Dragon's Summon,
an Android-based game developed by a third-party.

"We are excited about our social game pipeline as we plan to launch over 15
social games in 2013. The release of these games is the result of investments
and transitional efforts made last year. We invested heavily in developing
smartphone social games and establishing our third-party game publishing
capabilities. In addition, since November 2012, we have acquired eight game
development teams which we are confident will help drive our overall
performance over the long run.

"As our game portfolio expands, so have our distribution channels. We signed
strategic partnership agreements with China Wireless Technologies and Beijing
Tianyu Communication Equipment to pre-install our Game Center application on
over ten million smartphones. We expect that our Game Center application and
other selected games will be preinstalled on more than 60 million smartphones
in 2013 under co-operation with over 400 handset manufacturers. We intend to
leverage the size and number of our distribution channels to promote our
proprietary online games and decrease future promotional costs. These
partnerships have already started to contribute incrementally to our financial
performance and we look forward to finding new and exciting pre-installation
opportunities with handset and mobile chipset manufacturers as well as
cooperation with other platforms.

"The year ahead holds great potential as we believe that we have only just
begun to see the initial benefits of our transition to smartphone games. With
a distribution network that reaches over 150 million mobile users, and a
strong portfolio of games supported by strategic cooperation agreements with
handset manufacturers, mobile operators and other third party platforms, I am
confident in our ability to leverage these investments and carry out our
transition as we seek to deliver long-term value to our shareholders."

Mr. Ken Chang, China Mobile Games' Chief Financial Officer, added, "We were
pleased to see a strong increase in overall revenue, particularly from our
games segment, which rose by 40.0% from the fourth quarter of 2012. This
increase was largely a result of our ongoing successful transition to
smartphone games and the expansion of our third-party game publishing
business. In the first quarter of 2013, we launched three proprietary social
games, including Joyful Zha Jin Hua, the first in a series of card games,
which quickly achieved success with monthly paying users exceeding 160,000. In
addition, the number of subscriptions to our single-player game bundles on
China Mobile's platform increased as China Mobile began relaxing its
advertising policies. Our game bundles again ranked first on China Mobile's
platform in terms of revenue this quarter overall. We believe we are in the
early stages of renewed growth as we pick up momentum from the transitional
efforts that we undertook last year."

First Quarter 2013 Results

Revenues

Total net revenues were RMB36.5 million (US$5.9 million), compared with
RMB54.3 million in the first quarter of 2012 and RMB28.9 million in the prior
quarter.

  *Mobile phone game revenues were RMB29.0 million (US$4.7 million), a
    decrease of 43.7% from RMB51.5 million during the same period last year
    and an increase of 40.0% from RMB20.7 million in the prior quarter. The
    sequential quarterly growth in revenue is largely a result of increased
    revenue from social games and single player games and single-player game
    bundles which was due to a variety of factors including: (1) ARPU for
    single player games increased from RMB2.37 during the fourth quarter of
    2012 to RMB3.38 during the first quarter of 2013 due to the improvement in
    game quality, (2) the number of subscriptions for game bundles increased
    by 36.3% sequentially to 1.5 million as a result of China Mobile's
    decision to relax many of its advertising policies, while ARPU increased
    from RMB4.01 to RMB4.73, and (3) the number of paying users for social
    games increased by 538.6% compared with the fourth quarter of 2012 to
    308,039 paying users. The significant increase in the number of paying
    users was primarily due to the introduction of many new social games,
    including three self-developed social games, such as Joyful Zha Jin Hua,
    as well as other social game titles developed by third-parties. The
    decline in revenue when compared to the same period last year was a result
    of the Company's transition to focus its development efforts on a new
    generation of Android and iOS-based social games. The Company expects to
    launch more than 15 social games during 2013.
  *Handset design revenues were RMB7.5 million (US$1.2 million), compared
    with RMB2.8 million during the corresponding period in 2012 and RMB8.2
    million during the prior quarter. The sequential decline was primary due
    to the typical slowdown in production experienced during the Chinese New
    Year holiday in the first quarter. The year-over-year increase in revenue
    was primarily due to increased revenue from smartphone handset design.

Cost of Revenues

Cost of revenues was RMB22.0 million (US$3.5 million) during the first quarter
of 2013, a decrease of 9.5% from RMB24.3 million in the first quarter of 2012
and an increase of 5.3% from RMB20.9 million in the fourth quarter of 2012.
The sequential increase was primary due to an increase in the amount paid to
agents who pre-install the Company's game platform onto Android based
smartphones and was partially offset by a decrease in handset sales volume
which resulted in lower component costs. The decline from the same period last
year was primarily due to a decrease in the amount paid to agents who
pre-install the Company's games and game platform. The decline was partially
offset by an increase in handset sales volume, which resulted in higher
component costs.

  *Cost of revenue for mobile phone games was RMB14.7 million (US$2.4
    million), compared with RMB21.6 million during the first quarter in 2012
    and RMB11.8 million during the prior quarter. The sequential increase was
    primarily due to the increase in the amount paid to agents who pre-install
    the Company's game platform onto Android based smartphones. In addition,
    the Company increased spending to promote its game bundles. The
    year-over-year decline was primarily due to a decrease in the amount paid
    to agents who pre-install the Company's feature phone games.
  *Cost of revenue for handset design was RMB7.2 million (US$1.2 million),
    compared with RMB2.8 million during the first quarter of 2012 and RMB9.0
    million during the prior quarter. The sequential decrease was primary due
    to lower component costs as production activities decreased during the
    Chinese New Year holiday. The year-over-year increase was largely due to
    higher component costs as sales orders in smartphone PCBA increased.

The Company's overall gross margin was 40% during the first quarter of 2013,
compared with 55.2% in the first quarter of 2012 and 27.8% in the fourth
quarter of 2012.

  *Gross margin for mobile phone games was 49.3% during the first quarter of
    2013, compared with 58.1% during the first quarter of 2012 and 42.9% in
    the fourth quarter of 2012. The sequential increase was primarily due to
    an increase in revenues compared with fixed costs, which mainly consist of
    the amortization of intangible assets. The year-over-year decline was
    primarily due to higher amounts paid to agents who pre-install the
    Company's game platform, for which part of the cost is determined by the
    number of activated accounts on the Company's game platform.
  *Gross margin for handset design was 4.3% during the first quarter of 2013,
    compared with 0.8% during the first quarter of 2012 and (10.4)% in the
    fourth quarter of 2012. The sequential and year-over-year increases were
    due toa decrease in fixed costs because of reduction in amortization
    expenses.

Operating Expenses

Operating expenses were RMB32.8 million (US$5.3 million) during the first
quarter of 2013, compared with RMB16.7 million in the first quarter of 2012
and RMB71.7 million in the fourth quarter of 2012. The quarterly decrease is
largely because the Company incurred an impairment loss for goodwill and
intangible assets of RMB44.4 million in the fourth quarter of 2012.

Research and development expenses as a percentage of net revenue were 24.0% in
the first quarter of 2013, compared with 15.8% in the first quarter of 2012
and 34.0% in the fourth quarter of 2012. The year-over-year increase was
primary due to the Company's investment in developing smartphone social games.

Share-based compensation expenses totaled RMB5.8 million (US$0.9 million)
during the first quarter of 2013, compared with RMB1.9 million in the first
quarter of 2012 and expenses of RMB4.0 million in the fourth quarter of 2012.
The sequential quarterly and year-over-year increases were primary due to the
options and warrants granted to the Company's senior management and
consultants during the first quarter of 2013.

Impairment Loss

During the first quarter of 2013, the Company recorded a non-cash impairment
of intangible assets of RMB2.6 million (US$0.4 million) for software used in
feature phone game development that will not be used in future operations.

Operating Income (Loss)

As a result of the above factors, the Company's operating loss was RMB18.2
million (US$2.9 million) during the first quarter of 2013, compared with
operating income of RMB13.3 million in the first quarter of 2012 and operating
loss of RMB63.7 million in the fourth quarter of 2012.

Operating loss excluding (1) share-based compensation and (2) goodwill and
intangible assets impairment loss (non-GAAP) was RMB9.7 million (US$1.6
million) during the first quarter of 2013, compared with operating income
(non-GAAP) of RMB15.2 million in the first quarter of 2012 and operating loss
(non-GAAP) of RMB15.3 million in the fourth quarter of 2012.

Contingently Returnable Consideration Assets

Changes in the fair value of contingently returnable consideration assets
resulted in a loss of RMB2.8 million (US$0.5 million) during the first quarter
of 2013, compared with a gain of RMB7.1 million in the first quarter of 2012
and a gain of RMB2.8 million in the fourth 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 related to the
acquisitions of the 3GUU Group.

Income Tax

The Company had an income tax expense of RMB1.1 million (US$0.2 million)
during the first quarter of 2013, compared with an income tax expense of
RMB2.1 million in the first quarter of 2012 and an income tax benefit of
RMB1.7 million in fourth quarter of 2012.

Net Income (Loss)

Net loss during the first quarter of 2013 was RMB21.6 million (US$3.5
million), compared with net income of RMB18.8 million in the first quarter of
2012 and net loss of RMB58.3 million in the fourth quarter of 2012.

Net loss excluding (1) share-based compensation and (2) goodwill and
intangible assets impairment loss (non-GAAP) was RMB13.2 million (US$2.1
million) during the first quarter of 2013, compared with net income (non-GAAP)
of RMB20.7 million in the first quarter of 2012 and net loss (non-GAAP) of
RMB10.0 million in the fourth quarter of 2012.

Basic and Diluted Earnings (Loss) per ADS

Basic and diluted loss per ADS were RMB1.01 (US$0.16) during the first quarter
of 2013, compared with earnings per ADS of RMB0.87 in the first quarter of
2012 and a loss per ADS of RMB2.71 in the fourth quarter of 2012. Basic and
diluted loss per ADS excluding (1) share-based compensation and (2) goodwill
and intangible assets impairment loss (non-GAAP) were RMB0.62 (US$0.10) during
the first quarter of 2013, compared with earnings per ADS of RMB0.96 in the
first quarter of 2012 and loss per ADS of RMB0.48 in the fourth quarter of
2012.

Cash and Cash Equivalents

As of March 31, 2013, the Company had cash and cash equivalents of RMB125.4
million (US$20.2 million) and short-term investments were RMB45.1 million
(US$7.3 million). Operating cash flow for the first quarter of 2013 was a net
inflow of RMB3.5 million (US$0.6 million).

Common Shares

CMGE had 331.1 million common shares outstanding as of March 31, 2013, or the
equivalents of 23.6 million ADSs outstanding.

Conference Call

CMGE's management will host a conference call to discuss the results at 8:00
a.m. Eastern Daylight Time on May 31, 2013 (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          400-120-0654
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 May 31, 2013 through
11:59 p.m. Eastern Daylight Time on June 7, 2013. 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          72389583

A live webcast of the conference call will be available on the investor
relations section of CMGE's website at: http://ir.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, 2011 and 2012,
according to 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 smartphones and feature phones, and has
strong development capabilities, evidenced by the fact that it develops
single-player games and 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 theU.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
inChina; PRC governmental policies and regulations relating to the mobile
game industry inChina; competition in the mobile game industry; and general
economic and business conditions inChina. Further information regarding these
and other risks is included in the Company's registration statement on Form
F-1 and other documents filed with theSecurities 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 and goodwill
and intangible assets impairment loss. 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.

                                      

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for
number of shares)
                                                                
                                         As of
                                          December31, As of March31,
                                         2012*        2013        2013
                                         RMB          RMB         US$
                                                     (Unaudited) (Unaudited)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                 128,736     125,394    20,190
Short-term investments                    45,000      45,077     7,258
Accounts receivable                       41,726      41,147     6,625
Inventories                               2,359       3,859      621
Prepayment and other current assets       37,386      37,755     6,079
Deferred tax assets                       262         270        43
Total current assets                      255,469     253,502    40,816
Non-current assets:                                              
Property and equipment, net               4,814       4,987      803
Goodwill                                  564,841     564,841    90,945
Intangible assets, net                    42,998      38,822     6,251
Prepayments                               28,600      27,200     4,379
Deferred tax assets                       129         92         15
Other non-current assets                  343         926        149
Total non-current assets                  641,725     636,868    102,542
TOTAL ASSETS                              897,194     890,370    143,358
LIABILITIES, MEZZANINE EQUITY AND                                
SHAREHOLDERS' EQUITY
Current liabilities:                                             
Accounts payable                          3,689       9,857      1,587
Accrued expenses and other liabilities    19,597      18,944     3,050
Deferred revenue                          1,697       3,562      574
Income tax payable                        76          648        104
Amounts due to related parties            991         991        160
Total current liabilities                 26,050      34,002     5,475
Non-current liabilities:                                         
Unrecognized tax benefits                 21,944      23,092     3,718
Deferred tax liabilities                  7,844       7,204      1,160
Other non-current liabilities             2,150       2,720      438
Total non-current liabilities             31,938      33,016     5,316
Total liabilities                         57,988      67,018     10,791
Mezzanine equity                                                 
Contingently redeemable ordinary shares
(US$0.001 par value, 26,485,961 shares
authorized; 26,485,961 and 26,485,961
shares issued and outstanding as of
December31, 2012 and March31, 2013,     76,858      77,211     12,432
respectively. Aggregate liquidation
preference and redemption amount were
RMB75,899 and RMB 77,211 as of March31,
2013, respectively)
Shareholders' equity                                             
Class A ordinary shares (US$0.001 par
value, 750,000,000 shares authorized;
113,577,208 and 113,577,208 shares issued 727         727        117
and outstanding as of December31, 2012
and March31, 2013, respectively)
Class B ordinary shares (US$0.001 par
value, 250,000,000 shares authorized;
189,617,092 and 189,617,092 shares issued 1,213       1,213      195
and outstanding as of December31, 2012
and March31, 2013, respectively)
Additional paid-in capital                726,200     732,011    117,861
Retained earnings                         34,563      12,684     2,042
Accumulated other comprehensive loss      (420)       (532)      (86)
Total China Mobile Games and              762,283     746,103    120,129
Entertainment Group Limited's equity
Noncontrolling interests                  65          38         6
Total shareholders' equity                762,348     746,141    120,135
TOTAL LIABILITIES, MEZZANINE EQUITY AND   897,194     890,370    143,358
SHAREHOLDERS' EQUITY
                                                                
* Amounts for the year ended December31, 2012 were derived from December31,
2012 audited consolidated financial statements.



CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
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 Three Months Ended
                          March31,    December31, March31,    March31,
                          2012         2012         2013         2013
                          RMB          RMB          RMB          US$
                          (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Net Revenues                                                   
Games                      51,532      20,722      29,019      4,672
Handset design             2,801       8,194       7,528       1,212
Total net revenues         54,333      28,916      36,547      5,884
Cost of revenues                                               
Games                      (21,551)    (11,830)    (14,746)    (2,374)
Handset design             (2,780)     (9,049)     (7,205)     (1,160)
Total cost of revenues     (24,331)    (20,879)    (21,951)    (3,534)
Gross profit               30,002      8,037       14,596      2,350
Operating expenses:                                            
Selling expenses           (2,160)     (4,792)     (7,563)     (1,218)
General and administrative (5,907)     (13,385)    (13,818)    (2,225)
expenses
Research and development   (8,597)     (9,840)     (8,775)     (1,413)
expenses
Impairment of goodwill     —          (33,517)    —          —
Impairment of intangible   —          (10,910)    (2,613)     (421)
assets
Listing expenses           —          746         —          —
Operating income (loss)    13,338      (63,661)    (18,173)    (2,927)
Interest income            292         674         405         65
Other income               113         113         113         18
Change in fair value of
contingently returnable    7,131       2,806       (2,804)     (450)
consideration assets
Income (loss) before
income taxes and           20,874      (60,068)    (20,459)    (3,294)
noncontrolling interests
Income tax (expense)       (2,053)     1,738       (1,133)     (182)
benefit
Net income (loss)          18,821      (58,330)    (21,592)    (3,476)
Accretion of contingently  —          (560)       (353)       (57)
redeemable ordinary shares
Net income (loss)
attributable to            18,821      (58,890)    (21,945)    (3,533)
shareholders
Net income (loss)
attributable to            —          (135)       (67)        (11)
noncontrolling interests
Net income (loss)
attributable to China
Mobile Games and           18,821      (58,755)    (21,878)    (3,522)
Entertainment Group
Limited's ordinary
shareholders
Other comprehensive loss:                                      
Foreign currency           (7)         (36)        (112)       (18)
translation adjustment
Other comprehensive loss   (7)         (36)        (112)       (18)
Comprehensive income       18,814      (58,926)    (22,057)    (3,551)
(loss)
Comprehensive loss
attributable to            —          (135)       (67)        (11)
noncontrolling interests
Comprehensive income
(loss) attributable to
China Mobile Games and     18,814      (58,791)    (21,990)    (3,540)
Entertainment Group
Limited's ordinary
shareholders
Earnings (loss) per share
for ClassA and Class B                                        
ordinary shares:
Basic                      0.06        (0.19)      (0.07)      (0.01)
Diluted                    0.06        (0.19)      (0.07)      (0.01)
Weighted average number of
ClassA and Class B                                            
ordinary shares
outstanding in computing:
Basic                      302,729,550 303,194,300 303,194,300 303,194,300
Diluted                    302,729,550 303,194,300 303,194,300 303,194,300



CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))
                                                               
                             For the Three Months Ended
                             March31,   December31, March31,   March31,
                              2012        2012         2013        2013
                             RMB         RMB          RMB         US$
                             (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
Net cash provided by          12,393     25,572      3,473      559
operating activities
Net cash used in investing    (2,698)    (39,012)    (6,743)    (1,085)
activities
Net cash (used in) provided   (63,000)   (14,115)    40         6
by financing activities
Exchange rate effect on cash  (7)        (36)        (112)      (18)
and cash equivalents
Net decrease in cash and cash (53,312)   (27,591)    (3,342)    (538)
equivalents
Cash and cash equivalents,    187,237    156,327     128,736    20,728
beginning of the period
Cash and cash equivalents,    133,925    128,736     125,394    20,190
end of the period



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP MEASURES
(Amounts in thousands of Renminbi ("RMB") except per ADS data)
                                                                                                      
                  Forthethreemonthsended      Forthethreemonthsended         Forthethreemonthsended
                   March31,2012                  December31,2012                  March31,2013
                  GAAP    Adjustment(a) Non-GAAP GAAP      Adjustment(a) Non-GAAP  GAAP      Adjustment(a) Non-GAAP
                  RMB     RMB            RMB      RMB       RMB            RMB       RMB       RMB            RMB
Operatingexpenses 16,664 (1,892)       14,772   71,698   (48,351)       23,347   32,769   (8,441)       24,328
Income (loss) from 13,338 1,892        15,230   (63,661) 48,351        (15,310) (18,173) 8,441         (9,732)
operations
Operating margin   24.5%                28.0%   -220.2%                -52.9%   -49.7%                 -26.6%
Net income (loss)  18,821 1,892        20,713   (58,330) 48,351        (9,979)  (21,592) 8,441         (13,151)
Net margin         34.6%                38.1%   -201.7 %               -34.5%   -59.1%                 -36.0%
Netincome
attributable to    18,821 1,892        20,713   (58,755) 48,351        (10,404) (21,878) 8,441         (13,437)
CMGE
Netmargin
attributable to    34.6%                38.1%   -203.2%                -36.0%   -59.9%                 -36.8%
CMGE
Diluted earnings   0.87                 0.96    -2.71                  -0.48    -1.01                  -0.62
per ADS(b)
                                                                                                      
Non-GAAP                                                                                               
adjustments

(a) Adjustment to exclude the share-based compensation expense and goodwill and intangible assets impairment loss 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