CMGE Reports Third Quarter 2013 Unaudited Financial Results

CMGE Reports Third Quarter 2013 Unaudited Financial Results

HONG KONG, Nov. 15, 2013 (GLOBE NEWSWIRE) -- China Mobile Games and
Entertainment Group Limited (Nasdaq:CMGE) ("CMGE" or the "Company"), a leading
mobile game company in China, today reported its unaudited financial results
for the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights

  *Revenues were RMB98.1 million (US$16.0 million^1), 125.0% and 36.3%
    increases compared with RMB43.6 million in the third quarter of 2012, and
    RMB72.0 million in the second quarter of 2013, respectively. The
    sequential quarterly growth in revenue is largely due to the increased
    revenue in social games and the expansion of the Company's third-party
    game publishing business.
    
  *Net income was RMB25.6 million (US$4.2 million) for the third quarter of
    2013, compared with net income of RMB1.6 million in the third quarter of
    2012 and net loss of RMB12.6 million in the second quarter of 2013.
    
  *Non-GAAP^2 net income, which excludes share-based compensation expenses,
    was RMB24.9 million (US$4.1 million) in the third quarter of 2013,
    compared with non-GAAP net income of RMB6.7 million in the third quarter
    of 2012 and non-GAAP net loss of RMB3.9 million in the second quarter of
    2013.
    
  *Basic and diluted earnings per American Depositary Share^3 ("ADS") in the
    third quarter of 2013 were RMB0.98(US$0.16), compared with basic and
    diluted earnings per ADS of RMB0.04 in the third quarter of 2012 and basic
    and diluted loss per ADS of RMB0.66 in the second quarter of 2013.

Third Quarter Select Operating Data

  *Total paying user accounts for social games were 2.8 million in the third
    quarter of 2013, compared with 67,995 in the third quarter of 2012 and 1.4
    million in the second quarter of 2013. Average revenue per paying user
    account ("ARPU") for social games was RMB24.9 in the third quarter of
    2013, compared with RMB199.9 in the third quarter of 2012 and RMB20.8 in
    the second quarter of 2013.
    
  *Total subscriptions^4 for single-player game bundles were 1.6million in
    the third quarter of 2013, compared with 1.2million in the third quarter
    of 2012 and 2.0million in the second quarter of 2013. Average revenue per
    subscription for single-player game bundles was RMB5.5, compared with
    RMB4.1 in the third quarter of 2012 and RMB5.2 in the second quarter of
    2013.
    
  *Total paying user accounts^5for single-player games (excluding
    single-player game bundles) were 2.6million in the third quarter of 2013,
    compared with 9.8million in the third quarter of 2012 and 3.9million in
    the second quarter of 2013. ARPU for single-player games, excluding
    single-player game bundles, was RMB4.3 in the third quarter of 2013,
    compared with RMB2.9 in the third quarter of 2012 and RMB3.3 in the second
    quarter of 2013.

"We started 2013 with three key priorities: First, we wanted to establish a
leading position in third-party mobile game publishing. Second, we wanted to
significantly grow our portfolio of popular self- developed social games and
third, we wanted to bring the quarterly result to profitability within this
year. I am pleased to report that by the end of the first nine months of 2013,
we have met all of our objectives," said Mr. Ken Jian Xiao, Chief Executive
Officer of CMGE.

"We reported record quarterly revenue and strong growth on both a sequential
and year-over-year basis, demonstrating our success in transitioning to
developing and publishing smartphone games. Further evidence of this
successful transition is CMGE's number one position ranking in mobile game
publishing in China (based on revenue) in the third quarter of 2013 according
to Analysys International, a leading independent research firm on the
technology, media and telecom industries in China. This is a significant
achievement for our Company given that we started the publishing business
approximately 12 months ago.

"Currently, four games in our portfolio are leading revenue generators. Our
self-developed social game Joyful Zha Jin Hua, the first social poker game in
our Joyful poker game series, reached over RMB10.0 million in revenue during
every month of the third quarter, a significant milestone given that the game
launched only nine months ago in February.The other three games in our
portfolio are third-party games for which we have exclusive licensing
agreements, including Monster Island, Wu Xia Q Zhuan and a Ninja-themed card
game.

"Our third-party game publishing business has continued to expand
significantly and currently represents 32% of games revenue. Since the launch
of this business in the fourth quarter of 2012, we have published more than 50
third-party social games, including 23 games for which we have exclusive
licensing agreements. Many of the games that we publish are currently ranked
in the top 10 in terms of total downloads on major app stores and gaming
platforms, such as Qihoo 360, 91.com and Android Market.

"In addition, we launched our self-developed MMORPG game War Valley in
mid-July and it was recognized as the 2013 Golden Plume Award in November,
building on the previous awards received this year for War Valley including
the Online Game Award for Excellence by the Global Mobile Game Confederation,
Top 10 Mobile Game award by the Global Mobile Internet Conference and Best
Mobile Game of 2013 by International Golden Finger Tip. We believe these
awards demonstrate our expertise in self-developing social games. Many
overseas publishers are interested in War Valley, and we are on track to adapt
the game for a few other Asian countries during the fourth quarter of 2013.

"CMGE's leading position in mobile game publishing is further demonstrated by
the strong capabilities established in publishing, operating, sales and
technology to support and help further expand our third-party publishing
business. For publishing, CMGE runs one of China's strongest and most
extensive mobile distribution channels, and as such, we expect to achieve our
yearly target to pre-install our Game Center application or games on more than
60 million smartphones by the end of 2013. In terms of operating games, CMGE
has exceptional teams that provide data analysis, product testing as well as
around-the-clock customer support service, which enable us to continuously
refine the games. To enhance our sales and marketing efforts, we have
recruited top talent to promote our products on consumer- and
business-oriented platforms innovatively and efficiently. In terms of
technology, we have established strong SDK support and operating capabilities,
and we are able to quickly connect our games onto many app stores or social
networking platforms, as well as many major third-party payment gateways.

"We believe we have just begun to enjoy some of the success of the transition
that we initiated in 2012, and are confident that the strategy we have
implemented and the investments we have made will deliver the long-term
sustainable growth we are seeking," concluded Mr. Xiao. 

Mr. Ken Chang, Chief Financial Officer, added, "I am pleased to report that
CMGE achieved record quarterly revenue and strong growth in both financial and
operational performance in the third quarter. Our game revenue grew 114.1%
year-over-year, with over 90% of revenue generated from smartphone games as
compared to approximately 26% in the same period of last year. We believe this
demonstrates the success we are making in our transition and investment
efforts. Our social games currently represent approximately 78% of total
revenue, and paying users increased by over 96.5% sequentially. We expect our
pipeline and expanded portfolio of self-developed and third-party social games
to accelerate in the near-term, and therefore, remain positive about the
outlook for CMGE heading into 2014."

Third Quarter 2013 Results

Revenues

Total net revenues were RMB98.1 million (US$16.0 million) for the third
quarter of 2013, compared with RMB43.6 million in the third quarter of 2012
and RMB72.0 million in the second quarter of 2013.

  *Mobile phone game revenues were RMB89.2 million (US$14.6 million) for the
    third quarter of 2013, compared with RMB41.6 million in the third quarter
    of 2012, an increase of 114.4%, and RMB54.3million in the second quarter
    of 2013, an increase of 64.3%. The sequential improvement is largely due
    to the strong growth in social games. The number of paying users for
    social games increased by 96.5% over the second quarter of 2013, primarily
    driven by the continued success of Joyful Zha Jin Hua, the increase in the
    number of paying users for Monster Island, Wu Xia Q Zhuan and the debut of
    a Ninja-themed card game in September.
    
  *Handset design revenues were RMB8.9 million (US$1.5 million) in the third
    quarter of 2013, compared with RMB2.0 million in the third quarter of 2012
    and RMB17.6 million in the second quarter of 2013. The
    quarter-over-quarter decrease was primarily due to a change in product
    mix, while the year-over-year increase resulted from greater revenue
    generated by smartphone handset designs.

Cost of Revenues

Cost of revenues was RMB40.9 million (US$6.7 million) for the third quarter of
2013, compared with RMB22.5 million in the third quarter of 2012, or an
increase of 81.8%, and RMB39.1 million in the second quarter of 2013, or an
increase of 4.6%. The sequential and year-over-year increases were in line
with the growth in sales, as gross profit margin improved to 58.3% for the
third quarter of 2013, compared with 48.4% in the third quarter of 2012 and
45.7% in the second quarter of 2013.

  *Cost of revenues for games was RMB33.5 million (US$5.5 million) for the
    third quarter, compared with RMB19.9 million in the third quarter in 2012
    and RMB22.3 million in the second quarter of 2013. Cost of revenues for
    games was 37.6% of games revenue, compared with 47.8% in the third quarter
    of 2012 and 41.0% in the second quarter of 2013. The year-over-year and
    sequential decreases in these percentages resulted from growth in the
    games publishing business, as the amount paid to game developers increased
    along with the ramp up of the business.
    
  *Cost of revenues for handset design was RMB7.4 million (US$1.2 million) in
    the third quarter of 2013, compared with RMB2.6 million in the third
    quarter of 2012 and RMB16.8 million in the second quarter of 2013. The
    sequential decrease was in line with the decrease in sales, while the
    increase over the same period last year was largely due to higher
    component costs as sales orders for smartphone designs increased compared
    to the same period last year.

The Company's overall gross margin was 58.3% for the third quarter of 2013,
compared with 48.4% in the third quarter of 2012 and 45.7% in the second
quarter of 2013.

  *Gross margin for games was 62.4% in the third quarter of 2013, compared
    with 52.2% in the third quarter of 2012 and 58.9% in the second quarter of
    2013. The sequential and year-over-year increases resulted from the
    increase in the gross margin for games publishing business.
    
  *Gross margin for handset design was 16.4% in the third quarter of 2013,
    compared with (30.0)% in the third quarter of 2012 and 5.1% in the second
    quarter of 2013. The sequential increase was due to a change in product
    mix and the year-over-year increase was due to the increase in sales
    revenues relative to fixed costs.

Operating Expenses

Operating expenses were RMB59.0 million (US$9.6 million) for the third quarter
of 2013, compared with RMB40.6 million in the third quarter of 2012 and
RMB46.1 million in the second quarter of 2013.

Selling expenses were RMB34.2 million (US$5.6 million) in the third quarter of
2013, compared with RMB4.0 million in the third quarter of 2012 and RMB17.3
million in the second quarter of 2013.Selling expenses increased
year-over-year due to the additional selling costs associated with the
distribution of games for the games publishing business.

Research and development ("R&D") expenses were RMB 14.2 million (US$2.3
million) for the third quarter of 2013, compared with RMB 9.3 million in the
third quarter of 2012 and RMB 11.4 million in the second quarter of 2013. The
sequential and year-over-year increases were due to the larger scale of CMGE's
operations.

R&D expenses as a percentage of net revenue were 14.5% for the third quarter
of 2013, compared with 21.3% in the third quarter of 2012 and 15.8% in the
second quarter of 2013. The sequential and year-over-year decreases were due
to higher revenues and essentially flat R&D expenses.

Share-based compensation expenses totaled RMB(0.7 million) (US$(0.1million))
for the third quarter of 2013, compared with RMB5.1 million in the third
quarter of 2012 and RMB 8.6 million in the second quarter of 2013. The
sequential and year-over-year decreases were primarily due to a reversal of
share-based compensation for the forfeiture of warrants granted to a
consultant.

Operating Income (Loss)

As a result of the above factors, the Company recorded operating loss of
RMB1.9 million (US$0.3 million) for the third quarter of 2013, compared with
operating loss of RMB19.5 million in the third quarter of 2012 and operating
loss of RMB13.2 million in the second quarter of 2013.

Contingently Returnable Consideration Assets

Changes in the fair value of contingently returnable consideration assets
resulted in a gain of RMB11.2 million (US$1.8 million) during the third
quarter of 2013, compared with a gain of RMB20.6 million in the third quarter
of 2012 and a loss of RMB0.8 million in the second quarter of 2013. The gain
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
acquisition of the 3GUU Group.

Other income

Other income amounted to RMB14.4 million (US$2.4 million) during the third
quarter of 2013, compared with RMB 0.1 million in the third quarter of 2012
and RMB1.1 million for the second quarter of 2013.The increase
quarter-over-quarter and year-over-year was due to the reversal of contingent
liability for the accrued tax liability of a subsidiary, Shenzhen Douwan
Network Technology Co., Ltd.

Income Tax

The Company had an income tax benefit of RMB0.7 million (US$0.1 million)
during the third quarter of 2013, compared with an income tax benefit of
RMB0.2 million in the third quarter of 2012 and an income tax expense of
RMB0.5 million in second quarter of 2013. The sequential and year-over-year
increases resulted from an adjustment to the effective tax rate, as CMGE
experienced a tax loss for the nine months ended September 30, 2013.

Net Income/Loss

Net income was RMB25.6 million (US$4.2 million) for the third quarter of 2013,
compared with net income of RMB1.6million in the third quarter of 2012 and
net loss of RMB12.6 million in the second quarter of 2013.

Net income excluding share-based compensation (non-GAAP) was RMB24.9 million
(US$4.0 million) in the third quarter of 2013, compared with net income
(non-GAAP) of RMB6.7 million in the third quarter of 2012 and net loss
(non-GAAP) of RMB3.9 million in the second quarter of 2013.

Basic and Diluted Earnings/Loss per ADS

Basic and diluted earnings per ADS were RMB0.98 (US$0.16) during the third
quarter of 2013, compared with basic and diluted earnings per ADS of RMB0.04
in the third quarter of 2012 and basic and diluted loss per ADS of RMB0.66 in
the second quarter of 2013. Basic and diluted earnings per ADS excluding
share-based compensation (non-GAAP) were RMB0.98 (US$0.16) during the third
quarter of 2013, compared with basic and diluted earnings per ADS (non-GAAP)
of RMB0.25 in the third quarter of 2012 and basic and diluted loss per ADS
(non-GAAP) of RMB0.26 in the second quarter of 2013.

Cash and Cash Equivalents

As of September30, 2013, the Company had cash and cash equivalents of
RMB226.3 million (US$37.0 million) and short-term investments were RMB51.8
million (US$8.5 million). Net operating cash outflow for the third quarter of
2013 was RMB4.8 million (US$0.8 million).

Common Shares

CMGE had 375.2 million common shares outstanding, which is equivalent to 26.8
million ADSs, as of September 30, 2013.

Conference Call

CMGE's management will host a conference call to discuss the results at 8:00
a.m. Eastern Time on November 15, 2013 (9:00 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 beginning at 3:00 a.m.
Eastern Time on November 16, 2013 through 11:59 p.m. Eastern Time on November
23, 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          98089843

A live webcast of the conference call will be available on the events &
presentations page of the investor relations section of CMGE's website at:
http://ir.cmge.com/events.cfm.

About CMGE

CMGE is a leading mobile game company inChina. Itsfully integrated
capabilities span the development, operation and publishing of proprietary and
licensed mobile games. The Company's portfolio consists of 570 games,
including 510 single player and 60 social games. Its social games are mainly
developed for Android and iOS-based smartphones. CMGE's extensive distribution
network includes its proprietary Game Center distribution platform, handset
pre-installation, mobile advertisements, telecom operators and major
application stores. The Company currently has 610 employees, including 450 R&D
staff located in offices and R&D centers in Guangzhou, Shenzhen, Beijing,
Chengdu, Shanghai, Hangzhou and Hong Kong. The Company's stock is traded on
NASDAQ under the symbol CMGE. For more corporate and product information,
please visit CMGE's website athttp://www.cmge.com.

Safe Harbor Statement

This announcement 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 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 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.

^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 RMB6.1200 to US$1.00, the effective noon buying rate as of
September 30, 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.

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

^4 Total subscriptions represent 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.

^5Total 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.

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares)
                                                             
                                                             
                                       As of        As of September 30,
                                        December31,
                                       2012*        2013       2013
                                       RMB          RMB        US$
ASSETS                                                        
Current assets:                                               
Cash and cash equivalents              128,736      226,275    36,973
Short-term investments                 45,000       51,835     8,470
Accounts receivable                    41,726       63,976     10,454
Inventories                            2,359        3,753      613
Prepayments and other current assets   37,386       79,400     12,974
Deferred tax assets                    262          1,081      177
Total current assets                    255,469      426,320    69,661
Non-current assets:                                           
Property and equipment, net            4,814        10,257     1,676
Goodwill                               564,841      564,842    92,294
Intangible assets, net                 42,998       53,962     8,817
Prepayments                            28,600       24,400     3,987
Deferred tax assets                    129          888        145
Other non-current assets               343          482        178
Total non-current assets                641,725      654,830    106,998
TOTAL ASSETS                            897,194      1,081,150  176,659
LIABILITIES, MEZZANINE EQUITY AND                             
SHAREHOLDERS' EQUITY
Current liabilities:                                          
Accounts payable                       3,689        26,822     4,383
Accrued expenses and other liabilities 19,597       26,975     4,408
Deferred revenue                       1,697        8,469      1,384
Income tax payable                     76           2,622      428
Amounts due to related parties         991          1,192      195
Total current liabilities               26,050       66,080     10,798
Non-current liabilities:                                      
Unrecognized tax benefits              21,944       9,379      1,533
Deferred tax liabilities               7,844        5,925      968
Other non-current liabilities          2,150        2,720      444
Total non-current liabilities           31,938       18,024     2,945
Total liabilities                       57,988       84,104     13,743
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 September30,     76,858       77,406     12,648
2013, respectively. Aggregate
liquidation preference and redemption
amount were RMB75,899 and RMB 77,406 as
of September 30, 2013, respectively)
Shareholders' equity:                                         
ClassA ordinary shares (US$0.001 par
value, 750,000,000 shares authorized;
113,577,208 and 194,353,283 shares      727          1,136      186
issued and outstanding as of
December31, 2012 and September30,
2013, respectively)
Class B ordinary shares (US$0.001 par
value, 250,000,000 shares authorized;
189,617,092 and 180,821,228 shares      1,213        1,157      189
issued and outstanding as of
December31, 2012 and September30,
2013, respectively)
Additional paid-in capital             726,200      888,845    145,236
Retained earnings                      34,563       23,419     3,827
Accumulated other comprehensive (loss)  (420)        1,519      248
income
Total China Mobile Games and            762,283      916,076    149,686
Entertainment Group Limited's equity
Noncontrolling interests                65           3,564      582
Total shareholders' equity              762,348      919,640    150,268
TOTAL LIABILITIES, MEZZANINE EQUITY AND 897,194      1,081,150  176,659
SHAREHOLDERS' EQUITY
                                                             
* Amounts for the year ended December 31, 2012 were derived from      
December 31, 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 ThreeMonthsEnded                           For the NineMonthsEnded
              September30, June30,    September30, September30, September30, September30, September30,
              2012          2013        2013          2013          2012          2013          2013
              RMB           RMB         RMB           USD           RMB           RMB           USD
              (Unaudited)   (Unaudited) (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net revenues                                                                              
Games          41,630        54,319      89,163        14,569        151,463       172,501       28,186
Handset design 1,983         17,649      8,893         1,453         7,214         34,070        5,567
Total net      43,613        71,968      98,056        16,022        158,677       206,571       33,753
revenues
Cost of                                                                                    
revenues
Games          (19,906)      (22,302)    (33,514)      (5,476)       (63,048)      (70,562)      (11,530)
Handset design (2,579)       (16,757)    (7,431)       (1,214)       (7,803)       (31,393)      (5,130)
Total cost of  (22,485)      (39,059)    (40,945)      (6,690)       (70,851)      (101,955)     (16,660)
revenues
Gross profit   21,128        32,909      57,111        9,332         87,826        104,616       17,093
Operating                                                                                  
expenses:
Selling        (3,992)       (17,257)    (34,221)      (5,592)       (11,046)      (59,041)      (9,647)
expenses
General and
administrative (9,273)       (17,430)    (10,533)      (1,721)       (22,248)      (41,781)      (6,827)
expenses
Research and
development    (9,270)       (11,394)    (14,213)      (2,322)       (25,231)      (34,382)      (5,618)
expenses
Listing        (18,053)      —           —             —             (18,053)      —             —
expenses
Impairment of
intangible     —             —           —             —             —             (2,613)       (427)
assets
Operating      (19,460)      (13,172)    (1,856)       (303)         11,248        (33,201)      (5,426)
(loss) income
Interest       235           782         1,220         199           800           2,407         393
income
Other income   113           1,069       14,383        2,350         338           15,565        2,543
Changes in
fair value of
contingently   20,550        (777)       11,163        1,824         24,520        7,582         1,239
returnable
consideration
assets
Income (loss)
before income
taxes and      1,438         (12,098)    24,910        4,070         36,906        (7,647)       (1,251)
noncontrolling
interest
Income tax
(expenses)     176           (482)       729           119           6,951         (886)         (145)
benefits
Net income     1,614         (12,580)    25,639        4,189         43,857        (8,533)       (1,396)
(loss)
Accretion of
contingently
redeemable     (576)         (972)       (929)         (152)         (2,463)       (2,254)       (368)
ordinary
shares


CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
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,
                 2012          2013        2013          2013          2012          2013          2013
                 RMB           RMB         RMB           USD           RMB           RMB           USD
                 (Unaudited)   (Unaudited) (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net income (loss)
attributable to   1,038         (13,552)    24,710        4,037         41,394        (10,787)      (1,764)
shareholders
Net income (loss)
attributable to   —             639         (215)         (35)          —             357           58
noncontrolling
interests
Net income (loss)
attributable to
China Mobile
Games and         1,038         (14,191)    24,925        4,070         41,394        (11,144)      (1,822)
Entertainment
Group Limited's
ordinary
shareholders
Other
comprehensive                                                                                 
income:
Foreign currency
translation       23            623         1,428         233           43            1,939         317
adjustment
Other
comprehensive     23            623         1,428         233           43            1,939         317
income
Comprehensive     1,061         (12,929)    26,138        4,270         41,437        (8,848)       (1,447)
income (loss)
Comprehensive
income (loss)
attributable      —             15          —             —             —             (52)          (8)
tononcontrolling
interests
Comprehensive
income (loss)
attributable to
China Mobile
Games and         1,061         (12,944)    26,138        4,272         41,437        (8,796)       (1,439)
Entertainment
Group Limited's
ordinary
shareholders
                                                                                             
Earnings (loss)
per share for
Class A and Class                                                                             
B ordinary
shares:
Basic             0.0032        (0.05)      0.07          0.01          0.1257        (0.03)        (0.01)
Diluted           0.0030        (0.05)      0.07          0.01          0.1239        (0.03)        (0.01)
                                                                                             
Weighted average
number of Class A
and Class B
ordinary shares                                                                               
ordinary shares
outstanding in
computing:
Basic             302,729,550   303,194,300 324,549,164   324,549,164   302,729,550   310,417,269   310,417,269
Diluted           316,228,294   303,194,300 336,396,460   336,396,460   307,229,131   310,417,269   310,417,269


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                          For the nine months ended
            September30, June30,    September  September30, September30, September30, September30,
                                       30,
            2012          2013        2013        2013          2012          2013          2013
            RMB           RMB         RMB         US$           RMB           RMB           US$
            (Unaudited)   (Unaudited) (Unaudited) (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net cash
(used in)
provided by  (12,405)      (5,799)     (4,840)     (791)         22,243        (7,166)       (1,171)
operating
activities
Net cash
used in      (28,880)      (15,595)    (25,606)    (4,184)       (61,039)      (47,944)      (7,834)
investing
activities
Net cash
(used in)
provided by  (2,038)       —           152,376     24,898        7,843         152,416       24,905
financing
activities
Exchange
rate effect
on cash and  23            (694)       1,039       170           43            233           38
cash
equivalents
Net decrease
in cash and  (43,300)      (22,088)    122,969     20,093        (30,910)      97,539        15,938
cash
equivalents
Cash and
cash
equivalents, 199,627       125,394     103,306     16,880        187,237       128,736       21,035
beginning of
the period
Cash and
cash
equivalents, 156,327       103,306     226,275     36,973        156,327       226,275       36,973
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)
                                                                                                                           
                                                                                                                           
            ForthethreemonthsendedSeptember30,2012 ForthethreemonthsendedJune30,2013 ForthethreemonthsendedSeptember30,2013
                                           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    40,588        (5,054)            35,534       46,081       (8,631)          37,450     58,967       749                59,716
expenses
(Loss)
income from  (19,460)      5,054              (14,406)     (13,172)     8,631            (4,541)    (1,856)      (749)              (2,605)
operations
Operating    -44.62%                         -33.04%      -18.3%                       -6.3%      -1.9%                          -2.7%
margin
Net income   1,614         5,054              6,668        (12,580)     8,631            -3,949     25,639       (749)              24,890
(loss)
Net margin   3.70%                           15.3%        -17.5%                       -5.5%      26.1%                          25.4%
Net income
(loss)       1,038         5,054              6,092        (14,191)     8,631            (5,560)    24,925       (749)              24,176
attributable
to CMGE
Net margin
attributable 2.4%                            14.0%        -19.7%                       -7.7%      25.4%                          24.7%
to CMGE
Diluted
earnings     0.04                            0.25         -0.66                        -0.26      0.98                           0.98
(loss) per
ADS(b)

                                                        
            FortheninemonthsendedSeptember30,2012 FortheninemonthsendedSeptember30,2013
            GAAP        Adjustment (a)      Non-GAAP     GAAP         Adjustment (a)     Non-GAAP
            RMB         RMB                 RMB          RMB          RMB                RMB
Operating    76,578      (10,144)            66,434       137,817      (13,713)           124,104
expenses
Income
(loss) from  11,248      10,144              21,392       (33,201)     13,713             (19,488)
operations
Operating    7.1%                           13.5%        -16.07%                        -9.43%
margin
Net income   43,857      10,144              54,001       (8,533)      13,713             5,180
(loss)
Net margin   27.6%                          34.0%        -4.13%                         2.51%
Net income
(loss)       41,394      10,144              51,538       (11,144)     13,713             2,569
attributable
to CMGE
Net margin
attributable 26.1%                          32.5%        -5.40%                         1.24%
to CMGE
Diluted
earnings per 1.73                           2.16         -0.42                          0.23
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
        
         Tel: +852 2700 6168
         E-mail: ir@cmge.com
        
         In the U.S.:
         The Piacente Group
         Investor Relations
         Kathy Price
         Tel: +1 212-481-2050
         E-mail: cmge@tpg-ir.com