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TABLE OF CONTENTS
CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on September 7, 2012

Registration No. 333-183423

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Amendment No. 2 to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

China Mobile Games and Entertainment Group Limited
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant's name into English)

Cayman Islands
(State or other jurisdiction of
incorporation or organization) 7372
(Primary Standard Industrial
Classification Code Number) Not Applicable
(I.R.S. Employer
Identification Number)

Block A, 15/F Huajian Building
233 Tianfu Road, Tianhe District
Guangzhou, PRC
(86) 20 8561-3455
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Corporation Service Company
1180 Avenue of the Americas, Suite 210
New York, New York 10036-8401
800-927-9800
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David T. Zhang, Esq.
Benjamin Su, Esq.
Kirkland & Ellis International LLP
c/o 26th Floor, Gloucester Tower
The Landmark
15 Queen's Road Central
Hong Kong
(852) 3761-3300

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amounts to be registered(2)	Proposed maximum aggregate offering price(3)	Amount of registration fee(4)
Class A Ordinary Shares, par value US$0.001 per share(1)	22,046,374	US$8,637,836	US$990

(1)

American depositary shares issuable upon deposit of the Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-183539). Each American depositary share represents 14 Class A ordinary shares.

(2)

This relates to shares of Class A ordinary shares, par value US$0.001 per share, of China Mobile Games and Entertainment Group Limited ("CMGE"), which will be distributed to the holders of ordinary shares, par value HK$0.01 per share, of VODone Limited ("VODone"). The amount of CMGE Class A ordinary shares ("CMGE Class A Ordinary Shares") to be registered represents the maximum number of shares of CMGE Class A Ordinary Shares, which are represented by American depositary shares, that will be distributed to the holders of VODone ordinary shares ("VODone Ordinary Shares"). 22,046,374 shares of CMGE Class A Ordinary shares will be distributed to holders of VODone Ordinary Shares outstanding on the record date of this distribution.

(3)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2) of the Securities Act.

(4)

Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not distribute these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities.

Subject to Completion
Preliminary Prospectus Dated            , 2012

1,574,741
American Depositary Shares

China Mobile Games and Entertainment Group Limited

Representing 22,046,374 Class A ordinary shares

        This prospectus is being furnished in connection with VODone Limited's, or VODone's, distribution, or this distribution, of 1,574,741 ADSs, representing 22,046,374 Class A ordinary shares, par value US$0.001 per share, of our company, or approximately 6.7% of our total shares outstanding of our company to VODone's shareholders. The shares will be deposited with the custodian, as agent of The Bank of New York Mellon, as depositary. The Bank of New York Mellon, as depositary, will deliver the ADSs, which initially will be evidenced by ADRs. Each ADS represents an ownership interest in 14 Class A ordinary shares deposited with the custodian under the deposit agreement among us, the depositary and owners and beneficial owners of ADSs.

        At the time of this distribution, VODone will distribute the ADSs on a pro rata basis to holders of VODone's ordinary shares. Holders of VODone's ordinary shares will be entitled to receive one ADS, representing 14 Class A ordinary shares, for every 2,000 VODone ordinary shares held on the record date. All entitlements will be rounded down to a whole number of ADSs, and fractional entitlements will be disregarded.

        Prior to this distribution, the ordinary shares being distributed by VODone have not been traded on a shares exchange or other regulated trading market. The principal market for trading in the ADSs is expected to be the Nasdaq Global Market. In this regard, we will apply for the ADSs to be listed on the Nasdaq Global Market. It is currently anticipated that trading on the Nasdaq Global Market will commence on or about September 25, 2012 under the symbol "CMGE"on the Nasdaq Global Market. No action will be required of VODone shareholders to receive ADSs representing the Class A ordinary shares of our company.

        We are an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, and are therefore subject to reduced reporting requirements.

Investing in the ADSs involves risks. See "Risk Factors" beginning on page 17.

        Neither the United States Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        VODone expects to distribute ADSs representing our Class A Ordinary Shares to VODone's shareholders on or about September 21, 2012.

The date of this prospectus is            , 2012

TABLE OF CONTENTS

PROSPECTUS SUMMARY	2
RISK FACTORS	17
FORWARD-LOOKING STATEMENTS	53
THE DISTRIBUTION	54
USE OF PROCEEDS	57
DETERMINATION OF THE LISTING PRICE	57
DIVIDEND POLICY	57
CAPITALIZATION	58
ENFORCEABILITY OF CIVIL LIABILITIES	59
EXCHANGE RATE INFORMATION	61
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA	62
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	66
OUR CORPORATE HISTORY AND STRUCTURE	126
OUR RELATIONSHIP WITH VODONE	134
OUR INDUSTRY	135
OUR BUSINESS	142
REGULATIONS	162
MANAGEMENT	169
PRINCIPAL SHAREHOLDERS	178
RELATED PARTY TRANSACTIONS	181
DESCRIPTION OF SHARE CAPITAL	183
SHARES ELIGIBLE FOR FUTURE SALE	193
DESCRIPTION OF AMERICAN DEPOSITARY SHARES	194
TAXATION	202
EXPENSES RELATING TO THIS DISTRIBUTION	212
LEGAL MATTERS	213
EXPERTS	213
WHERE YOU CAN FIND MORE INFORMATION	214
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

        You should rely only on the information contained in this prospectus or in any related free writing prospectus that we have filed with the SEC. We have not authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. Unless otherwise indicated, the information in this document may only be accurate as of the date of this document.

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PROSPECTUS SUMMARY

You should read the following summary together with the entire prospectus, including the more detailed information regarding us, the ADSs being distributed in this distribution and our consolidated financial statements and related notes appearing elsewhere in this prospectus. You should consider carefully, among other things, the matters discussed in the section entitled "Risk Factors," in evaluating our company, our Class A ordinary shares and the ADSs. This prospectus contains information from a March 2012 report prepared by Analysys International, an independent market research firm, or the Analysys Report. The Analysys Report was commissioned by us and provides information on the mobile game market in China and our position in such market.

Overview

        We are a leading and profitable mobile game company in China with the largest market share among mobile game developers in terms of revenues in 2010 and 2011, according to the Analysys Report. Our market share reached 18.7% in terms of revenues generated by all mobile game developers in China compared to the 4.9% market share of our nearest competitor in 2011, and was greater than the combined market share of our nearest five competitors, according to the Analysys Report. We have integrated capabilities in the development, operation, sale and distribution of mobile games in China. Our mobile handset design business complements our game development business as we pre-install our mobile games and game platforms in the handsets we design, and enhances our knowledge of user habits and preferences and industry trends. Our total paying user accounts during 2011 and the first three months of 2012 were approximately 29.0 million and 12.1 million, respectively, for feature phone single-player games, 69,000 and 30,000, respectively, for feature phone mobile social games and 741,000 and 134,000, respectively, for smartphone mobile social games. Our total subscriptions for smartphone single-player games during 2011 and the first three months of 2012 were 9.6 million and 2.0 million, respectively. Total paying user accounts are calculated based on the total number of user accounts that paid to download our games or purchase in-game items during the period (adjusted to eliminate double-counting of the same user accounts). Total subscriptions are calculated based on the total number of monthly subscriptions to our game bundles offered through mobile network operators or the number of games downloaded through application stores.

        We have a large and diversified portfolio of games for feature phones and smartphones. We have strong development capabilities, evidenced by the fact that we develop single-player games and mobile social games for both types of handsets. As of March 31, 2012, our portfolio included 450 mobile games, of which 130 of our 136 feature phone games were developed in-house; we licensed 302 of our 314 smartphone games from third parties and we developed all of our smartphone mobile social games in-house. Certain of our games are also among the most popular (as measured by downloads) and highest grossing (as measured by revenues) mobile games in China. For example,

•

Kangri Yingxiong Zhuan, a single-player smartphone game that we launched in 2011, was the most downloaded single-player game among users of China Mobile, the largest mobile network operator in China, during January 2012.

•

Paopao Xiyou, a smartphone mobile social game we developed internally, received the Golden Plume Award as the Best Mobile Platform Online Game in China for 2011. Golden Plume Awards are awarded by 7yx.com.cn annually across a number of categories to recipients chosen by online and mobile game players using their mobile phones to vote for their favorite games. We did not pay any fee for our games to be nominated. Paopao Xiyou was also named as one of the ten most popular national mobile games during the 2011 China Game Industry Annual Conference, an award determined by industry experts and for which we did not pay any fee for our games to be nominated.

•

YY Three Kingdoms, Thumb Monopoly and Creation Song, all smartphone mobile social games that we developed in-house, won the Golden Phoenix Award from the General Administration

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of Press and Publications of China, or GAPP, being among the ten most popular original mobile games in 2008, 2009 and 2010, respectively. Golden Phoenix Awards are issued by GAPP to popular online games in China. The annual award event provides rankings of top ten games across a number of different categories, and voting is held online and any user may nominate his or her favorite games. As such, we do not pay any fee for our games to be nominated. According to the Analysys Report, Creation Song was also the top-grossing mobile social game available through China Mobile in 2010.

•

Xiao'ao Jianghu, one of our internally-developed feature phone mobile social games, was the top-grossing game in the Maopao application store, one of the most popular mobile application stores in China, from January to April of 2011, according to the Analysys Report.

        We have a strong pipeline of games offering a variety of themes, cultural characteristics and features designed to appeal to different users. We plan to launch 33 feature phone single-player games, one feature phone mobile social game, 112 smartphone single-player games and two smartphone mobile social games during the last nine months of 2012.

        We develop mobile games primarily using our proprietary game engines and development platform, which we believe allow us to create mobile games with consistent quality and system stability, and protect us from potential interruptions in our operations due to loss of development personnel. Our integrated capabilities across the mobile game value chain allow us to cross-sell mobile games among feature phone and smartphone users, and complements our strategy to build a user community that will reach users across different platforms and play methods. We are also able to identify and source popular mobile games, and we are able to attract developers of those games to partner with us due to our strong market reputation, scale of our business and distribution capability. For example, we are working with the developers of popular mobile games such as "Angry Birds" and "Fruit Ninja" to develop and distribute these games on feature phones in China.

        We believe our leading market position, diverse game offerings catering to both feature phones and smartphones and strong technical capabilities have enabled us to become a preferred game developer for many handset companies in China, a strategic partner with various chipset manufacturers and mobile platform providers, and a recognized content provider to China Mobile, the largest mobile network operator in China. We pre-installed our mobile games onto over 28.2 million feature phone handsets in 2011, compared to 25.1 million and 14.5 million in 2010 and 2009, respectively, of which 1.5 million were designed by our own handset design house in 2011. For the first three months of 2012, we pre-installed our mobile games onto over 7.4 million feature phone handsets, compared to 7.0 million for the first three months of 2011. We have a strategic cooperative relationship with China Mobile and have been granted access to fee-collection codes from China Mobile, which enables us to collect proceeds without having to use service providers as intermediaries. Because of our strong revenues and performance since the fourth quarter of 2011, China Mobile deemed us a "Grade A Business Partner" and we expect they will allocate to us more marketing resources and services such as giving greater prominence to our games in search results and on page displays and allowing us to publish more new games each month while expediting the approval and launch process for those games. We also formed strategic cooperations with the other two major mobile network operators in China. For example, in 2011 we entered into an agreement with China Telecom which allows us to offer games to mobile phone end users through their network.

        We have comprehensive capabilities in the mobile game value chain, spanning from handset design to mobile game development, operations and distribution as a result of the integration of three different businesses acquired during 2009 and 2010. Since the acquisition of our feature phone mobile game business in October 2009, our handset design business in October 2010, and our smartphone mobile game business in December 2010, the synergies created by the integration of these three businesses have allowed us to increase market share, reduce costs and operate with improved efficiency.

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We believe we are well-positioned to capture opportunities along the mobile game value chain as a result of our integrated capabilities.

        Our revenues were RMB52.8 million in 2009 on a pro forma basis, RMB125.4 million in 2010, RMB268.8 million in 2010 on a pro forma basis, RMB243.5 million (US$38.7 million) in 2011 and RMB54.3 million (US$8.6 million) for the first three months of 2012. Our net income was RMB24.9 million in 2009 on a pro forma basis, RMB40.7 million in 2010, RMB62.6 million in 2010 on a pro forma basis, RMB163.3 million (US$25.9 million) in 2011 and RMB18.8 million (US$3.0 million) for the first three months of 2012. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Unaudited Pro Forma Consolidated Financial Information" for a discussion of our pro forma consolidated financial information for 2009 and 2010.

Our Industry

        China is the world's largest mobile subscriber market, and the number of mobile subscriptions in China increased from 461 million as of the end of 2006 to 986 million as of the end of 2011, representing a CAGR of 16.4%, according to reports released by the Ministry of Industry and Information Technology, or the MIIT, in February 2007 and January 2011, respectively. Given the relatively low mobile penetration rate and low 3G penetration rate in China compared to more developed countries, the number of mobile subscriptions in China is expected to continue to increase rapidly in the next few years.

        The mobile game market in China has grown substantially, from RMB0.63 billion in 2007 to RMB3.96 billion (US$628.8 million) in 2011, and is expected to grow to RMB13.57 billion in 2014, according to the Analysys Report. Young users in relatively affluent areas in China make up most of the current mobile game player population in China. According to the Analysys Report, revenues from single-player mobile games and mobile social games constituted 69.5% and 30.5% of the mobile game market in terms of total revenues in China in 2011, respectively, compared to 80.4% and 19.6%, respectively, in 2010.

        Key players in the mobile game industry in China include:

•

content providers with product development capabilities;

•

mobile game operators and publishers that introduce games to market through pre-installation or other promotional means;

•

network operators that act as both payment channels and distribution channels;

•

mobile service providers that provide payment channels through their contractual relationships with network operators; and

•

payment processing agents that collect payment independent of channels provided by network operators.

Strengths and Strategies

        We believe the following strengths enable us to compete effectively and capture opportunities in the rapidly growing mobile game market in China:

•

leading mobile game developer in the China mobile game market;

•

strong game development and sourcing capabilities with in-depth market knowledge;

•

established distribution network;

•

strong technology platform with deep understanding of handset technical requirements; and

•

experienced management team with proven track record.

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        Our objective is to become a leading mobile game developer globally by solidifying our leading market position and increasing our market share in China, as well as strategically expanding our reach into international markets. We intend to achieve our objective by pursuing the following strategies:

•

continue to expand and enhance our game portfolio;

•

increase paying user accounts, subscriptions and user activity;

•

grow our user base by expanding our distribution network and installed base;

•

continue to invest in and enhance our research and development capabilities;

•

expand international user base to enhance our business and profitability; and

•

pursue strategic acquisitions and partnerships.

Challenges and Risks

        The successful execution of our strategies is subject to certain risks and uncertainties that may materially affect us, including those relating to:

•

technical, operational and strategic challenges that may prevent us from successfully integrating our acquired businesses;

•

our limited operating history;

•

our ability to maintain a cooperative relationship with our agent in dealing with mobile handsets manufacturers;

•

our dependence on network operators;

•

our ability to compete effectively; and

•

our ability to continue to attract new and retain existing users.

        Please see "Risk Factors" for a more detailed discussion of these and other risks and uncertainties we face.

Our Corporate History

        In 2009 and 2010, VODone Limited, a company listed on the Main Board of the Hong Kong Stock Exchange, or VODone, completed a series of transactions to acquire three business units that focus on key sectors of the mobile game market in China. In October 2009, VODone acquired a 70% equity interest in Dragon Joyce Limited, or Dragon Joyce, which focuses on developing, operating and marketing feature phone mobile games through its PRC subsidiaries. In October 2010, OWX Hong Kong Limited, or OWX HK, acquired substantially all of the assets of Bright Way Technology (Hong Kong) Limited, or Bright Way, and OWX (Beijing) Technology Co., Ltd., or OWX Beijing, acquired substantially all of the assets of Shenzhen Tastech Electronics Co., Ltd., or Tastech. OWX Holding Co. Ltd., or OWX Holding, a holding company, that was 70% held by VODone, was incorporated in the British Virgin Islands in December 2009 to hold 100% equity interests in OWX HK and OWX Beijing, focusing on operating a handset design business through its subsidiaries in China. In December 2010, Action King Limited, or Action King, VODone's wholly-owned subsidiary incorporated in the British Virgin Islands, acquired 70% equity interest in 3GUU Mobile Entertainment Industrial Co., Ltd., or 3GUU BVI, which focuses on developing, operating and marketing smartphone mobile games through its subsidiaries and a variable interest entity, or VIE, in China.

        On August 23, 2011, we entered into a series of share swap agreements with VODone and the minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI. Pursuant to these agreements, among other things, we acquired (1) the feature phone mobile game business operated by Beauty Wave Limited, or Beauty Wave, and China Wave Group Limited, or China Wave, from Dragon Joyce; (2) the handset design business operated by OWX HK from OWX Holding; and (3) the smartphone mobile

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game business operated by 3GUU BVI from Action King and Trilogic Investments Limited, or Trilogic. Immediately after this series of transactions, VODone owned 70.2% of our equity interests through its 100% equity interests in each of Dragon Joyce, OWX Holding and Action King; and the former minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI collectively owned 29.8% of our equity interests.

Our Corporate Structure

        We were incorporated under the laws of the Cayman Islands on January 20, 2011 and formed by VODone as its wholly-owned subsidiary. VODone, a company incorporated in Bermuda with limited liability, is a state-affiliated leading new media company in China which operates a nation-wide audio-video broadband transmission platform, delivering a range of cross media telecommunications contents and valued-added services through the Internet. In addition to self-produced programs and contents, such as news clippings, VODone also engages in content management, provision of advertising services and lottery related businesses in China. Our business was formed through three separate acquisitions by VODone in 2009 and 2010 and was operated by VODone through various subsidiaries until our reorganization by way of share swap agreements among our holding company, VODone, and the former minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI on August 23, 2011. See "—Our Recent Consolidation" above for information on the three acquisitions by VODone. Immediately after the reorganization, (1) VODone owned 70.2% of our equity interests through its 100% equity interests in each of Dragon Joyce, OWX Holding and Action King; and (2) the former minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI collectively owned 29.8% of our equity interests.

        Foreign ownership of mobile and Internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates the distribution of content over mobile and online platforms through strict business licensing requirements and other government regulations. We are a Cayman Islands company and our PRC operating subsidiaries are considered to be foreign-invested enterprises in China. Guangzhou Yitongtianxia Software Development Co., Ltd., or Yitongtianxia, one of our PRC operating entities and a foreign-invested enterprise, is restricted from holding the licenses necessary to operate our smartphone mobile game business in China. See "Regulations." Accordingly, 3GUU BVI conducts business activities relating to the development, operation and marketing of smartphone mobile games primarily through Guangzhou Yingzheng Information Technology Co., Ltd., or Yingzheng, our VIE, which, as a non-foreign-invested PRC enterprise, can hold these licenses. The current registered shareholders of Yingzheng are our officers or employees, namely, Yongchao Wang, De Liang and Feng Zheng. 3GUU BVI and Yitongtianxia have entered into contractual arrangements with Yingzheng and its registered shareholders, which enable us to (1) exercise effective control over Yingzheng; (2) receive substantially all of the economic benefits from Yingzheng as if we were its sole shareholder; and (3) have an exclusive option to purchase all of the equity interests in Yingzheng when and to the extent permitted by PRC law. Although we do not have any equity interest in Yingzheng, as a result of these contractual arrangements, we are considered the primary beneficiary of Yingzheng, and we account for it as our consolidated affiliated entity under the generally accepted accounting principles in the United States, or U.S. GAAP. We have consolidated the financial results of these companies in our consolidated financial statements in accordance with U.S. GAAP as we are determined to be the primary beneficiary in these arrangements. We believe consolidation is necessary to fairly present the financial position and results of operations of our company, because of the existence of a parent-subsidiary relationship through contractual arrangements. In addition, Huiyou Digital (Shenzhen) Ltd., or Huiyou, one of our PRC operating entities and a foreign-invested enterprise, is restricted from holding the licenses necessary to operate online feature phone business in China. Huiyou has entered into a cooperation contract with Yingzheng, pursuant to which Huiyou licenses the right to operate games that it has developed to Yingzheng, which operates the games in its own name and pays royalties to Huiyou.

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        The following diagram illustrates our corporate operating structure as of the date of this prospectus:

(1)

On August 24, 2011 and March 16, 2012, we issued 1,220,000 and 639,000 ordinary shares, respectively, to certain of our directors and officers, which shares contain transfer restrictions. In October 2011, we, Dragon Joyce and OWX Holding issued or transferred a total of 553,042, of our ordinary shares to each of Dr. Lijun Zhang, our chairman, and Mr. Hendrick Sin, our vice chairman, as consideration for the repurchase of share options held by Dr. Zhang and Mr. Sin in certain of our subsidiaries as part of our restructuring. See "Management—Compensation of Directors and Executive Officers—Share Options" for more information.

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(2)

Yingzheng is our VIE in China. Its current registered shareholders are Yongchao Wang, De Liang and Feng Zheng, both 3GUU BVI's officers, holding 76.0%, 4.0% and 20.0% of shares in Yingzheng, respectively. To manage our relationship with Yingzheng more effectively, we are in the process of transferring all of the equity interests in Yingzheng to Dr. Zhang and entering into contractual arrangements with Dr. Zhang and Yingzheng. See "Our Corporate History and Structure" for more information.

        The following diagram illustrates our shareholding structure immediately following this distribution.

Our Relationship with VODone

        We are currently a subsidiary of VODone. VODone first reported its mobile game business as one of its business segments in its annual report submitted to the Hong Kong Stock Exchange for the year ended December 31, 2009. On October 21, 2011, in an effort to more clearly delineate our relationship with VODone, we entered into a Non-Compete Agreement with VODone under which VODone agreed not to engage in or allow any of its subsidiaries to engage in the mobile game development and operation business or the handset design business in China without our consent. Also, although VODone may purchase or acquire up to 20% of any class of securities of any enterprise that is in business competition with us, it may not participate in the activities of that enterprise if such securities are listed on a stock exchange. In addition, VODone agreed not to, and to procure its subsidiaries not to, solicit our employees and clients. The Non-Compete Agreement will terminate on the earliest of (i) five years after the completion of this distribution and listing, (ii) when VODone owns less than 30% of our outstanding share capital on a fully diluted basis, or (iii) the date on which our shares or ADSs cease to be listed on a stock trading market anywhere in the world. As a result, we are the sole mobile game company in the VODone group.

        Upon the completion of this distribution, VODone will continue to be our controlling shareholder, with a shareholding of 57.2% of the combined total of our outstanding Class A and Class B ordinary shares, and control of 87.0% of the voting power of the combined total of our outstanding Class A and Class B ordinary shares.

Corporate Information

        Our principal executive office is located at Block A, 15/F Huajian Building, 233 Tianfu Road, Tianhe District, Guangzhou, PRC. Our telephone number is (86) 20 8561-3455. Our registered address in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our agent for service of process in the

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United States is Corporation Service Company, 1180 Avenue of the Americas, Suite 210, New York, New York 10036-8401.

        Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our corporate website address is www.cmge.com. The information contained on our website is not a part of this prospectus.

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THE DISTRIBUTION

Distributing company	VODone Limited, a company incorporated under the laws of Bermuda and listed on the Main Board of the Hong Kong Stock Exchange.
Distributed company	China Mobile Games and Entertainment Group Limited, a company incorporated under the laws of the Cayman Islands.
Securities to be distributed	1,574,741 ADSs, each representing 14 of our Class A ordinary shares, par value US$0.001 per share, which in total constitutes approximately 6.7% of our outstanding ordinary shares. The ADSs will initially be evidenced by American depositary receipts, or ADRs.
	The depositary will hold the Class A ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and holders of ADSs from time to time.
	You may surrender your ADSs to the depositary to withdraw the Class A ordinary shares underlying your ADSs. The depositary will charge you a fee for such an exchange.
	We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs.
	To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled "Description of American Depositary Shares." You should also read the deposit agreement, which is an exhibit to the registration statement that includes this prospectus.
Primary purposes of the distribution	The board of directors of VODone believes that the partial distribution of our ADSs will
	•       allow our management and management of VODone to each focus on their own respective businesses as public companies, as we and VODone have different business strategies and growth prospects,
	•       allow for our own equity-based options in order to enable us to provide incentives for management and other key employees that are directly related to the market performance of our publicly traded shares,
	•       allow us direct access to U.S. capital markets to finance our product and research development activities,
	•       enhance our access to financing by allowing the financial community to focus separately on our business,
	•       facilitate acquisitions, joint ventures and partnerships by VODone and us with other companies focusing on the same or complementary businesses and technologies,
	•       allow VODone to return value to its shareholders, and

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	•       provide VODone shareholders with a direct ownership interest in us in addition to the indirect interest in us that they have as VODone shareholders.
Distribution ratio	Holders of VODone's ordinary shares will be entitled to receive one ADS for every 2,000 VODone ordinary shares held on the record date. All entitlements will be rounded down to a whole number of ADSs, and fractional entitlements will be disregarded. For the avoidance of doubt, registered holders of less than 2,000 Shares on the record date will not be entitled to the distribution.
Record date	The record date is September 5, 2012.
Distribution date	The distribution date is expected to be September 21, 2012.
Use of proceeds	We will not receive any proceeds in connection with this distribution.
The distribution	On the distribution date, VODone will effect a distribution of 1,574,741 ADSs to the holders of its ordinary shares. The distribution will be made in book-entry form.
	Prior to the distribution, a direction form will be dispatched to holders of VODone's ordinary shares. Any VODone shareholder will be able to receive the ADSs if the shareholder specifies a DTC participant account or the details of a broker or dealer who is a DTC participant. Any registered shareholder whose address on the VODone's register on the record date is in a jurisdiction outside Hong Kong and is not permitted to receive ADSs, or who has filled out an invalid direction form, will not receive ADSs. Instead, the ADSs will be sold by one or more brokers designated by VODone on the shareholder's behalf as soon as reasonably practicable after the commencement of dealings in the ADSs on the Nasdaq Global Market and the shareholder will receive a cash amount equal to the net proceeds of such sale.
Fractional ADSs	As a result of this distribution ratio, no fractional ADS of the Company will be distributed to VODone shareholders.
Stock exchange listing	There is not currently a public market for the ADSs. We have applied for listing of our ordinary shares and the ADSs on the Nasdaq Global Market under the symbol "CMGE." We anticipate that trading will commence on or about September 25, 2012. We cannot predict the trading prices for the ADSs before or after the distribution date.
Ordinary shares outstanding immediately after this distribution	331,074,511 shares, comprised of:
	(i) 141,457,419 Class A ordinary shares, par value US$0.001 per share, including 22,046,374 Class A ordinary shares that will be distributed in this distribution; and
	(ii) 189,617,092 Class B ordinary shares, par value US$0.001 per share.

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	Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Only VODone and its affiliates, namely Dragon Joyce, OWX Holding and Action King, will hold our Class B ordinary shares. In respect of matters requiring shareholders' vote, each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to five votes. Each Class B ordinary share is convertible into one Class A ordinary share at any time upon the Class B shareholder's request. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, pledge, transfer, assignment or disposition of Class B ordinary shares by a holder thereof to any person or entity that is not an affiliate of such holder, those Class B ordinary shares shall be automatically and immediately converted into an equal number of Class A ordinary shares.
Relationship with VODone after this distribution	Upon the completion of this distribution, VODone will continue to be our controlling shareholder, with a shareholding of 57.2% of the combined total of our outstanding Class A and Class B ordinary shares, and control of 87.0% of the voting power of the combined total of our outstanding Class A and Class B ordinary shares.
Dividend policy	We intend to declare and pay dividends in the future. The payment and the amount of any dividends will depend on the results of our operations, cash flow, financial condition, statutory and regulatory restrictions on the payment of dividends, future prospects and other factors that we may consider relevant. For additional information, see "Dividend Policy."
U.S. federal income tax consequences to holders of VODone ordinary shares	For a discussion of the U.S. federal income tax consequences to VODone shareholders of this distribution, see the section of this prospectus entitled "Taxation." VODone shareholders should consult with their own individual tax advisors regarding the tax consequences of this distribution.
Depositary	The Bank of New York Mellon
Risk factors	See "Risk Factors" and other information included in this prospectus for a discussion of risks you should carefully consider before investing in the ADSs.

        The number of Class A and Class B ordinary shares outstanding after this distribution is based on 331,074,511 ordinary shares outstanding as of the date of this prospectus.

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA

        The following tables present summary consolidated statement of operations data of our predecessor, Kuailefeng Software Development Co., Ltd., or Kuailefeng, for the period from January 1, 2009 to October 26, 2009, our summary consolidated statement of operations data for the period from October 27, 2009 to December 31, 2009, for the years ended December 31, 2010 and 2011, for the first three months of 2011 and 2012, and our summary consolidated balance sheet data as of December 31, 2009, 2010 and 2011, and March 31, 2012.

        The data presented in these tables are derived from the historical consolidated financial statements and notes thereto and consolidated pro forma financial statements and the notes thereto that are included elsewhere in this prospectus. The consolidated financial statements have been prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.

        The summary consolidated pro forma statement of operations data for the year ended December 31, 2009 reflects the effect to the acquisition of the Dragon Joyce Group, which was completed in October 2009, as if such transaction had occurred on January 1, 2009. The summary consolidated pro forma statement of operations data for the year ended December 31, 2010 reflects the effects of the acquisitions of the assets of Bright Way and Tastech and of 3GUU BVI, which were completed in October 2010 and December 2010, respectively, as if they had occurred on January 1, 2010. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Unaudited Pro Forma Consolidated Financial Information" for more information. The consolidated pro forma statement of income is not intended to represent what our operating results would actually have been for the periods indicated or to project our operating results for any future period.

        The summary financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," particularly "—Our Acquisitions" and "—Unaudited Pro Forma Consolidated Financial Information," "Selected Consolidated Financial Information and Operating Data" and the consolidated financial statements and the notes to those statements included elsewhere in this prospectus. Our historical results do not necessarily indicate our results expected for any future periods.

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Summary Consolidated Statement of Operations Data

										For the Year Ended December 31,												For the Three Months Ended March 31,
	From January 1, 2009 to October 26, 2009			From October 27, 2009 to December 31, 2009
							For the Year Ended December 31, 2009			2010						2011						2011			2012
	(predecessor) RMB			(successor) RMB			(pro forma) (unaudited) RMB			(successor) RMB			(successor) (pro forma) (unaudited) RMB			(successor) RMB			(successor) US$			(unaudited) RMB			(unaudited) RMB			(unaudited) US$
							(In thousands, except for share and per share data)
Net revenues
Feature phone games		67,240			17,525			52,844			110,071			110,071			142,426			22,616			37,210			35,437			5,627
Smartphone games		—			—			—			—			60,823			62,368			9,904			11,755			16,095			2,556
Handset design		—			—			—			15,340			97,927			38,694			6,144			8,718			2,801			445
Total net revenues		67,240			17,525			52,844			125,411			268,821			243,488			38,664			57,683			54,333			8,628
Cost of revenues
Feature phone games		(31,921	)		(5,108	)		(13,372	)		(32,827	)		(32,827	)		(61,337	)		(9,740	)		(13,734	)		(17,873	)		(2,838	)
Smartphone games		—			—			—			—			(30,627	)		(17,974	)		(2,854	)		(4,004	)		(3,678	)		(584	)
Handset design		—			—			—			(10,083	)		(77,838	)		(29,037	)		(4,611	)		(4,660	)		(2,780	)		(441	)
Total cost of revenues		(31,921	)		(5,108	)		(13,372	)		(42,910	)		(141,292	)		(108,348	)		(17,205	)		(22,398	)		(24,331	)		(3,863	)
Gross profit
Feature phone games		35,319			12,417			39,472			77,244			77,244			81,089			12,876			23,476			17,564			2,789
Smartphone games		—			—			—			—			30,196			44,394			7,049			7,751			12,417			1,972
Handset design		—			—			—			5,257			20,089			9,657			1,533			4,058			21			4
Gross profit		35,319			12,417			39,472			82,501			127,529			135,140			21,459			35,285			30,002			4,765
Operating expenses
Selling expenses		—			—			—			(952	)		(8,349	)		(7,561	)		(1,201	)		(1,186	)		(2,160	)		(343	)
General and administrative expenses		(2,536	)		(2,556	)		(5,092	)		(11,817	)		(17,917	)		(16,263	)		(2,582	)		(3,974	)		(5,907	)		(938	)
Research and development expenses		(4,438	)		(226	)		(4,664	)		(8,377	)		(10,877	)		(24,566	)		(3,901	)		(3,935	)		(8,597	)		(1,365	)
Total operating expenses		(6,974	)		(2,782	)		(9,756	)		(21,146	)		(37,143	)		(48,390	)		(7,684	)		(9,095	)		(16,664	)		(2,646	)
Operating income		28,345			9,635			29,716			61,355			90,386			86,750			13,775			26,190			13,338			2,119
Interest income		25			—			25			70			266			927			147			136			292			46
Other income		—			—			—			—			1,112			293			47			18			113			18
Changes in fair value of contingently returnable consideration assets		—			(948	)		(948	)		(2,065	)		(2,065	)		39,446			6,264			(760	)		7,131			1,132
Income before income taxes and noncontrolling interests		28,370			8,687			28,793			59,360			89,699			127,416			20,233			25,584			20,874			3,315
Income tax (expenses) benefits		(6,597	)		638			(3,893	)		(18,647	)		(27,142	)		35,927			5,705			(8,682	)		(2,053	)		(326	)
Net income		21,773			9,325			24,900			40,713			62,557			163,343			25,938			16,902			18,821			2,989
Net income attributable to noncontrolling interests		—			2,798			2,798			12,215			18,767			11,837			1,880			5,071			—			—
Net income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders		21,773			6,527			22,102			28,498			43,790			151,506			24,058			11,831			18,821			2,989
Foreign currency translation adjustments		—			—			—			(111	)		(111	)		(278	)		(44	)		(129	)		(7	)		(1	)
Total comprehensive income		21,773			9,325			24,900			40,602			62,446			163,065			25,894			16,773			18,814			2,988
Total comprehensive income attributable to noncontrolling interests		—			2,798			2,798			12,181			18,734			11,908			1,891			5,032			—			—
Total comprehensive income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders		21,773			6,527			22,102			28,421			43,712			151,157			24,003			11,741			18,814			2,988
Earnings per share:
Basic earnings per share		N/A			0.03			0.10			0.13			0.21			0.62			0.10			0.06			0.06			0.01
Diluted earnings per share		N/A			0.03			0.10			0.13			0.21			0.62			0.10			0.06			0.06			0.01
Weighted average number of ordinary shares outstanding in computing basic and diluted earnings per share		N/A			212,500,000			212,500,000			212,500,000			212,500,000			244,594,415			244,594,415			212,500,000			302,729,550			302,729,550

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Summary Consolidated Balance Sheet Data

	As of December 31,								As of March 31,
	2009		2010		2011				2012
	RMB		RMB		RMB		US$		RMB		US$
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents		5,657		104,038		187,237		29,732		133,925		21,266
Total current assets		21,396		174,560		273,267		43,393		228,445		36,278
Total assets		330,098		853,644		950,430		150,922		902,634		143,334
Total current liabilities		3,662		29,873		111,278		17,670		43,085		6,843
Total liabilities		18,877		119,668		154,252		24,494		85,750		13,618
Total shareholders' equity		311,221		733,976		796,178		126,428		816,884		129,716

Selected Operating Data

			For the Year Ended December 31,						For the Three Months Ended March 31,
			2009		2010		2011		2011		2012
Feature Phone Games(1)
	Single-player games
		Number of games (as of the end of the period)		53		97		127		105		134
		Total paying user accounts(2)		16,022,278		23,530,123		29,023,956		10,823,152		12,107,080
		Average revenue per paying user account (in RMB)		N/A		3.47		4.46		3.42		2.81
	Mobile social games
		Number of games (as of the end of the period)		—		—		2		1		2
		Total paying user accounts(2)		—		—		68,584		18,125		30,118
		Average revenue per paying user account (in RMB)		—		—		51.46		12.76		48.47
Smartphone Games(3)
	Single-player games
		Number of games (as of the end of the period)		12		117		264		147		310
		Total subscriptions(4)		83,532		7,355,926		9,599,862		2,262,696		2,023,387
		Average revenue per subscription (in RMB)		5.00		4.99		4.64		4.26		4.59
	Mobile social games
		Number of games (as of the end of the period)		4		2		4		2		4
		Total new registered user accounts(5)		5,287,374		8,251,037		7,671,426		1,138,394		4,877,298
		Total paying user accounts(2)		466,472		825,270		740,823		207,380		133,912
		Average revenue per paying user account (in RMB)		36.99		33.08		24.07		10.23		50.79
Handset Design(6)
	Number of handsets manufactured using our design			0.6 million		1.6 million		1.5 million		597,000		81,000

(1)

The total paying user accounts for 2009 represent the operating data of Kuailefeng. The total paying user accounts and the average revenue per paying user account for 2010 represent the operating and financial data of Dragon Joyce and its subsidiaries prior to or after, as the case may be, our acquisition

15

of Dragon Joyce in October 2009, or the Dragon Joyce Group. The average revenue per paying user account for 2010 is calculated based on our net revenues for 2010 in an amount of RMB81.7 million, which excludes revenues from our exclusive technical support services on feature phone games provided to Kuailefeng in an amount of RMB5.9 million, and revenues from exclusive reseller rights on feature phone games provided to Kuailefeng in an amount of RMB22.5 million. See "Related Party Transactions—Transactions with Certain Directors, Officers, Shareholders and Affiliates."

(2)

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.

(3)

Represents the operating data of 3GUU BVI and its subsidiaries prior to or after, as the case may be, its acquisition by Action King in December 2010, or the 3GUU Group, for 2009 and 2010. We acquired the 3GUU Group in December 2010. See "Our Corporate History and Structure—Our Corporate History—Acquisition of 3GUU Group."

(4)

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

(5)

Represents the number of new user accounts registered to play our smartphone mobile social games within the relevant period. The number of new registered user accounts is included for smartphone mobile social games as not all registered user accounts are paying user accounts. We believe the number is meaningful as it indicates the general interest in our games and forms the user base of which we may convert our users into paying users.

(6)

Represents the operating data of the entities that now compose OWX Holding and its subsidiaries prior to or after, as the case may be, its acquisition of all assets of Bright Way and Tastech in October 2010, or the OWX Holding Group, for 2009 and 2010. The OWX Holding Group was formed in October 2010. See "Our Corporate History and Structure—Our Corporate History—Acquisition by OWX Holding Group."

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RISK FACTORS

You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, in evaluating our Company, our Class A ordinary shares and the ADSs. Any of the following risks could materially and adversely affect our business, prospects, financial condition and results of operations. As a result, the trading price of the ADSs could decline, and you could lose all or part of your investment.

Risks Related to Our Business

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

        We have a limited operating history under our current business model upon which to evaluate the viability and sustainability of our business. Our company, China Mobile Games and Entertainment Group Limited, or CMGE, was incorporated in the Cayman Islands as an exempted limited liability company on January 20, 2011 by VODone as its wholly-owned subsidiary. Our business was formed through three separate acquisitions undertaken by VODone in 2009 and 2010 and was operated by VODone through various subsidiaries and our VIE until our reorganization effective August 23, 2011. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving industries, such as the mobile game industry in China, and companies that have been formed through the combination of previously separate businesses. Some of these risks and uncertainties relate to our ability to:

•

maintain and extend our position as the leading mobile game developer in China;

•

continue to offer new and creative mobile games to attract and retain a larger user base and increase user activity;

•

maintain and expand our distribution network; and

•

upgrade our technology and infrastructure to support increased traffic and expanded offerings of products and services.

        If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

We may face technical, operational and strategic challenges that prevent us from successfully integrating the feature phone mobile games, handset design and smartphone mobile games businesses.

        We were recently formed as a holding company for our feature phone mobile games, handset design and smartphone mobile game businesses, three relatively independent business units, as a result of VODone's acquisitions of 70% equity interest in Dragon Joyce and 3GUU BVI, in October 2009 and December 2010, respectively, VODone's 70% equity interest in OWX Holding, which completed its acquisition of substantially all the assets of Bright Way and Tastech in October 2010, and our recent reorganization. See "Our Corporate History and Structure." The acquisition and combination of the underlying businesses involve risks related to the integration and management of the acquired technologies, operations and personnel. Prior to our reorganization, the three entities had limited experience operating together under the same management and each had its own operational and financial control systems. We believe the integration of the three businesses has been and will continue to be critical to our success. Accordingly, any events that hinder or prevent the effective integration or collaboration of these separate business units could negatively impact our business. For example, our management includes key executive officers from each of these three entities, who together with our other management members collectively manage and set strategy for our business. These executive officers have worked together for a relatively short period of time and there can be no assurance that they will always cooperate effectively. We may also encounter substantial difficulties, costs and delays in further integrating the operations of these entities. If we fail to successfully integrate the combined entities, we may not be able to realize the synergies expected from the combination.

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Our business depends on our ability to continue to attract new and retain existing users.

        Our success depends on our ability to attract new and retain existing users. In order to attract and retain users and compete against our competitors, we must continue to invest significant resources in research and development to improve our existing products, introduce additional high-quality products and services and enhance user experience. We may not be able to expand or maintain our user base if our products and services do not meet the needs of our users or are not effectively or timely marketed. We cannot guarantee that our mobile games will continue to sustain their current level of popularity, and our users may lose interest in our games over time despite our efforts to improve and upgrade our mobile games. If we are not able to maintain or extend the commercial lifespan of our mobile games, our business, prospects, financial condition and results of operations may be materially and adversely affected.

        Also, if we are unable to anticipate user preferences or industry changes to market and promote new products and services, or if we are unable to modify our products and services on a timely basis, our user base may not increase at the rate we anticipate, or at all, and it may even decrease. Users may not choose our products if our technology is unreliable. Also, we have from time to time received user complaints with regards to fee collection and technical problems, among others. If we are unable to address these and other complaints in a timely manner, we may lose existing users and become unable to attract new users.

        Further, many of our new games, especially mobile social games, require significant build-up periods during which users are first introduced to the games and the rise in popularity of some games can be slow, if it happens at all. If a build-up period coincides with the inevitable phasing-out period of our older games, the result could be a decrease in the number of total paying user accounts or total subscriptions as well as revenue during that period. For example, during the second half of 2011 we began to phase-out Creation Song, a smartphone mobile social game we launched in early 2009, and we launched Paopao Xiyou and Dian Feng, two new smartphone mobile social games, in June 2011 and July 2011, respectively. Because these new smartphone mobile social games generally require a build-up period of several months, the revenue they generated was not enough to compensate for the decrease of revenue resulting from the phase-out of Creation Song during the second half of 2011, which resulted in a decrease in both the number of total paying user accounts for and the revenues from our smartphone mobile social games. Further, if a game that we anticipate gaining acceptance by our users fails to do so and we do not introduce additional games to maintain our user base, the phasing out of previous games could result in a prolonged or permanent decrease in total paying user accounts or total subscriptions.

        The growth of our user base reinforces the popularity of our products, particularly the mobile social games which emphasize interaction among users. If we are unable to generate a large user base to sustain and continue our growth, there will be a material adverse effect on our business operations and financial position.

We depend on mobile network operators and mobile service providers for the collection of a significant portion of our revenues, any loss or deterioration of our relationship with mobile service providers or mobile network operators, or the inaccuracy of the billing and collection systems of mobile network operators and mobile service providers may result in the loss of revenues and have material adverse effect on our cash flows.

        We collect payments from our users primarily through the billing and collection systems of China's three largest network operators, including China Mobile and China Telecom, who dominate the wireless telecommunication sector in China. We collect payments from these mobile network operators directly for our revenues from smartphone games and indirectly for our revenues from feature phone games through mobile service providers. During 2010, 2011 and the first three months of 2012, 55.6%, 53.3% and 43.8%, respectively, of our revenues from feature phone games were collected through our top ten mobile service providers, the top three of which were Shenzhen Huayahexun Technology Co., Ltd., Beijing Shidaixunda Technology Co., Ltd., and Shenzhen Zhongxuntiancheng Technology Co., Ltd.

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during 2011. The concentration of our sales through one or a few large mobile service providers and China's dominant mobile phone operators could lead to a short-term disruption in our sales if one or more of them were to reduce its offerings or cease offering our products. Such concentration also makes us more vulnerable to collection risks should one or more of these providers or operators become unable or unwilling to share the proceeds it receives with us. Further, as we collect proceeds for feature phone games from mobile service providers, who in turn collect the proceeds from mobile network operators, changes to the profit sharing arrangements between the mobile service providers and mobile network operators could adversely affect our revenues from feature phone games. Also, China Mobile places content providers, including us, into different preference classes based on a series of criteria, including game performance, customer satisfaction, responsiveness and technical support, among others. Although as of the date of this prospectus we are one of the few strategic partners for mobile games and quality content providers that cooperate directly with China Mobile and since the fourth quarter of 2011 China Mobile has deemed us a "Grade A Business Partner," we have in the past been reclassified by China Mobile due to user complaints, and we may be subject to downgrades in the future. Our operations and business could be harmed if our relationships with one or more of these mobile network operators and mobile service providers deteriorates, or if one or more of the key mobile service providers experience deterioration in their business or experiences an increase in non-payment from users, or there is any disruption in the relationship between any of these mobile service providers and mobile network operators. In addition, we rely on some mobile network operators to distribute and promote certain of our games and changes in how they distribute or promote our games could have an adverse effect on our results of operations and financial condition.

        Furthermore, we depend on mobile network operators directly and indirectly to maintain accurate records of payments of sales proceeds by users and to collect such payments. We receive periodic statements from mobile network operators and mobile service providers that indicate the aggregate amount of fees that were charged to users for purchases of mobile game products. Our mobile service providers usually generate their periodic statements to us based on the periodic statements they receive from the mobile network operators. We generally offer mobile network operators and service providers credit terms ranging from 30 to 60 days. Receivables from China Mobile in terms of accounts receivable balances accounted for 31.6%, 15.2% and 11.7% of our total trade receivable as of December 31, 2010 and 2011, and March 31, 2012, respectively. Receivables from our top ten mobile service providers in terms of accounts receivable balances accounted for 57.6%, 48.9% and 39.7% of our total trade receivable as of December 31, 2010 and 2011, and March 31, 2012, respectively. Failure to timely collect our receivables from mobile network operators or mobile service providers may adversely affect our cash flows. For example, in recent months China Mobile has lengthened its payment period to our service providers due to its tightened settlement policy, which in turn lengthens the payment period of those service providers to us. In addition, if the mobile network operators or mobile service providers demand increase to their share of revenues under our revenue-sharing arrangement, our results of operation may be materially and adversely affected.

Significant changes in the policies, guidelines or practice of mobile network operators or the PRC government with respect to mobile applications and other content may result in lower revenues or additional costs for us and materially and adversely affect our business operations, financial condition and results of operations.

        We rely heavily on PRC mobile network operators, directly and indirectly, to distribute our products to our users. The mobile telecommunication business in China is highly concentrated and major mobile network operators, such as China Mobile, may from time to time issue new policies or change their business practices, requesting or stating their preferences for certain actions to be taken by all mobile service providers using their networks. In addition, the PRC government may also implement new policies or change existing policies regulating the mobile telecommunication business. Such new policies or change may cause our revenues to decrease or operating costs to increase. In January 2010, China Mobile began implementing an additional series of measures targeted at further improving the user experience from mobile handset embedded services. Under these measures, additional notices and

19

confirmations to users are required during their purchases of mobile applications and other content that are embedded in handsets. We cannot assure you that PRC mobile network operators or the PRC government will not introduce additional requirements with respect to the procedures for ordering monthly subscriptions or single-transaction downloads of our mobile games, notifications to users, the billing of users or other consumer-protection measures or adopt other policies that may require significant changes in the way we promote and sell our mobile games, any of which could have a material adverse effect on our financial condition and results of operations.

We may face increasing competition, which could reduce our market share and materially and adversely affect our results of operations.

        The mobile game industry in China is highly competitive. The industry is characterized by the frequent introduction of new products and services, short product life cycles, evolving industry standards, rapid adoption of technological and product advancements, as well as price sensitivity on the part of users. In China, we compete directly with:

•

other mobile game developers; and

•

large China-based Internet companies that may develop and operate their own mobile games.

        Some of our products are made available to customers in countries outside of China through our cooperation with mobile network operators abroad, handset companies in China and various application stores. Our mobile game products offered internationally are also subject to intense competition. In addition, we face competition from other media formats and mobile applications and content, such as Internet-based games, mobile music, mobile books and social network services.

        Some of our existing and potential competitors have significantly greater financial, technological and marketing resources and stronger relationships with industry participants than we do. Some of our competitors or potential competitors, especially major international mobile game developers, have greater mobile game development experience and resources than we have. If there are new entrants in the market or intensified competition among existing competitors, we may have to provide more incentives to industry participants, such as distributors and agents, which could adversely affect our profitability. If we fail to compete effectively, our market share could reduce and our results of operations could be materially and adversely affected.

Our business is highly dependent on Ouyinhua to establish and maintain relationships with handset companies.

        We rely on handset manufacturers of feature phones to pre-install our mobile games onto their products, which is the primary way in which we develop our user base among feature phone users. We rely on one agent, Shenzhen Ouyinhua Information Consulting Co., Ltd., or Ouyinhua, to pre-install Funbox, our platform for downloading single-player games on feature phones, as well as our feature phone games on the handsets of approximately 420 handset companies and design houses. Pursuant to a cooperation agreement we entered into with Ouyinhua, profits generated from games downloaded through Funbox or pre-installed on ROM of a handset are subject to profit sharing with Ouyinhua. For these games, after subtracting fees due to the mobile operator and service provider, we collect the net revenues from game players. We then deduct business tax and pay to Ouyinhua 80.5% of the remaining net revenue, which includes the amount to be paid to the handset manufacturers. We also use Ouyinhua to pre-install our games on T-cards, which are pre-installed in certain handsets to increase memory, though we do not share the revenue generated from or pay an additional fee for games pre-installed on T-cards with Ouyinhua. Revenue generated from games preinstalled on T-cards accounted for 69.9% and 69.6% of our feature phone revenue in 2011 and for the first three months of 2012, respectively. We account for the amounts we pay to Ouyinhua under cost of revenues. In 2010, 2011 and the first three months of 2012, we paid to Ouyinhua RMB20.7 million, RMB44.9 million and RMB12.1 million, respectively, as its share of revenues under the cooperation agreement, which represented 63.1%, 73.2% and 67.6% of our cost of revenues attributable to feature phones,

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respectively. Our cooperation agreement with Ouyinhua expires on August 22, 2014, and automatically renews unless either party terminates the agreement by written notice given one month before its expiration. Unfavorable changes to our relationship with Ouyinhua or its relationship with handset companies could materially and adversely affect our prospects, financial conditions and results of operations. We have direct agreements with 18 handset companies and design houses, and these agreements are generally for terms of one year. These agreements usually do not prohibit handset manufacturers from installing applications and content from other mobile game developers. We compete with other mobile game developers for limited space in chipsets or more prominent display of our games to users. Due to our reliance on handset manufacturers to install our applications, any loss of our existing relationship with these companies, our failure to establish cooperation with additional companies, particularly those with a substantial market share or growth potential, or our failure to maintain a good relationship with Ouyinhua would result in a decrease in the number of handsets pre-installed with our games and our market share.

Failure to capture opportunities in the expected growth of the smartphone market and our historical reliance on pre-installation of our products on feature phones may materially and adversely affect our growth prospects.

        Historically, we derived a substantial portion of our revenue from mobile game pre-installations on feature phones; however, the feature phone handset market has witnessed a decline since the second half of 2011. At the same time, we expect that smartphones will gain popularity in China and some of our feature phone users may migrate to smartphones that can run applications and have better functionality than feature phones. We have developed and expect to continue to devote substantial resources to developing and marketing smartphone games. Most smartphone games are made available by download, which may not be as convenient to some users as accessing pre-installed applications and contents on their handsets, and we may lose some users because of this inconvenience. In addition, smartphone users have access to a greater number of game options. Though we are actively pursuing opportunities to pre-install our mobile game products onto smartphones, we cannot assure you that we will be able to successfully enhance or maintain the volume and market share that we currently enjoy as smartphones become increasingly popular.

        In addition, many smartphone companies have developed their own mobile games. Even if our mobile games are installed on smartphones, we will compete with the mobile games operated by these smartphone companies and cannot guarantee that users of smartphones will use our products at the same level as feature phone users.

Our ability to generate revenues could suffer if the PRC market for mobile games does not develop as anticipated.

        The mobile games market in China has evolved rapidly in recent years, with developments such as the introduction of new business models, the development of user preferences, market entry by new competitors and the adoption of new strategies by existing competitors. We expect each of these trends to continue, and we must continue to adapt our strategy to successfully compete in our market. There are numerous other technologies and business models in varying stages of development, such as portable tablet computers, netbooks or other mobile Internet handsets involving fourth generation mobile technologies, which could render certain current technologies or applications obsolete.

        Accordingly, it is extremely difficult to accurately predict user acceptance and demand for our various existing and potential new offerings, and the future size, composition and growth of this market. Furthermore, given the limited history and rapidly evolving nature of our market, we cannot predict the price that users will be willing to pay for our mobile games or whether users will have concerns over security, reliability, cost and quality of service associated with mobile games. If acceptance of our mobile games is different than anticipated, our ability to maintain or increase our revenues and profits could be materially and adversely affected.

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As mobile social games are expected to account for an increasing portion of our revenues in the future, any adverse developments relating to such content may adversely affect our results of operations.

        We anticipate that revenue generated from our mobile social games will account for an increasing percentage of our revenues in the foreseeable future. Mobile social games require a substantial number of users to reach critical mass and may result in the concentration of users in certain titles. We are enhancing our efforts in developing and marketing mobile social games because of the expected growth of the mobile social game market. Accordingly, any of the following could materially and adversely affect our business, financial condition and results of operations:

•

any reduction in or failure to grow the user base of the existing mobile social games;

•

any decrease in popularity of the existing mobile social games in the market or any decrease in their purchases due to intensifying competition or other factors;

•

our failure to make quality upgrades, enhancements or improvements to mobile social games in a timely manner in response to user preferences;

•

our failure to develop and launch new mobile social games that appeal to users;

•

our failure to efficiently operate mobile social games and provide effective customer service;

•

our failure to comply with regulatory requirements with respect to mobile social games; or

•

any breach of related software security, prolonged server interruption due to network failures, hacking activities or other factors or any other adverse developments relating to mobile social games.

We may not be successful in effectively promoting or developing our brands.

        Enhancing the awareness of our mobile game brands among users is a part of our growth strategy. We believe our future success therefore depends on, among other things, market recognition and acceptance of our various brands, including CMGE, KKFun, 3GUU and OWX, as well as our ability to promote our new CMGE brand. We market our mobile games and promote our brands through advertising and promotional programs such as online advertising. Our ability to sell our products and enhance recognition of our brands depends in part upon the success of these programs. There is no assurance that we will be able to effectively promote or develop our brand and if we fail to do so, our growth may be adversely affected. In addition, negative publicity or disputes regarding our brands, offerings, company or management could materially and adversely affect public perception of our brands. Many of the factors that affect our brands may be outside our control, such as industry participants, including handset companies and content providers working with us, tainting our brand because of the concern over the quality of such industry participants' products and services. Any impact on our ability to effectively promote our brands or any significant damage to our brand's image could materially and adversely affect our sales, profits and prospects.

Our strategy of acquiring and investing in complementary businesses, assets and technologies may result in operating difficulties, dilution to our investors and other negative consequences.

        As part of our business strategy, we have successfully acquired, and intend to continue to selectively acquire and invest in, businesses, assets and technologies that complement our existing business, including (i) acquisitions of companies, businesses, intellectual property rights, and other assets, (ii) minority investments in strategic partners, and (iii) investments in new interactive mobile game businesses. Acquisitions and investments involve uncertainties and risks, including:

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accurately evaluating potential of acquisition targets and identifying acquisition targets with operations complementary to our existing operations;

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potential ongoing financial obligations and unforeseen or hidden liabilities;

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retaining key employees and maintaining the key business relationships with customers of the businesses we acquire;

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•

failure to achieve the intended objectives, benefits or revenue enhancement;

•

costs and difficulties of integrating acquired businesses and managing a larger business;

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the need to integrate an acquired company's accounting, management information, human resource and other administrative systems to permit effective management and timely reporting;

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the possibility that, before the acquisition or investment, we will not discover important facts during due diligence that could have a material adverse impact on the value of the businesses we acquire or invest in;

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significant accounting charges resulting from the completion and integration of a sizeable acquisition and increased capital expenditures;

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the possibility that a change of control of a company we acquire triggers a termination of contractual or intellectual property rights important to the operation of its business; and

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diversion of resources and management attention.

        Our failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. In addition, any such acquisition or investment may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. Furthermore, if we use our equity securities to pay for acquisitions, we may dilute the value of the ADSs and the underlying ordinary shares. Our shareholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments. If we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends.

Our failure to anticipate or successfully implement new technologies could render our mobile games uncompetitive or obsolete, and reduce our revenues and market share.

        The mobile applications industry is subject to rapid technological change, which requires us to anticipate well in advance, which technologies we must implement and take advantage of in order to make our mobile game products competitive in the market. We also need to invest significant financial resources in research and development to keep pace with technological advances in order to make our technologies, product offerings and development capabilities competitive in the market. However, development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our development results. Our expenditures on research and development may not generate commensurate benefits. Given the fast pace with which mobile games technology has been and will continue to be developed, we may not be able to timely improve our technologies in an efficient and cost-effective manner, or at all. New technologies in our industry could render the technologies and product offerings that we are developing or expect to develop in the future obsolete or uncompetitive, thereby potentially resulting in a decline in our revenues and market share.

Undetected programming errors or flaws in our mobile game products could harm our reputation or decrease market acceptance of our products.

        Our mobile games are subject to frequent improvement and updates and may contain errors or flaws that may become apparent only after the updated applications are accessed by mobile users, particularly as we launch new updates under tight time constraints. From time to time, our users may inform us of programming flaws affecting their experience, and we are generally able to resolve such flaws promptly. However, if for any reason, programming errors or flaws are not resolved in a timely fashion, we may lose some of our users and our revenues will be affected negatively, and our reputation and market acceptance of our mobile games may also be harmed. In addition, PRC government has promulgated rules and regulations targeting mobile service providers that charge for applications and other content without user consent. If a programming error or flaw in our products inadvertently charges users without consent, we may be subject to administrative penalties and fines.

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Network interruptions caused by system failures or other internal or external factors may lead to player attrition and revenue reduction and harm our business and reputation.

        Any failure to maintain the satisfactory performance, reliability, security and availability of our network and computer infrastructure may cause significant harm to our reputation and our ability to attract and maintain players. We have experienced server interruption lasting from several minutes to a few hours. Any server interruptions, break-downs or system failures, including failures which may be attributable to events within or outside our control that could result in a sustained shutdown of all or a material portion of our services, could adversely impact our ability to service our players and lead to player attrition and revenue reduction. Our network systems are also vulnerable to damage from computer viruses, fire, flood, earthquake, power loss, telecommunications failures, computer hacking and similar events.

The growth of our business may be adversely affected due to breaches of our security measures and unintended disclosures of our intellectual property or our customer data.

        As we conduct our business on mobile handsets only, we are collecting and storing an increasing amount of customer data. We rely on proprietary encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential user information, such as user name and password. It is possible that our security controls over customer data may not prevent the improper disclosure of personally identifiable information. A party who is able to circumvent these security measures could misappropriate proprietary information or cause interruptions in our operations. A security breach that leads to disclosure of customer account information (including mobile numbers or other personally identifiable information) could harm our reputation and subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. We may be required to expend significant capital and other resources to prevent such security breaches or to alleviate problems caused by such breaches. We may also lose current or potential customers for our mobile games that require the collection of customer data because of the perception that we cannot adequately protect our customers' privacy. Additionally, our business operation may be harmed by users' concerns over playing games on their mobile phones. For instance, a new malware has recently been identified to have disguised as popular mobile games on Android devices, namely: Mole Attack, Jawbreaker and Five Chess Game. The malware will subscribe to the paid services without user's consent thus resulting in fraudulent charges to users. Concerns over the security and privacy of user information may inhibit the wireless business generally, and our mobile games in particular. There can be no assurance that our security measures will prevent security breaches or the users' interest in playing mobile games would continue if malware spreads its attacks on the mobile phones. Failure to prevent security breaches or users' concerns over development of mobile phone malware may have a material adverse effect on our business, prospects, financial condition and results of operations.

We could be liable for breaches of security of payment processing agents, which may have a material adverse effect on our reputation and business.

        In addition to collection through China Mobile and mobile service providers, currently a small portion of our revenues is collected through payment processing agents, who help us collect sales proceeds through third-party payment channels such as prepaid cards, bank remittance, and virtual currency, among others. Although our payment processing agents have not historically collected a significant volume of sales proceeds, going forward, we plan to increasingly utilize these payment processing agents. In the transactions utilizing third-party payment channels, secured transmission of confidential information, such as customers' card numbers and expiration dates, personal information and billing addresses, over wireless networks, the Internet and/or third-parties' databases, is essential to maintain consumer confidence. We do not have control over the security measures of third-party payment channels and we cannot assure you that their security measures are adequate or will be

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adequate with the expected increased usage of their payment channels. Security breaches of these payment channels could expose us to litigation and possible liability for failure to secure customer transaction data and could harm our reputation and ability to attract users and encourage users to pay through these third-party payment channels.

Our business is subject to the risks associated with international operations.

        Although substantially all of our revenues in 2009, 2010, 2011 and for the first three months of 2012, were derived from our operations in China, international expansion forms an important component of our growth strategy. Expanding our business internationally exposes us to a number of risks, including:

•

fluctuations in currency exchange rates;

•

our ability to select the appropriate geographical regions for international expansion;

•

difficulty in identifying appropriate partners and establishing and maintaining good cooperation relationships with them;

•

difficulty in understanding local market and culture; and

•

increased costs associated with doing business in foreign jurisdictions.

        Our financial condition and operating results also could be significantly affected by these and other risks associated with international activities. Furthermore, we have implemented policies and procedures designed to facilitate compliance with laws and regulations in foreign jurisdictions applicable to us, but there can be no assurance that our employees, contractors, or agents will not violate such laws and regulations or our policies. Any such violations could individually or in the aggregate materially and adversely affect our financial condition or operating results.

Our success depends on the continuing and collaborative efforts of our management team and other key personnel, and our business may be harmed if we lose their services.

        Our future success depends heavily upon the continuing services of our key management team. If one or more of our executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for management and key personnel is intense, the pool of qualified candidates is limited, and we may not be able to retain the services of our executives or key personnel, or attract and retain experienced executives or key personnel in the future. If any of our executives or other key personnel joins a competitor or forms a competing company, we may lose customers, distributors, know-how and key personnel. Each of our executive officers and key employees has entered into an employment agreement with us that contains confidentiality provisions. If any disputes arise between any of our executives or key personnel and us, we cannot assure you the extent to which any of these agreements may be enforced.

We rely on highly skilled personnel. If we are unable to retain or motivate them or hire additional qualified personnel, we may not be able to grow effectively.

        Our performance and future success depend on the talents and efforts of highly skilled individuals. We will need to continue to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in the mobile games industry for qualified employees is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to

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retain and motivate our existing employees. As competition in the mobile games industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. While our game development engines help protect us from potential interruptions in our operations due to loss of development personnel, if we do not succeed in attracting additional highly skilled personnel or retaining or motivating our existing personnel, we may be unable to grow effectively.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

        We rely on a combination of copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods to protect our intellectual property rights. We have applied for the registration of the "KKFun Mobile Games" trademark in China. As of March 31, 2012, we registered 46 copyrights with the State Copyright Bureau of the PRC, for software we developed or acquired from third parties. The protection of intellectual property rights in China may not be as effective as those in the United States or other countries. We have in the past discovered some users had illegally modified our games so that they could access our games on smartphones for free. The steps we have taken may be inadequate to prevent the misappropriation of our technology or unauthorized use of our brands or products. Reverse engineering, unauthorized copying or other misappropriation of our technologies, or unauthorized access of our products could enable third parties to benefit from our technologies or products without compensating us. Moreover, unauthorized use of our technology could enable our competitors to offer products and services that are comparable to or better than ours, which could harm our business and competitive position. From time to time, we may have to enforce our intellectual property rights and brands through litigation. Such litigation may result in substantial costs and diversion of resources and management attention.

Third parties may claim that we infringe their proprietary rights, which could cause us to incur significant legal expenses and prevent us from promoting our products and services.

        We have not received any claims that we have infringed the intellectual property rights of others, but may in the future receive such claims. Any such claim, with or without merit, could result in costly litigation and distract our management from day-to-day operations. If we fail to successfully defend against such claims, we could be required to make unavailable or redesign our mobile games, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our users. Any royalty or licensing arrangements that we may seek in such circumstances may not be available to us on commercially reasonable terms or at all. Also, if we acquire technology to include in our products from third parties, our exposure to infringement actions may increase because we must rely upon these third parties to verify the origin and ownership of such technology. This exposure to liability could result in disruptions in our business that could materially and adversely affect our operating results.

If we fail to establish an effective system of internal control, we may be unable to accurately and timely report our financial results or prevent fraud.

        We will be subject to reporting obligations under U.S. securities laws. Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and related rules require a public company to include a management report on the company's internal control over financial reporting in its annual report, which contains management's assessment of the effectiveness of the company's internal control over financial reporting. In addition, under Section 404(b) of Sarbanes-Oxley, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting beginning with our annual report on Form 20-F following the date on which we cease to qualify as an "emerging growth company" under the Securities Act, which may be up to five

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fiscal years following the date of this distribution. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

        In the preparation of the consolidated financial statements for our predecessor for the period from January 1, 2009 to October 26, 2009, and for us for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011, we identified a material weakness in our internal control over financial reporting. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of our company's financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reports, effectively prevent fraud and operate as a public company.

        The material weakness relates to insufficient personnel with U.S. GAAP expertise in the preparation and review of the financial statements and related disclosures in accordance with U.S. GAAP and Securities and Exchange Commission requirements. We will take initiatives to improve our internal control over financial reporting and disclosure controls. For details on these initiatives, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." However, the implementation of these initiatives may not fully address the material weakness in our internal control over financial reporting. In addition, the process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to employ significant resources to maintain a financial reporting system that satisfies our reporting obligations. Our failure to remediate the material weakness or our failure to discover and address any other material weaknesses or deficiencies may result in inaccuracies in our financial statements or delay the preparation of our financial statements. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of the ADSs, may be materially and adversely affected. Ineffective internal control over financial reporting could also expose us to increased risk of fraud or misappropriations of corporate assets and subject us to potential delisting from the stock exchange on which the ADSs are listed, regulatory investigations or civil or criminal sanctions.

We are an "emerging growth company" and the reduced disclosure requirements applicable to emerging growth companies may make the ADSs less attractive to investors.

        As we are an "emerging growth company," as defined in Section 2(a) of the Securities Act, we benefit from certain exemptions from reporting requirements that apply to other public companies that are not emerging growth companies. For example, we will not be required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley until up to five fiscal years after the date of our initial public offering. Emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We will cease to be an emerging growth company on the earliest of (i) the last day of the fiscal year in which we had US$1 billion or more in annual gross revenues, (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than US$1 billion in non-convertible debt, or (iv) the date on which we are deemed a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

        We cannot predict if investors will find the ADSs less attractive if we rely on any of the exemptions available to emerging growth companies. If some investors find the ADSs less attractive as

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a result, there may be a less active trading market for the ADSs and the price of the ADSs may be more volatile.

We may need additional capital, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

        To grow our business and remain competitive, we may require additional capital. Our ability to obtain additional capital is subject to a variety of uncertainties, including:

•

our future financial condition, results of operations and cash flows;

•

general market conditions for capital raising activities by companies offering Internet and mobile products and services; and

•

economic, political and other conditions in China and internationally.

        We may be unable to obtain additional capital in a timely manner or on acceptable terms or at all. In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our shareholders.

Our lack of insurance could expose us to significant costs and business disruption.

        We have not purchased any insurance to cover our assets, property and business. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.

The unaudited pro forma consolidated financial information included in this prospectus contains financial information that has not been audited by an independent registered public accounting firm and that is derived in part through estimates by management, and accordingly the pro forma financial information may differ significantly from the actual consolidated financial information.

        The unaudited pro forma consolidated financial information presented in this prospectus contains all the adjustments, including normal recurring adjustments, necessary for a fair presentation of the operating results in the historical periods. However, since these adjustments are based on estimates, such as the estimated amortization period for intangible assets of significant acquired entities, it is not intended to show how the consolidated companies would have actually performed if the events described above had in fact occurred on the dates assumed or to project the results of operations or financial position for any future date or period. The financial information of some of the entities included in the pro forma consolidated financial information has been audited by an independent registered public accounting firm. However, the audited financial information of these entities for the periods described, including the statements of operations relating to these entities that have been used to calculate the pro forma financial information for the year ended December 31, 2010, may differ significantly from any actual consolidated financial information had it been audited or reviewed by an independent registered public accounting firm. See the explanatory paragraphs to "Summary Consolidated Financial Information and Operating Data" and "Unaudited Pro Forma Consolidated Financial Information."

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You should not rely on the discussion of the operating results of our predecessor as an indication of our future performance.

        The business of our predecessor company, Kuailefeng, was acquired by Dragon Joyce through Huiyou on October 26, 2009. The financial information has been included in our consolidated financial statements as of October 26, 2009. We then acquired substantially all of the assets of Bright Way and Tastech in October 2010 and we acquired 3GUU BVI in December 2010. See "Our Corporate History and Structure—Our Corporate History." Our results for the period from January 1, 2009 to October 26, 2009, however, do not include the financial information of the successor company, and may not serve as an adequate basis of comparison for results from the subsequent periods. We have placed, for illustrative purposes only, the financial results of the predecessor and successor entities along side each other. We also discuss the historical data as a part of the "Management's Discussion and Analysis of Financial Condition and Results of Operations." The discussion of the periodic data of our predecessor may not be sufficiently meaningful or informative, and you should not rely on these discussions as an indication of our future performance.

Risks Related to Our Corporate Structure

As the largest shareholder immediately after this distribution, VODone will control the outcome of our shareholder actions, and may thereby limit our ability to undertake any corporate action that requires shareholder approval, such as obtaining additional financing or making acquisitions.

        Upon the completion of this distribution, VODone will hold, directly or indirectly, 57.2% of our outstanding ordinary shares, representing 87.0% of the voting power of our outstanding ordinary shares, including the Class B shares. Its shareholding gives it the power to pass ordinary resolutions, thereby giving VODone effective control over a majority of our corporate actions (including appointment of directors) and, for so long as it holds more than two-thirds of the voting power of our outstanding ordinary shares, to pass special resolutions, which are required to effect important corporate actions including removing directors, approving a merger, changing our name, amending our constitutional documents and winding up our company. Even if VODone ceases to own or control more than 50% of our shares or voting power of our outstanding shares, for so long as it continues to have a substantial equity interest in us, it may, as a practical matter, be in a position to control many or all of our actions. Significant corporate actions, including the incurrence of material indebtedness, the issuance of a material amount of equity securities or significant strategic changes in our business, may be effected by our board of directors without the consent of our shareholders. VODone might oppose any action that would dilute its equity interest in us, and may be unable or unwilling to participate in our future financings. VODone, as our majority shareholder with the right to appoint directors to our board of directors, could block any such action and thereby materially harm our business or prospects. In addition, if VODone provides shareholder support to us in the form of shareholder loans or provides credit support by guaranteeing our obligations, they may become our creditors with different interests than shareholders with only equity interests in us. The concentration of controlling ownership of our shares may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of the ADSs.

We may have conflicts of interest with VODone and, because of VODone's controlling ownership interest in us, may not be able to resolve such conflicts on terms favorable to us.

        Conflicts of interest may arise between VODone and us in a number of areas relating to our past and ongoing relationships. Potential conflicts of interest that we have identified include, among others, competing for employee recruiting and retention and allocation of business and investment opportunities. There may be conflicts of interest arising from the ownership of VODone stock and

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options by members of our board and management, notwithstanding the duty of loyalty these persons owe us. Also, VODone may decide to sell all or a portion of the shares that it holds in us to a third party and give that third party substantial influence over our business and our affairs. Such a sale could be contrary to the interests of certain of our stakeholders, including our employees or our public shareholders.

        Our chairman, Lijun Zhang, is also the founder, chairman and a major shareholder of VODone. VODone may from time to time make strategic decisions that it believes are in the best interests of its business as a whole, including its stake in us. These decisions may be different from the decisions that we would have made on our own and may not be aligned with the interests of our shareholders. We may not be able to resolve any potential conflicts and, even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.

        In October 21, 2011, we entered into a Non-Compete Agreement with VODone under which VODone agreed not to, among other things, engage, or assist any of its other subsidiaries in engaging, in the mobile game development and operation, and handset design business. However, so long as VODone continues to control us, we may not be able to bring a legal claim against VODone in the event of contractual breach, notwithstanding our contractual rights under the Non-Compete Agreement. Even if the Non-Compete Agreement is enforced, we may not receive adequate remedies from courts in China or elsewhere.

To comply with PRC laws and regulations limiting foreign ownership of telecommunication and online cultural businesses, we conduct a substantial portion of our businesses through our VIE in China by means of contractual arrangements. If the PRC government determines that these contractual arrangements do not comply with applicable regulations, our business could be materially and adversely affected.

        The PRC government restricts foreign investment in telecommunication and online cultural businesses. See "Regulations—Regulations on Telecommunications Industry" and "Regulations—Regulations on Online Games and Cultural Products." In light of these restrictions, we conduct a significant portion of our business activities through our VIE, Yingzheng. Although we do not have any equity interest in Yingzheng, we are able to exercise effective control over Yingzheng and receive substantially all of the economic benefits of its operations through various contractual arrangements with Yingzheng and its registered shareholders. For a description of these contractual arrangements, see "Our Corporate History and Structure—Our Contractual Arrangements with VIE."

        On July 13, 2006, the MIIT issued the "Circular on Strengthening Administration of Foreign Invested Value-Added Telecommunications Business Operation," or the MIIT Circular. The MIIT Circular emphasizes that a foreign investor planning to invest in the PRC value-added telecommunications sector must set up a foreign-invested enterprise and apply for the applicable telecommunications business operating license. Further, a domestic value-added telecommunications services provider cannot lease, transfer or sell any telecommunications business operating license to a foreign investor, or provide resources, sites, facilities or other conditions to a foreign investor for its illegal operation of a telecommunications business in China. Due to a lack of interpretative materials from the regulators, it is currently unclear what impact the MIIT Circular will have on us or other companies that have adopted similar corporate and contractual structures.

        On September 28, 2009, GAPP, the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications jointly published the Notice Regarding the Consistent Implementation of the "Stipulations on Three Provisions of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Internet Games and the Examination and Approval of Imported Internet Games," or the GAPP Notice. The GAPP Notice prohibits foreign

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investors from participating in online game operating businesses through foreign-invested enterprises in China, and from controlling and participating in such businesses of domestic companies indirectly through other forms of joint ventures or contractual or technical support arrangements. As no detailed interpretation of the GAPP Notice has been issued to date, it is not clear how the GAPP Notice will be implemented. Furthermore, as some other primary government regulators, such as the Ministry of Commerce, or MOFCOM, Ministry of Culture, or MOC, and MIIT, did not join GAPP in issuing the GAPP Notice, the scope of the implementation and enforcement of the GAPP Notice remains uncertain. According to Regulations on the Main Functions, Internal Organization and Staffing of GAPP issued by the General Office of the State Counsel on July 11, 2008 and its interpretation circulars, GAPP is authorized to approve online games before their launch on the Internet, while the MOC is authorized to administer and regulate the overall online game industry. Once an online game is launched on the Internet, it will be regulated only by the MOC, and if an online game is launched on the Internet without the prior GAPP approval, the MOC is the authority responsible for investigating the matter. We thus believe GAPP is unlikely to take action against our contractual arrangements with our VIE based solely on the GAPP Notice and without participation from other PRC governmental authorities, including the MOC.

        Our PRC legal advisor, Guantao Law Firm, is of the opinion that (i) our ownership structure is in compliance with PRC law and (ii) the contractual arrangements are valid and legally binding and do not result in any violation of PRC law. There are, however, uncertainties regarding the interpretation and application of the MIIT Circular and GAPP Notice. If we are found to be in violation of the MIIT Circular, the GAPP Notice or any other PRC laws or regulations, or if we fail to obtain or maintain any of the required permits or approvals under our VIE arrangements, the relevant regulatory authorities would have broad discretion in dealing with such violations, including revoking the business and operating licenses of Yingzheng, our VIE, levying fines, confiscating our income or the income of Yingzheng to the extent that such income is related to the violation, discontinuing or restricting all or any portion of our operations or the operations of Yingzheng or taking other regulatory or enforcement actions. Any of these events could materially and adversely affect our business, financial condition and results of operations.

        Should our ownership structure under the current VIE arrangement be challenged by the PRC authorities while the foreign investment restrictions over the telecommunications sector remain in effect, we would need to restructure our ownership structure. In that case, we may still be able to (i) develop mobile games in China and own the copyright for those games; (ii) grant to Yingzheng, or any other Chinese company that possesses necessary regulatory licenses, copyright licenses to operate our games in China and collect royalties from Yingzheng or such other Chinese company; (iii) use our technology, expertise and experience to provide technical services and support to Yingzheng in exchange for service fees; and (iv) require the registered shareholders of Yingzheng to pledge their equity interests in Yingzheng in favor of us to secure Yingzheng's performance under these agreements. However, following such a restructuring we would not be able to adopt or rely on VIE arrangements and would thus be unable to exercise effective control over Yingzheng. Such a loss of control could result in disruptions in our business that could materially and adversely affect our financial condition and results of operations. Further, we may not be able to consolidate Yingzheng's financial results in our consolidated financial statements in accordance with U.S. GAAP due to the lack of sufficient control over Yingzheng after such restructuring, which could materially and adversely affect our financial condition and results of operations.

Our contractual arrangements with our VIE and its shareholders may not be as effective in providing control over the entity as direct ownership.

        Our contractual arrangements with Yingzheng and its shareholders may not be as effective in providing us with control over Yingzheng as direct ownership in it. If Yingzheng and its shareholders

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fail to perform their respective obligations under these contractual arrangements, we may incur substantial costs and resources enforcing these arrangements, and rely on legal remedies available under applicable PRC laws, including seeking specific performance and claiming damages. In particular, if shareholders of Yingzheng refuse to transfer their equity interests to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may need to initiate legal actions to compel them to fulfill their contractual obligations.

        We are in the process of transferring all of the equity interests in Yingzheng to Dr. Lijun Zhang, our chairman, and entering into contractual arrangements with Dr. Zhang and Yingzheng. Transferring all of the equity interests in Yingzheng to Dr. Zhang will allow us to manage our relationship with Yingzheng more effectively by limiting the number of Yingzheng shareholders, whose performance and cooperation we depend upon to maintain control, to just Dr. Zhang, whose interests by virtue of his share ownership and position in our company are closely aligned with ours. We will enter into an equity pledge agreement with Dr. Zhang, pursuant to which Dr. Zhang will pledge all of his equity interests in Yingzheng in favor of us to secure performance of his and Yingzheng's obligations under the contractual arrangements. The pledge contemplated by this equity pledge agreement may not be effective or enforceable until we properly register it with the relevant local branch of the State Administration for Industry and Commerce in China, or the SAIC. If Dr. Zhang fails to perform his obligation to complete the registration procedure with us, we may have limited remedies only for breach of contract and may not be able to enforce the security interest against him.

        If the applicable PRC authorities invalidate our contractual arrangements for violation of PRC laws, rules and regulations, or Yingzheng or its shareholders terminate the contractual arrangements or fail to perform their obligations under these contractual arrangements, part of our mobile game businesses in China would be materially disrupted, and the value of our ordinary shares would decrease substantially. Furthermore, if we fail to renew these contractual arrangements upon their expiration and the relevant foreign investment restrictions remain effective, we would not be able to continue our mobile game business.

        In addition, if Yingzheng declares bankruptcy or if all or part of its assets become subject to court injunctions or asset freezes or liens or rights of third-party creditors, we may be unable to continue our business, which could materially and adversely affect our business, financial condition and results of operations. If Yingzheng undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of its assets and we would have to rely on its registered shareholders with whom we have contractual arrangements to protect our rights. The occurrence of any of these events may hinder our ability to operate part of our mobile game business, which could in turn materially harm our business and our ability to generate revenues and cause the market price of our ordinary shares to decline significantly.

The shareholders of Yingzheng may have potential conflicts of interest with us, which may adversely affect our business.

        The registered shareholders of Yingzheng are our officers or employees, namely, Yongchao Wang, De Liang and Feng Zheng. Conflicts of interest may arise between these shareholders' duties to us and Yingzheng. If such conflicts arise, these shareholders may not act in our best interests and conflicts of interest may not be resolved in our favor. In addition, these shareholders may breach or cause Yingzheng to breach or refuse to renew its existing contractual arrangements that allow us to exercise effective control over it and to receive economic benefits from it. If certain shareholders of Yingzheng do not comply with their fiduciary duties to us as our designated directors, or if we cannot resolve any conflicts of interest or disputes between us and such shareholders or any future beneficial owners of Yingzheng, we would have to rely on legal proceedings to remedy the situation, which could result in disruption of our business and substantial uncertainty as to the outcome of any such legal proceedings.

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Further, these remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into with our VIE and its shareholders. To manage our relationship with Yingzheng more effectively, we are in the process of transferring all of the equity interests in Yingzheng to Dr. Lijun Zhang, our chairman, and will enter into contractual arrangements with Dr. Zhang and Yingzheng upon the completion of the transfer.

Contractual arrangements we have entered into may be subject to scrutiny by the PRC tax authorities, and a finding that we or our VIE owe additional taxes could reduce our net income and the value of your investment.

        Under applicable PRC tax laws and regulations, arrangements and transactions among related parties may be subject to audit or scrutiny by the PRC tax authorities within ten years after the taxable year when the arrangements or transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities were to determine that the contractual arrangements among 3GUU BVI, our wholly-owned subsidiary, Yitongtianxia, our wholly-owned subsidiary in China, Yingzheng and its shareholders were not entered into on an arm's-length basis and therefore constituted unfavorable transfer pricing arrangements. Unfavorable transfer pricing arrangements could, among other things, result in an upward adjustment on taxation. In addition, the PRC tax authorities may impose interest on late payments on our consolidated affiliated entity for the adjusted but unpaid taxes. Our results of operations may be materially and adversely affected if our consolidated affiliated entities' tax liabilities increase significantly or if they are required to pay interest on late payments.

We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of the stock of our operating companies

        Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the PRC State Administration of Taxation on December 10, 2009, where a foreign investor transfers the equity interests of a PRC resident enterprise indirectly by way of the sale of equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor should report such Indirect Transfer to the competent tax authority of the PRC resident enterprise. The PRC tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor has adopted an abusive arrangement in order to avoid PRC tax, they will disregard the existence of the overseas holding company and re-characterize the Indirect Transfer and as a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at the rate of up to 10%. In addition, the PRC resident enterprise is supposed to provide necessary assistance to support the enforcement of Circular 698.

        There is little guidance and practical experience regarding the application of Circular 698, and we have not reported and it is not clear that we are required to report either our offshore restructuring transactions prior to this distribution or this distribution to the PRC tax authorities. See "Our Corporate History and Structure—Our Corporate History—Reorganization." It is possible that the PRC tax authorities would pursue our offshore enterprise shareholders to conduct a filing regarding either our offshore restructuring transactions or this distribution and request our PRC subsidiaries to assist in providing such disclosures. In addition, if our offshore subsidiaries are deemed to lack substance, they could be disregarded by the PRC tax authorities. As a result, we and our non-resident investors would

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be at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which may have a material adverse effect on our financial condition and results of operations or such non-resident enterprise investors' investments in us.

MOFCOM may determine that our contractual arrangements are subject to their national security review and if they determine that our contractual arrangements are in violation of national security regulations, our business could be materially and adversely affected.

        On August 25, 2011, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Regulations, which became effective on September 1, 2011, to implement the Circular by General Office of State Council on Establishment of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors promulgated on February 3, 2011, or the Security Review Circular. According to the Security Review Circular, if a targeted domestic enterprise is engaged in industries having a national security concern and the merger or acquisition will result in foreign investor's acquiring actual control of the domestic enterprise, the transaction is subject to security review. According to the MOFCOM Security Review Regulations, MOFCOM will focus on substance and the actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial Panel, an authority established under the Security Review Circular led by the National Development and Reform Commission and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the mobile games business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review.

        We acquired actual control over our VIE prior to promulgation of the Security Review Circular and the MOFCOM Security Review Regulations, so we do not believe we are required to submit our existing contractual arrangement to MOFCOM for security review. However, we have been advised by our PRC legal counsel, Guantao Law Firm, that as the Security Review Circular and the MOFCOM Security Review Regulations are relatively new and there is no clear statutory interpretation of them, there can be no assurance that MOFCOM will have the same view as we do when applying the national security review requirements. If MOFCOM takes the view that we are required to submit our existing contractual arrangement for review by them and the Inter-Ministerial Panel's review, and if the Inter-Ministerial Panel determines that our contractual arrangement impacts or may impact national security, MOFCOM will, at the request of the Inter-Ministerial Panel and in collaboration with relevant departments, terminate our arrangement or take other effective measures, such as an equity transfer or assets transfer, so as to eliminate the impact of our contractual arrangement on national security. Any of these events could materially and adversely affect our business, financial condition and results of operations. Further, should MOFCOM take any of these actions, we may not be able to consolidate Yingzheng's financial results in our consolidated financial statements in accordance with U.S. GAAP due to lack of sufficient control over Yingzheng after such restructuring, which could materially and adversely affect our financial condition and results of operations.

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Risks Related to Regulation of Our Services and Products

The laws and regulations regulating mobile games in China continue to evolve and change. If we fail to obtain or maintain all applicable permits and approvals, our business and operations would be materially and adversely affected.

        We are required to obtain licenses, permits and approvals from different regulatory authorities in order to conduct our business. We have obtained the Internet Publishing License from GAPP, which authorizes the release of our existing and future online mobile game products over the Internet and wireless telecommunication networks, and the Online Culture Operation License from the MOC, which is required for the operation of online mobile games. In addition, PRC laws and regulations require that all online mobile game products be approved by GAPP and filed with the MOC. Although there are clear instructions and detailed implementing rules concerning the pre-approval and filing of online games, such instructions and rules do not exist for online mobile games. Nevertheless, we are in the process of applying for GAPP approval and filing with the MOC for the online mobile games we have released. However, we cannot assure you that we will be able to renew our current permits or that going forward we will be able to obtain all required permits, approvals or filings in a timely manner or at all.

        As mobile games are at an early stage of development in China, new laws and regulations may be adopted or amended from time to time that require licenses and permits beyond those we currently have. These regulations may also restrict our ability to expand our customer and user base or to provide services in additional geographic areas. Substantial uncertainty exists regarding the implementation and interpretation of the current PRC laws and regulations applicable to the operation of mobile games, and as new laws and regulations are passed, their implementation and interpretation may also be uncertain or unfavorable to our business and operations. We cannot assure you that in the future we will be able to obtain all required permits, licenses and approvals in a timely manner, or at all, and any failure to do so could result in penalties, or a requirement to curtail or cease operating all or part of our business, any of which may materially and adversely affect our financial condition, results of operations and future prospects.

We may be subject to regulations concerning electronic publications and be required to obtain approvals and licenses or change our business model regarding single-player mobile games which could disrupt our operations, require a costly restructuring of our business or adversely affect our ability to roll out and operate new or existing single-player mobile games.

        On February 21, 2008, GAPP issued the Regulations on Administration of the Publishing of Electronic Publications, or the Electronic Publications Regulations, which became effective from April 15, 2008. The Electronic Publications Regulations require that a company wishing to publish electronic publications must obtain an Electronic Publications Publishing License from GAPP, and that the electronic publications to be published must be approved by, or filed with, GAPP. There are no interpretative materials, specific instructions or detailed implementation rules in respect of requirements or procedures for applying for the license or approvals or making filings in respect of single-player mobile games. Accordingly we have so far not obtained such license, approvals or made such filings.

        We have had meetings with GAPP officials during which we informed them of our business model regarding single-player mobile games. They informed us that by their legal nature single-player mobile games are deemed electronic publications and therefore are theoretically subject to the Electronic Publications Regulations; however, GAPP has to date never regulated the publication of single-player mobile games. During the meetings, the GAPP officials did not object to our current business model regarding single-player mobile games. Furthermore, we believe GAPP is aware that many companies in China provide single-player mobile games to the public without these approvals and licenses, and we

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are unaware of any instance in which GAPP has penalized any company for its failure to obtain the approvals and licenses. The GAPP officials further informed us that prior to promulgating and implementing any new regulations to clarify the regulatory framework for both online and single-player mobile games, GAPP is unlikely to take regulatory or enforcement actions against such companies. However, GAPP may start requiring mobile game companies, such as us, to obtain approval under the Electronic Publications Regulations and impose penalties for any past non-compliance. GAPP may take enforcement action against us if it finds any game content to be in violation of any content restrictions issued by the PRC government.

        If GAPP adopts regulations or other rules to enforce the Electronic Publications Regulations against entities that develop, publish, preinstall in handsets or distribute single-player mobile games, we may be required to obtain approvals and licenses and/or change our current business model regarding single-player games. Any failure to obtain the necessary approvals and licenses in a timely manner or at all could delay or prevent us from rolling out and operating new or existing single-player mobile games. In addition, we may be required to restructure our operations to comply with such requirements by entering into a contractual arrangement with a non-foreign invested entity which holds the Electronic Publications Publishing License and entrusting such entity to file all single-player games developed by Huiyou with GAPP for its approval. Such a restructuring could be costly and disruptive to our business and would expose us to the risks associated with such arrangements. See "—Risks Related to Our Corporate Structure—To comply with PRC laws and regulations limiting foreign ownership of telecommunication and online cultural businesses, we conduct a substantial portion of our businesses through our VIE in China by means of contractual arrangements. If the PRC government determines that these contractual arrangements do not comply with applicable regulations, our business could be materially and adversely affected."

Huiyou, our subsidiary, has historically operated online mobile games and is currently promoting certain of our online mobile games to handsets companies and design houses. If the PRC government determines that a license or permit is required for these activities, we might be subject to regulatory sanctions.

        PRC laws and regulations require that an entity should obtain an Internet Publishing License and an Online Culture Operation License from the relevant PRC government authorities in order to operate in online mobile game business. See "Regulations—Regulations on Online Games and Cultural Products." However, our PRC subsidiary, Huiyou, has historically operated certain online mobile games without obtaining the required licenses from the relevant PRC government authorities, which may expose us to penalties and other administrative actions that may have a material adverse effect upon our business.

        Currently, Huiyou is developing mobile games, including certain online mobile games. Once an online mobile game it has developed is ready to be commercialized, Huiyou licenses the game to Yingzheng, our VIE, which operates the game in its own name, and receives royalties from Yingzheng. Yingzheng currently holds all of the required licenses and certificates for online mobile game operations and is responsible for all aspects of operating the game, including server maintenance, user registration and regulatory filings and approvals. Yingzheng entrusts Huiyou to enter into contracts with handset companies and design houses to pre-install the licensed game in handsets, and with other mobile service providers for the collection of payments from end-users, for which Yingzheng pays commissions to Huiyou. Mobile network operators and service providers are responsible for collecting payments from game players and for paying the contracted portion of the payments to Huiyou, who receives them on behalf of Yingzheng, the operator of the game. Huiyou then shares the payments it receives with Yingzheng, according to their cooperation agreement. See "Our Corporate History and Structure—Cooperation Agreement between Huiyou and Yingzheng."

        Our PRC legal advisor, Guantao Law Firm, is of the opinion that this current business model does not violate applicable PRC laws and regulations because (i) Huiyou develops online mobile games and

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promotes such games to handsets companies and design houses but it is not engaged in the operation of such games; (ii) Huiyou licenses Yingzheng to operate such games in its own name and Yingzheng holds all necessary licenses and certificates for online mobile game operations; (iii) Huiyou keeps royalties and commissions for its copyright license and promotional services while Yingzheng receives from Huiyou revenues for operating the games; and (iv) there are no explicit provisions in PRC laws or regulations requiring Huiyou to obtain any approval or license in order to develop online mobile games, grant copyright licenses or provide promotional services, as contemplated by its cooperation agreement with Yingzheng. However, the relevant PRC governmental authorities may deem the activities of Huiyou described above to be the operation of online games without obtaining the required licenses, which may subject us to penalties, require us to make costly changes to our business model and materially disrupt our business.

Regulation and censorship of information disseminated over the Internet and wireless telecommunication networks in China may adversely affect our business, and the mobile service providers with which we cooperate may be liable for information displayed on, retrieved from, or linked to their platforms.

        China has enacted regulations governing telecommunication mobile service providers, Internet and wireless access and the distribution of news and other information over the Internet and wireless telecommunication networks. Under these regulations, mobile content publishers like us are prohibited from posting or displaying over the Internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is obscene, superstitious, fraudulent or defamatory. Throughout the history of our industry, many mobile games have been designed to include certain hidden content and game features that are accessible through the use of in-game cheat codes or other technological means that are intended to enhance the gameplay experience. We have implemented preventive measures designed to reduce the possibility of hidden, objectionable content from appearing in the mobile games we publish. However, these preventive measures are subject to human error, circumvention, overriding and reasonable resource constraints.

        Meanwhile, when Internet and mobile service providers find that any obscene, superstitious, fraudulent or defamatory information is transmitted on their platforms, they are required to terminate the transmission of such information or delete such information immediately, keep records, and report to relevant authorities. Mobile network operators like China Mobile, China Telecom and China Unicom also have their own policies prohibiting or restricting the distribution of inappropriate content. On December 15, 2009, the MIIT issued the Notice Regarding Plan for Further Regulating Obscene Materials on Mobile Phones, or Circular 672. Under Circular 672, mobile network operators are required to examine their business, promotional channels, as well as the business of their partners, and must immediately terminate such business if any obscene material is involved. Mobile service providers involved in distributing or publishing such obscene materials on mobile handsets are subject to immediate suspension or termination of cooperation with mobile network operators, and a violation will be reported to relevant authorities. Mobile network operators and mobile service providers must examine all websites accessed through mobile handsets and conduct full daily inspection of such websites. If any obscene material is found, access and transmission must cease and be reported to authorities. On June 3, 2010, the MOC issued the Online Game Measures, which became effective August 1, 2010, according to which companies that plan to engage in the operation of online games, issuance of virtual currency and provision of virtual currency transaction services shall obtain a license from the provincial counterpart of the MOC. The MOC is responsible for content review of online games. Online and mobile game operators are also required to establish a self-censorship mechanism and ensure the lawfulness of the content of their games and corporate operations.

        As these regulations are relatively new and subject to interpretation by the relevant authorities, it may not be possible for us to determine in all cases the type of content that could result in liability for us as a mobile game developer and operator. In addition, we may not be able to control or restrict the

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content of other content providers linked to or accessible through our mobile service providers. To the extent that regulatory authorities find any portion of the applications and content on our mobile service providers objectionable, they may require them to limit or eliminate the dissemination of such information or otherwise curtail the nature of such content on our mobile service providers, which may reduce our user traffic, which in turn decrease access to and downloading of our mobile games.

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could negatively impact China's overall economic growth, which could materially and adversely affect our business.

        We conduct substantially all of our operations in China. Accordingly, our business, financial condition, results of operations and prospects depend significantly on economic developments in China. China's economy differs from the economies of most other countries in many respects, including the amount of government involvement in the economy, the general level of economic development, growth rates and government control of foreign exchange and the allocation of resources. While the PRC economy has grown significantly over the past few decades, this growth has remained uneven across different periods, regions and economic sectors.

        The PRC government also exercises significant control over China's economic growth by allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Between late 2003 and 2008, the PRC government implemented a number of measures, such as increasing the PBOC's statutory deposit reserve ratio and imposing commercial bank lending guidelines, which slowed the growth of credit. In 2008 and 2009, however, in response to the global financial crisis, the PRC government loosened such requirements. Any actions and policies adopted by the PRC government or any prolonged slowdown in China's economy, in particular the mobile applications industry, could have a negative impact on our business, operating results and financial condition in a number of ways. For example, our users may decrease spending on our offerings, while we may have difficulty expanding our user base fast enough, or at all, to offset the impact of decreased spending by our existing users.

We may rely on dividends and other distributions from our subsidiaries in China to fund our cash and financing requirements, and any limitation on the ability of our subsidiaries to make payments to us could materially and adversely affect our ability to conduct our business.

        As an offshore holding company, we may rely principally on dividends from our subsidiaries in China for our cash requirements, including to pay dividends or make other distributions to our shareholders or to service our debt we may incur and to pay our operating expenses. The payment of dividends by entities organized in China is subject to limitations. In particular, the PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is required each year to set aside at least 10% of its annual after-tax profits (as determined under PRC accounting standards) into its statutory reserve fund until the aggregate amount of that reserve reaches 50% of such entity's registered capital. These reserves are not distributable as cash dividends.

        If our subsidiaries in China incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Any limitation on the ability of our subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions, pay dividends and otherwise fund and conduct our business.

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PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using the proceeds of any offering to make loans or capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and ability to fund and expand our business.

        We may transfer funds to our PRC subsidiaries or finance our PRC subsidiaries by means of shareholder's loans or capital contributions upon completion of an offering. Any loans to our PRC subsidiaries, which are foreign-invested enterprises, cannot exceed statutory limits based on the amount of our investments in such subsidiaries, and shall be registered with the State Administration of Foreign Exchange, or SAFE, or its local counterparts. Furthermore, any capital contributions we make to our PRC subsidiaries shall be approved by the MOFCOM or its local counterparts. We may not be able to obtain these government registrations or approvals on a timely basis, if at all. If we fail to receive such registrations or approvals, our ability to provide loans or capital contributions to our PRC subsidiaries may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

        In addition, SAFE promulgated the Circular on the Relevant Operating Issues concerning Administration Improvement of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or Circular 142, on August 29, 2008. Under Circular 142, registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies may only be used within the business scope approved by the applicable governmental authority and may not be used for equity investments in the PRC, unless otherwise provided by PRC laws. In addition, foreign-invested companies may not change how they use such capital without SAFE's approval, and may not in any case use such capital to repay Renminbi loans if they have not used the proceeds of such loans. Furthermore, SAFE promulgated a circular on November 9, 2010, or Circular 59, which requires the authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in the offering documents. SAFE further promulgated the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses, or Circular 45, on November 16, 2011, which expressly prohibits foreign-invested enterprises from using the registered capital settled in Renminbi converted from foreign currencies to grant loans through entrustment arrangements with a bank, repay inter-company loans or repay bank loans that have been transferred to a third party. Circular 142, Circular 59 and Circular 45 may significantly limit our ability to transfer the net proceeds from an offering to our PRC subsidiaries and convert the net proceeds into Renminbi, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

        One of our offshore holding companies, 3GUU BVI, entered into a supplementary agreement with Yingzheng, our VIE, on December 16, 2011. Under this agreement, 3GUU BVI is obligated to provide Yingzheng with continuing financial support to meet the capital demands of Yingzheng for its business operations. Under the current PRC law and policies regarding foreign direct investment and foreign debt, there are only limited means for an offshore company to provide financial support to a domestic PRC company. Currently, the only way that 3GUU BVI is able to provide financial support to Yingzheng is by providing a guarantee for Yingzheng to secure an RMB loan from a bank within the PRC. 3GUU BVI's provision of a guarantee to Yingzheng is subject to approval from SAFE, which has broad discretion whether to grant approval and which approval will specify the maximum loan amount that Yinzheng can obtain using the guarantee, and approval from any other relevant authorities, depending upon the specific mechanism or arrangement adopted by 3GUU BVI and Yingzheng. We may not be able to obtain approval from SAFE or the other required authorities on a timely basis, or for the amount required by Yingzheng using the guarantee, or at all, which could impact our ability to provide financial support to Yingzheng.

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Fluctuations in the value of the Renminbi may materially and adversely affect your investment.

        The value of the Renminbi against the U.S. dollar and other currencies may fluctuate. Exchange rates are affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of foreign currencies. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. From July 2008 until June 2010, however, the Renminbi has traded stably within a narrow range against the U.S. dollar.

        There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against foreign currencies. On June 20, 2010, the PBOC announced that the PRC government would reform the Renminbi exchange rate regime and increase the flexibility of the exchange rate. We cannot predict how this new policy will impact the Renminbi exchange rate.

        Our revenues and costs are mostly denominated in the Renminbi, and a significant portion of our financial assets are also denominated in the Renminbi. Any significant fluctuations in the exchange rate between the Renminbi and the U.S. dollar may materially and adversely affect our cash flows, revenues, earnings and financial position, and the amount of and any dividends we may pay on the ADSs in U.S. dollars. In addition, any fluctuations in the exchange rate between the Renminbi and the U.S. dollar could also result in foreign currency translation losses for financial reporting purposes.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

        The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our wholly-owned PRC subsidiaries in China, Huiyou, OWX Beijing, and Yitongtianxia, to fund any cash and financing requirements we may have. See "Our Corporate History and Structure."

        Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements. Therefore, Huiyou, OWX Beijing and Yitongtianxia may pay dividends in foreign currency to us without pre-approval from SAFE. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. With the prior approval from SAFE, cash generated from the operations of our PRC subsidiary may be used to pay off debt they owe to entities outside China in a currency other than the Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.

Uncertainties in the PRC legal system could materially and adversely affect our business.

        We conduct our business primarily through our subsidiaries and affiliated entities in China. Our operations in China are governed by PRC laws and regulations. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

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        In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, and forms of foreign investment (including wholly foreign-owned enterprises and joint ventures) in particular. These laws, regulations and legal requirements, including those governing PRC tax matters, are relatively new and amended frequently, and their interpretation and enforcement often raise uncertainties that could limit the reliability of the legal protections available to us. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violations of these policies and rules until the violations have occurred. Furthermore, any litigation in China may be protracted and result in substantial costs and diversion of resources and management's attention. We cannot predict future developments in the PRC legal system. We may be required to procure additional permits, authorizations and approvals for our operations, which we may not be able to obtain. Our inability to obtain such permits or authorizations may materially and adversely affect our business, financial condition and results of operations.

We may be required to obtain approval of the China Securities Regulatory Commission, or the CSRC, before listing and trading the ADSs on the Nasdaq Global Market.

        Pursuant to the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rules, an offshore special purpose vehicle formed for purposes of overseas listing and controlled directly or indirectly by PRC companies or individuals shall obtain CSRC approval prior to listing and trading its securities on an overseas stock exchange. On December 14, 2006, the CSRC published procedures for special purpose vehicles to obtain approval of overseas listings. The procedures include filing documents with the CSRC and take several months to complete. The application of this new PRC regulation remains unclear.

        Our PRC legal counsel, Guantao Law Firm, is of the opinion that prior CSRC approval for this distribution is not required because we are not an offshore special purpose vehicle controlled directly or indirectly by PRC companies or individuals as defined by the New M&A Rules. However, we cannot assure you that PRC government authorities, including the CSRC, will reach the same conclusion as our PRC legal counsel. If the CSRC or other PRC government authorities determine that prior CSRC approval is required, any future registered offering will be delayed until we obtain the approval from the CSRC, which may take several months or longer. If a prior approval from the CSRC is required but not obtained, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities.

        These regulatory authorities may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from future offerings into the PRC, or take other actions that could materially and adversely affect our business or the trading price of the ADSs. The CSRC or other PRC regulatory authorities may also require us, or make it advisable for us, to halt an offering before settlement and delivery of the ADSs offered. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur.

A failure by the beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.

        SAFE has promulgated several regulations, including the Notice on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or Circular 75, effective on November 1, 2005, and the Notice on Printing and Distributing the Implementing Rules for Administration of Foreign Exchange in Fund-Raising and Roundtrip Investment Activities of Domestic Residents Conducted via Offshore

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Special Purpose Companies, or Circular 19, issued on May 20, 2011 and effective from July 1, 2011. These regulations require PRC residents (including any PRC citizen) and PRC corporate entities to register with local branches of SAFE in connection with their direct or indirect offshore investment activities. In the event that a PRC shareholder with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries of that offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

        These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future. In practice, however, different local SAFE branches may have different views on application and implementation of the SAFE regulations and we cannot assure you that all of our beneficial owners that are PRC residents will be able to register or update the registration of their direct and indirect equity interest in us as required. If they fail to make or update the registration, our PRC subsidiaries could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting our PRC subsidiaries' ability to distribute dividends to, or obtain loans denominated in foreign currencies from, our company, or prevent us from paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Failure to comply with the registration requirements for employee share option plans may subject our PRC equity incentive plan participants or us to fines and other legal or administrative sanctions.

        In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen's participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In addition, Circular of the SAFE on Relevant Issues Concerning the Foreign Exchange Administration for Domestic Individuals' Participating in the Share Incentive Schemes of Overseas-Listed Companies, or Circular 7, was promulgated by the SAFE on February 15, 2012.

        In accordance with Circular 7, PRC residents who are granted shares or share options by an overseas publicly-listed company under a share incentive scheme are required, through the PRC subsidiary of the overseas publicly-listed company, to entrust a PRC agent to register with SAFE or its local office and complete certain procedures relating to the share incentive schemes. A PRC agent can be one of the PRC subsidiaries participating in the share incentive scheme or another institution qualified to hold the assets as designated by the PRC subsidiary and in accordance with PRC laws. We and our PRC employees who receive stock option plan will be subject to these regulations when we are listed in the United States. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and other legal or administrative sanctions.

We may be classified as a "resident enterprise" for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

        Under the PRC Enterprise Income Tax Law, or the New EIT Law, and its implementation rules, both effective from January 1, 2008, an enterprise established outside of the PRC with "de facto management bodies" within the PRC is considered a PRC resident enterprise and is subject to a 25% enterprise income tax on its global income. The implementation rules further define the term "de facto management bodies" as establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting and properties of an enterprise. The State Administration of Taxation, or the SAT, issued the Notice Regarding the Determination of

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Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, which sets out certain specific criteria for determining whether the "de facto management body" of a Chinese-controlled offshore incorporated enterprise is located in China.

        Although such circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in Circular 82 may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals. As a result, we cannot assure you that the SAT will not implement Circular 82 or amend the rules in the future to the effect that such rules will apply to us or any of our overseas subsidiaries. The SAT issued the Administrative Measures on Enterprise Income Tax of Foreign-Incorporated Chinese-Controlled Resident Enterprises (Trial) on July 27, 2011, which will take effect from September 1, 2011. According to these measures, in the event that the PRC authorities subsequently determine that we should be treated as a resident enterprise and ever decide to issue the Resident Enterprise Recognition Letter for Foreign-Incorporated Chinese-Controlled Enterprises to us, we are required to handle all tax matters according to the rules governing PRC resident enterprises for the enterprise income tax purpose from the year when such letter is issued to us. A 25% enterprise income tax will be imposed on our global income, which could significantly increase our tax burden and materially and adversely affect our financial condition and results of operations. In addition, dividends paid to us from our PRC subsidiaries would qualify as "tax-exempted income." Finally, dividends payable by us to our investors and gain on the sale of our shares may become subject to PRC withholding tax.

Any change in the tax treatment we currently enjoy in the PRC may materially and adversely impact our net income.

        Our PRC subsidiaries are incorporated in the PRC and are governed by applicable PRC income tax laws and regulations. The New EIT Law and its implementing rules, both of which came into effect on January 1, 2008, impose a statutory rate of 25% on PRC enterprises. However, the New EIT Law also permits enterprises to continue to enjoy their existing tax incentives, adjusted by certain transitional phase-out rules, under which enterprises established before the promulgation date of the New EIT Law that were granted tax holidays under the then effective tax laws or regulations may continue to enjoy their tax holidays until their expiration. Our VIE, Yingzheng, as an enterprise established before the promulgation date of the New EIT Law, was entitled to enjoy its exemption of enterprise income tax exemption from 2006 and 2007 and a 50% reduced tax rate of 12.5% from 2008 to 2010. In addition, under the New EIT Law and its implementation regulations, newly established software enterprises are entitled to a two-year exemption followed by a three-year 50% enterprise income tax rate reduction from its first profit-making year. Beijing Dongganlefeng Information Technology Co., Ltd., or Donggan, one of our subsidiaries, obtained the new software enterprise status in May 2009 and therefore is entitled to enjoy tax exemption from 2008 to 2009 and a 50% reduced tax rate of 12.5% from 2010 to 2012. However, as Donggan was dormant during 2010, it was not entitled to any tax holiday and its applicable tax rate in 2010, 2011 and the first three months of 2012 was 25%. Preferential tax treatments and incentives granted to us by PRC governmental authorities are subject to review and may be adjusted or revoked at any time in the future. While the PRC enterprise income tax is generally imposed based on actual taxable income, some of our subsidiaries pay enterprise income tax based on a deemed profit calculation. Shenzhen Qilewuxian Software Development Co., Ltd., Shenzhen Yikechuanghui Technology Co., Ltd., and Shenzhen Douwan Network Technology Co., Ltd., or Shenzhen Douwan, paid enterprise income taxes calculated according to deemed profit rates from 6% to 10% during certain taxable periods based on documentation issued by the local tax authorities in lieu of their actual profits. However, starting from July 1, 2011 and January 1, 2012, respectively, Shenzhen Yikechuanghui Technology Co., Ltd. and Shenzhen Douwan ceased applying the deemed

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profits methodology as they are each no longer qualified under the applicable criteria. In addition, Shenzhen Qilewuxian Software Development Co., Ltd. is in the process of ceasing to apply the deemed profits methodology. We cannot assure you that the local tax authorities will not, in the future, change their position and discontinue any of our current tax treatments, potentially with retroactive effect. The discontinuation of any of our current tax treatments could materially increase our tax obligations and adversely impact our net income.

The New EIT Law will affect tax exemptions on dividends to be paid by our PRC subsidiaries to us through our Hong Kong subsidiaries and we may not be able to obtain certain treaty benefits under the relevant tax treaty.

        We are a holding company incorporated under the laws of the Cayman Islands. We conduct substantially all of our business through our PRC subsidiaries and we derive all of our income from it. Prior to January 1, 2008, dividends derived by foreign enterprises from business operations in China were not subject to the PRC enterprise income tax. However, under the New EIT Law and its implementation rules, dividends payable by a foreign-invested enterprise in China to its shareholders that are "non-resident enterprises" are subject to a 10% withholding tax starting from January 1, 2008, unless such shareholders' jurisdiction of incorporation has a tax treaty with China that provides for a preferential arrangement.

        Pursuant to the Notice of the SAT on Issuing the Table of Tax Rates on Dividends in Treatises, or Notice 112, which was issued on January 29, 2008, the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, or the Double Taxation Arrangement (Hong Kong), which became effective on December 8, 2006, such withholding tax may be lowered to 5% if the PRC enterprise is at least 25% directly held by a Hong Kong enterprise. In October 2009, the SAT further issued the Notice on How to Understand and Determine the "Beneficial Owners" in Tax Treaties, or Circular 601. According to Circular 601, non-resident enterprises that cannot provide valid supporting documents as "beneficial owners" may not be approved to enjoy tax treaty benefits, and "beneficial owners" refers to individuals, companies or other organizations which are normally engaged in substantive operations. These rules also set forth certain adverse factors on the recognition of a "beneficial owner." Specifically, they expressly exclude a "conduit company" that is usually established for the purposes of avoiding or reducing tax obligations or transferring or accumulating profits and not engaged in substantive operations such as manufacturing, sales or management, from being a "beneficial owner." As a result, dividends from our PRC subsidiaries paid to us through our Hong Kong subsidiaries may be subject to a reduced withholding tax at a rate of 5% if our Hong Kong subsidiaries are determined to be Hong Kong tax residents and are considered to be "beneficial owners" that are generally engaged in substantive business activities and entitled to treaty benefits under the Double Taxation Arrangement (Hong Kong). Otherwise, we may not be able to enjoy the preferential withholding tax rate of 5% under the tax arrangement and therefore be subject to withholding tax at a rate of 10% with respect to dividends to be paid by our PRC subsidiaries to us through our Hong Kong subsidiaries.

New labor laws in the PRC may adversely affect our results of operations.

        On June 29, 2007, the PRC government promulgated the PRC Labor Contract Law, which became effective on January 1, 2008. The PRC Labor Contract Law imposes greater liabilities on employers and significantly impacts the cost of an employer's decision to reduce its workforce. Furthermore, the PRC Labor Contract Law requires certain terminations to be based upon seniority and not the merits of employees. As a result, the PRC Labor Contract Law could increase our operating expenses and limit our ability to significantly change or decrease our workforce.

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Certain of our subsidiaries have not made all necessary contributions to social insurances and the housing fund, which could subject us to penalties, including fines and court enforcement.

        In accordance with the relevant laws and regulations on social security, employers in the PRC are required to make contributions to various social insurances (including medical, pension, unemployment, work-related injury and maternity insurance) and the housing fund on behalf its employees. As of the date of this prospectus, certain of our subsidiaries have not made all necessary contributions to the various social insurances and the housing fund on behalf of their employees, the aggregate amount of which is RMB2.3 million (US$0.4 million), for which we have made a full provision. Our PRC legal counsel, Guantao Law Firm, has advised us that our failure to make such payments could subject us to penalties, including fines, and court enforcement.

If the custodians or authorized users of our corporate chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these corporate instruments, our business and operations could be materially and adversely affected.

        The corporate chops and seals of our PRC entities are essential to our ability to enter into contracts, conduct banking business and take certain corporate actions, including registering any change to the composition of the board of directors or management with the relevant PRC authorities. In order to maintain the physical security of our corporate chops and seals, we generally store these items in secured locations accessible only to authorized personnel, who are usually members of our senior management. Although we monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. Accordingly, if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could experience significant disruption to our operations. Attempts to remedy such disruption may involve expensive legal or other proceedings, and we may not prevail for a long time or at all. In particular, during any period we lose effective control of an entity as a result of such misuse or misappropriation, the business activities and economic contribution of the affected entity could be severely disrupted, or our auditor may be unable to access documents and information from such entities that may be necessary for them to complete an audit of the consolidated financial statements of our group.

Risks Related to the ADSs and This Distribution

There has been no public market for our ordinary shares or ADSs prior to the listing of the ADSs on the Nasdaq Global Market, and you may not be able to sell the ADSs at an attractive price, or at all.

        Prior to the listing of the ADSs, there has been no public market for our ordinary shares or ADSs. We have applied to list the ADSs on the Nasdaq Global Market and expect that trading will begin the first trading day after completion of the distribution. Our ordinary shares will not be listed or quoted for trading on any other exchange. An active and liquid trading market for the ADSs may not develop as a result of this distribution or be sustained in the future. If an active trading market for the ADSs does not develop or is not sustained, it may be difficult for you to sell our ADSs at an attractive price, or at all, and could cause the market price of our ADSs to decline or be more volatile. Furthermore, if such active trading market does not develop or is not sustained, we may not be able to meet the Nasdaq Global Market's continued listing requirements or seek listing on another globally recognized exchange.

The market price for the ADSs may be volatile.

        We cannot predict the market price of the ADSs at the time of, or subsequent to, the distribution. The market price of the ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

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regulatory developments in the mobile game industry;

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actual or anticipated fluctuations in our quarterly or annual results of operations;

•

changes in financial estimates by securities research analysts or the failure by securities research analysts to cover our ADSs after the listing;

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negative publicity, studies or reports;

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changes in conditions of Internet and mobile security industry;

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changes in performance and valuation of our peer or comparable companies;

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announcements by us or our competitors of new services, acquisitions, strategic relationships, joint ventures or capital commitments;

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changes in our senior management;

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fluctuations in the exchange rate between the Renminbi and the U.S. dollar; and

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sales or anticipated sales of additional ordinary shares or ADSs.

        In addition, securities markets have experienced significant price and volume fluctuations unrelated to the operating results of any particular companies. These market fluctuations may also materially adversely affect the market price of the ADSs.

Our ADSs may have a low trading volume and limited liquidity, resulting from a lack of analyst coverage and institutional interest.

        Our ADSs may receive limited attention from market analysts. Lack of up-to-date analyst coverage may make it difficult for potential investors to fully understand our operations and business fundamentals, which may limit our trading volume. Such limited liquidity may impede the development of institutional interest in our ADSs, could adversely affect the value of our ADSs and limit your ability to sell our ADSs.

We are exempt from some of the corporate governance requirements of the Nasdaq Global Market.

        As a subsidiary of VODone, we are exempt from some of the corporate governance requirements of the Nasdaq Global Market by virtue of being a controlled company. Specifically, we are not required to:

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have a majority of independent directors on our board (other than due to the requirements for the audit committee under the Exchange Act); and

•

have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors.

        As a foreign private issuer, we may be exempt from these and other corporate governance requirements of the Nasdaq Global Market, though we intend to comply with such requirements. Should we choose not to comply, we are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practice required to be followed by U.S. domestic companies under the Nasdaq Global Market requirements. Although we currently do not intend to rely on any of the exemptions to corporate governance requirements of the Nasdaq Global Market, if we choose to rely on such exemptions in the future, the level of independent oversight over management of our company may afford less protection to our shareholders.

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We may be classified as a passive foreign investment company, which could result in adverse United States federal income tax consequences to United States holders of the ADSs or ordinary shares.

        We do not expect to be a passive foreign investment company, or PFIC, for United States federal income tax purposes for our current taxable year, although we may become a PFIC in the foreseeable future. The application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the United States Internal Revenue Service will not take a contrary position. A non-United States corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year.

        The classification of certain of our income as active or passive, and certain of our assets as producing active or passive income, and hence whether we expect to be or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations relating to royalty income and income from intangible assets, as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations and guidance are potentially subject to different interpretations. If the percentage of our assets treated as producing passive income increases, we may become a PFIC for the current or one or more future taxable years.

        In addition, the determination of whether we expect to be or will become a PFIC will depend in part upon the value of our goodwill and other unbooked intangibles not reflected on our balance sheet (which may depend upon the market value of the ADSs or ordinary shares) and also will be affected by how, and how quickly, we spend our liquid assets. In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our anticipated market capitalization following the listing of the ADSs on the Nasdaq Global Market. In addition, we have assumed that no offering or private placement of our ADSs or ordinary shares will take place in the current taxable year. Among other matters, if our market capitalization is less than anticipated or subsequently declines, we may be or become a PFIC for the current or future taxable years because our liquid assets and cash (which are for this purpose considered assets that produce passive income) may then represent a greater percentage of our overall assets. Further, while we believe our classification methodology and valuation approach is reasonable, it is possible that the Internal Revenue Service may challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our company being or becoming classified as a PFIC for the current or one or more future taxable years.

        We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% by value of the stock. Although the law in this regard is unclear, we treat Yingzheng as being owned by us for United States federal income tax purposes. If it is determined, however, that we are not the owner of Yingzheng for United States federal income tax purposes, the composition of our income and assets would change and we may become a PFIC for the current or one or more future taxable years. See "Taxation—United States Federal Income Taxation—Passive Foreign Investment Company."

        If we are a PFIC for any taxable year during which a United States person holds an ADS or ordinary share, certain adverse United States federal income tax consequences could apply to such United States Holder. See "Taxation—United States Federal Income Taxation—Passive Foreign Investment Company."

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Our dual-class ordinary share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

        Pursuant to our amended and restated memorandum and articles of association that will become effective upon the listing of the ADSs on the Nasdaq Global Market, our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to five votes per share. We may issue Class A ordinary shares represented by ADSs in future registered offerings. Only VODone and its affiliates, namely Dragon Joyce, OWX Holding and Action King, will hold our Class B ordinary shares.

        Each Class B ordinary share will be convertible into one Class A ordinary share at any time upon the Class B shareholder's request. Class A ordinary shares will not be convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares to any person or entity which is not an affiliate of the Class B shareholder, such Class B ordinary shares will automatically and immediately convert into an equal number of Class A ordinary shares.

        Due to the disparate voting powers attached to these two classes, we anticipate that our existing shareholders will collectively own approximately 98.0% of the voting power of our outstanding ordinary shares after this distribution and will have considerable influence over matters requiring shareholder approval, including election of directors and significant corporate transactions, such as a merger of our company. In particular, VODone will own approximately 57.2% of our outstanding ordinary shares, representing 87.0% of our total voting power after this distribution. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.

We may need additional capital, and the sale of additional ADSs or other equity securities could result in dilution to our shareholders.

        We believe that our current cash and cash equivalents, anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell equity or debt securities or obtain a credit facility. The sale of equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all.

Substantial future sales of the ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.

        Our ADSs issuable to VODone shareholders in connection with this distribution generally may be sold immediately in the public market. Although we have no actual knowledge of any plan or intention on the part of any significant shareholder to sell our ADSs following the distribution, some of our ADS holders may sell ADSs received in connection with this distribution for various reasons. For example, our business profile or market capitalization as an independent company may not fit such ADS holder's investment objectives and we will be listed in a jurisdiction that may be unfamiliar to some ADSs holders. Sales of significant amounts of our ADSs or the perception in the market that this will occur may result in the lowering of the price of our ordinary shares and could impair our future ability to

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raise capital through an offering of our equity securities. 91,792,619 ordinary shares outstanding after this distribution will not be held by affiliates and will be available for resale.

        Furthermore, certain holders of VODone's ordinary shares will not receive ADSs due to that such shareholders are located in a jurisdiction outside of Hong Kong that is not permitted to receive ADSs or have filled out an invalid direction form. The ADSs for such shareholders will be sold by one or more brokers on the holders' behalf as soon as reasonably practicable after the commencement of dealings in the ADSs on the Nasdaq Global Market. There will be no assurance of when or at what price these ADSs will be sold by these brokers, and neither VODone nor we shall have any influence over such decision. The period for resale of the ADSs may be as long as three months. Moreover, such resale may create a market overhang that may depress the price of our ADSs.

Our memorandum and articles of association will contain anti-takeover provisions that could materially and adversely affect the rights of holders of our ordinary shares and ADSs.

        We have adopted an amended and restated memorandum and articles of association that will become effective upon the listing of the ADSs on the Nasdaq Global Market. Our amended and restated articles of association will contain provisions that could limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could deprive our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges and relative participating, optional or special rights and their qualifications, limitations or restrictions. These preferred shares may include dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may provide rights and preferences that holders our ordinary shares or ADSs do not have.

        We could issue preferred shares quickly on terms that could delay or prevent a change in control of our company or make removal of management more difficult. If we issue preferred shares, the price of the ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.

        Furthermore, our amended and restated articles of association provide for a staggered board, which means that our directors are divided into three classes, with one-third of our board retiring from office and standing for re-election at each general meeting of our shareholders. Accordingly, with our staggered board, at least two annual general meetings of our shareholders instead of one, are generally required in order to effect a change in a majority of our directors as a result of retirement by rotation. Our staggered board can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to take control of our board in a relatively short period of time.

The depositary for our ADSs may give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not give voting instructions, which could adversely affect your interests.

        Under the deposit agreement for the ADSs, if we asked for your instructions but the depositary does not receive your instructions by the cutoff date it sets, the depositary will give us a discretionary proxy to vote the ordinary shares underlying your ADSs as to all matters at the shareholders' meeting unless:

•

we instructed the depositary we do not wish to receive a discretionary proxy;

•

we informed the depositary that there is substantial opposition to the particular matter; or

•

the particular matter would have a material adverse impact on shareholders.

49

        The effect of this discretionary proxy is that if you do not give voting instructions, you cannot prevent the ordinary shares underlying your ADSs from being voted, except in the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

Holders of the ADSs will not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise their right to vote through the depositary.

        Holders of the ADSs will not be able to directly exercise voting rights attaching to the ordinary shares represented by their ADSs. Holders of the ADSs will have the right to instruct the depositary how to vote the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, and you may not have the opportunity to exercise a right to vote.

Holders of the ADSs may not be able to participate in rights offerings and may experience dilution of your holdings as a result.

        We may distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act with respect to all holders of ADSs.

        We are not obligated to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take advantage of any exemptions from registration under the Securities Act. Accordingly, holders of the ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

Holders of the ADSs may be subject to limitations on transferring their ADSs.

        The ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems doing so expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs when our books or the books of the depositary are closed, when we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, under any provision of the deposit agreement or for any other reason.

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, holders of our ADSs may have less protection of your shareholder rights than you would under U.S. law.

        Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, the rights of minority shareholders to institute actions and the fiduciary responsibilities of our directors to us are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the latter of which has persuasive, but not binding, authority on a court in the Cayman Islands.

        The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in the United States. In particular, the Cayman Islands has a less developed body of securities law than the United States. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States. As a result, our public shareholders

50

may encounter more difficulty in protecting their interests against actions taken by the management, the board of directors or the controlling shareholders of our company than they would as shareholders of a public company incorporated in the United States.

You may have difficulty enforcing judgments obtained against us.

        We are a Cayman Islands company, and we conduct substantially all of our operations in the PRC. Substantially all of our assets are located outside of the United States. In addition, most of our directors and officers are nationals and residents of countries other than the United States. As a result, it may be difficult for you to effect service of process upon our directors and officers in the United States. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents of the United States and the substantial majority of whose assets are located outside of the United States.

        In addition, the courts of the Cayman Islands or the PRC may not recognize or enforce judgments of U.S. courts against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state. Furthermore, Cayman Islands or PRC courts may not be competent to hear original actions brought in the Cayman Islands or the PRC against us or our directors and officers predicated upon the securities laws of the United States or any state. See "Enforceability of Civil Liabilities."

We will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity.

        Upon completion of this distribution, we will become a public company in the United States. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, Sarbanes-Oxley and rules and regulations implemented by the SEC and the Nasdaq Global Market require significantly heightened corporate governance practices for public companies. We expect that these rules and regulations will increase our legal, accounting and financial compliance costs and will make many corporate activities more time-consuming and costly.

        We do not expect to incur materially greater costs as a result of becoming a public company than those incurred by similarly sized U.S. public companies. If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors may lose confidence in us and the market price of the ADSs could decline.

We are a "foreign private issuer," and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

        We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

        As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since

51

many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by the Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

        The independent registered public accounting firm that issues the audit reports included in our filings made with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because it is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting firms operating in China, does not undergo regular PCAOB inspection.

        Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms' audit and quality control procedures, which may be addressed as part of the inspection process to improve the quality of future audits. The inability of PCAOB to inspect independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor's audit or quality control procedures compared to those conducted by auditors outside of the PRC that are subject to PCAOB inspections. As a result, investors may be deprived of the benefits of PCAOB inspections and they may lose confidence in our reported financial information and procedures and the quality of our financial statements.

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FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to us. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our Industry" and "Our Business." These statements involve known and unknown risks, uncertainties and other factors, including those listed under "Risk Factors," which may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

        In some cases, you can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

•

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 and/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.

        This prospectus also contains data related to the mobile game industry in China, including projections that are based on a number of assumptions. These market data include market data from the Analysys Report. The mobile game industry in China may not grow at the rates projected by the market data, or at all. The failure of the markets to grow at the projected rates may have a material adverse effect on our business and the market price of the ADSs. In addition, the rapidly changing nature of the mobile game industry in China subjects any projections or estimates relating to the growth prospects or future condition of our market to significant uncertainties. If any one or more of the assumptions underlying the market data turns out to be incorrect, our actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

        You should read thoroughly this prospectus and the documents that we refer to in this prospectus with the understanding that our actual results in the future may be materially different from or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this prospectus include additional factors which could adversely affect our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

        You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

53

THE DISTRIBUTION

        VODone Limited plans to make a distribution of 1,574,741 ADSs, representing 22,046,374 Class A ordinary shares, par value US$0.001 per share, of our company, or approximately 6.7% of our total shares outstanding to VODone's shareholders. At the time of this distribution, VODone will cause the ADSs to be distributed on a pro rata basis to its shareholders. Holders of VODone's ordinary shares will be entitled to receive one ADS, representing 14 Class A ordinary shares, for every 2,000 VODone ordinary shares held on the record date. All entitlements will be rounded down to a whole number of ADSs, and fractional entitlements will be disregarded.

Reasons for the Distribution

        VODone, a company incorporated in Bermuda with limited liability, is a state-affiliated leading new media company in China which operates a nation-wide audio-video broadband transmission platform, delivering a range of cross media telecommunications contents and valued-added services through the Internet. The board of directors of VODone periodically reviews and assesses strategic alternatives to ensure that its assets are being utilized in the best manner to create value for VODone and its shareholders. After considering alternatives, including an initial public offering and remaining a private company, the VODone board determined that the best strategy for realizing the potential value of our assets was to effect this distribution and listing of our ADSs on an international stock exchange. The VODone board determined that the distribution and listing will enhance the stand-alone character of our business and operations without the expenses and uncertainties of raising new capital through an initial public offering, which new capital we do not currently require. The board of directors of VODone believes that the distribution and listing will:

•

allow our management and management of VODone to each focus on their own respective businesses as public companies, as we and VODone have different business strategies and growth prospects. The listing will allow the two companies to maintain separate platforms for their businesses without any overlap in management. In addition, despite our separate platforms, we have entered into a Non-Compete Agreement with VODone under which VODone agreed not to engage or assist any of its other subsidiaries in engaging in the mobile game development and operation or the handset design business in China without our consent,

•

allow for our own equity-based options in order to enable us to provide incentives for management and other key employees that are directly related to the market performance of our publicly traded shares,

•

allow us direct access to U.S. capital markets to finance our product and research development activities,

•

allow the financial community to focus separately on our and VODone's businesses,

•

facilitate acquisitions, joint ventures and partnerships by VODone and us with other companies focusing on the same or complementary businesses and technologies, and

•

allow VODone to return value to its shareholders, and provide VODone shareholders with a direct ownership interest in us in addition to the indirect interest in us that they have as VODone shareholders.

        The distribution and listing involve certain risks and uncertainties that may materially affect us. Please see "Risk Factors" for a more detailed discussion of risks and uncertainties relating to the distribution and listing, in particular "Risk Factors—Risks Related to the ADSs and This Distribution—There has been no public market for our ordinary shares or ADSs prior to the listing of the ADSs on the Nasdaq Global Market, and you may not be able to sell the ADSs at an attractive price, or at all" and "—We will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity."

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        We will bear the cost of all fees and expenses incurred in connection with the distribution and listing of ADSs representing our Class A ordinary shares on the Nasdaq Global Market. We anticipate that the aggregate of these fees and expenses will be approximately US$2,905,990.

Manner of the Distribution

        VODone expects to effect the distribution on or about September 21, 2012 by instructing The Bank of New York Mellon, as depositary, to deliver ADSs to VODone's shareholders. To be entitled to receive ADSs in the distribution, VODone shareholders must be registered shareholders of VODone on September 5, 2012, the record date.

        Based on 3,149,563,262 VODone ordinary shares outstanding as of the date of this prospectus, each holder of VODone ordinary shares will receive one ADS, representing 14 Class A ordinary shares of our company, for each 2,000 ordinary shares of VODone on the record date. For the avoidance of doubt, registered holders of less than 2,000 Shares on the record date will not be entitled to the distribution and all entitlements will be rounded down to a whole number of ADSs. Our Class A ordinary shares will be deposited with the custodian, as agent of the depositary. The depositary, will deliver the ADSs, which initially will be evidenced by ADRs. Each ADS represents an ownership interest in 14 Class A ordinary shares deposited with the custodian under the deposit agreement among us, the depositary and owners and beneficial owners of ADSs.

        The distribution is expected to be made in book-entry form.

        Prior to the distribution, a direction form will be dispatched to holders of VODone's ordinary shares. Any VODone shareholder will be able to receive the ADSs if the shareholder specifies a DTC participant account or the details of a broker or dealer who is a DTC participant.

        Any VODone shareholder whose address on VODone's register on the record date is in a jurisdiction outside Hong Kong and is not permitted to receive ADSs, or who has filled out an invalid direction form, will not receive ADSs. Instead, the ADSs will be sold by one or more brokers designated by VODone on the shareholder's behalf as soon as reasonably practicable after the commencement of dealings in the ADSs on the Nasdaq Global Market and the shareholder will receive a cash amount equal to the net proceeds of such sale. There will be no assurance of when or at what price these ADSs will be sold by the brokers, and neither we nor VODone will have any influence over such decision. The proceeds of the sale, net of commissions and expenses, will be paid to the shareholders in Hong Kong dollars at the exchange rate prevailing on the fifth business day before the expected date of despatch of cheques, rounded down to the nearest Hong Kong dollar. Cheques for all cash payments are expected to be despatched on or before December 28, 2012.

        Any direction form will be treated as invalid if:

(i)

it is incomplete; or



(ii)

the VODone shareholder is unable to provide the correct details of a DTC participant account or details of a broker or dealer who is a DTC participant (including details of the DTC participant, account and other information listed on the direction form); or



(iii)

the broker or dealer is not a DTC participant or refuses to accept ADSs, such that the ADSs could not be credited for the account specified in the direction form.

        VODone shareholders will not be required to pay for the ADSs received in the distribution or to surrender or exchange shares of VODone ordinary share to receive the ADSs.

Fractional ADSs

        As a result of the distribution ratio, no fractional ADSs will be distributed to VODone shareholders and all entitlements will be rounded down to a whole number of ADSs.

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Results of the Distribution

        After the distribution, we will be a publicly traded company. Immediately after the distribution made under this prospectus, we expect to have approximately 1,574,741 ADSs outstanding, representing 22,046,374 Class A ordinary shares outstanding. Upon the completion of this distribution, VODone will continue to be our controlling shareholder, with a shareholding of 57.2% of the combined total of our outstanding Class A and Class B ordinary shares, and control of 87.0% of the voting power of the combined total of our outstanding Class A and Class B ordinary shares.

Trading Market

        VODone currently owns approximately 63.9% of the voting power of our outstanding ordinary shares, and there has been no public market for our ordinary shares or ADSs. We have applied to list the ADSs on the Nasdaq Global Market under the symbol "CMGE"; however, an active trading market may not develop or be sustained in the future.

        We cannot predict the prices at which the ADSs may trade before the distribution on a "when-issued" basis or after the distribution. "When-issued" trading refers to a transaction made conditionally because the security has been authorized but not yet issued. On the first trading day after the distribution date, any "when-issued" trading in respect of the ADSs will end and "regular-way" trading will begin. Prices will be determined by the marketplace and may bear no relationship to the book value per share or other ordinary indicators of the value of our ordinary shares or the ADSs. The future prices at which trading in the ADSs occur may fluctuate significantly. These prices may be influenced by many factors, including quarter-to-quarter variations in our actual or anticipated financial results or those of other companies in the industries or the markets that we serve, investor perception of our company and the mobile game industry, and general economic and market conditions. In addition, the equity markets in general have experienced extreme price and volume fluctuations that have affected the market price of the shares of many companies and have often been unrelated or disproportionate to the operating performance of those companies. These are just some factors that may adversely affect the market price of the ADSs. See "Risk Factors—Risks Related to the ADSs and this Distribution" for more information.

        The ADSs that you will receive in the distribution will be freely tradable, except if you are considered an "affiliate" of ours under Rule 144 of the Securities Act. Persons who can be considered our affiliates after this distribution generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by, or are under ordinary control with us, and may include VODone and our directors, executive officers and principal shareholders. Our affiliates may only sell Class A ordinary shares or ADSs received in the distribution under:

•

a registration statement that the SEC has declared effective under the Securities Act, or

•

an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

        The number of options to purchase our Class A ordinary shares that will be outstanding immediately after the distribution is 25,835,712. Our Class A ordinary shares issued or issuable upon exercise of these options will be registered on a Form S-8 under the Securities Act shortly after the distribution and will, therefore, be freely transferable under the securities laws, subject, in the case of affiliates, to certain limitations described above. Immediately following the distribution made under this prospectus, and without considering the other transactions described in this prospectus, based upon the record number of VODone ordinary shares held as of September 5, 2012, our affiliates that are known to us, including VODone, will hold approximately 49,664,800, or 35.1%, of our Class A ordinary shares, including those represented by ADSs, and all of our Class B ordinary shares.

Reason for Furnishing this Prospectus

        This prospectus is being furnished to provide information to VODone shareholders who are entitled to receive ADSs representing our Class A ordinary shares in the distribution of such ADSs by VODone. The prospectus is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell our Class A ordinary shares or VODone ordinary shares.

        We believe that the information in this prospectus is accurate as of the date set forth on the cover page. Changes may occur after that date, and neither we nor VODone undertakes any obligation to update such information except in the normal course of its respective public disclosure obligations.

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USE OF PROCEEDS

        We will not receive any proceeds in connection with this distribution.

DETERMINATION OF THE LISTING PRICE

        No consideration will be paid for the ADSs representing our Class A ordinary shares distributed in this distribution.

DIVIDEND POLICY

        Our board of directors has complete discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant.

        On December 8, 2011, our board of directors declared a dividend of RMB71.4 million (US$11.3 million) to certain of our shareholders based on the undistributed retained earnings of the Dragon Joyce Group and the OWX Holding Group and their respective shareholdings in these entities at the time of our reorganization. We intend to declare and pay dividends in the future. The payment and the amount of any dividends will depend on the results of our operations, cash flow, financial condition, statutory and regulatory restrictions on the payment of dividends, future prospects and other factors that we may consider relevant.

        As an offshore holding company, we may rely on dividends from our subsidiaries in China for our cash requirements, including to pay dividends or make other distributions to our shareholders. PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves. These reserves are not distributable as cash dividends. Furthermore, if our subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

        Holders of the ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement, to the same extent as the holders of our ordinary shares. Cash dividends will be paid to the depositary in U.S. dollars, and the depositary will distribute them to the holders of ADSs according to the terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to the holders of ADSs in any means it deems legal, fair and practical. See "Description of American Depositary Shares—Dividends and Other Distributions."

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CAPITALIZATION

        The following table shows our capitalization as of March 31, 2012:

•

on an actual basis;

•

on a pro forma basis to reflect the May 11, 2012 issuance of 26,485,961 ordinary shares to Core Tech Resources Inc., or Core Tech, and PVG Venture Capital Partners (Wuxi), Limited Partnership, or PVG, pursuant to a share purchase agreement dated March 21, 2012; and

        You should read this table in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

		As of March 31, 2012
		Actual			Pro forma
		(in thousands of US$)
Contingently redeemable ordinary shares, par value US$0.001 per share, 26,485,961 shares issued and outstanding(1)			—			12,000
Shareholders' equity
	Ordinary shares, par value US$0.001 per share, 302,729,550 shares issued and outstanding on an actual basis(1) ;            Class A ordinary shares and            Class B ordinary shares issued and outstanding on an as adjusted basis		308			308
	Additional paid-in capital		113,381			113,381
	Retained earnings		16,096			16,096
	Accumulated other comprehensive loss		(69	)		(69	)
	Total shareholder's equity		129,716			129,716
	Total capitalization		129,716			141,716

(1)

The number of authorized shares for contingently redeemable ordinary shares and ordinary shares in aggregate is 1,000,000,000.

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ENFORCEABILITY OF CIVIL LIABILITIES

        We are incorporated in the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands in order to enjoy certain benefits associated with being a Cayman Islands exempted company, including:

•

political and economic stability;

•

an effective judicial system;

•

a favorable tax system;

•

the absence of exchange control or currency restrictions; and

•

the availability of professional and support services.

        We believe the court system in the Cayman Islands is effective because litigation practice and procedures are based on English law principles of civil procedures. The Grand Court of the Cayman Islands is presided over by the Chief Justice and Grand Court judges permanently resident on the islands. Appeals are made from the Grand Court to the Cayman Islands Court of Appeal, which sits in Grand Cayman, and from there to the Judicial Committee of the Privy Council in England. However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:

•

The Cayman Islands has a less developed body of securities laws compared to that of the United States and these securities laws provide significantly less protection to investors; and

•

Cayman Islands companies may not have standing to sue before the federal courts of the United States.

        Our organizational documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders be arbitrated.

        Almost all of our assets are located in China. A majority of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. Certain of our subsidiaries are incorporated in the British Virgin Islands and Hong Kong. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States. We appointed Corporation Service Company, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

        Maples and Calder, our counsel as to the laws of the Cayman Islands and British Virgin Islands, and Guantao Law Firm, our counsel as to Chinese law, have advised us respectively that there is uncertainty as to whether the courts of the Cayman Islands, the British Virgin Islands or China respectively would:

•

recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

•

entertain original actions brought in the Cayman Islands, the British Virgin Islands or China respectively against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

        Maples and Calder has further advised us that a final and conclusive judgment in a federal or state court of the United States under which a sum of money is payable, other than a sum payable in respect

59

of taxes, fines, penalties or similar charges, and which was neither obtained in a manner nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under the common law without any re-examination of the merits of the underlying dispute. However, the Cayman Islands courts are unlikely to enforce a punitive judgment of a United States court predicated upon the liabilities provision of the U.S. federal securities laws without retrial on the merits if such judgment gives rise to payments obligations that may be regarded as fines, penalties or similar charges.

        Maples and Calder has also advised us that a final and conclusive judgment in a federal or state court of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, and which was neither obtained in a manner nor is of a kind enforcement that is contrary to natural justice or the public policy of the British Virgin Islands, may be subject to enforcement proceedings as a debt in the courts of the British Virgin Islands under the common law without any re-examination of the merits of the underlying dispute. However, the British Virgin Islands courts are unlikely to enforce a punitive judgment of a United States court predicated upon the liabilities provision of the U.S. federal securities laws without retrial on the merits if such judgment gives rise to payment obligations that may be regarded as fines, penalties or similar charges.

        In addition, any judgment of United States courts will not be directly enforced in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. However subject to certain conditions, including but not limited to when the judgment is for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties or similar charges, the judgment is final and conclusive and has not been stayed or satisfied in full, the proceedings in which the judgment was obtained were not contrary to natural justice and the enforcement of the judgment is not contrary to public policy of Hong Kong, Hong Kong courts may accept such judgment obtained from a United States court as a debt due under the rules of common law enforcement. However, a separate legal action for debt must be commenced in Hong Kong in order to recover such debt from the judgment debtor.

        In addition, our PRC legal counsel, Guantao Law Firm, has advised us that the PRC Civil Procedures Law governs the recognition and enforcement of foreign judgments. Under the PRC Civil Procedures Law, courts in China may recognize and enforce foreign judgments pursuant to treaties between China and the country where the judgment is rendered based on reciprocity arrangements for the recognition and enforcement of foreign judgments between jurisdictions. If neither treaties nor reciprocity arrangements exist between China and a foreign jurisdiction where a judgment is rendered, according to the PRC Civil Procedures Law, parties may resolve matters relating to the recognition and enforcement of a foreign judgment in China through diplomatic channels. Currently there are no treaties or other arrangements providing for reciprocal recognition and enforcement of foreign judgments between China and either of the United States or the Cayman Islands. As a result, it is generally difficult to recognize and enforce in China a judgment rendered by a court in either of these two jurisdictions. In addition, given that we are incorporated in the Cayman Islands, a shareholder may not be able to originate a cause of action against us in a PRC court because of the difficulty in establishing both a connection to the PRC and subject matter jurisdiction, as required by PRC Civil Procedure Law, by virtue of only holding the ADSs or ordinary shares.

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EXCHANGE RATE INFORMATION

        Our business is primarily conducted in China, and the financial records of our PRC subsidiaries are maintained in Renminbi, their functional currency. However, we use the U.S. dollar as our reporting currency. The assets and liabilities of our PRC subsidiaries are translated from Renminbi into U.S. dollars at the exchange rates on the balance sheet date, shareholders' equity is translated at the historical rates and the revenues and expenses are translated at the weighted average exchange rate for the period. For all dates and periods through December 31, 2008, exchange rates of Renminbi into U.S. dollars are based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. For January 1, 2009 and all later dates and periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board.

        For your convenience, this prospectus also contains translations of certain amounts in Renminbi into U.S. dollars, all translations from Renminbi to U.S. dollar amounts at the rate of RMB6.2975 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 30, 2012.

        We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated.

		Exchange Rate
		Period End		Average(1)		Low		High
		(RMB per US$1.00)
2007			7.2946		7.5806		7.8127		7.2946
2008			6.8225		6.9193		7.2946		6.7800
2009			6.8259		6.8295		6.8470		6.8176
2010			6.6000		6.7603		6.8330		6.6000
2011			6.2939		6.4630		6.6364		6.2939
2012
	February		6.2935		6.2997		6.3120		6.2935
	March		6.2975		6.3125		6.3315		6.2975
	April		6.2790		6.3043		6.3150		6.2790
	May		6.3684		6.3242		6.3684		6.3052
	June		6.3530		6.3627		6.3703		6.3530
	July		6.3610		6.3717		6.3879		6.3487
	August		6.3484		6.3593		6.3738		6.3484

(1)

Annual averages are calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.

Source: Federal Reserve Bank of New York and Federal Reserve Board

        In addition, all translations from Hong Kong dollars to U.S. dollars are made for your convenience at the rate of HK$7.7656 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 30, 2012.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA

        The following tables present selected consolidated statement of operations data of our predecessor, Kuailefeng, for the period from January 1, 2009 to October 26, 2009, our selected consolidated statement of operations data for the period from October 27, 2009 to December 31, 2009, for the years ended December 31, 2010 and 2011, for the first three months of 2011 and 2012, and our selected consolidated balance sheet data as of December 31, 2009, 2010 and 2011, and March 31, 2012.

        The selected pro forma consolidated statement of operations data for the year ended December 31, 2009 reflects the effect of the acquisition of the Dragon Joyce Group, which was completed in October 2009, as if such transaction had occurred on January 1, 2009.

        The selected consolidated pro forma statement of operations data for the year ended December 31, 2010 reflects the effects of the acquisitions of the assets of Bright Way and Tastech and of 3GUU BVI, which were completed in October 2010 and December 2010, respectively, as if they had occurred on January 1, 2010. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Unaudited Pro Forma Consolidated Financial Information" for more information. The consolidated pro forma statement of income is not intended to represent what our operating results would actually have been for the periods indicated or to project our operating results for any future period.

        The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," particularly "—Our Acquisitions" and "—Unaudited Pro Forma Consolidated Financial Information" and the consolidated financial statements and the notes to those statements included elsewhere in this prospectus. Our historical results do not necessarily indicate our results expected for any future periods.

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Selected Consolidated Statement of Operations Data

																						For the Three Months Ended March 31,
	From January 1, 2009 to October 26, 2009			From October 27, 2009 to December 31, 2009			For the Year Ended December 31, 2009			For the Year Ended December 31,
										2010						2011						2011			2012
	(predecessor) RMB			(successor) (unaudited) RMB			(pro forma) RMB			(successor) RMB			(successor) (pro forma) (unaudited) RMB			(successor) RMB			(successor) US$			(unaudited) RMB			(unaudited) RMB			(unaudited) US$
	(In thousands, except for share and per share data)
Net revenues
Feature phone games		67,240			17,525			52,844			110,071			110,071			142,426			22,616			37,210			35,437			5,627
Smartphone games		—			—			—			—			60,823			62,368			9,904			11,755			16,095			2,556
Handset design		—			—			—			15,340			97,927			38,694			6,144			8,718			2,801			445
Total net revenues		67,240			17,525			52,844			125,411			268,821			243,488			38,664			57,683			54,333			8,628
Cost of revenues
Feature phone games		(31,921	)		(5,108	)		(13,372	)		(32,827	)		(32,827	)		(61,337	)		(9,740	)		(13,734	)		(17,873	)		(2,838	)
Smartphone games		—			—			—			—			(30,627	)		(17,974	)		(2,854	)		(4,004	)		(3,678	)		(584	)
Handset design		—			—			—			(10,083	)		(77,838	)		(29,037	)		(4,611	)		(4,660	)		(2,780	)		(441	)
Total cost of revenues		(31,921	)		(5,108	)		(13,372	)		(42,910	)		(141,292	)		(108,348	)		(17,205	)		(22,398	)		(24,331	)		(3,863	)
Gross profit
Feature phone games		35,319			12,417			39,472			77,244			77,244			81,089			12,876			23,476			17,564			2,789
Smartphone games		—			—			—			—			30,196			44,394			7,050			7,751			12,417			1,972
Handset design		—			—			—			5,257			20,089			9,657			1,533			4,058			21			4
Gross profit		35,319			12,417			39,472			82,501			127,529			135,140			21,459			35,285			30,002			4,765
Operating expenses
Selling expenses		—			—			—			(952	)		(8,349	)		(7,561	)		(1,201	)		(1,186	)		(2,160	)		(343	)
General and administrative expenses		(2,536	)		(2,556	)		(5,092	)		(11,817	)		(17,917	)		(16,263	)		(2,582	)		(3,974	)		(5,907	)		(938	)
Research and development expenses		(4,438	)		(226	)		(4,664	)		(8,377	)		(10,877	)		(24,566	)		(3,901	)		(3,935	)		(8,597	)		(1,365	)
Total operating expenses		(6,974	)		(2,782	)		(9,756	)		(21,146	)		(37,143	)		(48,390	)		(7,684	)		(9,095	)		(16,664	)		(2,646	)
Operating income (loss)		28,345			9,635			29,716			61,355			90,386			86,750			13,775			26,190			13,338			2,119
Interest income		25			—			25			70			266			927			147			136			292			46
Other income		—			—			—			—			1,112			293			47			18			113			18
Changes in fair value of contingently returnable consideration assets		—			(948	)		(948	)		(2,065	)		(2,065	)		39,446			6,264			(760	)		7,131			1,132
Income (loss) before income taxes and noncontrolling interests		28,370			8,687			28,793			59,360			89,699			127,416			20,233			25,584			20,874			3,315
Income tax (expenses) benefits		(6,597	)		638			(3,893	)		(18,647	)		(27,142	)		35,927			5,705			(8,682	)		(2,053	)		(326	)
Net income (loss)		21,773			9,325			24,900			40,713			62,557			163,343			25,938			16,902			18,821			2,989
Net income attributable to noncontrolling interests		—			2,798			2,798			12,215			18,767			11,837			1,880			5,071			—			—
Net income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders		21,773			6,527			22,102			28,498			43,790			151,506			24,058			11,831			18,821			2,989
Foreign currency translation adjustments		—			—			—			(111	)		(111	)		(278	)		(44	)		(129	)		(7	)		(1	)
Total comprehensive income		21,773			9,325			24,900			40,602			62,446			163,065			25,894			16,773			18,814			2,988
Total comprehensive income attributable to noncontrolling interests		—			2,798			2,798			12,181			18,734			11,908			1,891			5,032			—			—
Earnings per share:
Basic earnings per share		N/A			0.03			0.10			0.13			0.21			0.62			0.10			0.06			0.06			0.01
Diluted earnings per share		N/A			0.03			0.10			0.13			0.21			0.62			0.10			0.06			0.06			0.01
Weighted average number of ordinary shares outstanding in computing basic and diluted earnings per share		N/A			212,500,000			212,500,000			212,500,000			212,500,000			244,594,415			244,594,415			212,500,000			302,729,550			302,729,550

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Selected Consolidated Balance Sheet Data

	As of December 31,								As of March 31,
	2009		2010		2011				2012
	(successor) RMB		(successor) RMB		(successor) RMB		(successor) US$		RMB		US$
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents		5,657		104,038		187,237		29,732		133,925		21,266
Total current assets		21,396		174,560		273,267		43,393		228,445		36,278
Total assets		330,098		853,644		950,430		150,922		902,634		143,334
Total current liabilities		3,662		29,873		111,278		17,670		43,085		6,843
Total liabilities		18,877		119,668		154,252		24,494		85,750		13,618
Total shareholders' equity (deficit)		311,221		733,976		796,178		126,428		816,884		129,716

Selected Operating Data

			For the Year Ended December 31,						For the Three Months Ended March 31,
			2009		2010		2011		2011		2012
Feature Phone Games(1)
	Single-player games
		Number of games (as of the end of the period)		53		97		127		105		134
		Total paying user accounts(2)		16,022,278		23,530,123		29,023,956		10,823,152		12,107,080
		Average revenue per paying user account (in RMB)		N/A		3.47		4.46		3.42		2.81
	Mobile social games
		Number of games (as of the end of the period)		—		—		2		1		2
		Total paying user accounts(2)		—		—		68,584		18,125		30,118
		Average revenue per paying user account (in RMB)		—		—		51.46		12.76		48.47
Smartphone Games(3)
	Single-player games
		Number of games (as of the end of the period)		12		117		264		147		310
		Total subscriptions(4)		83,532		7,355,926		9,599,862		2,262,696		2,023,387
		Average revenue per subscription (in RMB)		5.00		4.99		4.64		4.26		4.59
	Mobile social games
		Number of games (as of the end of the period)		4		2		4		2		4
		Total new registered user accounts(5)		5,287,374		8,251,037		7,671,426		1,138,394		4,877,298
		Total paying user accounts(2)		466,472		825,270		740,823		207,380		133,912
		Average revenue per paying user account (in RMB)		36.99		33.08		24.07		10.23		50.79
Handset Design(6)
	Number of handsets manufactured using our design			0.6 million		1.6 million		1.5 million		597,000		81,000

(1)

The total paying user accounts for 2009 represent the operating data of Kuailefeng. The total paying user accounts and the average revenue per paying user account for 2010 represent the operating and financial data of Dragon Joyce and its subsidiaries prior to or after, as the case may be, our acquisition of Dragon Joyce in October 2009, or the Dragon Joyce Group. The average revenue per paying user account for 2010 is calculated based on our net revenues for 2010 in an amount of RMB81.7 million, which excludes revenues from our exclusive technical support services on feature phone games provided to Kuailefeng in an amount of RMB5.9 million and revenues from exclusive reseller rights on feature phone games provided to Kuailefeng in

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an amount of RMB22.5 million. See "Related Party Transactions—Transactions with Certain Directors, Officers, Shareholders and Affiliates."

(2)

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.

(3)

Represents the operating data of the 3GUU Group for 2009 and 2010. We acquired the 3GUU Group in December 2010. See "Our Corporate History and Structure—Our Corporate History—Acquisition of 3GUU Group."

(4)

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

(5)

Represents the number of new user accounts registered to play our smartphone mobile social games for the revelant period. The number of registered new user accounts is included for smartphone mobile social games as not all registered user accounts are paying user accounts. We believe the number is meaningful as it indicates the general interest in our games and forms the user base of which we may convert our users into paying users.

(6)

Represents the operating data of the entities that now comprise OWX Holding Group for 2009 and 2010. The OWX Holding Group, was formed in October 2010. See "Our Corporate History and Structure—Our Corporate History—Acquisition by OWX Holding Group."

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

The unaudited pro forma consolidated financial data for the year ended December 31, 2009 presented in this section is provided supplementally and includes adjustments to give effect to the acquisition of the Dragon Joyce Group, which was completed in October 2009, as if such transaction had occurred on January 1, 2009. The unaudited pro forma consolidated financial data for the year ended December 31, 2010 presented in this section is provided supplementally and includes adjustments to give effect to the acquisitions of the assets of Bright Way and Tastech and of 3GUU BVI, which were completed in October 2010 and December 2010, respectively, as if they had occurred on January 1, 2010. See "—Unaudited Pro Forma Consolidated Financial Information" for a discussion of the adjustments made for the presentation of the pro forma consolidated financial information.

Overview

        We are a leading and profitable mobile game company in China with the largest market share among mobile game developers in terms of revenues in 2010 and 2011, according to the Analysys Report. Our market share reached 18.7% in terms of revenues generated by all mobile game developers in China, compared to the 4.9% market share of our nearest competitor in 2011, and was greater than the combined market share of our nearest five competitors, according to the Analysys Report. We have integrated capabilities in the development, operation, sales and distribution of mobile games in China. Our mobile handset design business complements our game development business as we pre-install our mobile games and game platforms in the handsets we design, and enhances our knowledge of user habits and preferences and industry trends. Our total paying user accounts during 2011 and the first three months of 2012 were approximately 29.0 million and 12.1 million, respectively, for feature phone single-player games, 69,000 and 30,000, respectively, for feature phone mobile social games and 741,000 and 134,000, respectively, for smartphone mobile social games. Our total subscriptions for smartphone single-player games during 2011 and the first three months of 2012 were 9.6 million and 2.0 million, respectively. Total paying user accounts are calculated based on the total number of user accounts that paid to download our games or purchase in-game items during the period (adjusted to eliminate double-counting of the same user accounts). Total subscriptions are calculated based on the total number of monthly subscriptions to our game bundles offered through mobile network operators and the number of games downloaded through application stores.

        We have a large and diversified portfolio of games for feature phones and smartphones. We have strong development capabilities, evidenced by the fact that we develop single-player games and mobile social games for both types of handsets. As of March 31, 2012, our portfolio included 450 mobile games, of which 130 of our 136 feature phone games were developed in-house; we licensed 302 of our 314 smartphone games from third parties and we developed all of our smartphone mobile social games in-house. Certain of our games are also among the most popular (as measured by downloads) or highest grossing (as measured by revenues) mobile games in China. We have a strong pipeline of games offering a variety of themes, cultural characteristics and features designed to appeal to different users.

        We develop mobile games primarily using our proprietary game engines and development platform, which we believe allows us to create mobile games with consistent quality and system stability, and protects us from potential interruptions in our operations due to loss of development personnel. Our integrated capabilities across the mobile game value chain allow us to cross-sell mobile games

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among feature phone and smartphone users, and complements our strategy to build a user community that will reach users across different platforms and play methods. We also have the ability to identify and source popular games, and we are able to attract developers of those games to work with us due to our strong market reputation, scale of our business and distribution capability.

        We believe our leading market position, diverse game offerings catering to both feature phones and smartphones and strong technical capabilities have enabled us to become a preferred game developer for many handset companies in China, a strategic partner with various chipset manufacturers and mobile platform providers, and a recognized content provider to China Mobile, one of the largest mobile network operators in China. We pre-installed our mobile games onto over 28.2 million feature phone handsets in 2011, compared to 25.1 million and 14.5 million in 2010 and 2009, respectively, of which 1.5 million were designed by our own handset design house during 2011. For the first three months of 2012, we pre-installed our mobile games onto over 7.4 million feature phone handsets, compared to 7.0 million for the first three months of 2011. We have a strategic cooperative relationship with China Mobile and have been granted access to fee-collection codes from China Mobile, which enables us to collect proceeds without having to use service providers as intermediaries. Because of our strong revenues and performance since the fourth quarter of 2011, China Mobile deemed us a "Grade A Business Partner" and we expect they will allocate to us more marketing resources and services such as giving greater prominence to our games in search results and on page displays and allowing us to publish more new games each month while expediting the approval and launch process for those games. We also formed strategic cooperations with the other two major mobile network operators in China. For example, in 2011 we entered into an agreement with China Telecom which allows us to offer games to mobile phone end users through their network.

Our Acquisitions

        We are a holding company incorporated in the Cayman Islands and conduct substantially all of our operations through our subsidiaries in China. We were a business unit within VODone, a company listed on the Main Board of the Hong Kong Stock Exchange, prior to our reorganization as a separate subsidiary of VODone.

        Acquisition of Dragon Joyce Group.    On October 27, 2009, VODone acquired a 70% equity interest in Dragon Joyce. As part of the acquisition, Dragon Joyce's wholly owned subsidiary, Huiyou, acquired substantially all the assets of our predecessor, Kuailefeng. We are the successor entity to Kuailefeng subsequent to the acquisition. The total consideration for the acquisition was RMB216.4 million (US$34.4 million), which was settled with HK$40.0 million (US$5.2 million) in cash and 100,789,333 newly issued ordinary shares of VODone. Two-thirds of the consideration shares were subject to certain lock-up restrictions and downward adjustments. See "Our Corporate History and Structure—Our Corporate History" for more details. The acquisition in October 2009 was accounted for as a business combination and resulted in purchase price allocations that affected the comparability of results of operations between the periods before and after the acquisition.

67

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the Dragon Joyce Group totaled RMB295.6 million (US$47.0 million), which consisted of the following:

	RMB
	(in thousands)
Cash		35,249
VODone ordinary shares (100,789,333 shares)		181,186
Less: contingently returnable consideration asset		(3,813	)
30% noncontrolling interest in the Dragon Joyce Group		82,997
Total		295,619

        The fair value of the 100,789,333 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB3.8 million (US$0.6 million).

        With the assistance of an independent valuation firm, we estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 12.59% for which we have made reference to historical volatilities of several comparable companies. As of December 31, 2009, 2010 and 2011, and March 31, 2012 the fair value of the contingently returnable consideration asset was RMB2.9 million, RMB1.1 million, nil and nil, respectively. A loss of RMB0.9 million and RMB1.8 million, a gain of RMB11.7 million (US$1.9 million) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of comprehensive income for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011, respectively. There was no change in fair value of the contingently returnable consideration asset recognized in the consolidated statements of comprehensive income for the first three months of 2012 as the contingently returnable consideration asset expired.

        We estimated the fair value of the 30% noncontrolling interest in the Dragon Joyce Group to be RMB83.0 million (US$13.2 million). The fair value of the 30% noncontrolling interest was estimated by deriving the fair value of the acquired business as a whole and then subtracting the considerations transferred by VODone for the 70% controlling interest. The fair value of the acquired business was estimated primarily using the discounted cash flow method, or DCF method, under the income approach. Cost of equity, which is one of the assumptions in the income approach, was derived under the market approach. Data from several comparable companies in the same industry were used in deriving the cost of equity to calculate the discount rates used in the DCF method through the application of the Capital Asset Pricing Model, or CAPM. As the Dragon Joyce Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on (i) a discount rate of 22.55%, (ii) a long-term sustainable growth rate of 3% and (iii) a discount of 23% because of the lack of marketability that market participants would consider when estimating the fair value of the Dragon Joyce Group. In deriving the discount rate used in the DCF method, we used the weighted average cost of capital, or WACC, applicable to us. The WACC is calculated using the CAPM based on (i) a cost of equity of 9.35%, which is calculated based on data from six comparable companies in the same industry, (ii) a risk-free rate of 3.71%, (iii) a small-size premium of 9.53%, and (iv) an after-tax cost of debt of 5.05%.

        Kuailefeng was designated as a predecessor of us in accordance with Rule 405 of Regulation C as (i) Dragon Joyce and its subsidiaries had no operations prior to the acquisition of the mobile phone game business from Kuailefeng on October 27, 2009 and (ii) we succeeded to the mobile phone game

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business through the acquisition of Dragon Joyce on October 27, 2009 and our own operations prior to the succession was insignificant relative to the operations acquired. We were the successor to Kuailefeng subsequent to the date of acquisition of Dragon Joyce on October 27, 2009. For the period from January 1, 2009 to October 26, 2009, Kuailefeng only engaged in the sale of in-game premium features of mobile phone games on feature phones.

        Acquisition made by OWX Holding Group.    In October 2010, OWX HK acquired substantially all of the assets of Bright Way, a PRC company that engaged in handset design services. Concurrently, OWX Beijing, through Shenzhen Zhongtuokechuang Technology Co., Ltd., or Zhongtuo, also acquired substantially all of the assets of Tastech, a PRC company that engaged in service provider business. The first asset purchase agreement was subsequently novated to OWX Holding, a holding company incorporated in December 2009 in the British Virgin Islands, for the purpose of holding 100% equity interest in OWX HK, which in turn owns 100% equity interest in OWX Beijing. Prior to our reorganization, VODone and Realphone Technology Co., Ltd owned 70% and 30% equity interests in OWX Holding, respectively. As a result of these transactions, OWX Holding owns 100% of Zhongtuo, which operates our handset design business. The total consideration for the acquisition was RMB77.5 million (US$12.3 million), which was settled with RMB20.0 million (US$3.2 million) in cash and 28,694,372 newly issued ordinary shares of VODone. The consideration shares were subject to certain lock-up restrictions and downward adjustments. See "Our Corporate History and Structure—Our Corporate History" for more details. The acquisition in October 2010 was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805 Business Combinations.

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the OWX Holding Group totaled RMB101.3 million (US$16.1 million), which consisted of the following:

	RMB
	(in thousands)
Cash		20,000
VODone ordinary shares (28,694,372 shares)		57,463
Less: contingently returnable consideration asset		(5,231	)
30% noncontrolling interest in the OWX Holding Group		29,091
Total		101,323

        The fair value of the 28,694,372 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB5.2 million (US$0.8 million).

        With the assistance of an independent valuation firm, we estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 11.78% for which we have made reference to historical volatilities of several comparable companies. As of December 31, 2010 and 2011, and March 31, 2012, the fair value of the contingently returnable consideration asset was RMB5.0 million, RMB15.3 million (US$2.4 million), and RMB15.1 million (US$2.40 million), respectively. A loss of RMB0.3 million, a gain of RMB27.9 million (US$4.4 million) and a loss of RMB0.2 million (US$39,608) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of comprehensive income for the years ended December 31, 2010 and 2011, and the first three months of 2012, respectively.

        We estimated the fair value of the 30% noncontrolling interest in the OWX Holding Group to be RMB29.1 million (US$4.6 million). The fair value of the 30% noncontrolling interest was estimated by

69

deriving the fair value of the acquired business as a whole and then subtracting the consideration transferred by the OWX Holding Group for the 70% controlling interest. The fair value of the acquired business was estimated primarily using the discounted cash flow method, or DCF method, under the income approach. Cost of equity, which is one of the assumptions in the income approach, was derived under the market approach. Data from several comparable companies in the same industry were used in deriving the cost of equity to calculate the discount rates used in the DCF method through the application of the CAPM. As the OWX Holding Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market based on (i) a discount rate of 22.21%, (ii) a long-term sustainable growth rate of 3% and (iii) a discount of 19% because of the lack of marketability that market participants would consider when estimating the fair value of the OWX Holding Group. In deriving the discount rate used in the DCF method, we used the WACC applicable us. The WACC is calculated using the CAPM based on (i) a cost of equity of 9.62%, which is calculated based on the data from four comparable companies in the same industry, (ii) a risk-free rate of 3.35%, (iii) a small-size premium of 10.01% and (iv) an after-tax cost of debt of 4.96%.

        Acquisition of 3GUU Group.    On October 28, 2009, Yitongtianxia, 3GUU BVI's wholly owned subsidiary, entered into a series of contractual arrangements with Yingzheng, a PRC entity wholly owned by our officers or employees. As a result of such contractual arrangements, Yitongtianxia exercises effective control of Yingzheng, its VIE. See "Our Corporate History and Structure—Our Contractual Arrangements with VIE." In December 2010, Action King, VODone's wholly-owned subsidiary incorporated in the British Virgin Islands, acquired 70% equity interest in 3GUU BVI. Pursuant to the contractual arrangements after VODone's acquisition of 3GUU BVI, the operating results of Yingzheng are consolidated into our company effective from December 31, 2010. 3GUU BVI focuses on developing, operating and marketing mobile games on smartphones through its subsidiaries and VIE in China. The total consideration for the acquisition was approximately HK$233.4 million (US$30.1 million), which was settled with approximately HK$68.8 million (US$8.9 million) in cash and 68,600,000 newly issued ordinary shares of VODone. The consideration shares were subject to certain lock-up restrictions and downward adjustments. See "Our Corporate History and Structure—Our Corporate History" for more details. The acquisition in December 2010 was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805 Business Combinations.

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the 3GUU Group totaled RMB266.1 million (US$42.3 million), which consisted of the following:

	RMB
	(in thousands)
Cash		58,475
VODone ordinary shares (68,600,000 shares)		139,941
Less: contingently returnable consideration asset		(1,739	)
30% noncontrolling interest in the 3GUU Group		69,420
Total		266,097

        The fair value of the 68,600,000 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB1.7 million (US$0.3 million).

        With the assistance of an independent valuation firm, we estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 11.78% for which the Company has made reference to historical volatilities of several

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comparable companies. As of December 31, 2010 and 2011, and March 31, 2012, the fair value of the contingently returnable consideration asset was RMB1.7 million, RMB1.6 million (US$0.3 million), and RMB9.0 million (US$1.4 million), respectively. A loss of RMB0.1 million (approximately US$16,000) and a gain of RMB7.4 million (US$1.2 million) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of comprehensive income for the year ended December 31, 2011, and the first three months of 2012, respectively.

        We estimated the fair value of the 30% noncontrolling interest in the 3GUU Group to be RMB69.4 million (US$11.0 million). The fair value of the 30% noncontrolling interest was estimated by deriving the fair value of the acquired business as a whole and then subtracting the considerations transferred by Action King Limited for the 70% controlling interest. The fair value of the acquired business was estimated primarily using the discounted cash flow method, or DCF method, under the income approach. Cost of equity, which is one of the assumptions in the income approach, was derived under the market approach. Data from several comparable companies in the same industry were used in deriving the cost of equity to calculate the discount rates used in the DCF method through the application of the CAPM. As the 3GUU Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on (i) a discount rate of 22.97%, (ii) a long-term sustainable growth rate of 3% and (iii) a discount of 20% because of the lack of marketability that market participants would consider when estimating the fair value of the 3GUU Group. In deriving the discount rate used in the DCF method, we used the WACC applicable to us. The WACC is calculated using the CAPM based on (i) a cost of equity of 9.28%, which is calculated based on the data from six comparable companies in the same industry, (ii) a risk-free rate of 3.91%, (iii) a small-size premium of 10.06%, and (iv) an after-tax cost of debt of 4.80%.

        Reorganization.    In preparation for the listing of the ADSs on the Nasdaq Global Market, the following transactions were undertaken to reorganize our legal structure. On August 23, 2011, pursuant to a series of share swap agreements, CMGE issued (i) 106,500,000 new ordinary shares to Dragon Joyce to acquire Dragon Joyce's equity interest in its subsidiaries, (ii) 43,500,000 new ordinary shares to OWX Holding to acquire OWX Holding's equity interest in its subsidiaries, (iii) 59,999,000 new ordinary shares to Action King to acquire Action King's equity interests in 3GUU BVI and its subsidiaries, and (iv) a total of 90,000,000 new ordinary shares to the noncontrolling shareholders of Dragon Joyce and OWX Holding to acquire their equity interests in their subsidiaries and to the noncontrolling shareholder of 3GUU BVI to acquire its equity interests in 3GUU BVI. As a result of the reorganization, we effectively acquired from VODone and the noncontrolling shareholders, respectively, 70% and 30% of the equity interests in Dragon Joyce's subsidiaries, OWX Holding's subsidiaries and 3GUU BVI. Immediately after the Reorganization, (i) Dragon Joyce, OWX Holding and Action King became wholly-owned subsidiaries of VODone and collectively owned 70.2% of the equity interest in CMGE while the former noncontrolling shareholders collectively owned the remaining 29.8% equity interests of CMGE; and (ii) subsidiaries of Dragon Joyce, OWX Holding and Action King became CMGE's wholly-owned subsidiaries. Dragon Joyce, OWX Holding and Action King were investment holding companies and had no operations since inception. The Reorganization was accounted for as a legal reorganization of entities under common control, in a manner similar to a pooling-of-interest. Accordingly, the assets and liabilities of the parties to the Reorganization have been stated at their historical amounts in the consolidated financial statements. We accounted for the purchase of the 30% equity interest of Dragon Joyce, OWX Holding, 3GUU BVI from the noncontrolling interest holders on August 23, 2011 as an equity transaction in accordance with Accounting Standards Codification topic 810, Consolidation. The difference between the consideration paid by us to the noncontrolling interest holders and the carrying amount of the noncontrolling interests in Dragon Joyce, OWX Holding and 3GUU BVI was recognized in additional paid-in capital.

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Unaudited Pro Forma Consolidated Financial Information

Unaudited Pro Forma Consolidated Financial Information for the Year Ended December 31, 2009

        Our unaudited pro forma consolidated financial information for the year ended December 31, 2009 has been prepared to illustrate the effects of the acquisition of the entity below during the year ended December 31, 2009, or the 2009 Acquisition, as follows:

	Percentage of ownership			Date of completion of acquisition		Purchase consideration
						(RMB in thousands)
Dragon Joyce Group		70	%		October 27, 2009		216,435

        The unaudited pro forma consolidated statement of operations for the year ended December 31, 2009 gives effect to the 2009 Acquisition as if it had been consummated on January 1, 2009 and includes adjustments that give effect to events that are directly attributable to the transaction that are expected to have a continuing impact and that are factually supportable. As the 2009 Acquisition is already reflected in the Company's consolidated balance sheet as of December 31, 2009, the unaudited pro forma consolidated balance sheet as of December 31, 2009 is excluded from the unaudited pro forma consolidated financial information.

        The pro forma adjustments reflecting the completion of the 2009 Acquisition are based upon the purchase method of accounting in accordance with U.S. GAAP and upon the assumptions set forth in the notes included in this section. The unaudited pro forma consolidated financial information has been adjusted to reflect the allocation of the purchase price to identifiable net assets acquired and goodwill. The pro forma adjustments are based on estimates, currently available information and certain assumptions that we believe are reasonable. These estimates and assumptions have been made solely for purposes of developing this unaudited pro forma consolidated financial information. The unaudited pro forma consolidated financial information is presented for informational purposes only and does not reflect future events that may occur after the acquisition, or any operating efficiencies or inefficiencies that may result from the transaction. Therefore, the unaudited pro forma consolidated financial information is not necessarily indicative of results that would have been achieved had the businesses been acquired during the periods presented or the results that we will experience after the acquisition is consummated.

        Immediately prior to VODone's acquisition of 70% of the equity interests in Dragon Joyce on October 27, 2009, substantially all of the operating assets related to the feature phone games business owned by Kuailefeng were acquired by Huiyou, a wholly-owned subsidiary of Dragon Joyce. Kuailefeng was designated as our predecessor in accordance with Rule 405 of Regulation C, and we are Kuailefeng's successor subsequent to the acquisition of Dragon Joyce and its subsidiaries on October 27, 2009. We derive feature phone game revenues historically from Kuailefeng and the Dragon Joyce Group. The pro forma consolidated revenues for the year ended December 31, 2009 reflect the feature phone games revenues of Kuailefeng and the Dragon Joyce Group as if the acquisition of the Dragon Joyce Group had occurred on January 1, 2009. The same applies for our pro forma cost of revenues for the year ended December 31, 2009.

        Our historical financial statements for the period from October 27, 2009 to December 31, 2009 and the financial statements of Kuailefeng for the period from January 1, 2009 to October 26, 2009 are included elsewhere in this prospectus and the unaudited pro forma consolidated financial information should be read in conjunction with those financial statements and notes.

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Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2009

		Notes	Kuailefeng for the period from 1 Jan 2009 to 26 Oct 2009			CMGE and its subsidiaries for the period from 27 Oct 2009 to 31 Dec 2009			Adjustments			Pro Forma
			RMB			RMB			RMB			RMB
			(in thousands, except for share and per share data)
Net revenues
	Features phone games	a		67,240			17,525			(31,921	)		52,844
	Smartphone games			—			—			—			—
	Handset design			—			—			—			—
Total net revenues				67,240			17,525			(31,921	)		52,844
Cost of revenues
	Features phone games	a,b		(31,921	)		(5,108	)		23,657			(13,372	)
	Smartphone games			—			—			—			—
	Handset design			—			—			—			—
Total cost of revenues				(31,921	)		(5,108	)		23,657			(13,372	)
Gross profit				35,319			12,417			(8,264	)		39,472
Operating expenses:
	Selling expense			—			—			—			—
	General and administrative expenses			(2,536	)		(2,556	)		—			(5,092	)
	Research and development expenses			(4,438	)		(226	)		—			(4,664	)
Total operating expenses				(6,974	)		(2,782	)		—			(9,756	)
Operating income				28,345			9,635			(8,264	)		29,716
Change in fair value of contingently returnable consideration assets				—			—			—			—
Change in fair value of derivative financial Liabilities				—			(948	)		—			(948	)
Other income, net				—			—			—			—
Interest income				25			—			—			25
Income before income taxes and noncontrolling interests				28,370			8,687			(8,264	)		28,793
Income tax expenses		c		(6,597	)		638			2,066			(3,893	)
Net income				21,773			9,325			(6,198	)		24,900
Net income attributable to noncontrolling interests		d		—			2,798			4,672			7,470
Net income attributable to CMGE's ordinary shareholders				21,773			6,527			(10,870	)		17,430
Earnings per share:
Weighted average number of ordinary				N/A			0.03			N/A			0.08
	shares outstanding in computing basic and diluted earnings per share			N/A			212,500,000			N/A			212,500,000

        After taking into account the pro forma adjustments described below, our pro forma net income for the year ended December 31, 2009 was RMB24.9 million.

Pro Forma Adjustments

        The pro forma adjustments included in the unaudited pro forma consolidated financial information are as follows:

(a)

The adjustment to net revenues and cost of revenues represents a reversal of net revenues and cost of revenues of RMB31.9 million as if the exclusive business cooperation agreement between us and Kuailefeng had been entered into on January 1, 2009. Before entering into

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the exclusive business cooperation agreement, Kuailefeng operated and sold in-game items for feature phone games and recorded revenues and the related cost of revenues on a gross basis. Upon the acquisition of Dragon Joyce and its subsidiaries, we received fees from Kuailefeng for granting it the right to operate and sell in-game items of these feature phone games by entering into the exclusive business cooperation agreement. The adjustment represents the fees received from Kuailefeng on a net basis for the period from January 1, 2009 to the acquisition date.

(b)

The adjustment to cost of revenues represents an increase in amortization expenses of RMB8.3 million, which resulted from a step-up in basis of intangible assets to fair value at the date of acquisition of Dragon Joyce Group for the period from January 1, 2009 to the acquisition date.



(c)

The adjustment to income tax expenses represents the increase in amortization expenses in note (a), which resulted in a reduction in income tax expenses of RMB2.1 million. The income tax rate used is based on the applicable enacted statutory tax rate.



(d)

The adjustment to noncontrolling interests represents the noncontrolling interest in net income of the Dragon Joyce Group of RMB4.7 million in aggregate.

Unaudited Pro Forma Consolidated Financial Information for the Year Ended December 31, 2010

        Our unaudited pro forma consolidated financial information for the year ended December 31, 2010 has been prepared to illustrate the effects of the acquisitions of the entity and operating assets below during the year ended December 31, 2010, or the 2010 Acquisitions, as follows:

	Percentage of ownership			Date of completion of acquisition	Purchase consideration
					(RMB in thousands)
Operating assets of Bright Way and Tastech		N/A		October 11, 2010		77,463
3GUU BVI and its subsidiaries		70	%	December 31, 2010		198,416

        The unaudited pro forma consolidated statement of operations for the year ended December 31, 2010 gives effect to the 2010 Acquisitions as if they had been consummated on January 1, 2010 and include adjustments that give effect to events that are directly attributable to the transactions that are expected to have a continuing impact and that are factually supportable. As the 2010 Acquisitions are already reflected in the Company's most recent consolidated balance sheet, the unaudited pro forma consolidated balance sheet as of December 31, 2010 is excluded from the unaudited pro forma consolidated financial information.

        The pro forma adjustments reflecting the completion of the 2010 Acquisitions are based upon the purchase method of accounting in accordance with U.S. GAAP and upon the assumptions set forth in the notes included in this section. The unaudited pro forma consolidated financial information has been adjusted to reflect the allocation of the purchase price to identifiable net assets acquired and goodwill. The pro forma adjustments are based on estimates, currently available information and certain assumptions that we believe are reasonable. These estimates and assumptions have been made solely for purposes of developing this unaudited pro forma consolidated financial information. The unaudited pro forma consolidated financial information is presented for informational purposes only and does not reflect future events that may occur after the acquisitions, or any operating efficiencies or inefficiencies that may result from the transactions. Therefore, the unaudited pro forma consolidated financial information is not necessarily indicative of results that would have been achieved had the businesses

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been acquired during the periods presented or the results that we will experience after the acquisitions are consummated.

        We derive feature phone game revenues from the Dragon Joyce Group. Therefore, our revenues prior to the 2010 Acquisitions, which consisted mainly of revenues from the business of the Dragon Joyce Group, reflected our feature phone game revenues. We derive smartphone revenues from the 3GUU Group. The pro forma consolidated revenues for smartphone games for the year ended December 31, 2010 reflect mainly the revenues of the 3GUU Group as if the acquisition of the 3GUU Group had occurred on January 1, 2010. We derive handset design revenues from the OWX Holding Group. The pro forma consolidated revenues for the year ended December 31, 2010 for handset design reflect mainly the revenues of the OWX Holding Group as if the acquisition of the operating assets of Bright Way and Tastech had occurred on January 1, 2010. The same would apply for our cost of revenues.

        Our historical financial statement and the historical financial statements of each of the 2010 Acquisitions are included elsewhere in this prospectus and the unaudited pro forma consolidated financial information should be read in conjunction with those financial statements and notes.

Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2010

		Notes	CMGE and its subsidiaries for the year ended December 31, 2010			Bright Way and Tastech from January 1, 2010 to October 10, 2010			3GUU BVI and its subsidiaries for the year ended December 31, 2010			Adjustments			Pro Forma
			RMB			RMB			RMB			RMB			RMB
			(in thousands, except for share and per share data)
Net revenues
	Feature phone games			110,071			—			—						110,071
	Smartphone games	a		—			—			63,989			(3,166	)		60,823
	Handset design			15,340			82,587			—			—			97,927
Total net revenues				125,411			82,587			63,989			(3,166	)		268,821
Cost of revenues
	Feature phone games			(32,827	)		—			—			—			(32,827	)
	Smartphone games	b		—			—			(30,536	)		(91	)		(30,627	)
	Handset design	b		(10,083	)		(66,032	)		—			(1,723	)		(77,838	)
Total cost of revenues				(42,910	)		(66,032	)		(30,536	)		(1,814	)		(141,292	)
Gross profit				82,501			16,555			33,453			(4,980	)		127,529
Operating expenses:
	Selling expenses			(952	)		(32	)		(7,365	)		—			(8,349	)
	General and administrative expenses			(11,817	)		(2,077	)		(4,023	)		—			(17,917	)
	Research and development expenses			(8,377	)		—			(2,500	)		—			(10,877	)
Total operating expenses				(21,146	)		(2,109	)		(13,888	)		—			(37,143	)
Operating income				61,355			14,446			19,565			(4,980	)		90,386
Change in fair value of contingently returnable consideration assets				(2,065	)		—			—			—			(2,065	)
Change in fair value of derivative financial liabilities		c		—			—			1,711			(1,711	)		—
Other income, net				—			—			1,112			—			1,112
Interest income				70			20			176			—			266
Income before income taxes and noncontrolling interests				59,360			14,466			22,564			(6,691	)		89,699
Income tax expenses		d		(18,647	)		(5,159	)		(7,491	)		4,155			(27,142	)
Net income				40,713			9,307			15,073			(2,536	)		62,557
Net income attributable to noncontrolling interests		e		12,215			—			—			6,552			18,767
Net income attributable to CMGE's ordinary shareholders				28,498			9,307			15,073			(9,088	)		43,790
Earnings per share:
Basic and diluted earnings per share				0.13			N/A			N/A			N/A			0.21
Weighted average number of ordinary shares outstanding in computing basic and diluted earnings per share				212,500,000			N/A			N/A			N/A			212,500,000

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        After taking into account the pro forma adjustments described below, our pro forma net income for the year ended December 31, 2010 was RMB62.6 million.

Pro Forma Adjustments

        The pro forma adjustments included in the unaudited pro forma consolidated financial information are as follows:

(a)

The adjustment to net revenues represents the reversal of deferred revenue of RMB3.2 million as of December 31, 2009 that was recognized as smartphone games revenues during the year ended December 31, 2010 as if the amount was assumed as a deferred revenue liability in the acquisition of 3GUU BVI on January 1, 2010. The fair value of the assumed deferred revenue obligation on the date of acquisition is assessed to be nil, as the directly attributable and incremental costs to provide the remaining obligation is minimal.

(b)

The adjustment to cost of revenues represents an increase in amortization expenses of RMB1.8 million resulted from a step-up in basis of intangible assets to fair value at the date of acquisitions of the 2010 Acquisitions for the period from January 1, 2010 to their respective acquisition dates.

(c)

On October 28, 2009, 3GUU BVI issued 1,849,315 Series A convertible redeemable preferred shares, or Series A Preferred Shares, representing 27% of the equity interest of 3GUU BVI on a fully-diluted as converted basis, for an aggregate purchase price of RMB20.5 million. The covenant right and the contingent dividend right of the Series A Preferred Shares met the definition of a derivative in accordance with ASC 815, Derivatives and Hedging. As a result, the covenant right and the contingent dividend right were bifurcated from the Series A Preferred Shares on the issuance date as a compound derivative liability and subsequently adjusted to the fair value at each reporting date. The fair value of the embedded covenant right and contingent dividend right was RMB23.7 million as of December 31, 2009. On December 31, 2010, all outstanding Series A Preferred Shares were converted into ordinary shares of 3GUU BVI. The fair value of the covenant right and the contingent dividend right was RMB22.0 million as of December 31, 2010. An income of RMB1.7 million resulted from the change in fair value of the derivative liabilities was recognized in the historical consolidated statement of operations of 3GUU BVI for the year ended December 31, 2010.

The adjustment to changes in fair value of derivative financial liabilities represents the reversal of the income of RMB1.7 million resulted from the change in fair value of the derivative financial liabilities bifurcated from the Series A Preferred Shares as if the Series A Preferred Shares had been converted on January 1, 2010.

(d)

The adjustment to income tax expenses includes (i) the reversal of interest and penalties of RMB2.8 million related to unrecognized tax benefits of Bright Way and Tastech, which are liabilities not assumed by the Company; (ii) the reversal of interest and penalties of RMB1.1 million related to pre-acquisition period unrecognized tax benefits of the 3GUU Group, which were indemnified by the selling shareholders; and (iii) the increase in amortization expenses in note (b) resulted in a reduction in income tax expenses of RMB0.3 million for the year ended December 31, 2010. Income tax rate used is based on the applicable enacted statutory tax rate.

(e)

The adjustment to noncontrolling interests represents the noncontrolling interest in net income of Bright Way, Tastech and the 3GUU Group of RMB6.6 million in aggregate.

Factors Affecting Our Results of Operations

        Our results of operations and financial condition have been, and will continue to be, affected by general factors affecting the mobile game industry in China, including China's overall economic growth,

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growth of the mobile handset and mobile communications industries in China, demand for mobile games and entertainment, government policies for telecommunications, and competition in the mobile game industry in China.

        Our results of operations are more directly affected by the following company specific factors, including:

•

Our ability to expand distribution channels.  The growth of our user base depends upon, among others, our ability to pre-install our games on mobile phones and chipsets and to make our games available for download to mobile game players. We distribute our feature phone games through cooperation with handset companies and handset design houses, service providers, and mobile application stores and portals. For feature phones, our ability to pre-install our games on mobile phones ensures that our games are accessible to a large user base. We worked with handset companies and design houses to pre-install our mobile games onto over 28.2 million feature phone handsets in 2011, compared to 25.1 million and 14.5 million in 2010 and 2009, respectively, and we pre-installed our mobile games onto over 7.4 million handsets in the first three months of 2012, compared to 7.0 million in the first three months of 2011. The increase over these periods indicates our ability to access a large and growing user base. We have made our smartphone games available through major distribution channels such as China Mobile and major mobile application stores and will continue to utilize these distribution channels. Our ability to maintain and expand our distribution network is critical to our continuing success.

•

Our ability to continue to develop and source popular games.  Our ability to develop and source attractive games is another major factor that will allow us to continue to expand our user base. We have a large and diversified portfolio of feature phone and smartphone games and have developed single-player games and mobile social games for both types of handsets. As of March 31, 2012, our portfolio consisted of 450 mobile games of which 142 were developed in-house and 308 were purchased from third-party developers, compared to 255 mobile games as of March 31, 2011, of which 115 were developed in-house and 140 were purchased from third-party developers. According to the Analysys Report, one of the smartphone games we developed in-house, Creation Song, was the top grossing mobile social game available through China Mobile in 2010. Our other self-developed top-grossing games include Paopao Xiyou, Xiao'ao Jianghu, Cut Cut Boom and YY Three Kingdoms. In addition, we have the ability to identify and source popular games, and we are able to attract developers of those games to partner with us due to our strong market reputation, scale of our business and distribution capability. For example, we are working with developers of popular games such as "Angry Birds" and "Fruit Ninja" to develop and distribute such games on feature phones in China. We believe the growth of our net revenues during historical periods was driven by the increase in the size of our total paying user base and the number of total subscriptions, which were, in turn, partly driven by an increase in the diversity and quality of our game portfolio. Our ability to continue to enlarge our portfolio with various attractive games that target different user types and games of different life cycles will be critical to our user base growth.

•

Our ability to monetize our user base.  Our results of operations are also dependent on our ability to convert our users into paying users or subscribers. We believe our commitment to develop high-quality mobile games has contributed to the increase in the number of paying user accounts and subscribers. Most of our mobile games are offered on either a free-for-trial or free-to-play basis. We believe that the free-for-trial and free-to-play models enable us to quickly establish an active player base, opening up access to a pool of potential customers to purchase our virtual products and services and allowing those customers to experience our games before deciding if they want to purchase additional chances to play, access to additional stages in the game or other premium features. Our games are designed to maximize user playtime as well as the overall game life span, in order to convert a higher percentage of players into paying users or

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subscribers. In addition, in May 2010, we began to develop feature phone games with social functions, which generally generate higher spending per user and have longer product life spans than single-user games. Our average revenue per paying user account for single-player games on feature phones was RMB4.46 in 2011, compared to RMB3.47 in 2010, and RMB2.81 in the first three months of 2012, compared to RMB3.42 in the first three months of 2011. Our average revenue per paying user account for mobile social games on feature phones was RMB51.46 in 2011, compared to nil in 2010, and RMB48.47 in the first three months of 2012, compared to RMB12.75 in the first three months of 2011.

In addition to feature phone games, we have focused on enhancing the quality and variety of our smartphone games, which are available in application stores and through game bundles offered by China Mobile. Average revenue per paying user account or subscription for smartphone games is driven by enhancing game content, which allows us to increase subscription and in-game item fees, and a greater number of mobile social game offerings, which tend to result in higher fees. Our average revenue per paying user account for mobile social games on smartphones was RMB24.07 in 2011, compared to RMB33.08 in 2010. This decrease was due primarily to the phasing out of Creation Song, our popular massively multiplayer online role-playing game, or MMORPG, during the second half of 2011, while we introduced two new mobile social games and such mobile social games generally take several months to build up user acceptance. Our average revenue per paying user account for mobile social games on smartphones was RMB50.79 in the first three months of 2012 compared to RMB10.23 in the first three months of 2011. The increase was due primarily to Dian Feng and Paopao Xiyou attracting users who are willing to pay more for in-game features and accessories.

To enhance monetization, we will continue to introduce new products and content, including new games and in-game items. We plan to engage in additional in-game promotions and host more in-game events to further stimulate user interest. We believe we price our mobile games and virtual items at an attractive and affordable level for our users. While we do not foresee a short-term increase in the one-time download fee, we expect to have greater flexibility in pricing virtual items. We believe that the synergies achieved through integrating the feature phone mobile game and smartphone mobile game businesses will help enhance the quality of our games, which will in turn help to generate additional user interest and revenue.

•

Our ability to integrate the operations, technologies, services and personnel of our business units.  VODone transferred to us certain companies it had acquired in 2009 and 2010. See "Our Corporate History and Structure—Our Corporate History." The day-to-day operations of these companies continue to be primarily managed by the management teams that operated them before VODone's acquisitions. We plan to further integrate and centralize certain functions of these acquired companies and their subsidiaries and affiliated entities. Starting in 2011, we have integrated the financial reporting, legal and other administrative functions of our different businesses. We have begun marketing our mobile games under our "CMGE" brand. We have also begun to realize synergies by allowing our smartphone game developers to develop similar games on feature phones, and vice versa, and by installing our feature phone games on most of the handsets we have designed. The extent to which we will further integrate these acquired companies into our business in terms of customer service, growth strategy and corporate culture could impact our results of operations.

•

Our ability to control our operating costs and expenses and improve operational efficiency.  Our profitability is significantly affected by our cost of revenues and operating expenses. Our cost of revenues, which primarily includes fees paid to handset companies and design houses or their agents for pre-installation of mobile games and fees paid to mobile portals and application stores, increased from RMB37.0 million in 2009 to RMB42.9 million in 2010, decreased from RMB141.3 million in 2010, on a pro forma basis, to RMB108.3 million (US$17.2 million) in

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2011, and increased from RMB22.4 million in the first three months of 2011 to RMB24.3 million (US$3.9 million) in the first three months of 2012. Our cost of revenues in 2011 also included fees paid to content providers for acquiring certain smartphone single-player games. Our operating expenses increased significantly from RMB9.8 million in 2009 to RMB21.1 million in 2010 and from RMB37.1 million in 2010, on a pro forma basis, to RMB48.4 million (US$7.7 million) in 2011, and from RMB9.1 million in the first three months of 2011, to RMB16.7 million (US$2.6 million) in the first three months of 2012 as we completed the acquisitions of the acquired companies, incurred certain share-based compensation expenses, expanded our marketing and brand promotion efforts, and hired more product development, sales and marketing and administrative personnel. We expect our operating expenses to increase in the future as we seek to expand our user base and incur additional share-based compensation expenses. Our ability to control such costs and expenses directly impacts our profitability.

Descriptions of Certain Statement of Operations Items

Net Revenues

        We use the following revenue models for our mobile games:

•

Item purchase fee.  Mobile users can download and play the basic version of the game for free. We charge mobile users when they purchase in-game items, such as additional chances to play, the right to play additional stages, or performance-enhancing items such as weapons, accessories and pets.

•

Subscription fee.  We also promote single-player games on smartphones in game bundles together with China Mobile. For instance, users can subscribe to the game package from China Mobile for RMB10 (US$1.6) per month and download those games in the bundle and updates to those games during the subscription period.

•

One-time fee.  Many of our smartphone single-player games are available in various application stores for a one-time fee.

        Substantially all of our revenues are generated in China. We currently derive our net revenues from three segments: feature phone games, smartphone games and handset design. Feature phone games accounted for 100% of our revenues in 2009. Feature phone games, smartphone games and handset design accounted for 87.8%, nil and 12.2% of our revenues, respectively, in 2010, 40.9%, 22.6% and 36.4%, respectively, in 2010, on a pro forma basis, 58.5%, 25.6% and 15.9%, respectively, in 2011, and 65.6%, 29.2% and 5.2%, respectively, in the first three months of 2012. We only consolidated the revenue of OWX Holding's subsidiaries beginning on October 11, 2010, the date of our acquisition of OWX Holding's subsidiaries. As we acquired the 3GUU Group in December 2010, we did not consolidate any revenue from smartphone games in 2010. While revenue generated from feature phone games constituted most of our net revenues in 2011, we expect revenue generated from smartphone games to account for a growing portion of our net revenues in the foreseeable future given the increasing popularity and affordability of smartphones. For more details on revenue recognition, see "—Critical Accounting Policies—Revenue Recognition."

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        The following table sets forth the breakdown of our net revenues for the periods indicated:

		For the Year Ended December 31,										For the Three Months Ended March 31,
		2009		2010				2011				2011		2012
		(pro forma) RMB		(successor) RMB		(successor) (pro forma)		(successor) RMB		(successor) US$		RMB		RMB		US$
						RMB
				(in thousands)
Net revenues
	Feature phone games		52,844		110,071		110,071		142,426		22,616		37,210		35,437		5,627
	Smartphone games		—		—		60,823		62,368		9,904		11,755		16,095		2,556
	Handset design		—		15,340		97,927		38,694		6,144		8,718		2,801		445
Total net revenues			52,844		125,411		268,821		243,488		38,664		57,683		54,333		8,628

Feature Phone Games

        Our net revenues from feature phone games amounted to RMB52.8 million in 2009, on a pro forma basis, RMB110.1 million in 2010, RMB142.4 million (US$22.6 million) in 2011, and RMB35.4 million (US$5.6 million) in the first three months of 2012. We work with handset companies and design houses to pre-install our feature phone games and platforms onto feature phone handsets. On our mobile game platforms, Funbox and Douwan, users can also download feature phone games for free. Users can play by using the basic functions of the feature phone games for free and are charged when they purchase in-game premium features, such as weapons, accessories and pets, additional chances to play or the right to play additional stages. All chargeable in-game premium features on feature phones are consumed immediately upon the purchase, and any unused virtual items will be considered fully consumed and cannot be reused after the user exits the game. When mobile phone game players leave the game they are currently playing and perform other functions on the feature phone, the premium features purchased previously can no longer be accessed and are therefore considered completely consumed.

        Users can pay for virtual items in our feature phone games through the billing channels of mobile service providers. We have entered into agreements with mobile service providers for proceeds collection, and these service providers in turn contract with mobile network operators, such as China Mobile and China Telecom, who provide billing and collection services. Under these contracts, mobile network operators grant rights to mobile service providers to deliver digital content, such as feature phone games, news alerts, financial information, logos and ringtones, to mobile phone users. Our agreements with service providers are generally for terms of one year with automatic renewal provisions. Pursuant to these agreements, we share a certain percentage of the proceeds collected from the users by service providers. Net proceeds payable to us are calculated monthly based on the prescribed percentages and are evidenced by monthly statements issued by the service providers and agreed to by both parties. All of our sales proceeds for feature phone games were collected through these service providers, who utilize the billing channels of mobile network operators pursuant to their agreements with the mobile network operators. Proceeds we collect from customers do not include the fees earned by the service providers and mobile network operators, and therefore such fees are not recorded as part of our revenue.

        Growth in net revenues from feature phone games is driven by the increase in the size of our total paying user base, which is dependent on the expansion of the installed base of our feature phone games in mobile handsets, and the diversity and quality of our game portfolio. Increase in average revenue per paying user account is driven by enhancements of our game content, a greater number of mobile social game offerings, which tend to result in higher fees, and in-game promotions and in-game events that further attract user spending. Paying user accounts are accounts that have purchased

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in-game items during the relevant period. The table below sets forth the total number of paying user accounts and average revenue per paying user account for the periods indicated.

			For the Year Ended December 31,						For the Three Months Ended March 31,
			2009		2010		2011		2011		2012
Feature Phone Games(1)
	Single-player games
		Number of games (as of the end of the period)		53		97		127		105		134
		Total paying user accounts(2)		16,022,278		23,530,123		29,023,956		10,823,152		12,107,080
		Average revenue per paying user account (in RMB)		N/A		3.47		4.46		3.42		2.81
	Mobile social games
		Number of games (as of the end of the period)		—		—		2		1		2
		Total paying user account(2)		—		—		68,584		18,125		30,118
		Average revenue per paying user account (in RMB)		—		—		51.46		12.76		48.47

(1)

The total paying user accounts for 2009 represent the operating data of Kuailefeng. The total paying user accounts and the average revenue per paying user account for 2010 represent the operating and financial data of the Dragon Joyce Group. The average revenue per paying user account for 2010 is calculated based on our net revenues for 2010 in an amount of RMB81.7 million, which excludes revenues from our exclusive technical support services on feature phone games provided to Kuailefeng in an amount of RMB5.9 million and revenues from exclusive reseller rights on feature phone games provided to Kuailefeng in an amount of RMB22.5 million. See "Related Party Transactions—Transactions with Certain Directors, Officers, Shareholders and Affiliates."

(2)

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.

        The average revenue per paying user account of feature phone single-player games increased from RMB3.47 in 2010 to RMB4.46 in 2011 due mainly to our roll out of several high quality new games during these periods, which increased our sales of in-game items. The average revenue per paying user account for feature phone single-player games decreased from RMB3.42 in the first three months of 2011 to RMB2.81 in the first three months of 2012 due to the change in the mix of feature phone single-player games that we offer which includes some games that did not generate as much revenue per user through the sale of in-game items. Average revenue per paying user account for feature phone single-player games was also impacted by network operators increasing their share of the revenues from single-player games under their arrangements with the mobile service providers that we receive proceeds from. The average revenue per paying user account for feature phone mobile social games increased from RMB12.76 in the first three months of 2011 to RMB48.47 in the first three months of 2012 due mainly to the introduction of a new game during 2012 and the increased user acceptance of Xiao'ao Jianghu and Xunqing resulting in more players who are willing to purchase in-game items.

Smartphone Games

        As we acquired the 3GUU Group in December 2010, we did not consolidate any actual revenue from smartphone games in 2010. Our net revenues from smartphone games amounted to RMB60.8 million in 2010, on a pro forma basis, and RMB62.4 million (US$9.9 million) in 2011. We generate revenues from smartphone games primarily through one-time fees, monthly subscription fees

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and the sale of virtual items. For single-player games, users can download certain of our smartphone games from various application stores for a one-time fee. We also promote single-player games on smartphones in game bundles through China Mobile. Users can subscribe to the game package from China Mobile for RMB10 (US$1.6) per month and access our new games and updates. For mobile social games, users are required to register at the website that hosts the application and download our games online, both of which are free of charge to users. Users can then choose to pay a fee for virtual items in certain of our smartphone mobile social games, such as weapons, accessories and pets. For example, there are more than 20 in-game items available for download in Creation Song, a smartphone mobile social game we developed in-house, and the cost of each item ranges from RMB0.2 to RMB20.

        Users purchase game points by debiting their mobile accounts directly or by buying prepaid cards issued by mobile network operators or payment processing agents. Users can also pay for the game points with credit cards and debit cards which are generally settled by the banks and other billing channels. Game points can be used to purchase in-game premium features to provide an enhanced game-playing experience. We have entered into agreements with China Mobile and certain payment processing agents for proceeds collection, pursuant to which the collected proceeds are allocated between us and either China Mobile or the payment processing agents in agreed upon percentages. A substantial majority of our sales proceeds for smartphone games are collected directly through China Mobile's billing channels and the remaining portion is collected directly through payment processing agents, such as prepaid cards. Proceeds we collect from customers do not include the fees earned by the payment processing agents and China Mobile, and therefore such fees are not recorded as part of our revenue.

        We believe the growth of our net revenues from smartphone games will be driven by the increases in the size of our total paying user base and the number of total subscriptions, which will be in turn driven by an increase in the diversity and quality of our game portfolio. Average revenue per paying user account and average revenue per subscription are driven by enhancing game content, which allows us to increase subscription and in-game item fees, and a greater number of mobile social game offerings, which tend to result in higher fees. The table below sets forth the number of total paying user accounts, total subscriptions and the average revenue per paying user account and subscription for the periods indicated. We differentiate the data below into total subscriptions for single-player games and total paying user accounts for mobile social games because we use different bases for calculating these numbers. We use different bases because of limitations on the data we receive from mobile network operators and application stores and because we believe the different bases more accurately indicate the level of interest in our single-player and mobile social games and the ability of those games to generate revenue. When calculating the number of total subscriptions for our mobile games for single-player games, we count each monthly subscription or each download through an application store as one subscription. A monthly subscription gives a subscriber the right to download only the limited number of games included in the bundle to which he or she subscribed and does not include all of the single-player smartphone games we offer. A player could choose to simultaneously subscribe to multiple bundles or to separately download games from an application store, or both. 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. Accordingly, the number of total subscriptions for our single-player smartphone games represents the total number of user payments to play our single-player smartphone games and average revenue per paying user account represents the average revenue per user payment. We calculate total subscriptions for single-player smartphone games on this basis because we generate revenue from both subscription and download fees, and we believe this approach is a more accurate indicator of the success and popularity of these games. When calculating the number of paying user accounts of our mobile games for mobile social games, we count 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. Registered user accounts represent the number of

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user accounts registered to play our games. We track the number of registered accounts for mobile social games, as not all registered user accounts of mobile social games are paying user accounts. We believe the number of registered accounts is meaningful as it is an indication of interest in our games.

			For the Year Ended December 31,						For the Three Months Ended March 31,
			2009		2010		2011		2011		2012
Smartphone Games(1)
	Single-player games
		Number of games (as of the end of the period)		12		117		264		147		310
		Total subscriptions(2)		83,532		7,355,926		9,599,862		2,262,696		2,023,387
		Average revenue per subscription (in RMB)		5.00		4.99		4.64		4.26		4.59
	Mobile social games
		Number of games (as of the end of the period)		4		2		4		2		4
		Total new registered user accounts		5,287,374		8,251,037		7,671,426		1,138,394		4,877,298
		Total paying user accounts(3)		466,472		825,270		740,823		207,380		133,912
		Average revenue per paying user account (in RMB)		36.99		33.08		24.07		10.23		50.79

(1)

Represents the operating data of the 3GUU Group for 2009 and 2010. We acquired the 3GUU Group in December 2010. See "Our Group History and Structure—Our Corporate History—Acquisition of 3GUU Group."

(2)

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

(3)

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.

        The average revenue per subscription for single-player games was largely unchanged from 2009 to 2010 and decreased in 2011 due largely to a decrease in the amount collected by China Mobile because of an increase of non-payment by users. The average revenue per subscription for single-player games increased from RMB4.26 in the first three months of 2011 to RMB4.59 in the first three months of 2012 due to an increase in the amount collected by China Mobile because of a decrease of non-payment by users following China Mobile's efforts near the end of 2011 to increase payments from its users generally, including those that subscribe to our single-player smartphone games, which efforts we expect to continue going forward. Our total subscriptions for smartphone single-player games decreased from 2.3 million during the first three months of 2011 to 2.0 million during the first three months of 2012, primarily because of a decrease in the promotion of our smartphone single-player games by China Mobile, our service provider for all of our game bundles, due to China Mobile's efforts in the first quarter of 2012 to enhance user experience by decreasing the number of banner and pop-up advertisements it exposes its users to. Going forward, the amount of banner and pop-up advertisements China Mobile uses could vary, and any further decrease could reduce the amount of traffic to our websites and the number of our games downloaded. The average revenue per paying user account in mobile social games decreased in 2010 and 2011 primarily due to (i) not recognizing RMB3.9 million (US$0.6 million) in deferred revenue as a result of our acquisition of the 3GUU Group on December 31, 2010 because the fair value of the assumed deferred revenue obligation on the date of acquisition was assessed to be nil; (ii) in mid-2011, we rolled out two new games that we expect will increase in revenue over time but take time to build up user acceptance and stickiness, while in the second half of 2011 we began to phase out Creation Song, our popular MMORPG that we launched in

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2009. The average revenue per paying user account in mobile social games increased from RMB10.23 in the first three months of 2011 to RMB50.79 in the first three months of 2012 due to Dian Feng and Paopao Xiyou attracting users who are willing to pay more for in-game features and accessories. Our total paying user accounts for mobile social games for smartphones increased from 466,000 in 2009 to 825,000 in 2010, and then decreased to 741,000 in 2011. Our total paying user accounts for mobile social games for smartphones was 207,000 in the first three months of 2011, compared to 134,000 in the first three months of 2012. These decreases are due primarily to the phasing out of Creation Song while introducing two new mobile social games for smartphones during the second half of 2011, as our mobile social games usually take several months to build up user acceptance.

Handset Design

        Our net revenues from handset design amounted to RMB97.9 million in 2010, on a pro forma basis, RMB38.7 million (US$6.1 million) in 2011, and RMB2.8 million (US$0.4 million) in the first three months of 2012.

        We generate revenues through providing handset design services to handset manufacturers and receive a flat fee and/or certain percentage of proceeds from the sale of mobile content pre-installed into the handsets we designed. Our handset design services include (i) operating system software and hardware design with post-contract customer support, or PCS, service, (ii) printed circuit board with operating system software, component sourcing and optional assembly service, and (iii) mobile phone content installation service. The growth in revenues from handset design is primarily driven by growth in demand for mobile phones and the quality and diversity of our design offerings. The total number of handsets manufactured using our design increased from 0.6 million in 2009 to 1.6 million in 2010, and decreased to 1.5 million in 2011. This decrease was mainly due to the transitioning of our handset design focus from designing feature phones to smartphones. The total number of handsets manufactured using our design was 81,000 in the first three months of 2012, compared to 597,000 in the first three months of 2011, due mainly to decreased subscription volume for our printed circuit boards design services and fewer feature phone contracts as we shifted our handset design focus from designing feature phones to smartphones. We plan to launch our smartphone design business during the second half of 2012.

Cost of Revenues

        The following table sets forth the breakdown of our cost of revenues for the periods indicated:

		For the Year Ended December 31,															For the Three Months Ended March 31,
		2009			2010						2011						2011			2012
		(pro forma) RMB			(successor) RMB			(successor) (pro forma)			(successor) RMB			(successor) US$			RMB			RMB			US$
		(in thousands)
Cost of revenues
	Feature phone games		(13,372	)		(32,827	)		(32,827	)		(61,337	)		(9,740	)		(13,734	)		(17,873	)		(2,838	)
	Smartphone games		—			—			(30,627	)		(17,974	)		(2,854	)		(4,004	)		(3,678	)		(584	)
	Handset design		—			(10,083	)		(77,838	)		(29,037	)		(4,611	)		(4,660	)		(2,780	)		(441	)
Total cost of revenues			(13,372	)		(42,910	)		(141,292	)		(108,348	)		(17,205	)		(22,398	)		(24,331	)		(3,863	)

        Our cost of revenues relating to feature phone games primarily consists of fees paid to handset companies and design houses or their agents for pre-installing our feature phone games and platforms onto their feature phone handsets.

        Our cost of revenues relating to smartphone games primarily consists of the fees paid to content providers for acquiring certain single-player games and the fees paid to mobile portals and application

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stores for game distribution. Because we acquired the 3GUU Group in December 2010, we did not consolidate any cost of revenues from smartphone games in 2010.

        Our cost of revenues relating to handset design primarily includes fees paid to subcontractors for OEM services, including material costs and installations.

        Our cost of revenues also includes amortization of the acquired intangible assets, staff salaries, utilities, infrastructure maintenance fees, depreciation of equipment, and operating expenses directly related to the operation of the mobile game platforms. Amortization of the acquired intangible assets due to our acquisition of the Dragon Joyce Group was RMB2.5 million, RMB9.9 million, RMB9.9 million (US$1.6 million) and RMB2.5 million (US$0.4 million) in 2009, 2010, 2011, and the first three months of 2012, respectively. Amortization of the acquired intangible assets due to OWX Holding's acquisition of substantially all of the assets of Bright Way and Tastech was approximately RMB574,000 and RMB2.3 million (US$0.4 million) and RMB0.6 million (US$0.1 million) in 2010, 2011 and in the three months ended March 31, 2012, respectively. Amortization of the acquired intangible assets due to our acquisition of the 3GUU Group was RMB206,000 (US$33,000) and RMB78,000 (US$12,000) in 2011 and in the three months ended March 31, 2012. Staff salaries and benefits cost primarily comprise compensation to operations support staff. We expect costs associated with staff salaries and benefits to increase as we continue to expand our operations and hire more operations staff.

Operating Expenses

        Our operating expenses consist of general and administrative expenses, selling expenses and research and development expenses. Our general and administrative expenses primarily consist of salaries and benefits, including share-based compensation, for our general and administrative, finance and human resources personnel, office rentals, depreciation and amortization expenses relating to property and equipment used in general and administrative functions and other expenses incurred in connection with general corporate purposes. General and administrative expenses accounted for 9.6% of our total net revenues in 2009, on a pro forma basis, 9.4% of our total net revenue in 2010, 6.7% of our total net revenue in 2010, on a pro forma basis, 6.7% of our total net revenues in 2011, and 10.9% in the first three months of 2012. We expect our general and administrative expenses to increase as we incur additional expenses in connection with the expansion of our business and our operations as a publicly traded company, which include hiring more staff for our general and administrative team, expenses related to improving and maintaining our internal control over financial reporting and complying with our reporting obligations, and as we incur higher share-based compensation expenses for issuing share-based incentive awards.

        Our selling expenses primarily consist of costs of marketing activities, including cost of advertising in industry publications. We expect that selling expenses will grow as a result of our efforts to increase market presence and derive revenue growth.

        Our research and development expenses primarily consist of payroll, employee benefits and other headcount related expenses associated with product development. We expect our research and development expenses will increase in proportion to net revenues as we incur increased salary, employee benefits and other headcount-related expenses as we continue to develop new games and handset designs.

Taxation

Cayman Islands

        Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains. In addition, upon payments of dividends by us to our shareholders, no Cayman Islands withholding tax will be imposed.

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British Virgin Islands

        Under the current laws of the British Virgin Islands, Beauty Wave, China Wave and 3GUU BVI are not subject to tax on income or capital gains. In addition, upon payments of dividends by these companies to their respective shareholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

        For the years ended December 31, 2009, 2010 and 2011, and for the first three months of 2012, profits tax in Hong Kong were generally assessed at the rate of 16.5% of taxable income. In addition, upon payments of dividends by our Hong Kong subsidiaries to their respective shareholders, no Hong Kong withholding tax will be imposed.

China

        Prior to January 1, 2008, enterprises established in the PRC were generally subject to a 30% state and 3% local enterprise income tax rate. There were various preferential tax treatments promulgated by national tax authorities that were available to foreign-invested enterprises. The New EIT Law and its implementing rules, both of which came into effect on January 1, 2008 (i) reduce the top rate of enterprise income tax from 33% to 25%, (ii) permit companies to continue to enjoy their existing tax incentives, subject to certain transitional phase-out rules, and (iii) introduce new tax incentives, subject to various qualification criteria.

        An entity recognized as a qualified new software development enterprise is entitled to enjoy tax exemption for two years and 50% enterprise income tax rate reduction for the subsequent three years. An entity that enjoys preferential tax rate prior to January 1, 2008 will continue to enjoy its remaining tax holiday granted prior to the effectiveness of the New EIT Law. In May 2007, our VIE, Yingzheng, obtained the new software development enterprise status. Therefore, Yingzheng is entitled to enjoy tax exemption from 2006 to 2007 and a 50% reduced tax rate of 12.5% from 2008 to 2010. In May 2009, Donggan one of our subsidiaries, obtained the new software development enterprise status, with retroactive effect to 2008. Therefore, Donggan was entitled to enjoy tax exemption from 2008 to 2009 and a 50% reduced tax rate of 12.5% from 2010 to 2012. However, as Donggan was dormant during the year ended December 31, 2010 it was not entitled to any tax holiday and the applicable EIT rate for Donggan was 25% in 2010 and 2011 and in the first three months of 2012. In July 2011, Huiyou Digital (Shenzhen) Ltd. obtained the new software development enterprise status. Therefore, Huiyou Digital (Shenzhen) Ltd. is entitled to enjoy a tax exemption for two years, starting from the first year in which it makes a profit and a 50% reduced EIT rate of 12.5% for the subsequent three years. Shenzhen Douwan adopted the methodology of deemed profits basis in 2011. In April 2012, Yitongtianxia obtained the new software development enterprise status, with retroactive effect to 2011. Thus, Yitongtianxia was entitled to enjoy tax exemption from 2011 to 2012 and a 50% reduced EIT rate of 12.5% from 2013 to 2015.

        Moreover, the New EIT Law treats enterprises established outside of China with "de facto management bodies" located in China as PRC resident enterprises for PRC enterprise income tax purposes. The term "de facto management body" is defined as a body exercising substantial and overall management and control over the business, personnel, accounting, properties, among other things of an enterprise. If our company were considered a PRC resident enterprise for PRC enterprise income tax purposes, we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. As of December 31, 2009, 2010 and 2011, and March 31, 2012, we did not accrue for PRC tax on such basis as our non-PRC entities had zero assessable profits in the PRC for the period after January 1, 2008. We will continue to monitor the tax status with regards to the PRC tax resident enterprise regulation of our non-PRC entities. For a detailed discussion, see "Risk factors—Risks Related to Doing Business in China—We may be classified as a "resident enterprise" for PRC

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enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders."

        Dividends paid by our PRC subsidiaries out of the profits earned after December 31, 2007 to non-PRC tax resident investors would be subject to PRC withholding tax. The withholding tax would be 10%, unless a foreign investor's tax jurisdiction has a tax treaty with China that provides for a lower withholding tax rate. For a detailed discussion, see "Risk factors—Risks Related to Doing Business in China—The New EIT Law will affect tax exemptions on dividends to be paid by our PRC subsidiaries to us through our Hong Kong subsidiaries and we may not be able to obtain certain treaty benefits under the relevant tax treaty."

        Aggregate undistributed earnings of our PRC subsidiaries that are available for distribution to non-PRC tax resident parent companies at December 31, 2009, 2010 and 2011, and at March 31, 2012 are considered to be indefinitely reinvested under ASC subtopic 740-30, Income Taxes: Other Considerations or Special Areas. Accordingly, the amount of unrecognized deferred tax liabilities for temporary differences related to investments in PRC subsidiaries is not determined because such a determination is not practical.

        Deferred tax liabilities arising from (i) aggregate undistributed earnings of Yingzheng, our VIE, that are available for distribution to Yitongtianxia, its PRC tax resident parent company and (ii) the difference between the book basis and the tax basis in the investment in Yingzheng were RMB4.4 million and RMB47.0 million as of December 31, 2010, respectively.

        The registered shareholders of Yingzheng are contractually required to remit dividends received from Yingzheng to Yitongtianxia. This distribution chain results in (i) a taxable dividend from Yingzheng to its registered shareholders and (ii) a taxable contribution to Yitongtianxia when the proceeds are remitted to Yitongtianxia by the registered shareholders. The tax impact on the future cash distribution is recognized in deferred tax liabilities as an outside basis difference. On December 16, 2011, 3GUU BVI, a BVI entity, replaced Yitongtianxia, a PRC entity, as the primary beneficiary of Yingzheng. As management is asserting indefinite reinvestment of undistributed earnings of our foreign subsidiaries located in the PRC, the deferred tax liabilities arising from the aggregate undistributed earnings of Yingzheng and the difference between the book basis and the tax basis in the investment in Yingzheng were reversed during the year ended December 31, 2011.

Unrecognized Tax Benefits

        For the period from January 1, 2009 to October 26, 2009, the period from October 27, 2009 to December 31, 2009, the years ended December 31, 2010 and 2011, and for the first three months of 2012 we had unrecognized tax benefits of RMB4.6 million, nil, RMB20.9 million, RMB28.0 million (US$4.4 million), and RMB28.3 million (US$4.5 million), respectively. The unrecognized tax benefits were caused mainly by the adoption of a different methodology for deemed profits basis and the corresponding accounting treatment in our income tax filings. The unrecognized tax benefits, if recognized, would impact the effective tax rate. We have included in the balance as of December 31, 2009, 2010 and 2011, and March 31, 2012, RMB25,000, RMB0.8 million, RMB1.9 million (US$0.3 million), and RMB0.4 million (US$0.1 million), respectively, of tax positions that if recognized will result in deferred tax assets for which a full valuation allowance will be made. See "Risk Factors—Risks Related to Doing Business in China—Any change in the tax treatment we currently enjoy in the PRC may materially and adversely impact our net income."

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Share-Based Compensation Expenses

        Total share-based compensation expenses of equity and liability awards granted to our employees and directors were recorded in "general and administrative expenses" in the consolidated statements of income and comprehensive income and were RMB1.7 million in 2009, RMB6.9 million in 2010, RMB6.9 million in 2010, on a pro forma basis, RMB0.8 million (US$0.1 million) in 2011, and RMB1.9 million (US$0.3 million), in the first three months of 2012. See "—Critical Accounting Policies—Share-Based Compensation" for more details.

Segmentation

        We operate and manage our business as three reportable segments, namely feature phone games, smartphone games and handset design. In accordance with ASC subtopic 280-10, "Segment Reporting: Overall," our chief operating decision maker has been identified as our chief executive officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire group. We generate substantially all of our revenues from customers in the PRC. Accordingly, no geographical segments are available.

Critical Accounting Policies

        We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of our contingent assets and liabilities. We continually evaluate these judgments, estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

        An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated combined financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated combined financial statements and other disclosures included in this prospectus.

        When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Consolidation

        Our consolidated financial statements include the financial statements of our company, subsidiaries and VIE, Yingzheng. The results of our subsidiaries are consolidated from the date on which we obtained control and are continued to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when we hold a majority of the voting equity interest in an entity. However, if we demonstrate our ability to control the entity through the power to direct the activities of the entity that most significantly impact the entity's economic performance and the obligation to absorb losses of the entity that could potentially be significant to the entity or the right to receive benefits from the entity that could potentially be significant to the entity, then the entity is consolidated. All significant intercompany balances and transactions among our company, subsidiaries and VIE have been eliminated upon consolidation. With respect to consolidation of our

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VIE, we assess the consolidation of our VIE under ASC 810, which provides guidance on the identification of and financial reporting for entities over which control is achieved through means other than voting interests, which requires our VIE to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Through a series of contractual arrangements, our subsidiary, Yitongtianxia, through holding all the variable interests of our VIE, has been determined to be the primary beneficiary of our VIE and, accordingly, we consolidated the results of our VIE.

Business Acquisitions

        For the acquisitions of the Dragon Joyce Group, OWX Holding Group and 3GUU Group, we determined the value of the 30% noncontrolling interests by estimating the value of the acquired business as a whole and then subtracting the consideration transferred by VODone for the 70% controlling interest. We estimated the fair value of the acquired businesses using the income approach. Please see "—Our Acquisition" for discussion of the fair value measurements for each of these acquisitions.

Revenue Recognition

        Revenues are derived from the development, operation and sale of mobile phone games as well as the provision of handset design products and services. For each of the significant sources of revenue stated below, revenue is recognized only when the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the goods have been delivered or the services have been rendered; (iii) the price or fees are fixed or determinable; and (iv) collectability is reasonably assured.

Feature phone games

        We generate feature phone games revenues principally from the sale of in-game premium features of mobile phone games on feature phones.

Mobile social games

        Under the free-to-play model for mobile social games, mobile phone game players can download mobile phone games, obtain game accounts and play the basic functions of the mobile games free of charge, but may purchase game points for in-game premium features to enhance their game-playing experience. The purchased in-game premium features can be freely traded amongst game players within the applicable game as long as consumption of the items has not commenced. Mobile phone game players can purchase game points by either charging their account with mobile network operators directly or buying prepaid cards issued by mobile network operators. The prepaid cards can be converted into a pre-specified number of game points for consumption. Upon delivery of game points purchased directly from mobile network operators or converted from prepaid cards to mobile phone game players, we initially classify these amounts as deferred revenue. For purposes of determining when the service has been provided to the mobile phone game players, we have determined that an implied obligation exists to the mobile phone game players who purchased game points to provide an enhanced game-playing experience over the average playing period of the mobile phone game players. We, using data generated from our internal system, estimate the average playing period from the first time the mobile phone game players purchase game points through the period when the game players have not logged into the game for over two consecutive months. Mobile phone game players are deemed to be inactive if they have not logged into the game for two consecutive months.

        We contract with third-party payment platforms for billing, collection and transmission services offered to mobile phone game players who have purchased game points. We also contract with mobile

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application and software websites to distribute our mobile social games by providing platforms for mobile phone game players to download such games. The third-party payment platforms are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since we do not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the third-party payment platforms represent the amount of revenue we recognize.

        We have information generated from our internal system on the number of game points sold each month to estimate the amount of collectable net proceeds and to recognize mobile social games revenues. Differences between our estimates and the actual amounts confirmed by the third-party payment platforms have historically been insignificant. Generally, within 30 days after the end of each month, we receive billing confirmations from each of the third-party payment platforms confirming the amount of net proceeds we will receive. We pay service fees to the mobile application and software websites.

        Collectability is considered reasonably assured as we deal with only reputable third-party payment platforms and perform thorough credit assessment on the third-party payment platforms prior to entering into a business relationship with them. Historically, we have not experienced any significant defaults for payment.

        Based on the above, we recognize the estimated net proceeds to be received from the third-party payment platforms for the sale of game points of the mobile social games, using data generated from our internal system, as deferred revenue upon delivery of game points to mobile phone game players. Deferred revenue is recognized as feature phone games revenue ratably over the estimated average playing period of the paying mobile phone game players of three months, starting from the point in time when game points are delivered to the mobile phone game players. As the mobile social games are under a free-to-play model and revenue is only generated from paying mobile phone game players when they purchase game points for in-game premium features, we focus solely on the playing period of paying mobile phone game players when estimating the period over which revenue is being recognized. We determine the estimated average playing period of paying mobile phone game players, which is the time period between the paying mobile phone game players' first purchase and last log in, for each significant game based on historical player usage patterns and game playing behavior. Our internal system tracks each of the paying mobile phone game players' purchase and log in history for each significant game to generate data to estimate the average playing period for our population of paying mobile phone game players. Future usage patterns may differ from the historical usage patterns on which our revenue recognition policy is based. We monitor the operational statistics and usage patterns of its online game and modifies the expected life span when materially different. The difference between the estimated proceeds and the actual amount confirmed by the third-party payment platforms is recognized in the consolidated statements of comprehensive income when we receive billing confirmations and all revenue recognition criteria are met.

        Game points can be purchased at a discount if mobile phone game players purchase the game points with prepaid cards issued by mobile network operators or during promotional activities that we organize. We account for such discounts in accordance with ASC subtopic 605-50, Revenue Recognition: Customer Payments and Incentives. Such discounts are initially accounted for as a reduction of deferred revenue. As a result, deferred revenue includes the value of both discounted and undiscounted game points, which are subsequently recognized as revenue on a weighted average basis when we provide future services to enhance mobile phone game players' playing experience.

Single-player games

        We enter into service arrangements with feature phone manufacturers to pre-install the mobile phone games or application platforms we develop in-house onto the feature phones before they reach

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mobile phone game players. Mobile phone game players can access the pre-installed feature phone games directly or download the single-player games through the pre-installed application platform on the feature phones without additional charges. Single-player games are offered on a free-for-trial basis, where the mobile phone game players may purchase in-game items such as additional chances to play or the right to play additional stages. We only charge for in-game premium feature purchases. All chargeable in-game premium features on feature phones are considered completely consumed immediately upon purchase. Any unused premium features cannot be carried forward or accessed after the mobile phone users exit the game.

        We contract with mobile phone service providers, who in turn contract with mobile network operators, for billing and collection services offered to mobile phone users who have purchased in-game premium features. The mobile network operators are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players while the mobile phone service providers are entitled to profit sharing based on a prescribed percentage of the net proceeds collected from the mobile network operators. Since we did not have a direct contractual relationship with the mobile network operators in 2009 and 2010, the net proceeds after deducting the amounts shared by the mobile network operators and the mobile phone service providers represent the amount of revenue to be recognized by us. The net proceeds are evidenced by billing confirmations issued by the mobile phone service providers. Generally, within 30 to 120 days after the end of each month, we receive billing confirmations from each of the mobile phone service providers confirming the amount of net proceeds to be received by us.

        We have information generated from our internal system on the number of monthly plan subscriptions and single-player games downloaded each month to estimate the amount of collectable net proceeds and to recognize single-player feature phone games revenues. Differences between our estimates and the actual amounts confirmed by the mobile phone service providers have historically been insignificant.

        We pay service fees, which are recognized as cost of revenues, to the feature phone manufacturers based on a prescribed percentage of the estimated net proceeds or a prescribed fixed fee per mobile phone activated by mobile phone users.

        Based on the above, we recognize the estimated proceeds to be received from the mobile phone service providers as single-player feature phone game revenues, using data generated from their internal systems, when the goods are delivered based on the consumption of in-game premium features by mobile phone users. The difference between the estimated proceeds and the actual amount confirmed by the mobile phone service providers is recognized in the consolidated statements of income and comprehensive income when billing confirmations are received by us.

Smartphone games

        We generate smartphone game revenues from the sale of in-game premium features of mobile social games that we develop in-house, as well as from the sale of single-player games on smartphones that we develop in-house and license or acquire. We operate mobile social games and single-player games under a free-to-play model and a subscription-based model, respectively.

Mobile social games

        Under the free-to-play model for mobile social games, mobile phone game players can download mobile phone games, obtain game accounts and play the mobile games using basic functions free of charge, but may also purchase game points for in-game premium features to enhance their game-playing experience. The purchased in-game premium features can be freely traded among users within the applicable game as long as consumption of the items has not commenced. Mobile phone game players can purchase game points by either charging their account with mobile network operators

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directly or buying prepaid cards issued by mobile network operators. The prepaid cards can be converted into a pre-specified number of game points for consumption. Upon delivery of game points purchased directly from mobile network operators or converted from prepaid cards to mobile phone game players, we initially classify these amounts as deferred revenue. For purposes of determining when the service has been provided to the mobile phone game players, we have determined that an implied obligation exists to the mobile phone game players who purchased game points to provide an enhanced game-playing experience over the average playing period of the mobile phone game players. We use data generated from our internal system to estimate the average playing period from the first time the mobile phone game players purchase game points through the period when the game players have not logged in the game for over two months and are deemed to be inactive.

        We contract with mobile network operators and third-party payment platforms for billing, collection and transmission services offered to mobile phone game players who have purchased game points. We also contract with mobile application and software websites to distribute our mobile social games by providing platforms from which mobile phone game players can download our games. The mobile network operators and third-party payment platforms are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since we do not have a direct contractual relationship with the mobile phone game players the net proceeds after deducting the amounts shared by the mobile network operators and the third-party payment platforms represent the amount of revenue to be recognized by us. The net proceeds are evidenced by billing confirmations issued by the mobile network operators and the third-party payment platforms. Generally, within 30 days after the end of each month, we receive billing confirmations from each of the mobile network operators and the third-party payment platforms confirming the amount of net proceeds to be received by us.

        We have information generated from our internal system on the number of game points sold each month to estimate the amount of collectable net proceeds and to recognize mobile social games revenues. Differences between estimates and the actual amounts confirmed by the mobile network operators and the third-party payment platforms have historically been insignificant. We pay service fees to the mobile application and software websites, which are recognized as cost of revenues, based on a prescribed percentage of the net proceeds confirmed by the mobile network operators and the third-party payment platforms.

        Collectability is considered reasonably assured as we deal with only reputable mobile network operators and third-party payment platforms and performs thorough credit assessment on the mobile network operators and the third-party payment platforms prior to entering into business relationships with them. Historically, we have not experienced any significant defaults for payment.

        Based on the above, we recognize the estimated net proceeds to be received from the mobile network operators and the third-party payment platforms for the sale of game points of the mobile social games, using data generated from our internal system, as deferred revenue upon delivery of game points to mobile phone game players. Deferred revenue is recognized as smartphone games revenue ratably over the estimated average playing period of the paying mobile phone game players of three months, starting from the point in time when game points are delivered to the mobile phone game players. As mobile social games are under a free-to-play model and revenue is only generated when players purchase game points for in-game premium features, we focus solely on the play period of paying mobile game players when estimating the period over which revenue is being recognized. For each significant game, we determine the estimated average playing period of paying mobile phone game players, which is the time period between the paying mobile phone game player's first purchase and last log-in, based on historical player usage patterns and game playing behavior. Our internal system tracks each paying mobile phone game players' purchase and log-in history for each significant game to generate data to estimate the average play period for our population of paying mobile phone game players. Future usage patterns may differ from the historical usage patterns on which our revenue

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recognition policy is based. We monitor the operational statistics and usage patterns of its online game and modifies the expected life span when materially different. The difference between the estimated proceeds and the actual amount confirmed by the mobile network operators and third-party platforms is recognized in the consolidated statements of operations when billing confirmations are received by us and all revenue recognition criteria are met.

        Game points can be purchased at a discount if mobile phone game players purchase the game points with prepaid cards issued by mobile network operators or during promotional activities organized by us. We account for such discounts in accordance with ASC subtopic 605-50, Revenue Recognition: Customer Payments and Incentives. Such discounts are initially accounted for as a reduction of deferred revenue. As a result, deferred revenue includes the value of both discounted and undiscounted game points, which are subsequently recognized as revenue on a weighted average basis when we provide future services to enhance mobile phone game players' playing experience.

Single-player games

        Under the subscription-based model for single-player games, mobile phone game players can either subscribe to a monthly plan to download a fixed number of single-player games from mobile network operators for a fixed subscription fee per month or download each single-player game based on a fixed price per game.

        We contract with mobile network operators for billing, collection and transmission services offered to mobile phone users who have purchased single-player games. In addition, we purchase games from third-party game developers. The mobile network operators are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since we do not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the mobile network operators represent the amount of revenue to be recognized by us. The net proceeds are evidenced by billing confirmations issued by the mobile network operators. Generally, within 30 days after the end of each month, we receive billing confirmations from each of the mobile network operators confirming the amount of net proceeds to be received by us. We have information generated from our internal system on the number of subscription or single-player games downloaded each month to estimate the amount of collectable net proceeds and to recognize single-player games revenues. Differences between estimates and the actual amounts confirmed by the mobile network operators have historically been insignificant. We pay content fees to third-party game developers, which are recognized as cost of revenues, based on a prescribed percentage of the net proceeds confirmed by the mobile network operators.

        Based on the above, we recognize single-player smartphone games revenues when the goods are delivered based on download of games by mobile phone users or at the end of the subscription period. The difference between the estimated proceeds and the actual amount confirmed by the mobile network operators is recognized in the consolidated statements of operations when billing confirmations are received by us.

        We determine whether to record single-player smartphone games revenues using the gross or net method of reporting in accordance with ASC subtopic 605-45, or ASC 605-45, Revenue Recognition: Principal Agent Considerations. Determining whether revenue should be reported gross or net is based on an assessment of various factors, the primary factors being whether we are acting as the principal in offering services to the customer or whether we are acting as an agent in the transaction. We have determined that we are acting as the principal in offering services as we (i) are the primary obligor in the arrangement; (ii) have latitude in establishing the selling price; (iii) have discretion in suppliers selection; and (iv) are involved in the determination of product specifications. Therefore, we have the primary responsibility for fulfillment and acceptability of the single-player games and recognize the net

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proceeds to be received from the mobile network operators as smartphone games revenue on a gross basis. The amounts attributable to third-party game developers in the form of content fees are recognized as cost of revenues.

Handset design

        We generate handset design revenues from the provision of comprehensive handset design solutions to mobile phone manufacturers and mobile phone content providers. Handset design solutions include (i) operating system software and hardware design with one-year PCS service; (ii) printed circuit board with operating system software and optional assembly service; and (iii) mobile phone contents installation service. Operating system software and hardware designs with PCS services are provided to mobile phone manufacturers for either a fixed fee or a variable fee based on the units of production by the mobile phone manufacturers at a prescribed unit price. Printed circuit boards with operating system software are sold to mobile phone manufacturers for a fixed unit price. Mobile phone contents installation services are rendered to mobile phone content providers for a prescribed percentage of the mobile phone content providers' net profits.

        We early adopted Accounting Standards Update No. 2009-13, or ASU 2009-13, Revenue Recognition—Multiple-Deliverable Revenue Arrangements, and ASU No. 2009-14, Certain Revenue Arrangements that Include Software Elements, in assessing our arrangements with multiple deliverables and arrangements that include software elements for the periods presented. In accordance with ASU 2009-13, the total arrangement consideration is allocated to each unit of accounting based on our relative selling price which is determined based on the entity's best estimate of the selling price for that deliverable when vendor-specific evidence and third party evidence of selling price do not exist. In accordance with ASU2009-14, software contained on the tangible product which is essential to the tangible product's functionality is excluded from the scope of software accounting guidance in ASC subtopic 985-605, Software: Revenue Recognition.

Operating system software and hardware design with PCS service

        We sign agreements with mobile phone manufacturers containing the significant terms of the provision of operating system software and hardware design with PCS service to evidence that an arrangement exists. We recognize handset design revenues derived from operating system software and hardware design and PCS service concurrently in accordance with ASC 985-605, as (i) the PCS fee is included with the initial arrangement fee for operating system software and hardware design; (ii) the PCS is for one year or less; (iii) the PCS costs is estimated to be insignificant and (iv) unspecified upgrades or enhancements offered during PCS arrangements historically have been and are expected to be minimal and infrequent. Therefore, delivery of operating system software and hardware design with PCS service occurs upon receipt and acceptance of the operating system software and hardware design by the mobile phone manufacturers. We perform credit assessments on the mobile phone manufacturers prior to signing these agreements to ensure collectability is reasonably assured. Accordingly, revenues from the provision of operating system software and hardware design and PCS service are recognized upon (i) the mobile phone manufacturers accepting the handset design solutions if the arrangement is based on a fixed fee or (ii) the mobile phone manufactures accepting the handset design solutions and confirming their monthly units of production to us if the arrangement is based on a variable fee derived from the units of production by the mobile phone manufacturers at a prescribed unit price. We have not provided any refunds in the past and we do not expect to provide refunds in the future to mobile phone manufacturers.

Printed circuit board with operating system software and optional assembly service

        Printed circuit boards with operating system software and optional assembly services are multiple element arrangements comprising printed circuit boards, assembly services and operating system

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software specifically designed for the printed circuit boards. Since the operating system software is essential to the functionality of the printed circuit board, the transaction is outside the scope of software accounting guidance in ASC 985-605 in accordance with ASU 2009-14. Accordingly, we account for the sale of printed circuit boards with operating system software and optional assembly service as a multiple deliverables arrangement in accordance with ASU 2009-13. Each of the printed circuit board, operating system software and assembly service represents a separate unit of accounting.

        We sign an agreement with the mobile phone manufacturers containing the significant terms of the sale of printed circuit board with operating system software to evidence that an arrangement exists. The agreement also stipulates whether the mobile phone manufacturers engage us to perform assembly service on the printed circuit board. We deliver the assembled printed circuit boards together with the operating system software installed to mobile phone manufacturers if we are engaged to perform assembly service; whereas we normally deliver the operating system software prior to the printed circuit board to the mobile phone manufacturers if we are not engaged to perform assembly service. Therefore, delivery of printed circuit boards with operating system software and optional assembly services occurs upon receipt and acceptance of all deliverables by the mobile phone manufacturers. We perform a credit assessment on the mobile phone manufacturers prior to signing the agreements to ensure collectability is reasonably assured. The purchase price is fixed because the unit price is stipulated in the signed sales agreement and no concessions such as discounts, rebates, refunds or other price changes are provided subsequently. However, the mobile phone manufacturers only pay the agreed purchase price upon receipt of all of the deliverables in the arrangement. We outsource the assembly of printed circuit boards and the installation of operating system software to original equipment manufacturers, or OEM, and pay manufacturing fees, which are recognized as cost of revenues, based on a prescribed fixed fee per unit manufactured.

        In accordance with ASU 2009-13 and ASC subtopic 605-25, or ASC 605-25, Revenue Recognition: Multiple-Element Arrangements, the amount allocable to the delivered units or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Since the amount allocable to the operating system software is contingent upon the delivery of printed circuit board and the related assembly service, if any, revenues from the sale of printed circuit board with operating system software and optional assembly service are recognized only upon delivery of the final deliverable.

Mobile phone content installation service

        Mobile phone content installation service does not require significant production, modification or customization of the mobile phone contents received from the mobile phone content providers. Persuasive evidence of the arrangement is documented in a contract signed by us and the mobile phone content providers. Delivery of mobile phone content installation service occurs when the mobile phone contents are installed on the mobile device circuit boards by the OEM. The mobile phone content installation service fees are fixed and non-refundable once the mobile phone content providers confirm their monthly net profits to us. Collectability is considered reasonably assured as we deal with only reputable mobile phone content providers and performs thorough credit assessment on the mobile phone content providers prior to entering into a business relationship with them. Historically, we have not experienced any significant payment defaults. Accordingly, we recognize revenues from mobile phone content installation services when the services are delivered and the fees are fixed upon receipt of the monthly net profits confirmations from mobile phone content providers.

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Share-Based Compensation

Share Option Grants

        We account for share options granted to employees under provisions of ASC 718, "Stock Compensation." In accordance with ASC 718, we determine whether a share option should be classified and accounted for as a liability award or equity award. All grants of share options to employees classified as equity awards are measured at the grant date based on the fair value of the awards and are recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. All grants of share options to employees classified as liability awards are remeasured at the end of each reporting period until the date of settlement, with an adjustment for fair value recorded to the current period expenses in order to properly reflect the cumulative expense based on the current fair value of the vested options. We have elected to recognize share-based compensation using the straight-line method for all share-based awards issued. We use binomial and Black-Scholes option pricing valuation models in determining the fair value of the options granted. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any.

        We have made the following share option grants.

        VODone Options.    In connection with the acquisition of the Dragon Joyce Group, on October 12, 2009, VODone granted options to purchase 5,000,000 ordinary shares of VODone to an employee of the Dragon Joyce Group, who subsequently became our employee on October 27, 2009 upon the consummation of the Dragon Joyce Group acquisition, at an exercise price of HK$1.68 (US$0.22) per share. The 5,000,000 options were non-forfeitable, immediately vested and have a contractual life of five years.

        On November 4, 2010, VODone granted options to purchase 5,900,000 ordinary shares of VODone to certain of our employees at an exercise price of HK$2.25 (US$0.29) per share. The 5,900,000 options were immediately vested and have a contractual life of three years. In accordance with ASC 718, the accounting grant dates for options issued on October 12, 2009 and November 4, 2010 were October 18, 2009 and November 18, 2010, respectively, the dates on which VODone and the employees reached a mutual understanding of the key terms and conditions of the awards.

        The share options granted by VODone to our employees are classified as equity awards which are measured based on the grant date fair value. The fair value of the 5,000,000 options with grant date on October 18, 2009 was not subject to remeasurement when the grantee became our employee on October 27, 2009, as the options are non-forfeitable and vested immediately upon issuance. Since the options were granted by VODone to our employees for their provision of service to us, the compensation cost is recognized in our financial statements with a corresponding credit to additional paid-in capital, representing VODone's capital contribution. Since the share options were immediately vested, share-based compensation costs of RMB1.7 million for the 5,000,000 options granted and RMB2.7 million for the 5,900,000 options granted were immediately recognized on October 27, 2009 and November 18, 2010, respectively. Between May 2010 and December 2010, 4,700,000 options were exercised.

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        The grant date fair value of the equity awards granted by VODone to our employees was estimated using the Black-Scholes option pricing model with the following assumptions:

	October 18, 2009			November 18, 2010
Risk-free interest rate		0.17	%		0.26	%
Dividend yield		—			0.6	%
Expected volatility range		62.67	%		53.12	%
Weighted average expected life		1 year			1 year
Estimated forfeiture rate		—			—

        The fair value of the options granted by VODone as of October 18, 2009 and November 18, 2010 was estimated using the Black-Scholes option pricing model with the assistance of an independent valuation firm. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, the expected price multiple at which the holder is likely to exercise stock options and the expected employee forfeiture rate. We use historical data and future expectations to estimate forfeiture rate. The volatility assumption of the VODone options was estimated based on implied volatility and historical volatility of VODone's share price. The risk-free rate for periods within the contractual life of the options of VODone is based on yield in effect at the grant date on Exchange Fund Notes as indicated by the Hong Kong Monetary Authority. The dividend yield is based on the expected pay-out ratio. The fair value of the VODone shares was determined based on the closing market price of the VODone shares at the measurement date.

        Dragon Joyce, OWX Holding and 3GUU BVI Options.    On July 30, 2010, Dragon Joyce granted options to purchase 0.724% of the equity interest in Dragon Joyce to Dr. Lijun Zhang and Mr. Hendrick Sin at an aggregate exercise price of RMB1,738,000. On October 26, 2010, OWX Holding granted options to purchase 2.198% of OWX Holding to Dr. Zhang and Mr. Sin at an aggregate exercise price of RMB1,723,000. On January 3, 2011, 3GUU BVI granted options to purchase 0.610% of the equity interest in 3GUU BVI to Dr. Zhang and Mr. Sin at an aggregate exercise price of RMB1,708,000. These options vested immediately and will expire two years from their respective grant date.

        The functional currency of Dragon Joyce, OWX Holding and 3GUU BVI is the US dollar. In accordance with ASC 718, as these awards contained an exercise price denominated in Renminbi, which is different from the functional currency of Dragon Joyce, OWX Holding and 3GUU BVI, these stock options are dual indexed to foreign exchange and the shares of Dragon Joyce, OWX Holding and 3GUU BVI. Accordingly, the share options granted by Dragon Joyce, OWX Holding and 3GUU BVI are accounted for as liability awards that are remeasured at fair value at the end of each reporting period until the date of settlement.

        On October 27, 2011, we settled the granted options to purchase 0.436% of the equity interest in Dragon Joyce by issuing 418,268 of our ordinary shares to certain grantees. Concurrently, we modified the exercised price of the remaining granted options to purchase 0.288% of the equity interest in Dragon Joyce from Renminbi to U.S. dollar. The fair values of 418,268 of our ordinary shares and the granted options to purchase 0.436% of the equity interest in Dragon Joyce were the same on the date of settlement.

        On October 28, 2011, we settled the granted options to purchase 1.285% of the equity interest in OWX Holding by issuing 418,266 of our ordinary shares to certain grantees. Concurrently, we modified the exercised price of the remaining granted options to purchase 0.913% of the equity interest in OWX Holding from Renminbi to U.S. dollar. The fair values of 418,266 of our ordinary shares and the granted options to purchase 1.285% of the equity interest in OWX Holding were the same on the date of settlement.

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        The modification changed the liability awards into equity awards because the stock options were no longer dual indexed to foreign exchange and the shares of Dragon Joyce and OWX Holding. Additionally, as the modification did not result in any incremental fair value in the new equity awards granted, no additional compensation cost was recognized.

        On October 29, 2011, we settled all of the granted options to purchase 0.610% of the equity interest in 3GUU BVI by (i) issuing 15,917.82 newly issued ordinary shares of 3GUU BVI to the grantees and (ii) exchanging 15,917.82 ordinary shares of 3GUU BVI with 229,550 of our newly issued ordinary shares. The fair values of the 15,917.82 ordinary shares of 3GUU BVI, 229,550 of our ordinary shares and the granted options to purchase 0.610% of the equity interest in 3GUU BVI were the same on the date of settlement.

        The grant date, December 31, 2010 and October 27, 2011 fair value of the liability awards granted by Dragon Joyce was estimated using the binomial option pricing model with the following assumptions:

	July 30, 2010			December 31, 2010			October 27, 2011
Risk-free interest rate		2.28	%		3.28	%		3.04	%
Dividend yield		—			—			—
Expected volatility range		59.00	%		48.42	%		50.19	%
Weighted average expected life		2 year			1.58 year			0.76 year
Suboptimal exercise factor		3			3			3
Estimated forfeiture rate		—			—			—
Fair value of 0.724% of the equity interest in Dragon Joyce (in thousands)		RMB2,952			RMB3,547			RMB4,269

        The grant date, December 31, 2010 and October 28, 2011 fair value of the liability awards granted by OWX Holding was estimated using the binomial option pricing model with the following assumptions:

	October 26, 2010			December 31, 2010			October 28, 2011
Risk-free interest rate		2.34	%		3.32	%		3.07	%
Dividend yield		—			—			—
Expected volatility range		56.00	%		41.05	%		60.82	%
Weighted average expected life		2 year			1.82 year			0.99 year
Suboptimal exercise factor		3			3			3
Estimated forfeiture rate		—			—			—
Fair value of 2.198% of the equity interest in OWX Holding (in thousands)		RMB3,722			RMB3,722			RMB2,895

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        The grant date and October 29, 2011 fair value of the liability awards granted by 3GUU BVI was estimated using the binomial option pricing model with the following assumptions:

	January 3, 2011			October 29, 2011
Risk-free interest rate		3.34	%		3.14	%
Dividend yield		—			—
Expected volatility range		52.74	%		47.02	%
Weighted average expected life		2 year			1.18 year
Suboptimal exercise factor		3			3
Estimated forfeiture rate		—			—
Fair value of 0.61% of the equity interest in 3GUU BVI (in thousands)		RMB1,883			RMB2,523

        The fair value of the options granted by Dragon Joyce, OWX Holding and 3GUU BVI as of each of the measuring dates above was estimated using a binomial option pricing model with the assistance of an independent valuation firm. The binomial model requires the input of highly subjective assumptions, including the expected stock price volatility, the expected price multiple at which the holder is likely to exercise stock options and the expected employee forfeiture rate. We use historical data and future expectations to estimate forfeiture rate. For expected volatility of the Dragon Joyce, OWX Holding and 3GUU BVI options, we have made reference to the historical volatility of several comparable companies. The risk-free rate for periods within the contractual life of the options of Dragon Joyce, OWX Holding and 3GUU BVI is based on the market yield of China Government Bonds. The dividend yield is based on the expected pay-out ratio.

        We determined the fair value of the Dragon Joyce, OWX Holding and 3GUU BVI at the measurement date with the assistance of an independent valuation firm using the discounted cash flow method, which incorporates certain assumptions including the discount rates, financial results and growth trends of Dragon Joyce, OWX Holding and 3GUU BVI. The expected share option life was estimated based on the resulting output of the binomial option pricing model. The option awards are not transferable and the grantees have a limited amount of time subsequent to their termination of employment or service to exercise the options. These post-vesting restrictions are considered in the binomial option pricing model as a suboptimal exercise factor.

Restricted Share Units

        In addition to option grants, we also issued restricted share units to our employees. On August 24, 2011, we issued 1,220,000 restricted share units to certain directors and officers at a per share subscription price of US$0.001. On March 16, 2012, we issued 639,000 restricted share units to certain directors and officers at a per share subscription price of US$0.001. Pursuant to the restricted share units subscription agreements, 25% of the restricted share units will vest upon each of the completion, the first, the second and the third anniversary of the listing. Prior to vesting, the restricted share units may not be transferred. If an offering is not consummated by December 31, 2014, we are obligated to repurchase all of the restricted share units at the purchase price of US$0.001 per share. We may also repurchase an employee's RSUs at the subscription price of US$0.001 per share should his or her employment terminate prior to the vesting of his or her RSUs.

        The restricted share units are classified as equity awards, which are measured based on the grant date fair value. We estimated the grant date fair value of the restricted share units based on the fair value of our ordinary shares, which was determined to be the sum of the fair value of Dragon Joyce, OWX Holding and 3GUU BVI. Since a performance condition of a listing on an internationally recognized stock exchange is attached with the vesting of the restricted share units, share-based compensation cost will not be recorded before the performance condition of such listing is met. Accordingly, no compensation expense was recognized for the year ended December 31, 2011. As of

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March 31, 2012, the unrecognized compensation expenses for the restricted share units were RMB7.0 million (US$1.1 million).

        We determined the fair value of our equity interests at the grant date with the assistance of an independent valuation firm.

        We have appraised the business enterprise of our company and restricted shares on the basis of fair value. Since we were not a listed company as at the appraisal date, we must first determine the business enterprise value of our company as at the appraisal date. The estimated fair value of the ordinary shares of our company will be derived from our business enterprise value, which is one of the major variables in determining the fair value of the restricted shares. We have considered the following principal factors: the nature of our business, operating results and financial condition; specific economic and competitive elements affecting business and our industry; nature and prospect of our industry; rates of return as indicated by alternative investment opportunities of comparable magnitude; character and risk; and business risks and inherent uncertainties of our operation.

        Due to the changing environment in which we operate, a number of assumptions must be established in order to sufficiently support our concluded value of the business enterprise and the restricted shares. The major assumptions adopted in this appraisal are: no material changes in the existing political, legal, fiscal and economic conditions in China; no major changes in the current taxation law in the PRC, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with; exchange rates and interest rates will not differ materially from those presently prevailing; the availability of financing will not be a constraint on the future growth of our operation; industry trends and market conditions for related industries will not deviate significantly from economic forecasts; we will retain and have competent management, key personnel, and technical staff to support its ongoing operations; and there is no material difference between the fair values of each of our business segments.

        The aggregate fair values of the minority stakes of the Dragon Joyce, OWX and the 3GUU Groups were developed through the application of the income approach using the discounted cash flow method. The income approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the business enterprise that an amount equal to the present worth of anticipated future benefits (income) from the same or equivalent business enterprise with similar risk. The income approach explicitly recognizes that the current value of an investment is premised upon the expected receipt of future economic benefits such as cost savings, periodic income, or sale proceeds. The discounted cash flow approach consists of estimating future annual cash flows and individually discounting them to present value.

        We have applied the discounted cash flow method in appraising the economic benefits of the Dragon Joyce, OWX and 3GUU Groups. In practice, the discounted cash flow approach consists of estimating future annual cash flows and individually discounting them to the present value.

        A discount rate represents the total expected rate of return that an investor would demand on the purchase price of an ownership interest in an asset given the level of risk inherent in that ownership interest. When developing a discount rate to apply to the cash flow streams attributable to the Dragon Joyce, OWX and 3GUU Groups, the discount rate is the WACC. The cost of equity was developed through the application of the CAPM. The CAPM states that an investor requires excess returns to compensate for any risk that is correlated to the risk in the return from the stock market as a whole but requires no excess return for other risks. Risks that are correlated to the risk in the return from the stock market as a whole are referred to as systematic and measured by a parameter called beta, whereas other risks are referred to as nonsystematic. Under the CAPM, the appropriate rate of return is the sum of the risk-free return and the equity risk premium required by investors to compensate for the systematic risk assumed. The discount rate for the Dragon Joyce, OWX and 3GUU Groups is the sum of the risk-free rate of return, equity risk premium, small capitalization risk premium and specific

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risk premium inherent in the operations of the appraised businesses, if any. Small capitalization risk premium is the excess return that an investor would demand in order to compensate for additional risk over the entire stock market when investing in a small capitalization company. This premium reflects the fact that cost of capital increases as the size of the company decreases.

        In addition, we also applied a discount for lack of marketability. The concept of marketability deals with the liquidity of an ownership interest, or in other words how quickly and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for the equity interests of a closely held corporation. Ownership interests of rights to receive distributable profit from closely held companies are typically not readily marketable compared to similar interests in public companies. Therefore, a right to receive distributable profit from a privately held company is usually worth less than an otherwise comparable public company. The discount for lack of marketability is regarded as a put option of which the stock price equal to exercise price. The time to maturity and the volatility are replicated by the expected time to list its shares in a stock market and the average volatilities of comparable listed corporations, respectively.

        The per-share fair values of the restricted shares of RMB3.98 (US$0.63) and RMB3.35 (US$0.53) as of August 24, 2011 and March 16, 2012, respectively, are equivalent to our aggregate business enterprise value divided by the total enlarged ordinary share capital after issuance of the restricted shares.

        Our business enterprise values as of August 24, 2011 and March 16, 2012 are equal to the sum of the business enterprise values of our three reportable segments, namely feature phone games, handset design and smartphone games. The aggregate fair value of these three segments was estimated primarily using the DCF method under the income approach. Cost of equity, which is one of the assumptions in the income approach, was derived under the market approach. Data from several comparable companies in the same industry were used in deriving the cost of equity to calculate the discount rates used in the DCF method through the application of the CAPM. As our feature phone games, handset design and smartphone games segments are groups of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on the following assumptions:

August 24, 2011	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		22.94%		22.94%		22.90%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		10%		12%		10%

March 16, 2012	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		21.45%		21.79%		21.45%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		11%		16%		11%

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        The discount rate used in the DCF method is derived through the application of the CAPM, based on following assumptions:

August 24, 2011	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		9.16%		11.41%		9.14%
Risk-free rate		4.12%		4.12%		4.12%
Small-size premium		10.06%		10.06%		10.06%
After-tax cost of debt		5.99%		5.89%		5.29%

March 16, 2012	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		8.31%		11.85%		8.31%
Risk-free rate		3.55%		3.55%		3.55%
Small-size premium		9.81%		9.81%		9.81%
After-tax cost of debt		7.05%		7.05%		7.05%

*

Cost of equity is calculated based on the data from several comparable companies in the same industry.

Rights Offering

        On August 23, 2011, we effected a 2,500,000 ordinary share rights offering to our existing shareholder, VODone, for a subscription price of US$0.001 per ordinary share. Since the ordinary shares were issued for nominal consideration, the offering contains a bonus element, measured as the difference between the subscription price of US$0.001 per share and the fair value of the ordinary shares subscribed for of RMB3.98 (US$0.63) per share. This bonus element is accounted for similar to a stock dividend in accordance with ASC 260. All ordinary share and per share information is adjusted retrospectively for the rights offering for all periods presented.

        The per-share fair value of the ordinary shares subscribed for on August 23, 2011 is equivalent to our aggregate business enterprise value divided by the total number of enlarged ordinary share capital after issuance of the restricted shares. We applied the business enterprise value as of August 24, 2011 for the calculation of per-share fair value of the ordinary shares on August 23, 2011, as we believe that there was no material change in our operations in the short period between August 23, 2011 and August 24, 2011 that would materially impact the fair value of our total business enterprise value.

Options Granted to Employees

        On February 6, 2012, we granted our employees and employees of VODone options under the option scheme approved on November 15, 2011, or the Share Option Scheme, to purchase 23,404,120 and 2,431,592 of our ordinary shares, respectively, at an exercise price of US$0.605 per share. These share options have a contractual life of five years. Pursuant to the share options agreement, (i) 25% of the share options are vested and exercisable by each grantee on the first anniversary of the date of grant; and (ii) the remaining 75% of the share options are vested and exercisable by each grantee in 12 equal quarterly tranches beginning one calendar quarter after the first anniversary of the date of grant. Since VODone, the ultimate holding company of the Company, is a publicly listed company on the HK Stock Exchange, we and our subsidiaries are prohibited from granting share options with exercise prices lower than the new issue price of shares listing unless otherwise approved or waived by the HK Stock Exchange. Any share option granted by us during the period commencing six months before the first confidential filing date on Form F-1, or its equivalent for listing on the HK Stock Exchange or an overseas stock exchange, up to the listing date are subject to the above requirement. Except for any waivers that may be granted by the HK Stock Exchange, the exercise price of any share

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option granted during such period shall be adjusted to a price not lower than the new issue price as our board of directors may deem appropriate. The exercise price of the share options shall be adjusted to the price of the listing if the price of the listing exceeds $0.605 per share, whereas the exercise price of the share options shall remain unchanged if the price of our initial listing is less than $0.605 per share or a listing does not take place.

        In accordance with ASC 718, the accounting grant date for these share options was February 6, 2012, as we and the grantees reached a mutual understanding of the key terms and conditions of the awards when the grantees began to be adversely affected by subsequent changes in the price of our ordinary shares. The share options granted to our employees are classified as equity awards which are measured based on the grant date fair value. As a market condition in which the exercise price varies with the price of our ordinary shares is attached to the share options, the market condition was considered in the estimate of their grant-date fair value. The fair value of each of the share options granted by us was RMB0.95 at the grant date. Compensation cost for these awards with a market condition granted to our Group amounting to RMB22.2 million (USD3.5 million) is recognized ratably for each vesting tranche, using the accelerated attribution method, over the requisite service period regardless of whether the market condition is satisfied. The total fair value of share options granted to our employees vested during the three months ended March 31, 2012 was RMB1.9 million (US$0.3 million).

        ASC 718 does not apply to awards granted by an entity to employees of its controlling parent company. As a result, ASC 718 is not applicable to the share options granted by us to employees of VODone on February 6, 2012. However, since VODone, as our controlling parent, can always direct us to grant share-based awards to its employees, we measured the fair value of the shares options granted to employees of VODone at the grant date and recognized that amount as a dividend to VODone without regard to whether the options are subject to vesting provisions. While this is not consistent with the measurement model for share-based awards granted to nonemployees described in ASC topic 505-50 ("ASC 505-50"), Equity—Equity-Based Payments to Non-Employees, we considered the departure from ASC 505-50 was not unreasonable given that the grant of share options to employees of VODone was a capital transaction rather than compensation. Accordingly, the grant-date fair value of the share options granted to employees of VODone amounting to RMB2.3 million (US$0.4 million) was recorded as a one-time deemed dividend distribution to shareholder during the three months ended March 31, 2012.

        The grant date fair value of the equity awards granted to employees of us and VODone was estimated using the monte carlo simulation model with the following assumptions:

	February 6, 2012
Risk-free interest rate		0.75%
Dividend yield		2.00%
Expected volatility rate		51.64%
Weighted average expected life		5.00
Estimated forfeiture rate		—
Fair value of the Company's ordinary shares		3.25

Fair Value of Ordinary Shares

        The per-share fair values of the ordinary shares of RMB3.98 (US$0.63), RMB3.75 (US$0.60), RMB3.25 (US$0.51) and RMB3.35 (US$0.53) as of August 24, 2011, October 27, 2011, February 6, 2012 and March 16, 2012, respectively, are equivalent to our aggregate business enterprise value

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divided by the total number of enlarged ordinary share capital after the issuance of the restricted shares.

	August 24, 2011		October 27, 2011		February 6, 2012		March 16, 2012
RMB		3.98		3.75		3.25		3.35
US$		0.63		0.60		0.51		0.53

        The per-share fair values of the ordinary shares as of October 28, 2011 and October 29, 2011 are equivalent to the per-share fair value of the ordinary shares as of October 27, 2011.

        The per-share fair value of the ordinary shares did not fluctuate significantly in the periods from August 24, 2011 to October 27, 2011 and from February 6, 2012 to March 16, 2012. The decrease in the per-share fair values of the ordinary shares from RMB3.75 as of October 27, 2012 to RMB3.25 as of February 6, 2012 was primarily due to a RMB152 million decrease in our equity value. The decrease in our equity value from RMB1,135 million as of October 27, 2012 to RMB983 million as of February 6, 2012 was mainly due to (i) economic growth in the PRC during 2012 being slower than our previous expectation, as evidenced by the fact that the PRC government reduced the economic growth rate of China from 8% to 7.5%, (ii) growth of feature phone games in the PRC being slower than anticipated as the feature phone handset market has witnessed a decline since the second half of 2011. As a result, we revised our projected financial performance of feature phone game business in the future downward, and (iii) our discount for lack of marketability of both feature phone and smartphone game businesses increased from 8% as of October 27, 2011 to 13% as of February 6, 2012 since a higher estimated volatility was caused by the unstable financial market conditions.

        Our business enterprise values were equal to the aggregate of the business enterprise value of our three reportable segments, namely feature phone games, handset design and smartphone games. The aggregate fair value of these three segments was estimated using the DCF method under the income approach. Cost of equity, which is one of the assumptions in the income approach, was derived under the market approach. Data from several comparable companies in the same industry were used in deriving the cost of equity to calculate the discount rates used in the DCF method through the application of the CAPM. As our feature phone games, handset design and smartphone games segments are groups of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on the following assumptions:

August 24, 2011	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		22.94%		22.94%		22.90%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		10%		12%		10%

October 27, 2011 October 28, 2011 October 29, 2011	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		22.20%		21.92%		22.17%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		8%		10%		8%

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February 6, 2012	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		21.31%		21.57%		21.31%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		13%		17%		13%

March 16, 2012	Feature Phone Games		Handset Design		Smartphone Games
Discount rate		21.45%		21.79%		21.45%
Long-term sustainable growth rate		3%		3%		3%
Discount for lack of marketability		11%		16%		11%

        The discount rate used in the DCF method is derived through the application of the CAPM, based on following assumptions:

August 24, 2011	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		9.16%		11.41%		9.14%
Risk-free rate		4.12%		4.12%		4.12%
Small-size premium		10.06%		10.06%		10.06%
After-tax cost of debt		5.99%		5.89%		5.29%

October 27, 2011 October 28, 2011 October 29, 2011	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		8.80%		11.17%		8.77%
Risk-free rate		3.76%		3.74%		3.74%
Small-size premium		10.06%		10.06%		10.06%
After-tax cost of debt		7.05%		7.05%		5.29%

February 6, 2012	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		8.26%		11.86%		8.26%
Risk-free rate		3.46%		3.46%		3.46%
Small-size premium		9.81%		9.81%		9.81%
After-tax cost of debt		7.05%		7.05%		7.05%

March 16, 2012	Feature Phone Games		Handset Design		Smartphone Games
Cost of equity*		8.31%		11.85%		8.31%
Risk-free rate		3.55%		3.55%		3.55%
Small-size premium		9.81%		9.81%		9.81%
After-tax cost of debt		7.05%		7.05%		7.05%

*

Cost of equity is calculated based on the data from several comparable companies in the same industry.

Income Taxes

        We follow the liability method of accounting for income taxes in accordance with ASC topic 740, ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss

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carryforwards, and credits using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of income and comprehensive income in the period that includes the enactment date.

        We use ASC topic 740-10, or ASC 740-10, Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740-10 provides the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. Our estimated liability for unrecognized tax benefits and the related interests and penalties are periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. Additionally, in future periods, changes in facts, circumstances, and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. We have elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of income and comprehensive income.

Goodwill

        Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. In accordance with ASC topic 350, or ASC 350, Intangibles—Goodwill and Other, goodwill is not amortized, but rather is tested for impairment annually or more frequently if indicators of impairment present. We assign and assess goodwill for impairment at the reporting unit level. We determine that each reporting unit is identified at the operating segment level.

        The performance of the impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined by computing the future discounted cash flows expected to be generated by the reporting unit. If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss. The annual goodwill impairment test is performed on December 31 of each year. The estimated fair value of our reporting units was substantially in excess of their carrying values as of December 31, 2009, 2010 and 2011, and March 31, 2012. Accordingly, no goodwill impairment was recognized for any of the periods presented.

Fair Value of Financial Instruments

        Our financial instruments primarily include cash and cash equivalents, accounts receivables, amounts due from related parties, contingently returnable consideration assets, accounts payable and amounts due to related parties. As of December 31, 2009, 2010 and 2011, and March 31, 2012 the carrying values of these financial instruments, other than the contingently returnable consideration assets, approximated their fair values due to the short-term maturity of these instruments. The contingently returnable consideration assets were recorded at fair value as determined on the respective days of business acquisition and subsequently adjusted to the fair value at each reporting date. We determined the fair

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values of the contingently returnable consideration assets with the assistance of an independent valuation firm.

        We apply ASC topic 820, or ASC 820, Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.

        ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

        Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

        Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

        Level 3—Unobservable inputs which are supported by little or no market activity.

        ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach, (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

        In accordance with ASC 820, we measured the fair value of the contingently returnable consideration assets using an income approach based on inputs that are unobservable in the market.

        Realized and unrealized gain measured at fair value on a recurring or non-recurring basis was recorded as "Changes in fair value of contingently returnable consideration assets" in the consolidated statements of income and comprehensive income.

Internal Control Over Financial Reporting

        During the preparation and external audit of our consolidated financial statements of our predecessor, Kuailefeng, for the period from January 1, 2009 to October 26, 2009 and of our company the period from October 27, 2009 to December 31, 2009 and for the years ended December 31, 2010 and 2011, a material weakness in our internal control over financial reporting, as defined in the standards established by the U.S. Public Company Accounting Oversight Board, was identified. The material weakness identified related to insufficient personnel with U.S. GAAP expertise in the preparation and review of the financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements.

        We have taken initiatives to improve our internal control over financial reporting and disclosure controls, including (i) hiring more staff with U.S. GAAP, SEC reporting and accounting experience for financial reporting and analysis, and hiring additional qualified professionals with relevant experience for our finance and accounting department, (ii) providing additional training for our new and existing personnel by expanding the training program on U.S. GAAP financial statement preparation and financial reporting and (iii) establishing an internal audit department and an audit committee to oversee the accounting and financial reporting processes as well as external audits of our group. We hired several senior accounting personnel in 2011, including our chief financial officer, our financial controller and our finance manager in May, January and July 2011, respectively. These senior accounting personnel are experienced in preparing and supervising the preparation of financial statements and financial reporting. In particular;

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•

Our chief financial officer, Ken Fei Fu Chang, has over 15 years of finance experience. Prior to joining us, he worked as a director and senior analyst in several international investment banks and as the fund manager of a global equity fund, where he gained experience in financial reporting and understanding, reviewing and analyzing the financial statements of U.S.-listed companies that report their financials under U.S. GAAP.

•

Our financial controller, Henry Wai Tong Leung, worked as an audit manager at KPMG in Hong Kong before joining us, where he gained experience in financial reporting, auditing and preparing financial statements under several accounting standards, including U.S. GAAP, and compliance with Sarbanes-Oxley. Prior to carrying out these engagements at KMPG, he completed and passed internal training courses relating to U.S. GAAP and Section 404 of Sarbanes-Oxley. He is a certified public accountant in Hong Kong and an associate member of the Association of Chartered Certified Accountants.

•

Our finance manager, Olivia Yuan Shan Lee, worked as a manager at Ernst & Young LLP in the United States for six years before joining us. She has considerable experience in financial reporting, auditing and preparing financial statements under U.S. GAAP and compliance with Sarbanes-Oxley for U.S.-based companies. She also has experience in identifying and reporting internal control weaknesses and deficiencies. She is a certified public accountant under American Institute of Certified Public Accountants and a Certified Fraud Examiner.

        Our chief financial officer, financial controller and finance manager will oversee the preparation of the financial statements. Our chief financial officer and other members of senior management will also evaluate the effectiveness of our internal controls. Our finance department consists of a team of 15 persons (including our chief financial officer, financial controller and finance manager) with diverse finance and accounting related experience. We expect to continue to hire professionals with U.S. GAAP and financial reporting experience for our finance department and provide further training to our financial and accounting staff, especially our chief financial officer and financial controller, to enhance their knowledge of U.S. GAAP, including at least 20 hours of U.S. GAAP training annually. We also expect to engage an external financial advisor with extensive U.S. GAAP knowledge and experience on an as-needed basis to assist management assess complex accounting issues.

        However, the implementation of these measures may not fully address the material weaknesses, significant deficiencies and other control deficiencies in our internal control over financial reporting. We are not able to estimate with reasonable certainty the costs that we will need to incur to implement these and other measures designed to improve our internal control over financial reporting. For risks relating to internal control over financial reporting, see "Risk Factors—Risks Related to Our Business—If we fail to establish an effective system of internal control, we may be unable to accurately and timely report our financial results or prevent fraud."

Results of Operations

        The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

        The unaudited pro forma consolidated financial data presented in the table below for 2009 is provided supplementally and has been prepared to give effect to the acquisition of the Dragon Joyce Group as if such transaction had occurred on January 1, 2009. The unaudited pro forma consolidated financial data presented in the table below for 2010 is provided supplementally and has been prepared to give effect to the acquisition of assets of Bright Way and Tastech and of 3GUU BVI as if such transactions had occurred on January 1, 2010. See "—Unaudited Pro Forma Consolidated Financial Information" for a discussion of the adjustments made for the presentation of the pro forma consolidated financial information.

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				(In thousands, except for percentages)
													For the Year Ended December 31,																					For the Three Months Ended March 31,
	From January 1, 2009 to October 26, 2009
				From October 27, 2009 to December 31, 2009			For the Year Ended December 31, 2009
													2010
																									2011									2011						2012
																			(successor) (pro forma)
	(predecessor)			(successor)			(pro forma)						(successor)												(successor)
	RMB			RMB			RMB			%			RMB			%			RMB			%			RMB			US$			%			RMB			%			RMB			US$			%
							(unaudited)												(unaudited)															(unaudited)						(unaudited)
Net revenues
Feature phone games		67,240			17,525			52,844			100.0			110,071			87.8			110,071			41.0			142,426			22,616			58.5			37,210			64.5			35,437			5,627			65.2
Smartphone games		—			—			—			—			—			—			60,823			22.6			62,368			9,904			25.6			11,755			20.4			16,095			2,556			29.6
Handset design		—			—			—			—			15,340			12.2			97,927			36.4			38,694			6,144			15.9			8,718			15.1			2,801			445			5.2
Total net revenues		67,240			17,525			52,844			100.0			125,411			100.0			268,821			100.0			243,488			38,664			100.0			57,683			100.0			54,333			8,628			100.0
Cost of revenues
Feature phone games		(31,921	)		(5,108	)		(13,372	)		(25.3	)		(32,827	)		(26.2	)		(32,827	)		(12.2	)		(61,337	)		(9,740	)		(25.2	)		(13,734	)		(23.8	)		(17,873	)		(2,838	)		(32.9	)
Smartphone games		—			—			—						—			—			(30,627	)		(11.4	)		(17,974	)		(2,854	)		(7.4	)		(4,004	)		(6.9	)		(3,678	)		(584	)		(6.8	)
Handset design		—			—			—			—			(10,083	)		(8.0	)		(77,838	)		(29.0	)		(29,037	)		(4,611	)		(11.9	)		(4,660	)		(8.1	)		(2,780	)		(441	)		(5.1	)
Total cost of revenues		(31,921	)		(5,108	)		(13,372	)		(25.3	)		(42,910	)		(34.2	)		(141,292	)		(52.6	)		(108,348	)		(17,205	)		(44.5	)		(22,398	)		(38.8	)		(24,331	)		(3,863	)		(44.8	)
Gross profit
Feature phone games		35,319			12,417			39,472			74.7			77,244			61.6			77,244			28.7			81,089			12,876			33.3			23,476			40.7			17,564			2,789			32.3
Smartphone games		—			—			—			—			—			—			30,196			11.2			44,394			7,050			18.2			7,751			13.4			12,417			1,972			22.9
Handset design		—			—			—			—			5,257			4.2			20,089			7.5			9,657			1,533			4.0			4,058			7.0			21			4			0.04
Total gross profit		35,319			12,417			39,472			74.7			82,501			65.8			127,529			47.4			135,140			21,459			55.5			35,285			61.2			30,002			4,765			55.2
Operating expenses:
Selling expenses		—			—			—			—			(952	)		(0.8	)		(8,349	)		(3.1	)		(7,561	)		(1,201	)		(3.1	)		(1,186	)		(2.1	)		(2,160	)		(343	)		(4.0	)
General and administrative expenses		(2,536	)		(2,556	)		(5,092	)		(9.6	)		(11,817	)		(9.4	)		(17,917	)		(6.7	)		(16,263	)		(2,582	)		(6.7	)		(3,974	)		(6.9	)		(5,907	)		(938	)		(10.9	)
Research and development expenses		(4,438	)		(226	)		(4,664	)		(8.8	)		(8,377	)		(6.7	)		(10,877	)		(4.0	)		(24,566	)		(3,901	)		(10.1	)		(3,935	)		(6.8	)		(8,597	)		(1,365	)		(15.8	)
Total operating expenses		(6,974	)		(2,782	)		(9,756	)		(18.5	)		(21,146	)		(16.9	)		(37,143	)		(13.8	)		(48,390	)		(7,684	)		(19.9	)		(9,095	)		(15.77	)		(16,664	)		(2,646	)		(30.7	)
Operating income		28,345			9,635			29,716			56.2			61,335			48.9			90,386			33.6			86,750			13,775			35.6			26,190			45.40			13,338			2,119			24.5
Interest income		25			—			25			0.04			70			0.1			266			0.1			927			147			0.4			136			0.24			292			46			0.5
Other income		—			—			—			—			—			—			1,112			0.4			293			47			0.1			18			0.03			113			18			0.2
Changes in fair value of contingently returnable consideration assets		—			(948	)		(948	)		1.8			(2,065	)		(1.6	)		(2,065	)		(0.8	)		39,446			6,264			16.2			(760	)		(1.3	)		7,131			1,132			13.1
Income tax (expenses) benefits		(6,597	)		638			(3,893	)		(7.4	)		(18,647	)		(14.9	)		(27,142	)		(10.1	)		35,927			5,705			14.8			(8,682	)		(15.1	)		(2,053	)		(326	)		(3.8	)
Net income		21,773			9,325			24,900			47.1			40,713			32.5			62,557			23.3			163,343			25,938			67.1			16,902			29.3			18,821			2,989			34.6

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Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

        Net Revenues.    Our net revenues decreased by 5.9% to RMB54.3 million (US$8.6 million) in the three months ended March 31, 2012 from RMB57.7 million in the three months ended March 31, 2011. This decrease was primarily due to a decrease in revenue generated from handset designs and feature phone games and partially offset by the increase in revenue generated from smartphone games.

•

Feature phone games.  Our feature phone games revenue decreased by 4.8% to RMB35.4 (US$5.6 million) in the three months ended March 31, 2012 from RMB37.2 million in the three months ended March 31, 2011, primarily due to a decline in average revenue per paying user for our feature phone single-player games. Revenues also declined because mobile network operators increased their share of the revenues from single-player games under their arrangements with the mobile service providers that we receive proceeds from.

•

Smartphone games.  Our smartphone games revenue increased by 36.4% to RMB16.1 million (US$2.6 million) in the three months ended March 31, 2012 from RMB11.8 million in the three months ended March 31, 2011, primarily due to increases in average revenue per paying user account for our smartphone mobile social games. These increases are largely due to the success of Paopao Xiyou and Dian Feng, our two new smartphone MMORPG social games, which were introduced in the middle of 2011.

•

Handset design.  Our handset design revenue decreased by 67.8% to RMB2.8 million (US$0.4 million) in the three months ended March 31, 2012 from RMB8.7 million in the three months ended March 31, 2011, primarily due to decreased subscription volume for our printed circuit boards design services and fewer feature phone contracts and we shifted our handset design focus from designing feature phones to smartphones. We plan to launch our smartphone design business during the second half of 2012.

        Cost of Revenues.    Our cost of revenues increased by 8.5% to RMB24.3 million (US$3.9 million) in the three months ended March 31, 2012 from RMB22.4 million in the three months ended March 31, 2011. This increase resulted primarily from an increase in the cost of revenues from our feature phone games.

•

Feature phone games.  Our cost of revenues attributable to feature phone games increased by 30.7% to RMB17.9 million (US$2.8 million) in the three months ended March 31, 2012 from RMB13.7 million in the three months ended March 31, 2011. This increase was primarily because (i) of an increase in amounts paid to our agent because a greater portion of revenue came from pre-installations of our Funbox platform as opposed to pre-installation of our games on T-cards, for which we do not have to share profits, and (ii) in the three months ended March 31, 2011, we did not record cost of revenues attributable to revenues from certain customers of Kuailefeng as we received fees from Kuailefeng for granting it the rights to operate and sell in-game premium features of certain feature phone games. During our acquisition of Kuailefeng's assets in October 2009, in order to minimize disruption of services to customers, we did not immediately transfer all of the customer contracts of Kuailefeng to our subsidiary, Huiyou. We chose to transfer customer contracts gradually to Huiyou based on our assessment of when such transfer would be the least disruptive to our customers. In order to provide our services to those customers that we did not transfer, in October 2009 we entered into an exclusive business cooperation agreement with Kuailefeng, which granted Kuailefeng the right to operate and sell in-game premium features of certain feature phone games to third parties. In May 2010, Kuailefeng began to transfer customers previously using its products to us, after which we recognized cost of revenue associated with sales to these customers. Those customers were all transferred to us by the end of 2011 and during the three months ended March 31, 2012, we generated revenue directly from sales to those customers and recorded the corresponding cost of revenues.

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Smartphone games.  Our cost of revenues attributable to smartphone games decreased by 7.5% to RMB3.7 million (US$0.6 million) in the three months ended March 31, 2012 compared to RMB4.0 million in the three months ended March 31, 2011 primarily due to (i) us beginning to use application stores to distribute our smartphone mobile social games in the three months ended March 31, 2012, as application stores incur less distribution expenses and (ii) the favorable fee structure of certain application stores through which our smartphone single-player game players can register to subscribe to our game bundles. Under the fee structure, application stores only charge fees for the first several months after a player subscribes for a game bundle, thus reducing our costs for existing subscribers that have maintained their subscriptions beyond the first several months.

•

Handset design.  Our cost of revenues attributable to handset design decreased by 40.4% to RMB2.8 million (US$0.4 million) in the three months ended March 31, 2012 from RMB4.7 million in the three months ended March 31, 2011, primarily due to decreased subscription volume for our printed circuit boards design services and the transitioning of our handset design focus from designing feature phones to smartphones which resulted in fewer feature phone contracts.

        Gross Profit and Gross Margin.    As a result of the foregoing, our gross profit decreased by 15.0% to RMB30.0 million (US$4.8 million) in the three months ended March 31, 2012 from RMB35.3 million in the three months ended March 31, 2011. Our gross margin decreased to 55.2% in the three months ended March 31, 2012 from 61.2% in the three months ended March 31, 2011. This decline is attributable primarily to a decrease in gross margin from our feature phone games handset design.

•

Feature phone games.  Our gross profit attributable to feature phone games decreased by 25.1% to RMB17.6 million (US$2.8 million) in the three months ended March 31, 2012 from RMB23.5 million in the three months ended March 31, 2011. Our gross margin attributable to feature phone games decreased to 49.6% in the three months ended March 31, 2012 from 63.1% in the three months ended March 31, 2011 primarily due to (i) lower cost of revenue for the three months ended March 31, 2011 because we did not record cost of revenue attributable to revenue from certain customers of Kuailefeng, (ii) an increase in amounts paid to our agent because of a greater portion of expenses paid to them resulting from pre-installations of our Funbox platform as opposed to pre-installation of our games on T-cards, for which we do not have to share profits, and (iii) amortization of license fees from games using Disney characters and from Fruit Ninja incurred after March 31, 2011.

•

Smartphone games.  Our gross profit attributable to smartphone games increased by 59.0% to RMB12.4 million (US$2.0 million) in the three months ended March 31, 2012 from RMB7.8 million in the three months ended March 31, 2011. Our gross margin attributable to smartphone games was 77.1% in the three months ended March 31, 2012, compared to 65.9% in the three months ended March 31, 2011, primarily due to lower distribution costs for our smartphone games.

•

Handset design.  Our gross profit attributable to handset design decreased by 99.5% to RMB21,000 in the three months ended March 31, 2012 from RMB4.1 million in the three months ended March 31, 2011. Our gross margin attributable to handset design decreased to 0.7% in the three months ended March 31, 2012 from 46.5% in the three months ended March 31, 2011, primarily because of the decline in revenue from transitioning our handset design focus from feature phones to smartphones, which resulted in fewer feature phone contracts, and certain fixed costs, including the amortization of acquired intangible assets of RMB0.6 million (US$0.1 million). We plan to launch our smartphone design business during the second half of 2012.

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        Operating Expenses.    Our total operating expenses increased by 83.5% to RMB16.7 million (US$2.6 million) in the three months ended March 31, 2012 from RMB9.1 million in the three months ended March 31, 2011. This increase was primarily due to higher research and development and general and administrative expenses. Research and development expenses as a percentage of net revenues increased to 15.8% in the three months ended March 31, 2012 from 6.8% in the three months ended March 31, 2011, primarily due to that we incurred higher salary, employee and other headcount-related expenses as we developed more games. General and administrative expenses as a percentage of net revenues increased to 10.9% in the three months ended March 31, 2012 from 6.9% in the three months ended March 31, 2011 primarily due to an increase in share-based compensation and additional salary expenses as we hired more general and administrative staff.

        Operating Income.    Our operating income decreased by 49.2% to RMB13.3 million (US$2.1 million) in the three months ended March 31, 2012 from RMB26.2 million for the three months ended March 31, 2011. As a result of the cumulative effect of the above factors, the operating margin decreased to 24.5% in the three months ended March 31, 2012 from 45.4% in the three months ended March 31, 2011.

        Changes in Fair Value of Contingently Returnable Consideration Assets.    Our changes in fair value of contingently returnable consideration assets was a gain of RMB7.1 million (US$1.1 million) in the three months ended March 31, 2012 compared to a loss of RMB0.8 million in the three months ended March 31, 2011, primarily due to an increase in the fair value of the consideration shares to be returned to VODone pursuant to the contingent conditions relating to the acquisition of Dragon Joyce Group, OWX Holding Group and 3GUU Group.

        Income Tax.    We had an income tax expense of RMB2.1 (US$0.3 million) in the three months ended March 31, 2012, compared to RMB8.7 million in the three months ended March 31, 2011. Our effective tax rate was 9.8% in the three months ended March 31, 2012, compared to 33.9% for the three months ended March 31, 2011, primarily due to the impact of preferential tax treatment received by Huiyou Digital (Shenzhen) Ltd. as a new software development enterprise entitled to enjoy tax exceptions in 2012.

        Net Income.    As a result of the foregoing, our net income increased by 1.7 million to RMB18.8 million (US$3.0 million) in the three months ended March 31, 2012, from RMB16.9 million in the three months ended March 31, 2011.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 (Pro Forma)

        Net Revenues.    Our net revenues decreased by 9.4% to RMB243.5 million (US$38.7 million) in 2011 from RMB268.8 million in 2010, primarily due to a decrease in revenue generated from handset design.

•

Feature phone games.  Our feature phone games revenue increased by 29.3% to RMB142.4 million (US$22.6 million) in 2011 from RMB110.1 million in 2010, primarily due to an increase in our paying user base and an increase in average revenue per paying user account. The increase in average revenue per paying user account was due to an increase in sales of in-game items, which was primarily due to a general increase in the quality and popularity of our feature phone games and an increase in the number of games we offer to our users.

Our net revenues attributable to feature phones games also increased in 2011 because Kuailefeng continued to transfer its customers to us, which allowed us to generate sales directly from these customers and to generate revenue directly from sales to the customer. In 2010 and 2011, we generated revenues under the exclusive business cooperation agreement with Kuailefeng in an aggregate amount of RMB28.4 million and RMB6.1 million (US$1.0 million), respectively. Prior to a customer being transferred to us, we recognized revenues relating to that

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customer on a net basis under the agreement with Kuailefeng; once a customer was transferred to us, we recognized revenues relating to that customer on a gross basis. We completed the transfer of Kuailefeng's entire customer base prior to the end of 2011.

•

Smartphone games.  Our smartphone games revenue increased to RMB62.4 million (US$9.9 million) in 2011 from RMB60.8 million in 2010, due primarily to an increase in our subscriptions for our single-player games because we increased the number and type of mobile phone games we offer to our users. This was offset by a modest decrease in average revenue per subscription for single-player games and decreases in our paying user base and the average revenue per paying user account for our mobile social games. This decrease in the operating results of our mobile social games was due primarily to the phasing out of Creation Song, our popular MMORPG, during the second half of 2011, while we introduced two new mobile social games, which generally take about six months to build-up user acceptance.

•

Handset design.  Our handset design revenue decreased by 60.5% to RMB38.7 million (US$6.1 million) in 2011 from RMB97.9 million in 2010, primarily due to decreased subscription volume for our printed circuit boards design services and the transitioning of our handset design focus from designing feature phones to smartphones, which resulted in fewer feature phone contracts. We plan to launch our smartphone design business during the second half of 2012.

        Cost of Revenues.    Our cost of revenues decreased by 23.4% to RMB108.3 million (US$17.2 million) in 2011 from RMB141.3 million in 2010, primarily due to a decrease in the cost of revenues from smartphone games and handset design.

•

Feature phone games.  Our cost of revenues attributable to feature phone games increased by 86.9% to RMB61.3 million (US$9.7 million) in 2011 from RMB32.8 million in 2010, primarily due to increases in our feature phone game sales. In addition, in 2010, we did not record cost of revenues attributable to revenues from Kuailefeng as we received fees from Kuailefeng for granting it the rights to operate and sell in-game premium features of certain feature phone games. In May 2010, Kuailefeng began to transfer customers previously using its products to us, after which we started to generate revenue directly from sales to the customers and record the corresponding cost of revenues. In addition, we paid licensing fees to the developers and distributors of some of our games in 2011, even though we did not incur any licensing fees in 2010.

•

Smartphone games.  Our cost of revenues attributable to smartphone games was RMB18.0 million (US$2.9 million) in 2011 compared to RMB30.6 million in 2010 primarily due to that we had a higher sales contribution from single-player games, which had a lower cost of revenue that generally only includes staff salaries and content fees paid to third-party game developers for game development.

•

Handset design.  Our cost of revenues attributable to handset design decreased by 62.7% to RMB29.0 million (US$4.6 million) in 2011 from RMB77.8 million in 2010, primarily due to decreased subscription volume for our printed circuit boards design services and the transitioning of our handset design focus from designing feature phones to smartphones which resulted in fewer feature phone contracts.

        Gross Profit and Gross Margin.    As a result of the foregoing, our gross profit increased by 6.0% to RMB135.1 million (US$21.5 million) in 2011 from RMB127.5 million in 2010. Our gross margin increased to 55.5% in 2011 from 47.4% in 2010, primarily due to a decrease in our cost of revenues compared to the corresponding increase in revenue attributable to smartphone games and the corresponding decrease in revenue attributable to handset design.

•

Feature phone games.  Our gross profit attributable to feature phone games increased by 5.1% to RMB81.1 million (US$12.9 million) in 2011 from RMB77.2 million in 2010. Our gross margin

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attributable to feature phone games decreased to 56.9% in 2011 from 70.2% in 2010 primarily due to that prior to the transfer of Kuailefeng customers we did not record cost of revenues attributable to revenues from Kuailefeng, as discussed above.

•

Smartphone games.  Our gross profit attributable to smartphone games increased by 47.0% to RMB44.4 million (US$7.1 million) in 2011 from RMB30.2 million in 2010. Our gross margin attributable to smartphone games was 71.2% in 2011, compared to 49.6% in 2010, primarily due to increased relative revenue contribution from the sales of single-player games.

•

Handset design.  Our gross profit attributable to handset design decreased by 51.7% to RMB9.7 million (US$1.5 million) in 2011 from RMB20.1 million in 2010. Our gross margin attributable to handset design increased to 25.0% in 2011 from 20.5% in 2010, primarily because we had a greater relative revenue contribution from providing only hardware design, which has higher margins than providing both hardware design and sourcing.

        Operating Expenses.    Our operating expenses increased by 30.5% to RMB48.4 million (US$7.7 million) in 2011 from RMB37.1 million in 2010 primarily due to higher research and development and selling expenses in 2011. Research and development expenses as a percentage of net revenues increased to 10.1% in 2011 from 4.0% in 2010, primarily due to that we incurred higher salary, employee benefits and other headcount-related expenses as we developed more games. Selling expenses as a percentage of net revenues was 3.1% in both 2011 and 2010.

        Operating Income.    Our operating income decreased by 4.0% to RMB86.8 million (US$13.8 million) in 2011 from RMB90.4 million in 2010. As a result of the cumulative effect of the above factors, the operating margin decreased to 35.6% in 2011 from 33.6% in 2010.

        Changes in Fair Value of Contingently Returnable Consideration Assets.    Our changes in fair value of contingently returnable consideration assets was a gain of RMB39.4 million (US$6.3 million) in 2011 compared to a loss of RMB2.1 million in 2010, which gains were primarily due to an increase in the fair value of the consideration shares to be returned to VODone pursuant to the contingent conditions relating to the acquisition of Dragon Joyce Group and OWX Holding Group.

        Income Tax.    Our income tax benefit was RMB35.9 million (US$5.7 million) in 2011 compared to an income tax expense of RMB27.1 million in 2010. Our effective tax rate was a benefit of 28.2% in 2011, compared to an expense of 30.3% in 2010, primarily due to (i) reversals of the deferred tax liabilities of RMB51.4 million (US$8.2 million) arising from the aggregate undistributed earnings of Yingzheng and the difference between the book basis and the tax basis in the investment in Yingzheng, and (ii) the tax benefits that were recognized as a result of the tax position Shenzhen Douwan took in 2011.

        Net Income.    As a result of the foregoing, our net income increased by 160.9% to RMB163.3 million (US$26.0 million) in 2011 from RMB62.6 million in 2010.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

        Net Revenues.    Our net revenues increased by 94.2% to RMB243.5 million (US$38.7 million) in 2011 from RMB125.4 million in 2010, primarily due to an increase in revenue generated from feature phone game sales and the consolidation of revenues of our smartphone games and handset design businesses.

        Cost of Revenues.    Our cost of revenues increased by 152.4% to RMB108.3 million (US$17.2 million) in 2011 from RMB42.9 million in 2010, primarily due to an increase in the cost of revenues from feature phone games and the consolidation of the cost of revenues of our smartphone games and handset design business.

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        Gross Profit and Gross Margin.    As a result of the foregoing, our gross profit increased by 63.8% to RMB135.1 million (US$21.5 million) in 2011 from RMB82.5 million in 2010. Our gross margin decreased to 55.5% in 2011 from 65.8% in 2010, primarily due to an increase in our cost of revenues compared to the corresponding increase in revenue attributable to feature phone games as well as the consolidation of our handset design business, which had lower gross margins than our other two businesses.

        Operating Expenses.    Our operating expenses increased by 129.4% to RMB48.4 million (US$7.7 million) in 2011 from RMB21.1 million in 2010 due to higher research and development and selling expenses in 2011. Research and development expenses as a percentage of net revenues increased to 10.1% in 2011 from 6.7% in 2010, primarily due to the consolidation of our smartphone games business and because of higher salary, employee and other headcount-related expenses as we developed more games. Selling expenses as a percentage of net revenues increased to 3.1% in 2011 from 0.8% in 2010, primarily due to the consolidation of our smartphone business, which incurred expenses from advertising on other websites and in marketing events.

        Operating Income.    Our operating income increased by 41.6% to RMB86.8 million (US$13.8 million) in 2011 from RMB61.3 million in 2010. As a result of the cumulative effect of the above factors, the operating margin decreased to 35.6% in 2011 from 48.9% in 2010.

        Changes in Fair Value of Contingently Returnable Consideration Assets.    Our changes in fair value of contingently returnable consideration assets was a gain of RMB39.4 million (US$6.3 million) in 2011 compared to a loss of RMB2.1 million in 2010, which gains were primarily due to an increase in the fair value of the consideration shares to be returned to VODone pursuant to the contingent conditions relating to the acquisition of Dragon Joyce Group and OWX Holding Group.

        Income Tax.    Our income tax benefit was RMB35.9 million (US$5.7 million) in 2011 compared to income tax expense of RMB18.6 million in 2010. Our effective tax rate was a benefit of 28.2% in 2011, compared to an expense of 31.4% in 2010, primarily due to (i) reversals of the deferred tax liabilities of RMB51.4 million (US$8.2 million) arising from the aggregate undistributed earnings of Yingzheng and the difference between the book basis and the tax basis in the investment in Yingzheng, and (ii) the tax benefits that were recognized as a result of the tax position Shenzhen Douwan took in 2011.

        Net Income.    As a result of the foregoing, our net income increased by 301.2% to RMB163.3 million (US$26.0 million) in 2011 from RMB40.7 million in 2010.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009 (Pro Forma)

        Net Revenues.    Our net revenues increased by 137.5% to RMB125.4 million (US$19.9 million) in 2010 from RMB52.8 million in 2009, primarily due to an increase in revenue generated from feature phone game sales and the consolidation of revenue of our handset design business.

•

Feature phone games.  Our feature phone game revenues increased by 108.5% to RMB110.1 million (US$17.5 million) in 2010 from RMB52.8 million in 2009, primarily due to an increase in our paying user base, which is attributable to the increase in pre-installed handsets and the increasing diversity and quality of our game portfolio. In addition, in May 2010 Kuailefeng began to transfer customers previously using its products to us. Prior to the transfer of a Kuailefeng customer, we recognized revenues from that customer on a net basis under an exclusive business cooperation agreement with Kuailefeng. Once a customer contract was transferred to us, and for all new customer contracts, we recognized revenues and associated cost of revenues relating to that customer on a gross basis.

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•

Handset design.  Our handset design revenues increased to RMB15.3 million (US$2.4 million) in 2010 from nil in 2009, due to the consolidation of the results from our acquisition of the OWX Holding Group, which was completed in October 2010.

        Cost of Revenues.    Our cost of revenues increased by 220.1% to RMB42.9 million (US$6.8 million) in 2010 from RMB13.4 million in 2009, primarily due to the consolidation of the cost of revenues of our handset design business and an increase in our feature phone games sales.

•

Feature phone games.  Our cost of revenues attributable to feature phone games increased by 144.8% to RMB32.8 million (US$5.2 million) in 2010 from RMB13.4 million in 2009, primarily due to the increase in cost of revenues of RMB19.4 million (US$3.1 million) resulting from the increase in our feature phone game sales and the transfer of customer contracts to us by Kuailefeng beginning in May 2010.

•

Handset design.  Our cost of revenues attributable to handset design increased to RMB10.1 million (US$1.6 million) in 2010 from nil in 2009, due to the consolidation of the results from our acquisition of the OWX Holding Group, which was completed in October 2010.

        Gross Profit and Gross Margin.    As a result of the foregoing, our gross profit increased by 108.9% to RMB82.5 million (US$13.1 million) in 2010 from RMB39.5 million in 2009. Our gross margin decreased to 65.8% in 2010 from 74.7% in 2009, primarily due to the consolidation of the results from our acquisition of the OWX Holding Group, which was completed in October 2010, as our handset design business has lower gross margin than our other businesses.

•

Feature phone games.  Our gross profit increased to RMB77.2 million (US$12.3 million) in 2010 from RMB39.5 million in 2009. The increase was primarily due to the significant increase in revenues from feature phone games, which increase was greater than the associated increase in cost of revenues. Our gross margin attributable to feature phone games was 70.2% in 2010 and 74.7% in 2009.

•

Handset design.  Our gross margin attributable to handset design was 34.3% in 2010 compared to nil in 2009.

        Operating Expenses.    Our operating expenses increased by 115.3% to RMB21.1 million (US$3.4 million) in 2010 from RMB9.8 million in 2009 due to higher general and administrative, research and development and selling expenses. General and administrative expenses as a percentage of net revenues decreased to 9.4% in 2010 from 9.6% in 2009 primarily due to our substantial increase in net revenues from 2009 to 2010. Research and development expenses as a percentage of net revenues decreased to 6.7% in 2010 from 8.8% in 2009 primary due to the consolidation of our handset design business and a substantial increase in feature phone games revenue. Selling expenses as a percentage of net revenues increased to 0.8% in 2010 from nil in 2009 primarily due to that we incurred cost of advertising in industry publications in 2010.

        Operating Income.    Our operating income increased by 106.4% to RMB61.3 million (US$9.7 million) in 2010 from RMB29.7 million in 2009. As a result of the cumulative effect of the above factors, the operating margin decreased to 48.9% in 2010 from 56.2% in 2009.

        Changes in Fair Value of Contingently Returnable Consideration Assets.    Our changes in fair value of contingently returnable consideration assets was a loss of RMB2.1 million (US$0.3 million) in 2010 from a loss of RMB0.9 million in 2009, primarily due to the effect from the satisfaction of contingent conditions which resulted in a decrease in the fair value of the VODone consideration shares that were subject to lock-up prior to release to the sellers of the Dragon Joyce Group, Bright Way and Tastech.

        Income Tax.    Our income tax expense was RMB18.6 million (US$3.0 million) in 2010 compared to income tax expense of RMB3.9 million in 2009, primarily due to the increase in pretax income. Our

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effective tax rate was 31.4% in 2010 compared to 13.5% in 2009. The higher effective tax rate in 2010 was partly due to the share-based compensation expenses we incurred in 2010, which was not tax deductable and for the period from October 27, 2009 to December 31, 2009, we had a tax holiday which reduced our tax expenses in such period, and that we recognized part of our unrecognized tax benefits in 2010.

        Net Income.    As a result of the foregoing, our net income increased by 63.5% to RMB40.7 million (US$6.5 million) in 2010 from RMB24.9 million in 2009.

The Period from January 1, 2009 to October 26, 2009 (the 2009 Predecessor Period) and the Period from October 27, 2009 to December 31, 2009 (the 2009 Successor Period)

        Net Revenues.    Our net revenues were RMB67.2 million for the 2009 predecessor period and RMB17.5 million for the 2009 successor period. The net revenues in both periods are due to revenues generated from our feature phone sales.

        Cost of Revenues.    Our cost of revenues was RMB31.9 million for the 2009 predecessor period and RMB5.1 million for the 2009 successor period. Cost of revenues incurred was from our feature phone sales, which included fees paid to handset companies and design houses or their agents for pre-installing our feature phone games and platforms onto feature phone handsets. Our cost of revenues in the 2009 successor period also included amortization of intangibles of RMB2.5 million as a result of our acquisition of the Dragon Joyce Group.

        Gross Profit.    As a result of the foregoing, our gross profit was RMB35.3 million for the 2009 predecessor period and RMB12.4 million for the 2009 successor period.

        Operating Expenses.    Our operating expenses consisting of general and administrative expenses and research and development expenses were RMB7.0 million for the 2009 predecessor period and RMB2.8 million for the 2009 successor period. Both amounts were due to staff salaries and headcounts, office rentals and depreciation and amortization expenses relating to equipment use.

        Income Tax.    Our income tax expense was RMB6.6 million for the 2009 predecessor period, compared to income tax benefit of RMB0.6 million for the 2009 successor period mainly due to tax holiday in 2009 of Beijing Dongganlefeng Information Technology Co., Ltd., a member of the Dragon Joyce Group, whose assets we acquired in 2009. Our effective tax rate was 23.3% for the 2009 predecessor period and negative 7.3% for the 2009 successor period.

        Net Income.    As a result of the foregoing, our net income was RMB21.8 million for the 2009 predecessor period and RMB9.3 million for the 2009 successor period.

Selected Quarterly Results of Operations

        The following table presents our unaudited consolidated quarterly results of operations for the five quarters ended March 31, 2012. You should read the following table in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. We have prepared the unaudited consolidated quarterly financial information on the same basis as our audited consolidated financial statements. This unaudited consolidated financial information includes all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair representation of our financial position and results of operations for the quarters presented. Our operating results for any particular quarter are not necessarily indicative of our future results. Our limited operating history makes it difficult to predict future operating results. The historical quarterly

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results presented below are not necessarily indicative of the results that may be expected for any future quarters or periods.

	For the Three Months Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011			March 31, 2012
	RMB			RMB			RMB			RMB			RMB
	(in thousands)
Net revenues
Feature phone games		37,210			37,300			35,509			32,407			35,437
Smartphone games		11,755			16,042			16,174			18,397			16,095
Handset design		8,718			9,397			11,409			9,170			2,801
Total net revenues		57,683			62,739			63,092			59,974			54,333
Cost of revenues
Feature phone games		(13,734	)		(15,401	)		(15,091	)		(17,111	)		(17,873	)
Smartphone games		(4,004	)		(3,982	)		(4,640	)		(5,348	)		(3,678	)
Handset design		(4,660	)		(6,829	)		(9,301	)		(8,247	)		(2,780	)
Total cost of revenues		(22,398	)		(26,212	)		(29,032	)		(30,706	)		(24,331	)
Gross profit
Feature phone games		23,476			21,899			20,418			15,296			17,564
Smartphone games		7,751			12,060			11,534			13,049			12,417
Handset design		4,058			2,568			2,108			923			21
Total gross profit		35,285			36,527			34,060			29,268			30,002
Operating expenses
Selling expenses		(1,186	)		(1,550	)		(2,405	)		(2,420	)		(2,160	)
General and administrative expenses		(3,974	)		(5,703	)		(3,939	)		(2,647	)		(5,907	)
Research and development expenses		(3,935	)		(4,460	)		(6,682	)		(9,489	)		(8,597	)
Total operating expenses		(9,095	)		(11,713	)		(13,026	)		(14,556	)		(16,664	)
Changes in fair value of contingently returnable consideration assets		(760	)		(2,870	)		11,163			31,913			7,131
Interest income		136			214			275			303			292
Other income		18			86			99			89			113
Income tax (expenses) benefits		(8,682	)		(8,353	)		(8,411	)		61,373			(2,053	)
Net income		16,902			13,891			24,160			108,390			18,821

        Our net revenues generally increased in the first three quarters of 2011 primarily due to increases in smartphone game and handset design sales. The increase in smartphone game sales was due mainly to an increase in the number of subscriptions to our single-player game bundles, while handset design sales increased mainly due to an increase in the revenue contribution from design orders, including sourcing components for customers. During the fourth quarter of 2011, sales in feature phone games and handset design decreased while smartphone revenues continued to grow. During the first quarter of 2012, our net revenues decreased, as compared to the fourth quarter of 2011, due primarily to decreased revenues from handset design.

        Our selling and marketing expenses generally increased during 2011 primarily due to our focus on increasing marketing efforts to attract more users to our games. Our general and administrative expenses generally decreased primarily due to our achievement of scale, despite higher salary costs of staff caused by the increase in headcount. Our selling and marketing expenses decreased in the first quarter of 2012 compared to the fourth quarter of 2011 as we wound up a promotion of certain of our mobile social games for smartphones. Our research and development expenses increased in 2011 as we

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grew our research and development staff to expand our feature phone and smartphone game development capabilities. Our research and development expenses decreased in the first quarter of 2012 compared to the fourth quarter of 2011 because research and development expenses in the fourth quarter of 2011 included year-end bonus expenses that were not incurred in the first quarter of 2012.

        Our net income generally increased from quarter to quarter in 2011. Our net income increased significantly in the fourth quarter of 2011 primarily due to (i) an increase in the fair value of contingently returnable consideration assets, (ii) reversals of the deferred tax liabilities arising from the aggregate undistributed earnings of Yingzheng and the difference between the book basis and the tax basis in the investment in Yingzheng, and (iii) the tax benefits that were recognized as a result of the tax position Shenzhen Douwan took in 2011. While total gross profit remained essentially flat between the fourth quarter of 2011 and the first quarter of 2012, our net income decreased during the first quarter of 2012 due primarily to (i) an income tax expense of RMB2.1 million in the first quarter of 2012 as opposed to an income tax benefit of RMB61.3 million during the fourth quarter of 2011 and (ii) a smaller increase in the fair value of contingently returnable consideration assets in the first quarter of 2011 than in the fourth quarter of 2012.

        Our quarterly results of operations are less affected by seasonal trends and more by the life span and the build-up and phase-out periods of our mobile games. We generally experience lower user traffic and acquire fewer new users for our games during the build-up and phasing-out periods of the games. Many of our new games, especially mobile social games, require significant build-up periods during which users are first introduced to the games and the games increase in popularity among our users. See "Risk Factors—Risks Related to Our Business—Our business depends on our ability to continue to attract new and retain existing users." We do not believe that seasonality will impact our results of operations significantly in the future. We expect that as we build up a large and diversified portfolio of feature phone and smartphone games, particularly single-player games and mobile social games for both types of handsets, our quarterly results of operations will become less volatile.

Liquidity and Capital Resources

        The following table sets forth a summary of our cash flows for the periods indicated.

															2011			2012
						2010			2011
	From January 1, 2009 to October 26, 2009			From October 27, 2009 to December 31, 2009											For the Three Months Ended March 31,
						For the Year Ended December 31,
	(predecessor)			(successor)		(successor)			(successor)			(successor)
	RMB			RMB		RMB			RMB			US$			RMB			RMB			US$
	(in thousands)
Net cash generated from operating activities		5,246			5,654		71,836			108,461			17,223			12,686			12,393			1,968
Net cash (used in) generated from investing activities		(420	)		3		26,656			(16,584	)		(2,634	)		(2,020	)		(2,698	)		(429	)
Net cash generated from (used in) financing activities		—			—		—			(8,400	)		(1,334	)		—			(63,000	)		(10,004	)
Exchange rate effect on cash and cash equivalents		—			—		(111	)		(278	)		(44	)		(129	)		(7	)		(1	)
Net increase/(decrease) in cash and cash equivalents		4,826			5,657		98,381			83,199			13,211			10,537			(53,312	)		(8,466	)
Cash and cash equivalents at beginning of the period		532			—		5,657			104,038			16,521			104,038			187,237			29,732
Cash and cash equivalents at end of the period		5,358			5,657		104,038			187,237			29,732			114,575			133,925			21,266

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        We have financed our operations primarily through cash from operations. We did not have any short-term or long-term bank borrowings outstanding as of December 31, 2009, 2010 and 2011 and March 31, 2012. Our cash position improved from 2009 to 2010 and 2011 primarily as a result of the expansion in our operations. As of December 31, 2010 and 2011, and March 31, 2012, we had RMB104.0 million, RMB187.2 million (US$29.7 million) and RMB133.9 million (US$21.3 million), respectively, in cash and cash equivalents. Our principal uses of cash have historically consisted of working capital. Our cash and cash equivalents consist of cash on hand and bank deposits placed with commercial banks in China and Hong Kong.

        We believe that our current levels of cash balances and cash flows from operations will be sufficient to meet our anticipated cash needs to fund our operations for at least the next 12 months. In addition, we may need additional cash resources in the future if we experience adverse business conditions or other developments or if we find and wish to pursue opportunities for investment, acquisitions, strategic cooperations or other similar actions.

        Since we are a holding company, our ability to pay dividends and meet other cash needs relies principally on the dividends paid by our PRC subsidiaries. A part of our business also depends on service fees and management fees payable by our VIE, Yingzheng, to Yitongtianxia under the technology services agreement, market promotion agreement and a supplementary agreement between our VIE and Yitongtianxia. Earnings of our PRC subsidiaries would be paid to our offshore intermediate holding companies, and from these companies to us, mainly through dividend distributions. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. As of March 31, 2012, our PRC subsidiaries had an aggregate accumulated profit of RMB132.9 million (US$21.1 million) as determined under the applicable Chinese accounting standards, consisting of RMB1.6 million accumulated losses from certain PRC subsidiaries. The primary difference between accumulated profits calculated pursuant to PRC accounting standards and regulations as compared to accumulated profits calculated pursuant to U.S. GAAP as presented in the Company's financial statements relates to the recognition of liabilities for unrecognized tax benefits and the related interest and penalties in accordance with ASC 740 under U.S. GAAP. Our relevant PRC subsidiaries are not able to distribute dividends to us until the accumulated losses have been made up.

        The aggregate undistributed earnings of our PRC subsidiaries that are available for distribution to non-PRC tax resident parent companies are considered to be indefinitely reinvested under ASC 740 and, therefore, we did not incur a tax liability charge for these undistributed earnings. As of March 31, 2012, the amount of such undistributed earnings was RMB116.9 million (US$18.6 million). If our PRC subsidiaries were to distribute all of these earnings to their respective non-PRC tax resident parent companies, such distributions would be subject to PRC withholding tax of up to 10%. The undistributed earnings generated before January 1, 2008 are exempt from PRC withholding tax if distributed to the foreign investor in 2008 or later. For a detailed discussion with respect to the PRC withholding tax impact associated with the repatriation of undistributed earnings of our PRC subsidiaries, see "Risk factors—Risks Related to Doing Business in China—The New EIT Law will affect tax exemptions on dividends to be paid by our PRC subsidiaries to us through our Hong Kong subsidiaries and we may not be able to obtain certain treaty benefits under the relevant tax treaty."

        In addition, each of our subsidiaries and our VIE in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The amounts restricted net assets include paid-in capital and general or statutory reserve funds of our PRC subsidiaries and VIE, as determined pursuant to PRC generally accepted accounting principles, totaled RMB44.8 million (US$7.1 million) as of March 31, 2012. Furthermore, if our subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may restrict the ability of our PRC subsidiaries to pay dividends and make other distributions to us.

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        Under PRC law, the foreign currency loans borrowed by our PRC subsidiaries from us or other foreign lenders should not exceed the differences between their respective approved total investment amount and registered capital, and shall be registered with SAFE. Furthermore, any capital contributions we make to our PRC subsidiaries shall be approved by MOFCOM or its local counterparts. As of March 31, 2012, our PRC subsidiaries were able to borrow US$1.2 million in foreign currency loans, subject to applicable PRC governmental approvals and registrations. These limits may be increased in correspondence with the increases of the total investment amounts and registered capitals of our PRC subsidiaries, subject to the PRC governmental approvals and registrations. Currently, we do not expect that the amount of foreign exchange loans to be incurred by our PRC subsidiaries will exceed the above limit in the foreseeable future. However, should the amount of foreign currency loans we need to borrow exceed the limit, we cannot assure you that we will be able to obtain these governmental approvals or registrations on a timely basis, if at all. Failure to obtain these governmental approvals or registrations could limit our ability to fund our PRC operations, which could adversely and materially affect our liquidity and our ability to fund and expand our business. We may need to seek alternative funding sources. See "Risk Factors—Risks Relating to Doing Business in China—PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using the proceeds of any offering to make loans or capital contributions to our PRC operating subsidiaries, which could materially adversely affect our liquidity and ability to fund and expand our busines."

        In addition, our PRC legal counsel, Guantao Law Firm, is of the opinion that prior CSRC approval for this distribution is not required because we are not an offshore special purpose vehicle controlled directly or indirectly by PRC companies or individuals as defined by the New M&A Rules. If the CSRC or other PRC regulatory agencies subsequently determine that prior CSRC approval was required under the M&A Rules for the listing and trading of the ADSs on the Nasdaq Global Market, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies, which could materially adversely affect the timing of any future registered offering and our ability to fund our PRC subsidiaries. See "Risk Factors—Risks Relating to Doing Business in China—We may be required to obtain approval of the China Securities Regulatory Commission, or the CSRC, before listing and trading the ADSs on the Nasdaq Global Market."

Operating Activities

        Net cash from operating activities was RMB12.4 million (US$2.0 million) in the first three months of 2012, while our net income was RMB18.8 million (US$3.0 million). The difference was due to an adjustment of amortization of intangible assets of RMB5.8 million (US$0.9 million), offset by an adjustment in the fair value of contingently returnable consideration assets of negative RMB7.1 million (US$1.1 million) due to an increase in the fair value of the consideration shares to be returned to VODone pursuant to the contingent conditions relating to the acquisition of Dragon Joyce Group and OWX Holding Group and cash movements, including a decrease of tax payable of RMB7.2 million (US$1.1 million), an increase in prepayments and other current assets due to a RMB4.5 million prepayment to a service provider of feature phone business and a decrease of accrued expenses due to a settlement of accrued IPO costs and lower business tax accrued for the period.

        Net cash from operating activities was RMB108.5 million (US$17.2 million) in 2011, while our net income was RMB163.3 million (US$25.9 million). The difference was due primarily to an adjustment of amortization of intangible assets of RMB19.7 million (US$3.1 million) and a decrease in amounts due from related parties of RMB16.6 million (US$2.6 million) due to fewer transactions going through Kuailefeng as we transferred their customers to us and a number of service providers ceasing to be our related parties, offset by adjustments to changes in fair value of contingently returnable consideration assets to RMB39.4 million (US$6.3 million) due to that a greater amount than expected of the consideration shares from our acquisitions of Dragon Joyce Group and OWX Holding Group were returned to VODone and an increase in accounts receivable of RMB19.1 million (US$3.0 million) due

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to increased receivable from service providers because China Mobile lengthened its payment period to our service providers from an average of 70 to 80 days in 2010 to an average of 120 to 150 days in 2011.

        Net cash from operating activities was RMB71.8 million in 2010, while our net income was RMB40.7 million. The difference was primarily due to adjustments in amortization of other intangible assets of RMB10.5 million and share-based compensation expenses of RMB6.9 million and movements in cash, including increase in amounts of RMB5.8 million due to related parties as a result of our acquisition of inventories of Bright Way and Tastech and an increase in unrecognized tax benefits of RMB17.2 million, which were partially offset by increases in accounts receivable of RMB16.8 million including receivables from service providers.

        Net cash from operating activities was RMB5.7 million for the period from October 27, 2009 to December 31, 2009, while our net income was RMB9.3 million. The difference was primarily due to increases in amount due from related parties of RMB12.6 million, which represented the amount of service fees due from Kuailefeng.

        Net cash from operating activities was RMB5.2 million for the period from January 1, 2009 to October 26, 2009, while our net income was RMB21.8 million. The difference was primarily due to increases in prepayments and other current assets of RMB17.8 million in connection with our feature phone game sales, which were partially offset by an increase in unrecognized tax benefits of RMB4.6 million.

Investing Activities

        Net cash used in investing activities was RMB2.7 million (US$0.4 million) in the first three months of 2012 primarily due to our acquisition of intangible assets of RMB2.2 million (US$0.3 million) for purchases for the acquisition of additional games and RMB0.5 million (US$80,000) for the purchase of equipment.

        Net cash used in investing activities was RMB16.6 million (US$2.6 million) in 2011 primarily due to our acquisition of property and equipment of RMB5.0 million (US$0.8 million) for the purchases of additional equipment and renovation of certain of our newly-leased office spaces and our acquisition of intangible assets of RMB11.6 million (US$1.8 million) for the acquisition of additional games.

        Net cash from investing activities was RMB26.7 million in 2010, primarily due to cash acquired from our acquisition of the 3GUU Group of RMB27.0 million, partially offset by our acquisition of property and equipment of RMB0.3 million.

        Net cash from investing activities was approximately RMB3,000 for the period from October 27, 2009 to December 31, 2009, primarily due to cash acquired from our acquisition of the Dragon Joyce Group of RMB131,000, partially offset by our acquisition of property and equipment of RMB128,000.

        Net cash used in investing activities was RMB0.4 million for the period from January 1, 2009 to October 26, 2009, primarily due to our acquisition of property and equipment of RMB0.4 million.

Financing Activities

        Net cash used in financing activities was RMB63,000 (US$10,000) in the first three months of 2012, due to dividend paid in February 2012 for the purpose of distributing the undistributed retained earnings of the Dragon Joyce Group to their respective shareholders.

        Net cash used in financing activities was RMB8.4 million (US$1.3 million) in 2011, due to dividend paid in December 2011 for the purpose of distributing the undistributed retained earnings of the OXW Group to their respective shareholders. There was no cash flow from financing activities in 2009 and 2010.

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Capital Expenditures

        We had capital expenditures of approximately RMB375,000 for the period from January 1, 2009 to October 26, 2009 and RMB128,000 for the period from October 27, 2009 to December 31, 2009, RMB0.3 million in 2010, RMB16.6 million (US$2.6 million) in 2011 and RMB2.7 million (US$0.4 million) in the first three months of 2012 for purchases of equipment, primarily computers and servers, in connection with the significant increase in our paying user accounts, subscriptions and our handset design business. Due to the nature of our business, we do not have high capital expenditures.

        In 2012, we expect to use capital expenditures primarily for purchases of additional servers, computer game software, equipment and leasehold improvements as we expand our business. Specifically, we will continue to

•

purchase equipment to expand our feature phone and smartphone game development capabilities;

•

grow our research and development staff; and

•

purchase equipment to support the expansion and enhancement of our Douwan social game platform and Funbox game downloading platform.

        We expect that our capital expenditures will increase in the future as our business continues to develop and expand and as we make technological improvement to our game development infrastructure and purchases other intangible assets such as additional games and software.

Contractual Obligations and Capital Commitments

        The following table sets forth our contractual commitments as of December 31, 2011.

	Payment Due by Period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(In thousands of RMB)
Operating lease commitments		12,132		3,614		8,175		343		—

        On July 30, 2012, we entered into a memorandum of understanding with MediaTek Inc., or MediaTek, to indirectly acquire 51% of the business of Vogins Network Technology (Shanghai) Limited Co., Ltd., or Vogins Shanghai. Under this memorandum of understanding, we are obligated to make a capital contribution of US$1,020,000 to a joint venture entity, US$400,000 of which the joint venture entity will use as a prepayment for the acquisition of the business and assets of Vogins Shanghai. See "Our Corporate History and Structure—Memorandum of Understanding with MediaTek to Purchase a Controlling Interest in Vogins Shanghai."

        Other than the contractual obligations set forth above, we do not have other material commitments or long-term obligations as of December 31, 2010. The operating lease obligations relate to lease agreements with lessors of our offices in China, including offices in Beijing, Guangzhou and Shenzhen, under leases with terms ranging from one to five years.

Off-balance Sheet Commitments and Arrangements

        We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder's equity, or that are not reflected in our consolidated combined financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

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Quantitative and Qualitative Disclosure about Market Risk

Foreign Exchange Risk

        Our revenues and purchases from our PRC subsidiaries and Yingzheng, our VIE, are primarily denominated in Renminbi. Our assets and liabilities are also denominated in Renminbi, except for cash held in other currencies, which included US$0.9 million as of March 31, 2012. As a result, fluctuations in the exchange rates between the U.S. dollar and Renminbi may affect our results of operations and financial condition, but not significantly. The Renminbi's exchange rate with the U.S. dollar is affected by, among other things, changes in China's political and economic conditions and China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under this policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. For almost two years after reaching a high against the U.S. dollar in July 2008, the Renminbi traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high. As a consequence, the Renminbi fluctuated sharply since July 2008 against other freely traded currencies, in tandem with the U.S. dollar. In June 2010, the PRC government announced that it would increase the Renminbi exchange rate flexibility and since that time the Renminbi has gradually appreciated against the U.S. dollar. However, it remains unclear how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar.

        To the extent that we need to convert U.S. dollars we receive from financing activities into the Renminbi for our operations or other uses within the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. On the other hand, a decline in the value of the Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our company and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the prices of ADSs. As of March 31, 2012, we had U.S. dollar-denominated cash balances of US$0.9 million. Assuming we had converted the US$0.9 million into the Renminbi at the exchange rate of US$1.00 for RMB6.2975 as of March 30, 2012, this cash balance would have been RMB5.7 million. Assuming a 5% appreciation of the RMB against the U.S. dollar, this cash balance would have decreased to RMB5.4 million (US$0.9 million).

Interest Rate Risk

        Our exposure to interest rate risk primarily relates to finance income generated by excess cash invested in demand deposits with original maturities of three months or less. We have not used any derivative financial instruments to manage our interest risk exposure. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. However, our future finance income may be lower than expected due to changes in market interest rates.

Inflation Risk

        In recent years, inflation has not had a material impact on our results of operations. According to a report issued by the National Bureau of Statistics of China on February 28, 2011, the change in China's Consumer Price Index decreased by 0.7% in 2009 and increased 3.3% in 2010. If inflation rises, it may materially and adversely affect our business.

Credit Risk

        As of March 31, 2012, all of our cash was deposited in financial institutions located in the PRC, which management believes are of high credit quality. We have not experienced any losses on deposits of cash and cash equivalents.

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        Accounts receivable are typically unsecured and derived from revenue earned from customers and agents in the PRC, which are exposed to credit risk. The risk is mitigated by credit evaluations we perform on our counterparties and our ongoing monitoring process of outstanding balances. 2.7% and 19.0% of our total net revenues were derived from our customers, Shenzhen Chuangshi Interactive Technology Co., Ltd. and Jiangsu Mobile Communications Co., Ltd., respectively, for the year ended December 31, 2011 and 0.92% and 18.58%, respectively, for the first three months of 2012. 12.6% of our total net revenues was derived from one customer, namely Shenzhen Chuangshi Interactive Technology Co., Ltd., for the year ended December 31, 2010. 25.9% of our total revenues was derived through four mobile service providers, all our related parties, namely Shenzhen Provider Technology Co., Ltd., or Shenzhen Provider, Shenzhen Huazhongtianxun Technology Co., Ltd., or Huazhongtianxun, Beijing Changshi Jiaren Technology Development Co., Ltd., or Changshi Jiaren, and Beijing Shidai Xunda Technology Co,. Ltd., or Shidai Xundai, in 2010. 23.1% and 100% of our total revenue for the year ended December 31, 2010 and the period from October 27, 2009 to December 31, 2009 was derived from our predecessor, Kuailefeng.

Recently Issued Accounting Pronouncements

        In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. ASU 2011-04 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. We do not expect the adoption of ASU 2011-04 will have a significant effect on its consolidated financial statements.

        In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which eliminates the current option to report other comprehensive income and its components in the statements of shareholders' equity. Instead, an entity will be required to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers the ASU 2011-05 requirement that companies present reclassification adjustments for each component of other comprehensive income in both net income and other comprehensive income on the face of the financial statements and the requirement to report reclassification adjustments in interim periods. The amendments in ASU 2011-05 and ASU 2011-12 should be applied retrospectively and are effective for fiscal years and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. We early adopted ASU 2011-05 in 2011 by presenting items of net income and other comprehensive income in one continuous statement, the Consolidated Statements of Comprehensive Income. Prior years' comparative information has been rearranged to conform to the presentation in accordance with ASU 2011-05.

        In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a "qualitative" assessment to determine whether further impairment testing is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. We do not expect the adoption of ASU 2011-08 will have a significant effect on our consolidated financial statements.

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OUR CORPORATE HISTORY AND STRUCTURE

Our Corporate History

        Our company, China Mobile Games and Entertainment Group Limited, was incorporated in the Cayman Islands as an exempted limited liability company on January 20, 2011 by VODone as its wholly-owned subsidiary. Our business was acquired through three separate transactions by VODone in 2009 and 2010 and was operated by VODone through various subsidiaries and a VIE, until our reorganization effective August 23, 2011.

Acquisition of Dragon Joyce Group

        In October 2009, VODone entered into a share purchase agreement to acquire a 70% equity interest in Dragon Joyce, which focuses on developing, operating and marketing mobile games on feature phones through its PRC subsidiaries. As a result of the acquisition, VODone, King Reach Limited and Greatfaith Group Limited owned 70%, 25% and 5% of Dragon Joyce, respectively. The total consideration for the acquisition was RMB216.4 million (US$34.4 million), which was settled with HK$40 million (US$5.2 million) in cash and 100,789,333 newly issued ordinary shares of VODone. Two-thirds of the consideration shares were subject to certain lock-up restrictions and downward adjustments, depending on whether the actual audited net profit before tax of the Dragon Joyce Group meets the profit targets of RMB13.8 million (US$2.2 million) for the period from October 1, 2009 to December 1, 2009, RMB71.5 million (US$11.4 million) in 2010 or RMB85.8 million (US$13.6 million) in 2011. As of March 31, 2012, none of the consideration shares remained subject to lock-up restrictions and 15,477,154 shares were released back to VODone. Huiyou, a subsidiary of Dragon Joyce, purchased substantially all of the assets of our predecessor, Kuailefeng, as a part of this acquisition.

Acquisition by OWX Holding Group

        In October 2010, OWX HK acquired substantially all of the assets of Bright Way. Concurrently, OWX Beijing acquired substantially all of the assets of Tastech, the PRC operating company of Bright Way and transferred the assets of Tastech to its subsidiary, Zhongtuo. The first asset purchase agreement was subsequently novated to OWX Holding, a holding company incorporated in December 2009 in the British Virgin Islands for the purposes of holding 100% equity interest in OWX HK, which in turn owns 100% equity interest in OWX Beijing. Prior to our reorganization, VODone and Realphone Technology Co., Ltd, owned 70% and 30% equity interests in OWX Holding, respectively. As a result of these transactions, OWX Holding, through its 100% ownership in OWX HK, beneficially owns 100% of Zhongtuo which operates our handset design house. The total consideration for the acquisition was RMB77.5 million (US$12.3 million), which was settled with RMB20.0 million (US$3.2 million) in cash, 28,694,372 newly issued ordinary shares of VODone and 30% newly issued ordinary shares in OWX Holding. The consideration shares were subject to certain lock-up restrictions and downward adjustments, depending on whether the actual audited net profit before tax of OWX Holding meets the profit targets of RMB10 million (US$1.6 million) in 2010, RMB36 million (US$5.7 million) in 2011 and RMB50 million (US$7.9 million) in 2012. As of March 31, 2012, 1,911,675 of the consideration shares remained subject to lock-up restrictions and adjustments and 21,217,611 shares were released back to VODone.

Acquisition of 3GUU Group

        In December 2010, Action King, VODone's wholly-owned subsidiary incorporated in the British Virgin Islands, entered into a share purchase agreement to acquire a 70% equity interest in 3GUU BVI from Trilogic Investments Limited, or Trilogic, CMHJ Technology Fund II, L.P. and Natixis Ventech China AB. As a result of this transaction, Action King and Trilogic owned 70% and 30% of 3GUU BVI, respectively. 3GUU BVI focuses on developing, operating and marketing mobile games on

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smartphones through its subsidiaries and VIE in the PRC. The total consideration for the acquisition was approximately HK$233.4 million (US$30.1 million), which was settled with approximately HK$68.8 million (US$8.9 million) in cash and 68,600,000 newly issued ordinary shares of VODone. The consideration shares were subject to certain lock-up restrictions and downward adjustments, depending on whether the actual audited net profit before tax of 3GUU BVI meets the profit targets of RMB1.7 million (US$0.3 million) for the period from December 1, 2010 to December 31, 2010, RMB35 million (US$5.6 million) in 2011, RMB50 million (US$7.9 million) in 2012 or RMB75 million (US$11.9 million) in 2013. As of March 31, 2012, 30,184,000 of the consideration shares remained subject to lock-up restrictions and adjustments and none had been released back to VODone.

Our Reorganization

        On August 23, 2011, we entered into a series of share swap agreements with VODone and the minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI. As a result of these transactions, (a) we acquired the interests of (i) Dragon Joyce in the feature phone mobile game business operated by Beauty Wave Limited, or Beauty Wave, and China Wave Group Limited, or China Wave, (ii) OWX Holding in the handset design business operated by OWX HK, and (iii) 3GUU BVI in the smartphone mobile game business operated by 3GUU BVI, and (b)VODone became the beneficial owner of 70.2% of our equity interests through its 100% equity interests in each of Dragon Joyce, OWX Holding and Action King, while the former minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI collectively owned 29.8% of our equity interests.

        Our acquisition of the three businesses was accomplished through the following transactions:

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we issued a total of 106,500,000 ordinary shares to Dragon Joyce in exchange for 100% of the equity interests in each of Beauty Wave and China Wave;

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we issued 38,000,000 ordinary shares to King Reach Limited in exchange for its 25% equity interests in Dragon Joyce acquired by VODone;

•

we issued 7,600,000 ordinary shares to Greatfaith Group Limited in exchange for its 5% equity interests in Dragon Joyce acquired by VODone;

•

we issued 43,500,000 ordinary shares to OWX Holding in exchange for 100% of the equity interests in OWX HK;

•

we issued 18,600,000 ordinary shares to Realphone Technology Co., Ltd in exchange for its 30% equity interests in OWX Holding acquired by VODone;

•

we issued 59,999,000 ordinary shares to Action King in exchange for its 70% equity interests in 3GUU BVI; and

•

we issued 25,800,000 ordinary shares to Trilogic in exchange for its 30% equity interests in 3GUU BVI.

        Pursuant to the share swap agreements with the former minority shareholders of Dragon Joyce, OWX Holding and 3GUU BVI, these minority shareholders are subject to lock-up restrictions in dealing in or disposing of their holdings of our ordinary shares over a three-year period beginning from the listing date.

        On August 23, 2011, we effected a 2,500,000 ordinary share rights offering to our existing shareholder, VODone, for a subscription price of US0.001 per ordinary share.

        On October 27, 2011, Dragon Joyce repurchased options to purchase 0.4362% of the equity interest in Dragon Joyce from certain non-employee directors of the Dragon Joyce Group in exchange for 418,268 of our ordinary shares.

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        On October 28, 2011, OWX Holding repurchased options to purchase 1.2848% of the equity interest in OWX Holding from certain non-employee directors of the OWX Group in exchange for 418,266 of our ordinary shares.

        On October 29, 2011, 3GUU BVI repurchased all options it had previously granted to non-employee directors in exchange for 15,917.82 ordinary shares of 3GUU BVI. Concurrently, we entered into a share swap agreement to acquire the 15,917.82 ordinary shares of 3GUU BVI from the non-employee directors in exchange for 229,550 of our ordinary shares.

        On March 23, 2012, we (i) transferred all of the equity interests in Beauty Wave and China Wave to HYD Holding Limited, a company incorporated under the laws of the British Virgin Islands that is wholly-owned by us; (ii) transferred all of the equity interests in OWX HK to OWX Development Limited, a company incorporated under the laws of the British Virgin Islands that is wholly-owned by OWX Group Limited, a company incorporated under the laws of the British Virgin Islands that is wholly-owned by us; and (iii) transferred all of the equity interest in 3GUU BVI to 3GUU Holding Limited, a company incorporated under the laws of the British Virgin Islands that is wholly-owned by us.

Share Purchase Agreement

        On March 21, 2012, we and VODone entered into a shares purchase agreement with MediaTek, Core Tech, a subsidiary of MediaTek, and PVG, pursuant to which Core Tech and PVG agreed to subscribe for 15,450,144 and 11,035,817 shares of our ordinary shares, respectively, for consideration of US$7 million and US$5 million, respectively. Core Tech's investment was made in connection with MediaTek and our intention to further develop our cooperative relationship. These ordinary shares contain a liquidation preference, as well as a right to put back the shares after one year. The transaction was closed on May 11, 2012.

Our Contractual Arrangements with VIE

        Yitongtianxia, our PRC operating subsidiary, is a wholly foreign-owned enterprise and is subject to PRC legal restrictions on foreign ownership in the telecommunications sector. See "Regulations." Accordingly, we conduct business activities relating to the development, operation and marketing of mobile games on smartphones primarily through Yingzheng, our VIE. The registered shareholders of Yingzheng are Yongchao Wang, De Liang and Feng Zheng, each of whom is our officer or employee. We are in the process of transferring all of the equity interests in Yingzheng to Dr. Lijun Zhang, our chairman, and entering into contractual arrangements with Dr. Zhang and Yingzheng. Transferring all of the equity interests in Yingzheng to Dr. Zhang will allow us to manage our relationship with Yingzheng more effectively by limiting the number of Yingzheng shareholders, whose performance and cooperation we depend upon to maintain control, to just Dr. Zhang, whose interests by virtue of his share ownership and position in our company are closely aligned with ours. Through contractual arrangements with Yingzheng and its registered shareholders, we bear the economic risks and receive the economic benefits of Yingzheng. Although we do not have an equity interest in Yingzheng, due to the nature of these contractual arrangements, we have consolidated the financial results of Yingzheng into our financial statements in order to fairly present our financial position and results of operations. Yitongtianxia has entered into contractual arrangements with Yingzheng and its registered shareholders, which enable us to:

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exercise effective control over Yingzheng;

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receive substantially all of the economic benefits from Yingzheng as if we were its sole shareholder; and

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have an exclusive option to purchase all of the equity interests in Yingzheng when and to the extent permitted by PRC law.

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Exclusive Call Option Agreement

        Yitongtianxia entered into an option agreement with Yingzheng's registered shareholders, pursuant to which Yitongtianxia or its designated person have the exclusive option to purchase, when and to the extent permitted under PRC law, all of the equity interests in Yingzheng. The exercise price for the options to purchase all of the equity interests in Yingzheng is the minimum amount of consideration permissible under PRC law. This option agreement provides, among other things, that without Yitongtianxia's prior written consent, the registered shareholders of Yingzheng may not transfer, encumber, grant security interest in, or otherwise dispose of any equity interests in Yingzheng.

Exclusive Technology Services and Market Promotion Agreement

        Yitongtianxia entered into an exclusive technology services and market promotion agreement and related supplemental agreements with Yingzheng, which provides that Yitongtianxia has the exclusive right to provide to Yingzheng various technology and market promotion services related to the mobile phone games business. In return, Yingzheng is required to pay Yitongtianxia a service fee in an amount as determined at the sole discretion of Yitongtianxia. In addition, without the prior written consent of Yitongtianxia, Yingzheng may not engage in any transaction that may substantially alter its business, assets, operations, employees or other relevant rights and obligations. Unless Yitongtianxia terminates the agreement, the exclusive technology services and market promotion agreement will remain in effect.

Loan Agreement

        Under a loan agreement between Yitongtianxia and the registered shareholders of Yingzheng, Yitongtianxia agreed to extended loans of an aggregate principal amount up to RMB20 million (US$3.2 million) to the registered shareholders of Yingzheng. The registered shareholders obtained the loans to contribute registered capital to Yingzheng or provide shareholder's loan to Yingzheng, which funds should be used by Yingzheng for its normal business operation and expansion. The term of the loan is 10 years and it will automatically extend for another 10 years unless we, in our sole discretion, object. As of March 31, 2012, Yingzheng's shareholders have not drawn down any loans from Yitongtianxia.

Equity Pledge Agreement

        Under Yitongtianxia's equity pledge agreement with Yingzheng and its registered shareholders, the registered shareholders of Yingzheng pledged all of their equity interests in Yingzheng to Yitongtianxia to secure performance of the obligations of the registered shareholders and Yingzheng under the various contractual arrangements. If Yingzheng or any of its registered shareholders breach any of their respective contractual obligations under these agreements, Yitongtianxia, as pledgee, will be entitled to exercise certain rights, including the right to obtain compensation from a sale of the pledged equity interests, with the priority over other creditors. The registered shareholders of Yingzheng agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their respective equity interests in Yingzheng without Yitongtianxia's prior written consent. The above share pledge has been registered with the relevant local branch of the SAIC.

Technology Services Agreement

        Under a technology services agreement dated August 6, 2010 between Yitongtianxia and Yingzheng and a supplementary agreement dated January 6, 2011, Yitongtianxia agreed to provide Yingzheng with technology support and market promotion services related to Yingzheng's mobile game business. Yingzheng agreed to distribute 40% of its income generated from the game products developed under the technology services agreement (after deducting taxes and expenses) to Yitongtianxia on a monthly basis from August 6, 2010 to August 5, 2013. The term of the agreement is three years and it will automatically extend for another three years unless we, in our sole discretion, object.

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Agreement for Voting Proxies

        Under an agreement for voting proxies, among Yitongtianxia, Yingzheng and its registered shareholders, each registered shareholder of Yingzheng has appointed Yitongtianxia to be his or her attorney, and irrevocably authorize Yitongtianxia to vote on his or her behalf on all matters concerning Yingzheng that may require shareholders' approval. Pursuant to a supplementary agreement to the voting proxy agreement dated December 30, 2010, in consideration of Yitongtianxia's provision of management services to Yingzheng, Yingzheng will pay to Yitongtianxia management fees amounting to Yingzheng's annual revenues net of operating costs, expenses, and applicable taxes. On December 16, 2011, Yingzheng, Yitongtianxia and 3GUU BVI entered into an agreement on shareholder voting proxies, pursuant to which Yitongtianxia re-assigned to 3GUU BVI the right to vote on all of the matters in Yingzheng that require shareholders' approval irrevocably entrusted to it by shareholders of Yingzheng.

Supplementary Agreements

        On December 30, 2010, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders. Under this supplementary agreement, Yingzheng has agreed to pay an annual management fee to Yitongtianxia based on annual revenue of Yingzheng minus actual operating costs, other costs of Yingzheng, which include fees paid under the technology services agreement, and taxes paid by Yingzheng.

        On August 23, 2011, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders. Under this supplementary agreement: (i) prior to Yitongtianxia exercising its option to acquire Yingzheng, Yingzheng's shareholders cannot declare any dividends or distribute any residual profits without the consent of Yitongtianxia; (ii) any funds, including dividends distributed out of Yingzheng's residual profits, received by Yingzheng's shareholders or any persons designated by Yingzheng's shareholders, will be remitted in full to Yitongtianxia; (iii) the consideration received by Yingzheng's shareholders upon the exercising of Yitongtianxia's option to acquire Yingzheng must be immediately remitted to Yitongtianxia or any persons designated by Yitongtianxia; and (iv) Yitongtianxia has the unilateral right to change the service fee amount under the exclusive technology services and market promotion agreement. In addition, the supplementary agreement clarified that Yitongtianxia was obligated to provide continuous financial support to Yingzheng for operations from October 2009 to August 2011.

        On December 16, 2011, 3GUU BVI agreed to provide financial support to Yingzheng, our VIE, for its operations. In addition, Yitongtianxia re-assigned the right to vote on all of the matters in Yingzheng that require shareholders' approval irrevocably entrusted to it by shareholders of Yingzheng to 3GUU BVI. Accordingly, as a result of the power to direct the activities of Yingzheng pursuant to the power of attorney agreement and the obligation to absorb the expected losses of Yingzheng through financial support, Yitongtianxia ceased to be and 3GUU BVI became the primary beneficiary of Yingzheng.

Cooperation Agreement between Huiyou and Yingzheng

        On August 22, 2011, Huiyou and Yingzheng entered into a cooperation agreement. Pursuant to the agreement, once an online mobile game Huiyou has developed is ready to be commercialized, Huiyou licenses the game to and receives royalties from Yingzheng, which operates the game in its own name. Yingzheng currently holds all of the required licenses and certificates for online mobile game operations. Yingzheng entrusts Huiyou to enter into contracts with handset companies and design houses to pre-install the licensed game in handsets and with other mobile service providers for the collection of payments from end-users, for which Yingzheng pays commissions to Huiyou. Mobile network operators and service providers are responsible for collecting payments from game players and

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for paying the contracted portion of the payments to Huiyou, who receives them on behalf of Yingzheng, the operator of the game. Huiyou then shares the payments it receives with Yingzheng. Unless there is a material default or fraud on the part of either party, neither party may terminate the cooperation agreement without mutual consent. Neither party may assign its respective rights or obligations to a third party without the other's consent. The agreement is for a term of five years and is subject to annual reviews by both parties for necessary amendments or supplements.

Memorandum of Understanding with MediaTek to Purchase a Controlling Interest in Vogins Shanghai

        On July 30, 2012, we entered into a memorandum of understanding with MediaTek to indirectly acquire 51% of the business of Vogins Shanghai, which provides a development platform that application developers and mobile device makers can utilize to develop products that are compatible with different mobile handset platforms. Under the terms of the memorandum of understanding, we will inject funds of approximately US$1,020,000 for 51% of the equity interest in a new joint venture entity, or JV BVI, with the remaining 49% equity interest held by Vogins Technology Co. Limited, or Vogins BVI, a wholly-owned subsidiary of MediaTek. JV BVI will form an indirectly wholly-owned subsidiary in China, or JV WFOE, which will then enter into a series of agreements with Vogins BVI and Vogins Shanghai under which JV WFOE will purchase the existing business and assets of Vogins Shanghai. Vogins BVI will also pledge its equity interest in Vogins Shanghai to JV WFOE to secure the performance of Vogins Shanghai's obligations under the series of agreements. We will make a prepayment of US$400,000 to Vogins Shanghai on behalf of JV WFOE for the purchases of the business and assets of Vogins Shanghai under the series of agreements. We have the right to appoint three out of the five directors on the board of JV BVI and JV WFOE.

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Our Corporate Structure

        The following diagram illustrates our corporate structure after our reorganization and immediately prior to this distribution.

(1)

On August 24, 2011 and March 16, 2012, we issued 1,220,000 and 639,000 ordinary shares, respectively, to certain of our directors and officers, which shares contain transfer restrictions. In October 2011, we, Dragon Joyce and OWX Holding issued or transferred a total of 533,042, of our ordinary shares to each of Dr. Lijun Zhang, our chairman, and Mr. Hendrick Sin, our vice chairman, as consideration for the repurchase of share options held by Dr. Zhang and Mr. Sin in certain of our subsidiaries as part of our restructuring. See "Management—Compensation of Directors and Executive Officers—Share Options" for more information.

(2)

Yingzheng is our VIE in China. Its current registered shareholders are Yongchao Wang, De Liang and Feng Zheng, both 3GUU BVI's officers, for 76.0%, 4.0% and 20.0% of Yingzheng's shares, respectively. To manage our relationship with Yingzheng more effectively, we are in the process of transferring all of the equity interests in Yingzheng to Dr. Zhang and entering into contractual arrangements with Dr. Zhang and Yingzheng.

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The following diagram illustrates our shareholding structure immediately following this distribution.

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OUR RELATIONSHIP WITH VODONE

Our Relationship with VODone

        We were a business unit within VODone Limited, or VODone, a company listed on the Main Board of the Hong Kong Stock Exchange, prior to our reorganization as a separate subsidiary of VODone. VODone is a state-affiliated leading new media company in China that operates a nation-wide audio-video broadband transmission platform for China, delivering a range of cross media telecommunications contents and value-added services through the Internet. In addition to self-produced programs and contents, such as news clippings, VODone also engages in content management and provision of advertising services and lottery related business in China.

Our Relationship with VODone Following this Distribution

        Upon the completion of this distribution, VODone will continue to be our controlling shareholder, with a shareholding of 57.2% of the combined total of our outstanding Class A and Class B ordinary shares, and control of 87.0% of the voting power of the combined total of our outstanding Class A and Class B ordinary shares.

Non-Compete Agreement

        On October 21, 2011, we entered into a Non-Compete Agreement with VODone under which VODone agreed not to engage or assist any of its subsidiaries in engaging in the mobile game development and operation or the handset design business in China without our consent. Although VODone may purchase or acquire up to 20% of any class of securities of any enterprise that is in business competition with us, it may not participate in the activities of that enterprise if such securities are listed on a stock exchange. In addition, VODone agreed not to, and to procure its subsidiaries not to, solicit our employees and clients. The Non-Compete Agreement will terminate on the earliest of (i) five years after the completion of this distribution and listing, (ii) when VODone owns less than 30% of our outstanding share capital on a fully diluted basis, or (iii) the date on which our shares or ADSs cease to be listed on a stock trading market anywhere in the world. As a result, we are the sole mobile game company in the VODone group.

        On October 21, 2011, we entered into an administrative services agreement with VODone, pursuant to which VODone agreed to provide administrative and support services to us, including accounting services, administrative and clerical services, human resources services, office space and facilities services and information technologies services and support. In exchange for the provision of these services, we agreed to pay VODone a monthly fee of HK$80,000 (US$10,300). The agreement remains in effect until it is terminated in writing by either party.

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OUR INDUSTRY

China's Mobile Phone Market

Growth of Mobile Phone Usage

        The growth of China's economy and commensurate increase in disposable income and urbanization in recent years have driven the rapid growth in mobile phone usage in China. According to a report issued by the National Bureau of Statistics of China on February 22, 2012, per capita disposable income of urban households in China grew from RMB11,759 in 2006 to RMB21,810 in 2011, representing a CAGR of 13.15%. The diagram below sets forth the per capita disposable income of urban households in China for the periods indicated.

Per Capita Disposable Income of Urban Households (2006-2011)

Source: Statistical, Communiqué of the People's Republic of China on the National Economics and Social Developments, National Bureau of Statistics of China February 28, 2011

        According to reports released by the MIIT in February 2007 and March 2012, the number of mobile subscriptions in China increased from 461 million as of the end of 2006 to 986 million as of the end of 2011, representing a CAGR of 16.4%, making China the world's largest mobile subscriber market. Given the relatively low mobile penetration rate in China compared to more developed countries, the number of mobile subscriptions in China is expected to continue to increase rapidly in the next few years. According to the Analysys Report, the mobile penetration rate in China was 64.1% in 2010, which was significantly lower than that of Hong Kong at 189.0%, the United States at 96.0% and Japan at 94.5%, and the mobile penetration rate in China was 73.2% in 2011. The diagram below sets forth the total number of mobile phone subscribers and penetration rate in China for the periods indicated.

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Total Number of Mobile Phone Subscribers in China (2006-2011)

Source: Analysys Report

        As a result of the strong growth in number of mobile phone subscribers in China, mobile phone sales in China reached 302 million units in 2010, compared to 194 million units in 2006, representing a CAGR of 11.7%, and are expected to grow to 426 million units in 2013, representing a CAGR of 11.44% from 343 million units in 2011, according to the Analysys Report.

Types of Mobile Devices and Growth Trends

        The handset market in China can be divided into three segments: basic phones, feature phones and smartphones. The diagram below shows the growth and market share of each segment for the periods indicated.

Handset Market in China (2006-2014)

Source: Analysys Report

        Basic phones are low-end digital handsets that offer basic telephony without camera or any other special features, and usually lack social networking functions.

        Feature phones, the dominant form of handset in China, are multi-function mobile communication devices that have proprietary operating systems. According to the Analysys Report, the feature phone segment represented approximately 60.8% of the total mobile handset market in China as of the end of

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2011 and is expected to remain as the dominant type of mobile handset as it offers China's price-sensitive mobile phone users relatively broad functionality at compelling price. The feature phone segment is expected to represent approximately 56.0% of the total mobile handset market in China by the end of 2014. Mobile games and other applications are usually pre-installed on feature phones by handset companies before shipment. According to the Analysys Report, while most of the mobile games installed on feature phones are single-player games due to the performance constraints, many feature phones now have connectivity functions, such as bluetooth, WiFi and connections to 3G network that allow users to play mobile social games. The pre-installed base of mobile games or applications consists of the total number of feature phone's handset shipped with such mobile games or applications.

        Smartphones are high-end, technologically advanced devices with personal computer-level versatility that operate advanced operating systems such as Android, Apple's iOS, BlackBerry OS, Linux, Palm WebOS, Symbian and Windows Mobile. Smartphones are usually characterized by more powerful processors, larger screens and higher data storage capacity than feature phones, and are able to easily install and run high performance mobile games with sophisticated graphics and intricate game design, but are less affordable to the general mass market. Smartphones accounted for 25.2% of the total mobile handset installed base in China in 2011, according to the Analysys Report. Smartphone usage is expected to grow rapidly, reaching approximately a 43.0% market share in 2014. Smartphone users tend to have higher disposable income and a developed appetite for phones with more sophisticated operating systems, applications and content.

China's Mobile Game Market

Size of Mobile Game Market in China

        According to the Analysys Report, the size of the mobile game market in China reached RMB3.96 billion with a total of 162 million users in 2011, and is expected to grow to RMB13.57 billion and approximately 357 million users in 2014. The diagram below sets forth the total market size of mobile games in China for the periods indicated.

Total Market Size of Mobile Games in China

Source: Analysys Report

        Currently, young users in relatively affluent areas in China make up most of the mobile game population in China. According to the Analysys report, in 2010, approximately 95.5% of all mobile game users in China are under the age of 30. However, given the increasing popularity and general availability of mobile devices, mobile games are becoming more widely accepted across different age and gender groups and have immense growth potential as compared to traditional Internet games.

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        The diagram below sets forth the total number of mobile game users in China for the periods indicated.

Total Number of Mobile Game Users in China

Source: Analysys Report

Key Growth Drivers for Mobile Game Industry

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Increasing Disposable Income and Mobile Handset Penetration.  The growth of the mobile handset market in China is expected to continue due to increase in disposable income and decreases in handset prices.

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Affordability and Convenience of Play.  Most casual mobile games are offered for free or a small one-time fee in China. The portability and convenience of mobile games will likely continue to attract users, especially students and young workers with small intervals of play time. In addition, over the last few years, mobile network operators have reduced data streaming fees, and as a result, users find it more affordable and convenient to download and play mobile games, especially mobile social games. According to the Analysys Report, telecommunication costs in China have been decreasing since 2006, and overall telecommunications costs decreased 5.1% for the eleven months ending November 31, 2011.

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Maturity of Payment Channels.  Payment for mobile games and other value-added services in China have become more transparent, reliable and widely-accepted. Users have a variety of payment options for mobile value-added services, including through mobile network operator channels and third-party payment channels, such as bank cards and prepaid cards.

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Emergence of Mobile Internet and 3G Networks.  According to China Internet Network Information Center, in 2011 China had 356 million mobile Internet users, an increase of 17.5%, or 53 million users, from 2010. In 2010, mobile Internet users made up 69.3% of all Internet users in China, according to the Analysys Report. The emergence of the mobile Internet and the development of 3G networks are expected to deliver enhanced connectivity to mobile handsets in China. There is expected to be a rapid migration from handy-phone system (HPS) services to wireless services, made possible by 3G technology and more widely available WIFI spots, which offer fast and easy mobile access to the Internet and make possible the transfer of relatively large files to mobile phone users. By the end of 2011, 128 million mobile subscribers in China were connected to 3G networks, representing only 9.5% of China's total population, compared to a 3G penetration rate of 42.7% in the United States and 95.5% in Japan, according to iResearch, demonstrating the large growth potential of China's 3G networks.

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Availability of Feature Phones with Improved Functionality.  Over the past few years, intense competition in the feature phone market has put downward pressure on prices, making them attractive to a large segment of Chinese consumers. Feature phones manufactured in China have become more sophisticated and offer users more functionality such as better display, better multimedia capabilities and more social networking functions.

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Growth of Smartphones.  Growth of smartphones, which have better operating systems, user interfaces and functionality, are expected to further drive the growth of the mobile game market in China. The development of the market for smartphones will be driven by technological advancements, the attractiveness of handsets and functions to users, fast growing rural markets and mobile number portability. Also, Android-based smartphones are expected to become increasingly affordable to consumers in China.

Types of Mobile Games

        According to the Analysys Report, revenues from single-player mobile games and mobile social games constituted 69.5% and 30.5% of the mobile game market in terms of total revenues in China in 2011, respectively, compared to 80.4% and 19.6%, respectively, in 2010. Mobile games are predominately played on feature phones and smartphones.

Single-player Games

        Feature phone single-player games are generally more casual and less demanding in terms of skill and play time. These games involve relatively simple graphics and rules. Game types include shooting, action, adventure, fighting, simple role-playing and sports.

        Compared to feature phone single-player games, smartphone single-player games usually involve superior graphics, more complex playing techniques and more intriguing storylines.

Mobile Social Games

        Feature phone mobile social games may involve more elaborate graphics, virtual items and frequent interactions among different game players on different mobile devices. Examples of feature phone mobile social games include sports or racing games and interactive card and board games.

        Smartphone mobile social games resemble MMORPGs in many ways. Like MMORPGS, most smartphone mobile social games are action adventure-based and draw upon themes including martial arts, combat, fantasy, adventure and historical events. Each mobile social game creates an evolving virtual world within which thousands of game players can play and interact with one another or with network-operated "non-playing characters" at the same time. Players usually assume an alter-ego and may gain experience and attain or purchase certain virtual items, such as weapons and accessories, which enhance the status of the character and, in the process, build a strong identity. We believe there is a high degree of game player loyalty for mobile social games and players can spend a significant amount of time playing these games.

Mobile Game Industry Landscape

        Key players in the mobile game industry in China include content providers with product development capabilities, mobile game operators and publishers that introduce games to the market through pre-installation or other promotional means and operate games to maximize user activity level, mobile network operators that act as both payment channels and distribution channels, mobile service providers that provide payment channels through their contractual relationships with mobile network operators and payment processing agents that collect payment independent of channels provided by mobile network operators.

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        The mobile game market in China is highly competitive and fragmented. Industry participants that develop mobile games and content include mobile game developers and operators, and certain China-based Internet companies. In order to attract users, mobile game developers and operators work with handset companies and design houses to pre-install mobile games and game platforms, offer games through mobile network operators and mobile application stores.

        We believe the key factors for success in the mobile game market in China include:

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ability to anticipate user preferences or industry changes to market and promote new products and services;

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ability to develop popular mobile game titles inhouse;

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established user base with strong brand loyalty and ability to retain and expand such user base;

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ability to distribute games through pre-installation, application stores and other channels;

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ability to achieve economy of scale in terms of operations; and

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ability to obtain government approvals and permits.

        The mobile games industry in China is highly fragmented with the top five mobile games developers contributed 33.1% of total revenues in 2011. The diagram below sets forth the market positions of PRC-based mobile games developers in China in terms of revenues in 2011.

PRC-based Mobile Game Developers' Market Share by Revenues in China in 2011

Source: Analysys Report

Mobile Game Revenue Models in China

        There are three main types of revenue models that are adopted by mobile game operators in China:

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Item-based.  Many mobile social games and certain single-player games adopt the item-based revenue model, where players usually play for free, but may choose to pay for virtual items and other add-on services, such as accessories, pets and weapons, to enhance the game-playing experience. According to the Analysys Report, 56.0% of all mobile game users expressed a preference for certain forms of item-based or trial period-based payment model in 2010;

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One-time fee.  Single-player games and mobile social games that require game players to pay a one-time fee to download. According to the Analysys Report, 30.4% of all mobile game users expressed a preference for this model in 2010; and

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Subscription-based.  Users pay a monthly fee to subscribe to a mobile game package with frequent updates of new games. According to the Analysys Report, 5.7% of all mobile game users expressed a preference for this model in 2010.

Key Challenges Facing the Mobile Game Industry

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Fragmentation of handset manufacturing and design industry in China.  According to the Analysys Report, there were approximately 400 handset manufacturers and over 1,000 mobile solutions companies in China. The fragmentation of the handset manufacturing and design industry in China makes it difficult for mobile game developers to enlarge their market shares as most mobile game developers rely on handset companies to distribute and release games on feature phones.

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Dominant position of mobile network operators.  China Mobile, China Unicom and China Telecom dominate the wireless telecommunications sector in China. Most providers of mobile value-added service, or MVAS, rely on these mobile network operators to collect a substantial majority of payment from end users and are subject to policy changes of these mobile network operators.

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Uneven game development capabilities.  Many mobile game development companies suffer from high employee turnover, lack of knowledge of user behavior and lack of effective distribution network. As a result, the quality of mobile games offered in China and the ability to deliver new game or improve existing games are uneven.

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High technical requirements and competing operating systems.  Mobile game developers need to customize the design of their games in order for the games to be able to run on different models feature phones or smartphones. Mobile game developers must spend considerable resources to acquire knowledge of the system specifications and operating systems of feature phones and smartphones. They also need to build or acquire development engines and procure professional expertise associated with developing games for feature phones and smartphones.

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High network coverage requirement and bandwidth usage.  Growth of the mobile game industry in China relies on the expansion in the coverage of China's wireless network to reach users while existing coverage in suburban or rural areas may not be sufficient. Especially for mobile social games and games with sophisticated graphics, reliable connectivity and sufficient bandwidth are necessary.

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Rampant violations of intellectual property rights.  Mobile game developers in China may become victims of intellectual property rights violations, including reverse engineering, unauthorized copying or other misappropriation of technology. As a result, many mobile game developers struggle to differentiate their products and monetize their games.

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Scarcity of government permits and uncertainty of government regulations.  Developers and operators of mobile games are required to obtain an array of government approvals and permits in order to conduct business in China, which creates a significant barrier to entry for new entrants and regulatory risks for players who operate without requisite approvals. In addition, the PRC government has promulgated various policies and regulations aimed at regulating MVAS industry and/or the online games industry. These policies are subject to frequent changes and uncertain interpretations by government agencies.

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OUR BUSINESS

Overview

        We are a leading and profitable mobile game company in China with the largest market share among mobile game developers in terms of revenues in 2010 and 2011, according to the Analysys Report. Our market share reached 18.7% in terms of revenues generated by all mobile game developers in China compared to the 4.9% market share of our nearest competitor in 2011, and was greater than the combined market share of our nearest five competitors, according to the Analysys Report. We have integrated capabilities in the development, operation, sale and distribution of mobile games in China. Our mobile handset design business complements our game development business as we pre-install our mobile games and game platforms in the handsets we design, and enhances our knowledge of user habits and preferences and industry trends. Our total paying user accounts during 2011 and the first three months of 2012 were approximately 29.0 million and 12.1 million, respectively, for feature phone single-player games, 69,000 and 30,000, respectively, for feature phone mobile social games and 741,000 and 134,000, respectively, for smartphone mobile social games. Our total subscriptions for smartphone single-player games during 2011 and the first three months of 2012 were 9.6 million and 2.0 million, respectively. Total paying user accounts are calculated based on the total number of user accounts that paid to download our games or purchase in-game items during the period (adjusted to eliminate double-counting of the same user accounts). Total subscriptions are calculated based on the total number of monthly subscriptions to our game bundles offered through mobile network operators and the number of games downloaded through application stores.

        We have a large and diversified portfolio of games for feature phones and smartphones. We have strong development capabilities, evidenced by the fact that we develop single-player games and mobile social games for both types of handsets. As of March 31, 2012, our portfolio included 450 mobile games, of which 130 of our 136 feature phone games were developed in-house; we licensed 302 of our 314 smartphone games from third parties and we developed all of our smartphone mobile social games in-house. Certain of our games are also among the most popular (as measured by downloads) and highest grossing (as measured by revenues) mobile games in China. For example,

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Kangri Yingxiong Zhuan, a single-player smartphone game that we launched in 2011, was the most downloaded single-player game among users of China Mobile, the largest mobile network operator in China, during January 2012.

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Paopao Xiyou, a smartphone mobile social game we developed internally, received the Golden Plume Award as the Best Mobile Platform Online Game in China for 2011. Golden Plume Awards are awarded by 7yx.com.cn annually across a number of categories to recipients chosen by online and mobile game players using their mobile phones to vote for their favorite games. We did not pay any fee for our games to be nominated. Paopao Xiyou was also named as one of the ten most popular national mobile games during the 2011 China Game Industry Annual Conference, an award determined by industry experts and for which we did not pay any fee for our games to be nominated.

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YY Three Kingdoms, Thumb Monopoly and Creation Song, all smartphone mobile social games that we developed in-house, won the Golden Phoenix Award from GAPP, being among the ten most popular original mobile games, in 2008, 2009 and 2010, respectively. Golden Phoenix Awards are issued by GAPP to popular online games in China. The annual award event provides rankings of top ten games across a number of different categories, and voting is held online and any registered user may nominate his or her favorite games. As such, we do not pay any fee for our games to be nominated. According to the Analysys Report, Creation Song, a game we developed in-house, was also the top-grossing mobile social game available through China Mobile in 2010.

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Xiao'ao Jianghu, one of our internally-developed feature phone mobile social games, was the top-grossing game in the Maopao application store, one of the most popular mobile application stores in China, from January to April of 2011, according to the Analysys Report.

        We have a strong pipeline of games offering a variety of themes, cultural characteristics and features designed to appeal to different users. We plan to launch 33 feature phone single-player games, one feature phone mobile social games, 112 smartphone single-player games and two smartphone mobile social games during the last nine months of 2012.

        We develop mobile games primarily using our proprietary game engines and development platform, which we believe allow us to create mobile games with consistent quality and system stability, and protect us from potential interruptions in our operations due to loss of development personnel. Our integrated capabilities across the mobile game value chain allow us to cross-sell mobile games among feature phone and smartphone users, and complements our strategy to build a user community that will reach users across different platforms and play methods. We are also able to identify and source popular games, and we are able to attract developers of those games to partner with us due to our strong market reputation, scale of our business and distribution capability. For example, we are working with developers of popular games such as "Angry Birds" and "Fruit Ninja" to develop and distribute these games on feature phones in China.

        We believe our leading market position, diverse game offerings catering to both feature phones and smartphones and strong technical capabilities have enabled us to become a preferred game developer for many handset companies in China, a strategic partner with various chipset manufacturers and mobile platform providers, and a recognized content provider to key mobile network operators in China. We pre-installed our mobile games onto over 28.2 million feature phone handsets during 2011, compared to 25.1 million and 14.5 million in 2010 and 2009, respectively, of which 1.5 million were designed by our own handset design house in 2011. We pre-installed our mobile games onto over 7.4 million feature phone handsets in the first three months of 2012, compared to 7.0 million feature phone handsets in the first three months of 2011. We have a strategic cooperative relationship with China Mobile and have been granted access to fee-collection codes from China Mobile, which enables us to collect proceeds without having to use service providers as intermediaries. Because of our strong revenues and performance since the fourth quarter of 2011, China Mobile deemed us a "Grade A Business Partner" and we expect they will allocate to us more marketing resources and services such as giving greater prominence to our games in search results and on page displays and allowing us to publish more new games each month while expediting the approval and launch process for those games. We also formed strategic cooperations with the other two major mobile network operators in China. For example, in 2011 we entered into an agreement with China Telecom which allows us to offer games to mobile phone end users through their network.

        We have comprehensive capabilities in the mobile game value chain, spanning from handset design to mobile game development, operations and distribution as a result of the integration of three different companies during 2009 and 2010. Since the acquisitions of our feature phone mobile game business in October 2009, our handset design business in October 2010 and our smartphone mobile game business in December 2010, the synergies created by the integration of the three businesses have allowed us to increase market share, reduce costs and operate with improved efficiency. We believe we are well-positioned to capture opportunities along the mobile game value chain as a result of our integrated capabilities.

        Our revenues were RMB52.8 million in 2009 on a pro forma basis, RMB125.4 million in 2010, RMB268.8 million in 2010 on a pro forma basis, RMB243.5 million (US$38.7 million) in 2011 and RMB54.3 million (US$8.6 million) in the first three months of 2012. Our net income was RMB24.9 million in 2009 on a pro forma basis, RMB40.7 million in 2010, RMB62.6 million in 2010 on a pro forma basis, RMB163.3 million (US$25.9 million) in 2011 and RMB18.8 million (US$3.0 million)

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in the first three months of 2012. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Unaudited Pro Forma Consolidated Financial Information" for a discussion of our pro forma consolidated financial information for 2009 and 2010.

Our Competitive Strengths

        We believe the following strengths enable us to compete effectively and capture opportunities in the rapidly growing mobile game market in China.

Leading mobile game developer in the China mobile game market

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Leading mobile game developer with diverse portfolio.  We are the leading mobile game developer in China in terms of market share based on revenue in 2011, according to the Analysys Report. Our market share reached 18.7% of revenues generated by all mobile game developers in China in 2011, compared to the 4.9% market share of our nearest competitor, according to the Analysys Report. As an early entrant into the mobile game development industry in China, we believe we offer one of the largest portfolios of high-quality, popular and profitable mobile games in China. As of March 31, 2012, our portfolio includes 136 feature phone games and 314 smartphone games that appeal to different users and many of which have won industry-wide awards. In 2012, Forbes China named us as one of the 30 top mobile businesses in China.

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Integrated capabilities.  We have a complete mobile game product line-up and a business structured to focus on the development, operation, sales and distribution of feature phone and smartphone mobile games in China. We believe our integrated business model allows us to achieve fast development cycles and wide product distribution in an efficient manner through the sharing of market intelligence, development expertise, technical know-how and customer resources among our business units. Our integrated capabilities also allow us to efficiently develop and launch games into both the feature phone game market and the fast-growing smartphone game market. We believe our business model and the scale of our operations are difficult to replicate.

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Fast-growing paying user base.  We had total paying user accounts during the first three months of 2012 and during 2011, 2010 and 2009 for feature phone single-player games of 12.1 million, 29.0 million, 23.5 million and 16.0 million, respectively, for feature phone mobile social games of approximately 30,000, 69,000, nil and nil, respectively, and for smartphone mobile social games of 134,000, 741,000, 825,000 and 466,000, respectively. Our total subscriptions for smartphone single-player games during the first three months of 2012 and during 2011, 2010 and 2009 were 2.0 million, 9.6 million, 7.4 million and 0.1 million, respectively. Total paying user accounts are calculated based on the total number of user accounts that paid to download our games or purchase in-game items during the period (adjusted to eliminate double-counting of the same user accounts). Total subscriptions are calculated based on the total number of subscriptions to our game bundles offered through mobile network operators or the number of games downloaded through application stores.

Strong game development and sourcing capabilities with in-depth market knowledge

        Leveraging our success in developing mobile games, we have established a large operational scale and expansive reach within the mobile game industry in China, through which we have accumulated in-depth market knowledge of user preferences and industry trends that allows us to better promote our products and develop or source attractive games. Over the past three years, we have consistently introduced popular and top ranked mobile games, developing a diversified portfolio of mobile games across different game categories, including actions, puzzles, skill-based, role-playing, racing, shooting, adventures and cards. According to the Analysys Report, Creation Song, one of the games we

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developed in-house, was the top-grossing mobile social game available through China Mobile in 2010 while Cut Cut Boom was the most purchased game on iPad in China in November and December of 2010. Our other popular games include Xiao'ao Jianghu, the top-grossing game in the Maopao application store, one of China's leading application stores for feature phones, from January to April of 2011, according to the Analysys Report and Kangri Yingxiong Zhuan, a single-player smartphone game that we launched in 2011, was the most downloaded single-player game among China Mobile users during January 2012. Paopao Xiyou, a smartphone mobile social game we developed internally, received the Golden Plume Award as the Best Mobile Platform Online Game in China for 2011. YY Three Kingdoms, Thumb Monopoly and Creation Song, all smartphone mobile social games we developed in-house, won the Golden Phoenix Award from GAPP, being among the top 10 most popular original mobile games, in 2008, 2009 and 2010, respectively. In addition, we have the ability to identify and source popular games, and we are able to attract developers of those games to partner with us due to our strong market reputation, scale of our business and distribution capability. For example, we are working with developers of popular games such as "Angry Birds" and "Fruit Ninja" to develop and distribute such games on feature phones in China.

        Leveraging on data we accumulated on user behavior and preferences through our existing mobile games and powered by our proprietary game engines, we have been able to react quickly to changing customer preferences and market trends in China and consistently offer popular mobile games through developing our own games and selectively acquiring or licensing games developed by third parties. As of December 31, 2011, we have a large team of more than 200 game development employees. We have identified trends through a combination of local user behavioral analysis and market research and proceeded to quickly develop mobile games that cater to the latest user preferences. For instance, we developed Xiao'ao Jianghu, a martial-art themed mobile social game that became one of the top grossing mobile games within two months of its launch on the Maopao application store. We also cooperate with well-known brands and media companies to develop mobile games based on popular franchises, stories and characters. For example, together with Skyinfo, a licensee of Marvel Comics, we developed a series of mobile single-player games based on the Ironman franchise.

        We possess the tools to closely analyze and quickly adapt to changing player preferences. Our handset design business enhances our knowledge of user habits and preferences and industry trends. To deepen our understanding of player preferences, we have recruited game players to work at our game design department. We believe our understanding of market trends helps us develop or source mobile games that cater to user preferences, and our extensive knowledge of technical requirements of handsets help us develop games that deliver exceptional user experience, contributing to the popularity of our games. We maintain a system for collecting market information and maintaining open and effective internal communications. We have established strict research and development management and control procedures to improve the success of product launches.

Established distribution network

        We believe we have established one of the largest and most extensive sales and distribution networks for mobile games in China. To efficiently distribute our games, we cooperate with handset companies, handset design houses, mobile network operators such as China Mobile, China Unicom and China Telecom, the three largest mobile network operators in China, respectively, mobile service providers, as well as mobile application stores and portals. We work with approximately 420 handset companies and design houses to pre-install our feature phone mobile games and game platforms on mobile handsets. In 2011 and in the first three months of 2012, our feature phone mobile games and game platforms were pre-installed on more than 28.2 million and 7.4 million handsets, representing an increase of 12.5% and 5.7% over approximately 25.1 million and 7.0 million handsets in 2010 and in the first three months of 2011, respectively. Our handset design business also complements our mobile game development business by expanding our installation base and sharing its technical know-how. In

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addition to distributing feature phone games through pre-installation, our mobile games are also available in popular application stores and social networking game platforms, such as Sina Weibo and Japan's GREE platform. We also distribute through our own Funbox and Douwan platforms, and through game bundles offered by China Mobile. We are among a limited number of mobile game companies that enjoy a strategic cooperation partnership with China Mobile, which affords us preferential treatment in terms of billing and promotional activities for both our feature phone and smartphone games. Because of our strong revenues and performance since the fourth quarter of 2011, China Mobile deemed us a "Grade A Business Partner" and we expect they will allocate to us more marketing resources and services such as giving greater prominence to our games in search results and on page displays and allowing us to publish more new games each month while expediting the approval and launch process for those games. During each of the first seven months of 2012, our game bundles ranked us number one in terms of revenues generated through China Mobile. We also formed strategic cooperations with the other two major mobile network operators in China. For example, in 2011 we entered into an agreement with China Telecom which allows us to offer games to mobile phone end users through their network.

Strong technology platform with deep understanding of handset technical requirements

        We have built a strong research and development team that as of March 31, 2012 had 245 employees and we own proprietary game engines that allow us to develop high-quality mobile games quickly and efficiently, and to launch new games shortly after the development and testing phase. We have developed the KDE game engine, which modularizes key functions, including graphic design, network connection, fee calculation, game operation and updates. Our proprietary game engines give us more control over the game development, protect us from potential interruptions in our operations due to loss of development personnel, and provide the technical foundation upon which to develop innovative game features. Our game engines also streamline online data transmission, game operations and user control and as of March 31, 2012, our server network consisted of 58 servers with the capacity to support up to one million concurrent users. We believe these advanced game engines enable us to develop games more efficiently than our competitors. Our server technology also enables a greater number of players to interact with each other in the game environment, which we believe provides our players with more social interactions. For instance, Creation Song enables up to 20,000 players to play concurrently. Moreover, Funbox, a pre-installed platform for downloading and updating our single-player games on feature phones and receiving updates, overcomes the general problem of limited memory on feature phones and the constant updates enhance player experience and stickiness.

Experienced management team with proven track record

        We have an experienced management team that has successfully led our operations and the integration of our acquired businesses and assets. Our senior management has a combined more than 60 years of experience in the mobile game industry. We believe our management team's industry experience and vision have contributed to our leading position in the China mobile game market and the efficient integration of acquired businesses over the past two years. Our senior management team will continue to lead us in capturing market opportunities and ensuring our strong and sustainable growth.

Our Strategies

        Our objective is to become a leading mobile game developer globally by solidifying our leading market position and increasing our market share in China, as well as by strategically expanding our

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reach into international markets. We intend to achieve our objective by pursuing the following strategies:

Continue to expand and enhance our game portfolio

        Our long term target is to establish a comprehensive game portfolio catering to all of the major mobile phone market segments and player demographics. We intend to expand our game portfolio through the following measures.

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Increase game offerings.  Based on our understanding of user behavior, we plan to continue to develop and launch new games on a regular basis by further intensifying our product development efforts and leveraging our proprietary game engines and powerful game development platform. We plan to launch 33 feature phone single-player games, one feature phone mobile social game, 112 smartphone single-player games and two smartphone mobile social games during the last nine months of 2012.

We have recently entered into strategic arrangements with several content providers to develop and distribute games using Disney characters and to distribute popular games such as "Fruit Ninja." These strategic arrangements include:

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In August 2011, we obtained a license from the distributor of several popular games on iPhone applications to distribute their games on feature phones in China. These games include popular titles such as "Fruit Ninja." The term of the license is for one year and we believe it will enhance the quantity and quality of our game offerings. We plan to promote these games through our Funbox platform.

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In August 2011, we entered into an exclusive cooperation agreement with the only company authorized by the Chess and Cards Administration Center of the General Administration of Sports of China to host events for Chinese chess, checkers and card games on mobile devices. We plan to develop a mobile game platform that would allow players to participate in nationwide game competitions, for which players would have to pay item fees and would have the chance to earn prizes.

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In May 2012, we entered into an exclusive agreement with Shanghai Media Group to develop and operate mobile social games based on the television game show "Maidong Menglifang," which requires contestants to complete a series of games or challenges. As part of this agreement, we have developed smartphone mobile social games for download through our Douwan platform that allow users to play simulations of games featured on Maidong Menglifang and to enter their names to watch or compete in the show in person.

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Enhance social game pipelines and social games platform.  We believe the principle of Social, Local and Mobile, or SOLOMO, will direct the mobile game industry. In adopting SOLOMO as a key game development strategy, we plan to develop games with social features that will attract users, increase our average revenue per user and enhance user stickiness. We also intend to build a social game platform for feature phones, smartphones and a platform that connects both types of phones. We plan to launch an enhanced version of our Douwan social game platform for feature phones and smartphones during the second half of 2012, which will feature games that focus on competition and social interactions among players and offer functions such as local-based services (LBS), which we anticipate will attract other game developers to cooperate with us.

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Develop complementary titles.  We plan to focus on developing games that can be played on both smartphones and feature phones to complement our existing portfolio in terms of play method, target users and revenue model.

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Co-development and design.  We intend to develop more online games based on various styles of play, storylines and designs, and to collaborate with creative design sources overseas.

Increase paying user accounts, subscriptions and user activity

        We believe mobile games developed on the principle of SOLOMO will attract more user interest, generate higher spending per user and have a longer product lifespan than single-user games. Specifically, we plan to build a strong mobile social game platform and enhance our pipeline of mobile social games by implementing the strategies below.

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Social.    We plan to build a social game platform for feature phones, smartphones and a platform that connects both types of phones. In the second quarter of 2012, we enhanced our Douwan social game platform to include social games such as adventures, sports and other leisure games, for feature phones and smartphones. We also plan to enhance social community features such as user profiles, bulletin boards, chat rooms, national and regional scoreboards and rankings. We plan to launch an integrated smartphone MMORPG social platform on which our MMORPG players can socialize and communicate not only within the social games, but also outside the games on the social platform. Finally, we will build social games capable of running on both feature phones and smartphones in order to expand our social community to the vast majority of mobile users.

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Local.    Our enhanced Douwan platform will contain interactive map features that will allow users to identify other players in the same city or neighborhood. For example, players in the same neighborhood can co-operate a task or form an alliance to compete against players from different areas. Players will be able to engage each other socially, increasing both the enjoyment they derive from playing the games and their stickiness. We plan to introduce in-game items or awards that can be earned only by collaborative efforts among users to stimulate social networking activities.

        We plan to increase the number of paying user accounts, subscriptions and user activity by enhancing user experience and increasing loyalty to our games. Over the next 12 months, we plan to, among others,

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establish account management systems to track our players' purchase habits and patterns through detailed analysis of collected data and use this information to improve content and display in-game items;

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offer rewards to top-ranked players to enhance their game playing experience;

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introduce in-game features in the new mobile games that allow users to use accumulated game points or virtual items;

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engage additional in-game promotions and host more in-game events to further attract user interests;

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step up our cross selling efforts between mobile social games and single-player games;

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redesign smartphone mobile social games for feature phones; and

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expand online game centers to cross sell products across titles.

        We operate most of our feature phone and smartphone games on either a free-for-trial or a free-to-play basis, which allows users to download our games and play the initial levels of the game or use the basic functions of the game for free. We believe the free-for-trial and free-to-play models enable us to build quickly a large base of potential customers to purchase our virtual goods. Through virtual goods players are able to extend their play sessions, enhance or personalize their game environments, accelerate their progress in our games and share and trade with friends. We believe our

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players' acquisition, gifting and purchase of virtual goods creates social interaction that increases players' engagement with our games and with each other. Players are encouraged to make incremental purchases to empower or enhance the virtual items they already own. To expand paying user base and convert potential customers to paying users or subscribers, we have developed creative incentives such as virtual treasure boxes, which contain in-game items worth more than the treasure box itself. We will continue to enhance and expand the virtual product and services under the free-for-trial and free-to-play models.

Grow our user base by expanding our distribution network and installed base

        We will continue to focus on expanding our feature phone user base through growing our pre-installation base. We believe we can deepen our relationships with handset companies and reach out to new handset companies by developing new popular games, enhancing our product portfolio and continuing to advertise in industry magazines. To enlarge our smartphone user base, we plan to work together with smartphone manufacturers to pre-install certain of our mobile games onto their smartphone shipments. In addition, we plan to intensify our cooperation with provincial-level operating companies of China Mobile to promote our mobile games directly to users and to introduce more single-player game bundles for subscription. We are also strengthening our relationship with China Telecom and working to establish a similar relationship with China Unicom. Our own handset design business further enhances our knowledge of handset development trends.

        We have also entered into cooperative relationships with various chipset manufacturers and mobile platform providers, such as MediaTek and Spreadtrum, and MStar, a mobile platform provider, that will allow us to develop games for integration into their respective chipsets and platforms. We believe this will allow us to further broaden our user base as well as to develop games that will remain accessible to our users as new technologies develop. In February 2012, we entered into a cooperation agreement with Beijing Sina Internet Information Service Co., Ltd., an online media and mobile value-added services company in the PRC, to distribute certain of our mobile social games for smartphones on its Weibo social networking platform in China.

        Furthermore, we plan to promote and enhance our brand recognition among users and to build user trust in the quality of our games and customer services. We plan to increase investments in advertising campaigns to promote our "China Mobile Games and Entertainment" and "CMGE" brands over the next 12 months and to display our logo on the welcome screen of each of our mobile games. We believe that our branding efforts will increase consumer awareness of China Mobile Games and Entertainment while creating a more active and loyal user community that associates our brands with fun, high-quality and diverse mobile games.

Continue to invest in and enhance our research and development capabilities

        We will continue to devote substantial resources to our research and development efforts to optimize game engines and build community features for mobile social games and user account management systems that allow users to interact on a real time basis. We plan to further expand the size and capabilities of our research and development team by recruiting at least 30 additional talented program developers, game designers and graphics artists over the next 12 months. In addition, we intend to provide our employees with appropriate incentives to motivate and reward strong performance, such as providing promotion opportunities and employee incentive plans. We will continually improve and upgrade our game development engines to keep pace with the latest technical advancements and offer more attractive features in our games.

        We will also continue to devote substantial research and development efforts to increasing the performance and functionality of our games, enhancing user experience and using our know-how to

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optimize the utilization of mobile handset and network capabilities. We plan to increase our research and development budget from RMB25 million (US$4.0 million) in 2011 to RMB30 million in 2012.

Expand our international user base to enhance our business and profitability

        Handsets that are preinstalled with our games, including handsets that we have designed, are shipped all over the world. Our game development and handset design businesses target emerging market countries with sizable and growing mobile user bases and that are major export markets for Chinese-made handsets. We plan to leverage our existing relationships with handset companies to install our games and game platforms onto their exported handsets. We have entered into cooperative relationships with mobile network operators and other key market players covering more than 75 countries around the world. We have established a dedicated sales team to cover our target international markets and we have translated the user interface of many of our single-player games into seven different languages including English. For example, in March 2011, we entered into strategic cooperation agreements with G'Five and Hexing, two of China's leading handset designers that target emerging market countries, to pre-install our games and game platforms onto the handsets they export to developing markets. In November 2011, we entered into a cooperation agreement with TENDA Co. Ltd., a mobile games and applications distributor in Japan, to distribute Paopao Xiyou, a smartphone mobile social game we developed internally, on the Japanese GREE platform. In 2011, we have begun generating revenues from our overseas operations and we plan to double the number of pre-installations of our games in handsets shipped overseas from 2011 to 2012. We believe our international expansion plan provides a cost-effective way for us to increase the reach of our mobile games.

Pursue strategic acquisitions and partnerships

        In order to increase our market share in China's highly fragmented mobile games industry, we intend to selectively acquire complementary mobile game businesses, particularly game development studios in China. We believe such acquisitions will help broaden our game formats, expand our research and development team and obtain access to other valuable resources. We expect to realize synergies through sharing distribution channels, sales network, technical know-how and management resources. To strengthen our market position in China, we also intend to establish relationships with or make strategic investments in key players in other industry sectors that may complement our business and broaden our player base. We may consider strategically partnering with leading international game developers to identify game designs with market potential, and engaging in joint-development projects to tailor popular foreign games to the Chinese market. If we decide to make such strategic partnership, acquisitions or investments, our management will carefully evaluate strategic partnership, acquisition or investment opportunities and pursue optimal transaction structures.

Our Games

Feature Phone Games

        We have a proven track record of developing popular feature phone games that appeal to users in China. Our portfolio of feature phone games includes single-player games and mobile social games, substantially all of which are games that we develop in-house. We target a broad spectrum of feature phone users who may have limited entertainment options and fragments of playing time.

Single-Player Games

        Single-player games usually involve relatively simple rules and do not require significant time commitment from the users. In January 2010, we launched Funbox, a pre-installed game distribution platform for downloading and updating our single-player games on feature phones and receiving

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updates, which overcomes the general problem of limited memory on feature phones. Funbox has been pre-installed on approximately 2.7 million feature phones as of March 31, 2012. Certain of our single-player games are available through the Funbox platform, with 9.9 million and 42.3 million downloads of our single-player games through Funbox in 2010 and 2011, respectively. As of March 31, 2012, our portfolio contained 134 feature phone single-player games, including 38 action games, 34 puzzles or trivia games, 33 skill-based games, 13 application games, six role-playing games and ten leisure games.

        We cooperate with well-known brands and media companies to develop mobile games based on popular franchises, stories and characters. For example, together with Skyinfo, a licensee of Marvel Comics, we developed a series of mobile single-player games based on the Ironman franchise. We also worked with Shanghai World Expo to develop mobile games based on its official mascot, Haibao.

        Feature phone single-player games are available on a free-for-trial basis. These games are offered in either "chances" or "stages," depending upon the game. For games offered in chances, a user is given a certain number of chances to play the game for free. When the user uses up these free chances, he or she can purchase additional chances as an in-game premium feature to continue playing at the level they were previously at. However, as soon as the user exits the game, any unused chances that he or she purchased are forfeited and considered immediately consumed. If the user chooses not to purchase additional chances, their game is over and they must start over at the first level of the game should they wish to play again. For feature phone single-player games offered in "stages," a user is given a certain number of trial stages in which he or she can play the game for free. When the trial stages are completed, he or she can purchase the right to play the remaining stages of the game as an in-game premium feature. Upon purchase, the remaining stages of the game will be unlocked and the mobile phone player can gain access to all stages repeatedly without additional charges, even if he or she exits the game.

Mobile Social Games

        Our feature phone mobile social games enable interaction among multiple players using different handsets. We believe mobile social games have significant growth potential in China and that they will occupy an increasing proportion of consumer leisure time. In addition, social games are very popular on social networks and we believe they are and will continue be a key driver of social network use, especially on mobile platforms.

        Our mobile social games are free to play. Compared to pay-to-play business models, the free-to-play approach tends to attract a wider audience of players, increasing the number of potential paying users. By attracting a larger audience, the free-to-play model also enables a higher degree of in-game social interaction, which enhances the game experience for all players. Free-to-play games have proven popular as they encourage players to "try before they buy" and to pay only for additional functionality that they desire.

Smartphone Games

        We develop in-house and selectively license or acquire smartphone games, including single-player games and mobile social games. We target smartphone users who may have higher disposable income or users who may be attracted to mobile social games with high quality graphics and a more engaging user experience.

Single-Player Games

        We have developed eight single-player smartphone games for Android, iPhone and iPad, and licensed or purchased from third-parties 302 single-player games for other smartphones using the Kjava platform, as of March 31, 2012. Total downloads of our smartphone single-player games reached over 320,000, 5.3 million and 2.6 million in 2010, 2011 and the first three months of 2012, respectively. As of March 31, 2012, our portfolio contained 310 smartphone single-player games, including 132 role-playing games, 59 fighting or racing games, 26 shooting games, 64 trivia games and 29 card games.

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        Our games are available through Apple's App Store, Android market and other mobile advertisers to reach users around the world. Kangri Yingxiong Zhuan, Cut Cut Boom and Facebrick are among our most popular smartphone single-player games. As of December 31, 2010, Cut Cut Boom ranked as the 9th most purchased game in Apple's App Store in China, 28th in the United States, 5th in Italy and 42nd in Japan. It was the most purchased game on iPad in China in November and December of 2010. For certain smartphone single-player games, we make a one-time payment to a third-party content provider to acquire all associated rights or license the games and share sales proceeds with third-party content providers.

        We also provide single-player game bundles to users through China Mobile. For instance, users can pay RMB10 per month to download the six games in a package and we will replace two games in the bundle every month, so that all games are replaced every quarter and allowing continuing subscribers to download two new games every month. Game bundles includes games in the categories of action, adventure, strategy, shooting, IQ, pokers, sports, car racing, fighting and music. We had 7.4 million, 9.6 million and 2.0 million total subscriptions for single-player smartphone games for the years ended December 31, 2010 and 2011 and for the first three months of 2012, respectively, which amount counts each subscription to our game bundles or each game download through an application store as one subscription. During each of the first seven months of 2012, our game bundles ranked us number one in terms of revenues generated through China Mobile.

Mobile Social Games

        We have developed all of our mobile social games for smartphones using Kjava client terminal, WAP and Android. Our smartphone mobile social games are available for download on a free-to-play basis. The four smartphone mobile social games we had as of March 31, 2012 were role-playing games.

        Compared to feature phone mobile social games, smartphone mobile social games generally have better graphic interfaces, more interesting story lines, more in-game items, and allow a greater number of users to play concurrently. In a typical mobile social game, thousands of players play in the same game world at the same time. The players can assume specific characters to compete within the game. Social mobile games for smartphone incorporate many sophisticated technology features to enhance user experience, which include:

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differing levels of strengths and weaknesses across game characters, and each character can gain different experiences and collect different virtual items;

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the game world continues to evolve, even while the player is not playing the game;

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an engaging storyline and the player upgrading system, through which players are encouraged to achieve higher game attributes as they develop experience or purchase virtual items; and

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an instant messaging system that allows players to communicate extensively with each other or form alliances in order to achieve collaborative objectives.

        Paopao Xiyou, a smartphone mobile social game we developed internally, received the Golden Plume Award as the Best Mobile Platform Online Game in China for 2011. According to the Analysys Report, Creation Song, one of the smartphone mobile social games we developed in-house, was the top-grossing mobile social game available through China Mobile in 2010. YY Three Kingdoms is also among our most popular smartphone mobile social games.

        In May 2012, we launched Douwan for smartphones, a game platform and community that provides mobile social games for smartphones. Douwan allows players to know the player profiles, to send messages, voice chats and pictures for no charge. Users can play social games, socialize with other players and form social communities. For example, we have developed smartphone mobile social games for download through our Douwan platform that allow users to play simulations of games featured on Maidong Menglifang and to socialize with other players in social communities.

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Game Pipeline

        We plan to launch 33 feature phone single-player games, one feature phone mobile social games, 112 smartphone single-player games and two smartphone mobile social games during the last nine months of 2012. Games in our pipeline vary in terms of theme, style and target demographics. We also plan to develop new games based on licensed content from third parties, such as popular film or television characters.

        Most of the 112 smartphone single-player games we plan to launch during the last nine months of 2012 will be purchased or licensed from third parties for inclusion into the game bundles to be sold through China Mobile in order to meet certain contractual requirements concerning the number of games available in a bundle. We believe these third-party developed games add to the variety of games in the game bundles and enhance their attractiveness to users.

        We have recently secured several strategic cooperation contracts that will allow us to further expand and enhance our game portfolio. In August 2011, we obtained an exclusive license from the developers of several popular games on iPhone applications to distribute such games on feature phones in China. These games include popular titles such as "Fruit Ninja." In addition, in August 2011, we entered into an exclusive cooperation agreement with the only company authorized by the Chess and Cards Administration Center of the General Administration of Sport of China to host events for Chinese chess, checkers and card games on mobile devices, with whom we plan to develop a mobile game platform that would allow players to participate in nationwide game competitions.

        In June 2012, Yitongtianxia entered into a contractual arrangement whereby Yitongtianxia will develop and design location-based mobile phone games for VODone Telemedia Co. Ltd. In return, Yitongtianxia will receive revenue generated from these location-based mobile phone games.

Game Development and Planning

        We develop new mobile games and related updates and expansion packs. As of March 31, 2012, we have developed 130 feature phone games and 12 smartphone games in-house. We have strong in-house game development capabilities supported by our teams that specialize in game planning, graphic design, research and development and game operation. In particular, our game development engines enable us to create colorful graphics with impressive visual effects and provide a technical foundation upon which to develop innovative features in the game environment. These game engines use modularized key functions, including graphic design, network connection, fee calculation, game operation and updates.

Development Engines

KDE and NCG Game Engines

        We have developed the KDE and NCG game engines to develop our games. Our feature phone games are developed using the KDE game engine and the development cycle is approximately six weeks for our recent feature phone single-player games and one month for our recent feature phone mobile social games. The KDE engine modularize key functions, including graphic design, network connection, fee calculation, game operation and updates. Our smartphone games are developed using NCG game engines, which support cross-platform systems technologies. All mobile games developed based on these game engines can receive updates or upgrades over-the-air as needed.

MNG Platform

        The MNG platform modularizes key functions, including graphic design, network connection, fee calculation, game operation and updates. The MNG platform can develop mobile games for feature phones and smartphones, and both single-player and mobile social games. All of our smartphone games and certain feature phone mobile social games are developed using our MNG platform, and the development cycle is approximately two months for our most recent smartphone single-player games and six months for our most recent smartphone mobile social games.

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Game Development Process

        Our game development process generally includes the following key steps:

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concept generation;

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development of new game proposal and commencement of technical review;

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formulation of development projects;

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commencement of development;

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closed beta testing; and

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open beta testing.

        We have a game design team that generates new game ideas based on market research, latest trends and player preference. We encourage all of our employees to suggest creative ideas and concepts for game development. After a concept is generated, a committee consisting of representatives from management, marketing, operations and technology departments will review and approve the proposal. Upon the management's approval, the design team prepares detailed proposal that includes target audience, playing styles, game characters, storylines and cost budgets. We then form a project team to develop a new game implementation plan with the following division of labor: (i) game designers to develop new game study and overall game design (ii) graphic artists to design game characters and game environments; and (iii) programmers to develop server-end and user-end software. We then conduct closed beta testing with a selected group of players in preparation for the commercial launch. Players under the closed beta testing report any technical problems that they encounter. Our quality assurance team follows its testing procedure to test the game before launch. After the commercial launch of our games, we continue to closely monitor the performance, consistency and stability of operational systems of the game.

        As of March 31, 2012, we had more than 240 game development employees. Most of our software programmers and testing engineers have bachelor or graduate degrees. We plan to continue to expand our research and development center by recruiting from leading universities in China.

Handset Design

        We offer comprehensive handset design solutions through our own handset design house, the OWX Holding Group. We provide a full range of mobile communication solutions to handset manufacturers, including hardware design, software design, quality assurance testing, industrial design and structural design. We design IC boards and operating systems for handsets that feature touch-screen, analog television, TV-Out, full-screen touch, full-keyboard flip, vertical slide, horizontal slide, professional audio sounds and other multimedia functions.

        We cooperated with seven handset manufacturers as of March 31, 2012, to offer designs for feature phones and smartphones. We generate revenues from the handset design business through providing handset design services and receive a flat fee and/or a certain percentage of proceeds from sales of mobile content pre-installed into the handsets we designed. Most of the handsets designed by OWX have primarily mobile games developed by our company pre-installed into them, but may also have pre-installed other mobile content such as mobile music, mobile books and application store, and multimedia and social network services.

Collaborative Relationships

Distribution Channels

Handset Companies and Design Houses

        We work with handset companies and design houses to pre-install our mobile games and game platforms. We pre-installed our mobile games and platforms onto over 28.2 million feature phone handsets in 2011, compared to 14.5 million and 25.1 million in 2009 and 2010, respectively. In the first

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three months of 2012, we pre-installed our mobile games and platforms onto over 7.4 million feature phone handsets, compared to 7.0 million in the first three months of 2011.

        We entered into a cooperation agreement with an agent, Ouyinhua, to pre-install our feature phone games on the handsets of approximately 420 handset companies and design houses that are Ouyinhua's customers. We have the exclusive right to pre-install Funbox, our platform for downloading single-player games on feature phones, as well as our games in the handsets of Ouyinhua's customers. Pursuant to the cooperation agreement, profits generated from games downloaded through Funbox or pre-installed on ROM of a handset are subject to profit sharing with Ouyinhua. For these games, after subtracting fees due to the mobile operator and service provider, we collect the net revenues from game players. We then deduct business tax and pay to Ouyinhua 80.5% of the remaining net revenue, which includes the amount to be paid to the handset manufacturers. We also use Ouyinhua to pre-install our games on T-cards, which are pre-installed in certain handsets to increase memory, though we do not share the revenue generated from or pay an additional fee for games pre-installed on T-cards with Ouyinhua. Revenue generated from games preinstalled on T-cards accounted for 69.9% of our feature phone revenue in 2011. We account for the amounts we pay to Ouyinhua under cost of revenues. In 2010, 2011 and for the three months ended March 31, 2012, we paid to Ouyinhua RMB20.7 million, RMB44.5 million and RMB12.1 million as its share of revenues under the cooperation agreement, which represented 63.1%, 72.5% and 67.6% of our cost of revenues attributable to feature phones, respectively. We provide these handset companies and design houses with direct services, such as game selection, technical support and system testing. We renewed the cooperation agreement with Ouyinhua on August 23, 2011 to expire on August 22, 2014 and automatically renew unless either party terminates the agreement by written notice given one month before expiration. If Ouyinhua terminates the cooperation agreement, we may enter into direct contractual arrangements with the handset companies and design houses that are Ouyinhua's clients, and Ouyinhua will provide reasonable assistance in facilitating those arrangements.

        We had entered into direct contractual relationships with 13 handset companies and design houses as of March 31, 2012. We generally pay handset companies with direct contractual relationships with us certain percentage of the proceeds we receive from mobile network operators or the service providers. Our agreements with these handset companies generally have a term ranging from one to three years and may be renewed at the parties' mutual agreement or automatically renew for one year absent any prior notice of termination.

        We have our own handset design house, the OWX Holding Group, that offers handset design solutions to handset manufacturers. See "—Handset Design."

Mobile Network Operators

        We have a direct strategic cooperative relationship with China Mobile, the largest mobile network operator in China. Our VIE, Yingzheng, was recognized as a quality content provider by China Mobile in October 2010 and as a result, it has been granted access to fee-collection codes from China Mobile, which enables it to collect proceeds from our smartphone games directly through China Mobile, without having to use service providers as intermediaries. We are among the few mobile game developers recognized by China Mobile as a strategic cooperation partner in April 2010. Because of our strong revenues and performance since the fourth quarter of 2011, China Mobile deemed us a "Grade A Business Partner" and will allocate to us more marketing resources and services such as giving greater prominence to our games in search results and on page displays and allowing us to publish more new games each month while expediting the approval and launch process for those games. We were also the top-grossing service provider on China Mobile's network in January 2012. We have a service provider contract and a content provider contract with China Mobile, both of which have a term of one year. Pursuant to the service provider contract, we distribute our games to players over China Mobile's network and on its platform, and pursuant to the content provider contract, we receive technical support, customer support and user data from China Mobile. In exchange for providing these services, China Mobile keeps a portion of the funds it collects from our game players that play over its network and on

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its platform before transferring the proceeds to us. The service provider contract does not contain automatic renewal provisions, as is customary for service providers working with China Mobile. Absent any prior notice of termination, the content provider contract will automatically renew for another six-month term.

        In addition to our strategic cooperative relationship with China Mobile, we also formed strategic cooperations with the other two major mobile network operators in China. For example, in 2011 we entered into an agreement with China Telecom which allows us to offer games to mobile phone end users through their network.

Application Stores and Mobile Portals

        Our games are available through distributors such as Apple's App Store, the Android Market, d.cn, Sina's mobile portal, the Maopao application store developed by Sky-mobi Limited and Taiwan Mobile's Match Market application store. Our agreements with application stores and portals are generally for terms of one year. We share a certain percentage of the proceeds we receive through games offered in the application stores and through mobile portals.

Chipset Manufacturers

        We have recently entered into cooperative relationships with various chipset manufacturers, such as MediaTek and Spreadtrum, and MStar, a mobile platform provider, which will allow us to develop games for integration into their respective chipsets. We believe this will allow us to further broaden our user base as well as to develop games that will remain accessible to our users as new technologies develop.

        On March 21, 2012, we entered into a share purchase agreement with MediaTek and one of its subsidiaries, pursuant to which MediaTek purchased our ordinary shares in exchange, in part, for the entering into of a strategic cooperation between us and MediaTek. Pursuant to the stock purchase agreement, MediaTek agreed to license the use of its MRE platform to us, including all necessary technical support to assist us in developing our games on the MRE platform, so that we can expand our business on the MTK platform, which was pre-installed on more than 500 million feature phones during 2011. MediaTek also agreed to explore the possibility of pre-installing our games along with its platform on certain feature phones and to work with us going forward as a close partner. This transaction was closed on May 11, 2012.

Payment Channels

        We also work with service providers for the collection of proceeds from our feature phone games and they in turn depend on mobile network operators, such as China Mobile and China Telecom, to provide billing and collection services for them. As of March 31, 2012, we have entered into agreements with 76 service providers, who have access to payment channels provided by mobile network operators pursuant to their respective agreements. We select service providers based on their network coverage, proceeds-sharing arrangements and track record of proceeds collection. Our agreements with service providers are generally for terms of one year with automatic renewal provisions. Service providers collect proceeds for us from users and we share a certain percentage of such proceeds with the service providers. We have established billing cooperation with many domestic services providers, as well as mobile network operators and services providers in over 79 countries and regions around the world as of March 31, 2012.

        In addition to China Mobile and mobile service providers' billing channels, we offer a variety of third-party payment options to mobile handset users. Our users can pay for our mobile games with credit cards, debit cards and game cards of third-party companies, such Shenzhoufu and Yeepay. We are actively seeking to further expand the third-party payment channels available to our users. As overall costs related to third-party payment channels are lower than costs associated to mobile service providers, increased usage of third-party payment processing agents will enable us to better manage our

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payment related costs as percentage of revenues and potentially increase our profitability. We plan to encourage usage of these third-party payment channels through educational and promotional activities.

        The following chart shows the payment channels for our feature phone mobile games.

        The following chart shows the payment channels for our smartphone mobile games.

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Content Providers

        While we primarily focus on developing mobile games in-house, we have strategically purchased third-party developed smartphone single-player games to complement our existing portfolio. We believe we are able to better balance our portfolio and utilize our existing resources by selectively acquiring games developed by third-parties. We may acquire all associated rights of such games or enter into cooperation agreements to share proceeds derived from such games.

        We also cooperate with well-known brands to develop mobile games based on popular franchises, stories and characters, or license mobile games developed by independent third-parties. When we license franchises or third-party developed games, we share sales proceeds generated from the games with the content developers.

        We have a team that specializes in identifying and selecting third-party games that complement our existing portfolio, based on analysis of market trends and consumer demand. We make a one-time payment to a third-party content provider to acquire all associated rights or enter into cooperation agreements with content providers to share proceeds from the games based on our assessment of the game's potential.

Game Operations

Game Management

        Each mobile game is managed by a designated game management team. Our game management teams:

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conduct cost/benefit analyses and produce detailed operational plans;

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coordinate internal resources and interact with our other departments such as game design, artistic design, quality assurance, marketing, and technological services;

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devise the timing of the release of updates and expansion packs; and

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manage the game's virtual community on an ongoing basis by, for example, organizing in-game events.

        A centralized game management center monitors the performance of each team. Our operational expertise and best practices are shared with all of our game management teams and departments.

Network Infrastructure

        Our network infrastructure is administered by our operations departments, which handle hardware, system and network operation and maintenance. Our systems are designed for scalability and reliability to support growth in our user base. We lease bandwidth from telecommunication operators such as China Mobile to connect to the national Internet backbone. We believe that our current network facilities and broadband capacity provide us with sufficient capacity to carry out our current operations.

        We have developed an extensive technology infrastructure to support our game development and operations, including a nationwide server network. As of March 31, 2012, our server network consisted of 58 servers with the capacity to support up to one million concurrent users. Due to the real-time interaction among hundreds of thousands of users for mobile social games, the stable operation of our games requires a large number of servers and a significant amount of Internet connectivity bandwidth. We have located game servers in Beijing, Shenzhen and Jiangsu Province.

        While we believe that our network infrastructure and maintenance will likely prevent network interruption resulting from attacks by hackers, there remains a possibility that such attacks could result in delays or interruptions on our network. For a further discussion, see the section entitled "Risk

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Factors—Risks Related to Our Business—Undetected programming errors or flaws in our mobile game products could harm our reputation or decrease market acceptance of our products."

Sales and Marketing

        We employ various traditional, online and mobile marketing programs and promotional activities, including in-game events and announcements, online and traditional advertising, and offline promotions. We primarily promote our games to end users through mobile network operators, mobile portals and applications stores. We also utilize some of China's popular social networking services, such as Sina Weibo, Renren.com and 360.cn, to promote our games. We also engage in cross-selling between our single-player games and mobile social games. China Mobile has recently launched its own application store, the Mobile Market, and we plan to leverage our existing relationship with China Mobile to place our mobile games into the Mobile Market and engage in promotions in the Mobile Market. We believe "word-of-mouth" within our large user base has also positively contributed to the popularity and sales of our mobile games.

Customer Service and Technical Support

        Our customers are end users for direct game purchases and handset companies as we work with handset manufacturers to pre-install our mobile games and platform. We believe our emphasis on customer service enhances our brand image and user loyalty. Our users can access our customer service center via phone, online in-game chats or e-mail at any time 24 hours a day, seven days a week. With the growth of our user base and the expansion of our game portfolio, we expect to continue to expand the size of our customer service team. We have implemented detailed performance measures to monitor our calls to ensure that our customers will receive quality service. In addition to providing customer service to our users, our customer service representatives also collect player comments and complaints about our games and generate for our management and operations personnel periodic reports that summarize important issues raised by users and our responses to those issues.

        We have a dedicated team to service each handset manufacturer and mobile network operator. We work closely with handset manufacturers and mobile network operators to resolve technical problems, conduct testing and trials, and address customer complaints.

Competition

        The mobile game market in China is highly competitive and fragmented. We compete directly with mobile game developers and operators in China. We may face competition from application store operators and other providers of mobile applications and content, or from alliances between our existing and new competitors, mobile and online game developers and other content providers. Some of our existing and potential competitors have significantly greater financial, technological and marketing resources, stronger relationships with industry participants and a larger portfolio of mobile game offerings than we do. Some of our competitors or potential competitors, especially major foreign mobile game developers, also have greater development experience and resources than we have.

        We compete primarily on the basis of user base, relationships with mobile handset companies, mobile service providers and mobile network operators, key technologies as well as research and development capabilities. For a discussion of risks relating to competition, see "Risk Factors—Risks Related to Our Business—We may face increasing competition, which could reduce our market share and materially and adversely affect our results of operations."

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Intellectual Property

        We regard our copyrights, trademarks, trade secrets and similar intellectual property as critical to our success, and rely on trademark and copyright law, trade secret protection and confidentiality agreements with our employees, suppliers and others to protect our proprietary rights.

        We have applied for the registration of the "China Mobile Games and Entertainment" trademark in China. As of March 31, 2012, we have registered with the State Copyright Bureau of the PRC 46 copyrights for software we developed or acquired from third parties. In addition, we have registered 12 domain names, including www.cmge.com, www.kkfun.com, www.3guu.com and www.sz-tastech.com, our primary operation websites.

        While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. Also, we cannot be certain that our products and services do not or will not infringe valid patents, copyrights or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others, as discussed in "Risk Factors—Risks Related to Our Business—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position."

Employees

        We had 223, 254, 339 and 391 full-time employees as of December 31, 2009, 2010, 2011, and March 31, 2012, respectively. The following table sets forth the number of our employees categorized by areas of operations as of March 31, 2012:

Function		Number of Employees
Research and game development			245
Management and general administration			39
Operations, sales and marketing, and technology support			107
	Total		391

        Our success depends on our ability to attract, retain and motivate qualified personnel. We focus on long-term growth in our hiring decisions and search for employees that are innovative, take ownership of their assignments and are committed to advancing their careers. We believe our unique company culture is the foundation of our success in attracting and retaining game design, product management, engineering and operational talent. We believe we offer our employees competitive compensation packages, and we have generally been able to attract and retain qualified personnel and maintain a stable core management team. We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes. For a description of the employment agreement we signed with some members of our senior management, see "Management—Employment Agreements."

        Substantially all of our employees are based in the PRC. In accordance with PRC laws, our full-time employees in China participate in various employee benefit plans required by the government, including pension, medical benefit plans, unemployment insurance, work-related injury insurance and maternity insurance.

        Compensation for our full-time employees typically consists of base salary, seniority pay and other subsidies. In addition, based on our results of operations, we may award bonuses to our employees solely at our discretion.

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Facilities

        Our principal executive offices are located at Block A, 15/F Huajian Building, 233 Tianjun Road, Tianhe District, Guangzhou, PRC. We also maintain offices in other cities in China, including offices in Beijing, Guangzhou and Shenzhen, under leases with terms ranging from one to five years. In aggregate, we maintained a total of approximately 2,000 square meters for our offices as of March 31, 2012. We lease our facilities from independent third-parties and do not own any real property.

        We believe that our leased facilities are adequate to meet our needs for the foreseeable future, and that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansions.

Insurance

        We do not maintain any property insurance policies covering equipment and facilities for losses due to fire, earthquake, flood or any other disaster. Consistent with customary industry practice in China, we do not maintain business interruption insurance or key employee insurance for our executive officers. Damage to any of our uninsured equipment or buildings or a significant product liability claim could have a material adverse effect on our results of operations. See "Risk Factors—Risks Relating to Our Business—Our lack of insurance could expose us to significant costs and business disruption."

Legal Proceedings

        We are currently not a party to, and we are not aware of any threat of, any legal, arbitral or administrative proceedings, which, in the opinion of our management, is likely to have a material and adverse effect on our business, financial condition or results of operations. We may from time to time become a party to various legal, arbitral or administrative proceedings arising in the ordinary course of our business.

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REGULATIONS

        Our provision of mobile game development and operation and mobile handset design services is subject to a number of PRC laws and regulations relating to the telecommunications services, Internet information services, electronic and Internet publications, online games and cultural products, and information security and censorship, and is regulated by various PRC government authorities, including:

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the Ministry of Industry and Information Technology, or MIIT (formerly the Ministry of Information Industry, or MII);

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the General Administration of Press and Publication, or GAPP (formerly the State Press and Publications Administration, or SPPA);

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the Ministry of Culture, or MOC;

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the Ministry of Public Security;

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the State Administration for Industry and Commerce, or SAIC;

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the Ministry of Commerce, or MOFCOM (formerly the Ministry of Foreign Trade and Economic Cooperation, or MOFTEC);

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the State Council Information Office, or SCIO; and

•

the State Administration of Foreign Exchange, or SAFE.

        These PRC government authorities have issued a series of rules that regulate a number of different substantive areas of our business, which are discussed below.

Regulations on Telecommunications Industry

Telecommunications Services

        On September 25, 2000, the State Council of the PRC, or the State Council, promulgated the Regulations on Telecommunications of the PRC, or the Telecom Regulations, which regulate the telecommunication industry and telecommunication-related activities in the PRC. Pursuant to the Telecom Regulations, telecommunications business operations in the PRC are subject to certain licenses from MIIT or its provincial counterpart, depending upon the different categories of services and geographic region of operation. Telecommunications services are divided into two main categories: basic telecommunications services and value-added telecommunications services. Each category of services is further divided into several sub-categories. Pursuant to the Catalogue for Classification of Telecommunications Services effective as of April 1, 2003, our business constitutes the information services business, which falls within the value-added telecommunications business category.

        On March 5, 2009, MIIT issued the Measures on Administration of Telecommunications Business Operation Licensing, or the Telecom Licensing Measures, which became effective on April 10, 2009 and repealed the Measures on Administration of Telecommunications Business Operation License issued in 2001. The Telecom Licensing Measures spell out the conditions, documents required and procedures for application for the telecommunications business operation license and specify the requirements on usage of the license and the code of conduct that telecommunications services providers must comply with. According to the Telecom Licensing Measures, telecommunications services providers are also required to lodge certain documents with the competent authorities in first quarter of each year and go through the annual inspection process in respect of their operations during the previous year.

Foreign Investment in Telecommunications Sector

        Foreign investment in telecommunications sector is governed by the Regulations on Administration of Foreign Invested Telecommunications Enterprises, or the FITE Regulations, which were promulgated

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by the State Council on December 11, 2001 and amended on September 10, 2008. Pursuant to the FITE Regulations, a foreign investor must establish a Chinese-foreign equity joint venture with a Chinese partner to invest in telecommunications industry. A foreign-invested telecommunications enterprise, or FITE, is allowed to be engaged in basic telecommunications business and value-added telecommunications business. The foreign investor's ultimate equity holding percentage in a value-added telecommunications business may not exceed 50%.

        To comply with the restrictions on the foreign participation percentage in the telecommunications industry, we have established Yingzheng, a VIE to undertake the value-added telecommunications business. For a detailed discussion of the contractual arrangements with our VIE, please refer to "Our Corporate History and Structure—Our Contractual Arrangements with VIE."

        On July 13, 2006, MIIT issued the Circular on Strengthening Administration of Foreign Invested Value-Added Telecommunications Business Operation, or the MIIT Circular. The MIIT Circular emphasizes that a foreign investor planning to invest in the value-added telecommunications sector in the PRC must set up an FITE and apply for the applicable telecommunications business operation license. A domestic value-added telecommunications services provider shall not lease, transfer or sell any telecommunications business operation license in any way to a foreign investor, or provide resources, sites, facilities or other conditions for a foreign investor to illegally operate a telecommunications business in the PRC.

        According to the MIIT Circular, if a foreign investor cooperates with a domestic value-added telecommunications services provider, the following requirements apply: (1) the domain names and registered trademarks used by the value-added telecommunications services provider must be legally owned by itself or its shareholder; (2) the value-added telecommunications services provider must have site, servers and other necessary facilities for its approved business operations and maintain such facilities in the regions covered by its license; and (3) the value-added telecommunications services provider must safeguard its network information by establishing relevant measures and administrative system for network security and putting in place procedures for handling emergencies of network and information security.

Regulations on Electronic and Internet Publication

        On February 21, 2008, GAPP issued the Regulations on Administration of Publishing of Electronic Publications, or the Electronic Publications Regulations, which became effective from April 15, 2008 and repealed the previous Regulations on Administration of Electronic Publications issued on December 30, 1997. Pursuant to the Electronic Publications Regulations, the PRC implements a licensing system for publishing of electronic publications. A company wishing to publish electronic publications must meet the specified requirements on registered capital, equipment, site, organizational structure, etc. and obtain the approval from GAPP. With such approval, the company must handle registration with the provincial counterpart of GAPP and obtain an Electronic Publications Publishing License. A company engaged in publishing of electronic publications is also required to go through a regular inspection process every two years, in which process, the company's registration, qualification, business operation, compliance and internal management will be reviewed by the provincial counterpart of GAPP. Mobile games are classified as a type of electronic production and publishing of mobile games is subject to the foregoing license and requirements.

        On June 27, 2002, GAPP and MIIT jointly issued the Interim Regulations on Administration of Internet Publication, or the Internet Publication Regulations, which became effective from August 1, 2002. These regulations require business operations involving internet publishing to be approved by GAPP prior to applying for the relevant approval from the MIIT. Under a relevant notice jointly issued by GAPP and other government authorities on September 28, 2009, provision of online games via Internet is regarded as an Internet publishing activity and subject to the prior approval by GAPP. With

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such approval, the online game operator will be granted an Internet Publishing License specifically allowing online games operation. The notice prohibits any direct foreign investment in online games operation business. Furthermore, it prohibits foreign control or participation in domestic companies' online game operation business in an indirect way such as entering into relevant agreements or providing technical support, or in any other disguised manner.

Regulations on Online Games and Cultural Products

        Pursuant to the Guiding Catalogue for Foreign Investment Industries of 2007, the Internet culture business falls within the category of industries prohibiting foreign investment. On February 17, 2011, MOC issued the revised Interim Regulations on Administration of Internet Culture, or the Internet Culture Regulations, effective as of April 1, 2011. According to the Internet Culture Regulations, the "Internet cultural products" are defined as including the online games specially produced for Internet and games reproduced or provided through Internet. Provision of Internet cultural products and related services is subject to the approval of MOC or its provincial counterpart. MOC issued the Circular on Implementation of the Newly Revised Interim Regulations on Administration of Internet Culture on March 18, 2011, which provides that temporarily the authorities will not accept applications by foreign-invested Internet content providers for operation of Internet culture business (other than online music business).

        On June 3, 2010, MOC issued the Interim Measures on Administration of Online Games, or the Online Game Measures, which became effective from August 1, 2010. Pursuant to the Online Game Measures, a company wishing to be engaged in operation of online games, including mobile games operated through wireless telecommunication networks, issuance of virtual currency and/or provision of virtue currency transaction services must have a registered capital of at least RMB10 million and obtain an Internet Culture Business License from the provincial counterpart of MOC.

        The Online Game Measures place restrictions on the content of online games and MOC is responsible for conducting the content review. With respect to the online games developed in the PRC, the online game operators are required to complete filing procedures with MOC within thirty days after the online games are provided via internet, and indicate the filing numbers at the designated places of their websites and in the games. Online game operators are also required to establish self-censorship systems and have dedicated personnel for the purpose to ensure the lawfulness of the content of online games.

        The Online Game Measures require the online game operators to, based on the contents, functions and target users, formulate user guidance and warning information regarding the online games, and indicate such information at a conspicuous place of their websites and in the games. MOC has formulated the Essential Clauses of the Standard Agreement for Online Game Services. Pursuant to the Online Game Measures, the service agreement entered into between an online game operator and a user must include all the essential clauses specified by MOC. Other clauses in the service agreement shall not contravene the essential clauses. Furthermore, the online game operators are required to take technical and managerial measures to ensure online information security, including preventing computer virus invasion, attack or damage, backing up important data and saving user registration information, operating information, maintenance logs and other information, and protect State secretes, trade secrets and users' personal information.

Regulations on Software Products

        On March 5, 2009, MIIT issued the Measures on Administration of Software Products, or the Software Measures, which took effect as of April 10, 2009 and replaced the previous measures concerning the same subject matter issued on October 27, 2000. The Software Measures regulate development, production, sales, import and export of software products in the PRC in a view to

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promoting the development of China's software industry. The Software Measures brought into place a registration and filing system for software products. Software products developed in China shall be registered with the provincial counterpart of MIIT and filed with MIIT, and be granted the Software Product Registration Certificates. According to the Circular on Purifying Online Games jointly issued by MOC, MIIT, SAIC and other relevant government authorities on June 9, 2005, if an online game is not registered and filed under the Software Measures, it is not allowed to be operated in the PRC.

Regulations on Technology Import and Export

        On December 10, 2001, the State Council promulgated the Regulations on Administration of Import and Export of Technologies, which took effect as of January 1, 2002. These regulations and related legislations set out the regime regulating the import and export of technologies. The import and export of technologies is broadly defined as including transfer or license of patents, software and know-how, and provision of services in relation to the technology. Under the regime, technologies are classified as prohibited, restricted or freely-tradable. The technologies in the freely-tradable category may be traded freely without a special approval or license. The contracts for export of freely-tradable technologies are required to be filed with the relevant government authority for record but the filing procedure is not a pre-condition for effectiveness of the contracts.

Regulations on Information Security and Privacy Protection

        On December 28, 2000, the Standing Committee of the National People's Congress introduced legislation for protection of the Internet security. The legislation prohibits use of the Internet that violates the PRC laws and regulations or damages the public security. It also prohibits dissemination of illegal or socially destabilizing content or leakage of state secrets through the Internet, or infringement on trade secret or other legal rights and interests. According to the Regulations on Protection of Computer Information System Security issued by the State Council and effective as of February 18, 1994, the public security authorities are responsible for supervising, inspecting and guiding the Internet security protection work of the information system users and investigate and penalize activities breaching the mandatory Internet security requirements.

        On December 11, 1997, the State Council approved the Measures for Administration of Security Protection of Internet and Computer Information Network, and the measures took effect on December 30, 1997. The measures require internet service providers to provide a monthly report of certain user information to the public security authority and assist the public security authority in investigating incidents involving breach of laws and regulations on the Internet security.

        On December 13, 2005, the Ministry of Public Security issued the Regulations on Technological Measures for Internet Security Protection, or the Internet Protection Measures, which took effect from March 1, 2006. The Internet Protection Measures require ICP operators to take proper measures including anti-virus, data back-up and other related measures, and keep records of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days, and detect illegal information, stop transmission of such information, and keep relevant records. Internet services providers are prohibited from unauthorized disclosure of users' information to any third parties unless such disclosure is required by the laws and regulations. They are further required to establish management systems and take technological measures to safeguard the freedom and secrecy of the users' correspondences.

Regulations on Intellectual Property

Copyright

        The Copyright Law of the PRC, adopted in 1991 and revised respectively in 2001 and 2010, protects copyright and explicitly covers computer software copyright. On December 20, 2001, the State

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Council promulgated the new Regulations on Computer Software Protection, effective from January 1, 2002, which are intended to protect the rights and interests of the computer software copyright holders and encourage the development of software industry and information economy. In the PRC, software developed by PRC citizens, legal person or other organizations is automatically copyright protected immediately after its development, without an application or approval. Software copyright may be registered with the designated agency and if registered, the certificate of registration issued by the software registration agency will be the preliminary evidence of the ownership of the copyright and other registered matters. On February 20, 2002, the National Copyright Administration of the PRC introduced the Measures on Computer Software Copyright Registration, which outline the operational procedures for registration of software copyright, as well as registration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as the software registration agency under the regulations.

Trademark

        The Trademark Law of the PRC, adopted in 1982 and revised respectively in 1993 and 2001, protects registered trademarks. The China Trademark Office under the SAIC is responsible for trademark registrations. Upon the registration of a trademark, the register will have the right to exclusively use the trademark. Registered trademark license agreements are required to be filed with the China Trademark Office for record.

Domain Name

        Internet domain name registration and related matters are primarily regulated by the Implementing Rules on Registration of Domain Names issued by CNNIC, the domain name registrar of the PRC, which became effective on June 5, 2009, the Measures on Administration of Domain Names for the Chinese Internet, issued by MIIT on November 5, 2004 and effective as of December 20, 2004, and the Measures on Domain Name Disputes Resolution issued by CNNIC on February 14, 2006 and effective as of March 17, 2006. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and the applicants become domain name holders upon successful registration.

SAFE Circular 75

        On October 21, 2005, SAFE issued the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or the SAFE Circular 75, which became effective as of November 1, 2005. Detailed rules for implementation of the SAFE Circular 75 were issued in May 2007. Pursuant to the SAFE Circular 75 and the detailed rules, a PRC resident (whether a natural or legal person) is required to complete the initial registration with the local SAFE counterpart before incorporating or acquiring control of an offshore special purpose vehicle, or SPV, with assets or equity interests in an onshore company located in the PRC, for the purpose of offshore equity financing. The PRC resident is also required to amend the registration or handle a filing procure upon (i) injection of the assets or equity interests in an onshore company or undertaking of offshore financing, and (ii) a material change that may affect the capital structure of the SPV.

        Under the SAFE Circular 75, the fulfillment of the initial and amended SAFE registrations as described above is a prerequisite for other regulatory approvals and registrations required for relevant cross-border investment activities and capital flows, such as the offshore entity's inbound investment or provision of shareholder's loans to the onshore entity and the onshore entity's payment of dividends or repatriation of liquidation proceeds, equity interests disposal proceeds or capital reduction to the offshore entity.

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National Security Review

        On August 25, 2011, MOFCOM promulgated the MOFCOM Security Review Regulations, which became effective on September 1, 2011, to implement the Security Review Circular. According to the Security Review Circular, if a targeted domestic enterprise is engaged in industries having a national security concern and the merger or acquisition will result in foreign investor's acquiring actual control of the domestic enterprise, the transaction is subject to security review. According to the MOFCOM Security Review Regulations, MOFCOM will focus on substance and the actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial Panel, an authority established under the Security Review Circular led by the National Development and Reform Commission and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the mobile games business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review. As we acquired actual control over our VIE prior to promulgation of the Security Review Circular and the MOFCOM Security Review Regulations, we do not believe we are required to submit our existing contractual arrangement to MOFCOM for security review. However, we have been advised by our PRC legal counsel, Guantao Law Firm, that as the Security Review Circular and the MOFCOM Security Review Regulations are relatively new and there is no clear statutory interpretation of them, there can be no assurance that MOFCOM will have the same view as we do when applying the national security review requirements.

Regulations on Foreign Currency Exchange

        The principal regulations governing foreign currency exchange in the PRC are the Regulations on Administration of Foreign Exchange, or the Foreign Exchange Regulations, promulgated by the State Council in 1996 and amended in 1997 and 2008. Under the Foreign Exchange Regulations, RMB is freely convertible for current account items, such as dividends distributions, interest payments, and trade and service-related foreign exchange transactions, on a basis of true and lawful transactions, but not for capital account items, such as direct investments, loans, repatriation of investments, and investments in securities outside the PRC, unless the prior approval of SAFE is obtained and registration with SAFE is completed.

        Pursuant to the Rules on Administration of Settlement, Sale and Payment of Foreign Exchange Provisions, issued by the People's Bank of China on June 20, 1996 and effective from July 1, 1996, foreign-invested enterprises in the PRC may purchase foreign currency, subject to a cap approved by SAFE, to settle current account transactions, without the approval from SAFE. Foreign exchange transactions under capital account are still subject to limitations and require approvals from or registrations with SAFE.

Regulations on Dividend Distribution

        The principal regulations governing distribution of dividends by wholly foreign-owned enterprises include the Company Law of the PRC, adopted in 1993 and amended in 1999, 2004 and 2005, The Law on Wholly Foreign-owned Enterprises of the PRC, adopted in 1986 and amended in 2000, and the Implementing Rules of the Wholly Foreign-owned Enterprise Law, issued in 1990 and amended in 2001. Under these laws and regulations, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with the PRC accounting standards and regulations. Foreign-invested enterprises in the PRC are required to allocate 10% of its after-tax

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profits each year to their general reserves until the accumulated amount of such reserves has reached 50% of their registered capital. These reserve funds are not distributable as cash dividends.

Laws on Labor and Social Security

        On June 29, 2007, the PRC government promulgated the PRC Labor Contract Law, which became effective on January 1, 2008. Pursuant to the PRC Labor Contract Law and the PRC Labor Law, which became effective on January 1, 1995, (i) employers must execute written labor contracts with full-time employees, (ii) employers are prohibited from forcing employees to work overtime unless they pay overtime pay to the employees and the hours worked beyond the standard working hours are within the statutory limits, (iii) employers are required to pay salaries to employees on time and the salaries paid to employees shall not be lower than the local minimum salary standard, and (iv) employers shall establish its system of work safety and sanitation, and provide employees with workplace safety training. In addition, in accordance with the relevant laws and regulations on social security, employers in the PRC are required to make contributions to various social insurances (including medical, pension, unemployment, work-related injury and maternity insurance) and the housing fund on behalf its employees. As of the date of this prospectus, certain of our subsidiaries have not made all necessary contributions to the various social insurances and the housing fund on behalf of their employees, the aggregate amount of which is RMB2.3 million (US$0.4 million). Our PRC legal counsel, Guantao Law Firm, has advised us that our failure to make such payments could subject us to penalties, including fines and court enforcement.

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth information about our directors, appointee directors, and executive officers as of the date of this prospectus. The business address of all of our directors and executive officers is Block A, 15/F Huajian Building 233, Tianfu Road, Tianhe District, Guangzhou, PRC.

Name	Age		Position
Lijun Zhang		48	Chairman of the board
Hendrick Sin		37	Vice-chairman of the board
Yongchao Wang		38	Vice-chairman of the board
Ken Jian Xiao		32	Director and chief executive officer
Ken Fei Fu Chang		37	Director and chief financial officer
Estella Yi Kum Ng		54	Independent director(1)
Chen-Wen Tarn		51	Independent director
Haila Wang		51	Independent director(1)
San Xie Shu Liu		36	Chief operating officer
Hupert Zhenning Hu		37	Executive vice president
Zhenyu Hu		43	Vice president
Kevin Yongning Ye		35	Vice president
Henry Wai Tong Leung		30	Financial controller
Olivia Yuan Shan Lee		29	Finance manager

(1)

Ms. Ng and Mr. Wang have accepted appointments to be our directors effective upon the declaration of effectiveness of the registration statement of which this prospectus forms a part.

Lijun Zhang has been our chairman since the completion of our reorganization in August 2011. He has been the chairman of VODone, our principal shareholder, since its inception. He is a Chinese representative to the APEC Business Advisory Council, chairman of China APEC Development Council, council member of the Association for Relations Across the Taiwan Strait, vice chairman of the China Internet Association, vice chairman of China Social Workers Association, vice president of China WTO Research Institute, honorary president of the Council of Beijing Association of Online Media, and a standing member of China Copyright Council. Dr. Zhang is also a professor of Nankai University in China, an honorary professor of the University of Sydney in Australia and an experienced expert in China's Internet media. Dr. Zhang holds a doctorate degree in economics from Nankai University in July 2002.

Hendrick Sin has been our vice-chairman since the completion of our reorganization in August 2011. Mr. Sin has approximately 15 years of experience in finance and investment banking. He has been VODone's executive director since March 2009 and chief financial officer since May 2009. Prior to joining VODone, he was a director of investment banking advisory at HSBC and advised on a wide range of notable equity fund raisings and merger & acquisition transactions involving PRC and Hong Kong corporations. He graduated from Stanford University in 1997 with a master's degree in engineering-economic systems and operations research. He also holds three bachelor's degrees in computer science/mathematics, economics and industrial management with honors from Carnegie Mellon University. Mr. Sin is a member of the Hong Kong Institute of Directors.

Yongchao Wang became our vice-chairman in August 2012. Prior to then he served as our chief executive officer from our inception. Mr. Wang founded Yingzheng and became its chief executive officer in 2004. He has more than 15 years of experience in the mobile value-added services industry in China, holding management positions with a number of telecommunications companies in China.

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Mr. Wang has extensive experience in market development, operations and team management. Mr. Wang graduated from Guangdong Provincial Academy of Social Science with a master of science degree in economics in 2002. He also holds a bachelor's degree in business management from Jinan University in 1994.

Ken Jian Xiao became our chief executive officer in April 2012 and became our director in August 2012. Before becoming our chief executive officer, Mr. Xiao served as our chief operating officer from our inception. Mr. Xiao founded Huiyou in 2007 and is the chairman of Dragon Joyce, our subsidiary operating the feature phone business. Prior to founding Huiyou, he founded Infomobile, a company acquired by Samsung in August 2003. He was an initial key member of A8 Digital Music, a company listed on the Main Board of the Stock Exchange of Hong Kong. Mr. Xiao graduated from South China Normal University in 2008 with a bachelor's degree in law.

Ken Fei Fu Chang has been our chief financial officer since May 23, 2011 and became our director in August 2012. Mr. Chang has worked for 15 years in a number of leading international investment banks and asset management companies with extensive experience in research, product structuring, financial analysis, asset management and equity capital markets. Ken's most recent position was director and senior strategist at Barclays Capital from 2010. From 2005 to 2010, based in Tokyo, Mr. Chang worked as senior analyst and fund manager for the Silverstone Fund in Tokyo, a US$400 million global equity hedge fund. Prior to that, from 1998 to 2005 (four years in Tokyo and three years in Hong Kong), Mr. Chang was the head of the Asia Pacific and Japan equity linked and convertible strategy group of Merrill Lynch. Mr. Chang graduated from Stanford University with a master's degree in engineering economic systems in 1996. He also holds a bachelor's degree in electrical engineering from the University of Michigan.

Estella Yi Kum Ng will become our director upon the effectiveness of the registration statement of which this prospectus forms a part. Ms. Ng has served as the chief financial officer of Country Garden Holdings Company Limited, a China-based property development company listed on the Hong Kong Stock Exchange, since 2008. Prior to that, she worked at Hang Lung Properties Limited, a property development company listed on the Hong Kong Stock Exchange, from 2003 to 2007, including as an executive directors. She has worked at the Hong Kong Stock Exchange in various senior positions, including as senior vice president of the listing division, and at Deloitte Touche Tohmatsu, where she gained substantial auditing experience. Ms. Ng is an associate of the Institute of Chartered Accountants in England and Wales, a fellow of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants and a member of the American Institute of Certified Public Accountants. She has also fulfilled public service appointments, including as a co-opted member of the audit committee of the Hospital Authority of Hong Kong and a corporate advisor to the Business School of Hong Kong University of Science and Technology. Ms. Ng was voted the best chief financial officer in the property sector by sell-side analysts who participated in the 2012 All-Asia Executive Team Survey organised by the Institutional Investor magazine. Ms. Ng received a master's of business administration degree from the Hong Kong University of Science and Technology in 1995.

Chen-Wen Tarn became our director in May 2012. He is a general partner and a member of the investment committee at Pacific Venture Partners, an affiliate of PVG. Dr. Tarn has been engaged in academic research and higher education for over fifteen years. He has worked at the National Taiwan University of Science and Technology as professor in the department of electrical engineering from September 1991 to January 2004 and as a professor at the Graduate Institute of Electro-Optical Engineering since February 2009. Dr. Tarn has also held senior positions in various telecommunication, Internet and technology firms, including as a consultant of Pacific Venture Partners from February 2004 to August 2007, as the executive vice president of GigaMedia Limited and as the president of Koos Broadband Telecom Inc. from February 2004 to October 2008. He also served as the chairman of the Taiwan Internet Association from 2006 to 2009. Mr. Tarn received a Ph.D. degree in electrical engineering from Syracuse University in 1991.

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Haila Wang will become our director upon the effectiveness of the registration statement of which this prospectus forms a part. Mr. Wang has over 20 years of experience in the telecommunication industry. He co-founded Orange Labs Beijing, a research and development center owned by France Telecom that develops internet services and Android applications for mobile devices, in 2004 and has served as its chief executive officer since 2009. He served as vice president of the service management division of Equant from 2001 to 2003 and as a vice president in charge of the global field operations of Global One from July 2000 to July 2001. He also worked in various technical departments of France Telecom beginning in 1988. He received his engineer's degree from Ecole Polytechnique in Paris, France in 1983 and his Ph.D. from the University of Paris in 1986.

San Xie Shu Liu became our chief operating officer in April 2012. He is generally responsible for product development, channel expansion, market promotion and customer service. Prior to his appointment as chief operating officer, he was the chief operating officer for Yingzheng, our VIE, which he joined in 2006. Prior to joining Yingzheng, he worked for Rock Mobile as a senior designer and for Sina.com as the greater China regional vice marketing director, where his duties related to developing and marketing mobile games. Mr. Liu received his bachelor's degree in interior and furniture design from the Central South University of Forestry and Technology located in Hunan province in 1996.

Hupert Zhenning Hu has been our executive vice president since our inception. Mr. Hu founded OWX Holding in 2007 and is the chairman of OWX Holding, our subsidiary operating our own handset design business. Prior to founding OWX Holding, he was a senior engineer at TCL from 2003 to 2006. Mr. Hu graduated from Wuhan Institute of Technology in 1998 with a bachelor's degree in automation and from Guizhou University in 2001 with a master's degree in automation.

Zhenyu Hu has been our vice president since our inception. He has over 10 years of experience in commercial operations and team management. Mr. Hu has also been the assistant general manager of 3GUU BVI since 2006. Mr. Hu is instrumental in our strateigic planning, and in developing strategic partnerships for mobile game business with China Mobile, China Unicom and China Telecom. Mr. Hu obtained a bachelor's degree in marketing from Jiangxi Academy for Specialized Economic Management in 2006.

Kevin Yongning Ye has been our vice president since our inception. In December 2009, he was appointed a senior vice president for the marketing and products center of Kuailefeng, our predecessor. Mr. Ye has 10 years of experience in the mobile value-added services and mobile games development industry in China. Mr.Ye co-founded and was appointed the chief operation officer of Shenzhen Kai Kai Technology Co., Ltd., a technology company in Shenzhen. Prior to that, he was a market development manager with Samsung MPEON Asia Co., Ltd., a mobile value-added service company, and a Greater China customer relations manager with PCCW Limited, an international telecommunications provider. Mr. Ye graduated from Columbia Southern University with an MBA in 2007.

Henry Wai Tong Leung has been our financial controller since our inception. Prior to joining our company, he was an audit manager at KPMG in Hong Kong. He is a certified public accountant in Hong Kong and an associate member of Association of Chartered Certified Accountants. Mr. Leung graduated from The Hong Kong Polytechnic University in 2004 with a bachelor's degree in accountancy.

Olivia Yuan Shan Lee has been our finance manager since July 2011. Prior to joining our company, she worked as a manager at Ernst & Young LLP in the United States. She has significant experience in financial reporting, auditing and preparing financial statements under U.S. GAAP and compliance with Sarbanes-Oxley for U.S.-based companies. She is a certified public accountant under American Institute of Certified Public Accountants and a Certified Fraud Examiner. Ms. Lee graduated from the

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University of Southern California in Los Angeles, California in 2005 with a bachelor's degree in Science in Accounting and Accounting Information Systems.

Employment Agreements

        We have entered into an employment agreement with each of our executive officers. We may terminate an executive officer's employment for cause, at any time, without prior notice or remuneration, for certain acts of the officer, including, but not limited to, conviction of a crime, material violation of our rules and regulations, or other misconduct that cause material damage to us. Furthermore, an executive officer may terminate the employment at any time upon prior written notice to us.

        Each of our executive officers has agreed to hold in strict confidence any trade secrets or confidential information of our company or trade secrets of any third-party received by us. Each executive officer has agreed that the intellectual property rights related to all work products, inventions, computer software, or other technological information which he has developed while performing his duties at our company or through mainly using our resources shall belong to us. Each executive officer has agreed to assist us to obtain and exercise all such intellectual property rights.

        In addition, some of our officers have entered into employment agreements with certain of our subsidiaries pursuant to which they serve as officers of those subsidiaries. The terms of these employment agreements include, among other things, duration, remuneration, the treatment of confidential information, social insurance and employment benefits.

Board of Directors

        Currently, we intend to have eight directors on our board of directors. A director is not required to hold any shares to qualify for appointment. A director may vote with respect to any contract, proposed contract or arrangement in which he is materially interested as long as he or she has made a declaration of the nature of such interest. Our board of directors may exercise all the powers of the company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock or other securities whether outright or as security for any debt, liability or obligation of our company or of any third party.

Indemnification Agreements

        We have entered into indemnification agreements with each of our directors to indemnify them against certain liabilities and expenses arising from their being a director. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Duties of Directors

        Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure that we comply with our memorandum and articles of association, as amended from time to time. Our company has the right to seek damages if a duty owed by our directors is breached.

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        The functions and powers of our board of directors include, among others:

•

convening shareholders' annual general meetings and reporting its work to shareholders at such meetings;

•

declaring dividends and distributions;

•

appointing officers and determining the term of office of officers;

•

exercising the borrowing powers of our company and mortgaging the property of our company; and

•

approving the transfer of shares of our company, including the registering of such shares in our share register.

Terms of Directors

        Each of our directors is subject to a term of office set out in our amended and restated memorandum and articles of association, that will become effective upon the listing of the ADSs on the Nasdaq Global Market, pursuant to which one-third of the current members of our board are required to retire and stand for re-election at each annual general meeting of our company. Each director will hold office until the earlier of (i) the expiration of his term, (ii) his resignation, death or incapacity or (iii) his removal from office by a resolution of our board (except for our chairman) or by a special resolution of the shareholders. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors, or (ii) is found to be or becomes of unsound mind.

        Pursuant to the requirement for retirement by rotation as contained in our amended and restated memorandum and articles of association, that will become effective upon the listing of the ADSs on the Nasdaq Global Market, it is tentatively set that Lijun Zhang and Hendrick Sin will retire and stand for re-election at our 2013 annual general meeting, Haila Wang, Yongchao Wang and Ken Jian Xiao will retire and stand for re-election at our 2014 annual general meeting and Estella Ng, Ken Fei Fu Chang and Chan-Wen Tarn will retire and stand for re-election at our 2015 annual general meeting.

Committees of the Board of Directors

        We have established an audit committee, a compensation committee and a corporate governance and nominating committee.

Audit Committee

        Our audit committee will consist of Mr. Sin, Ms. Ng and Mr. Tarn. Ms. Ng and Mr. Tarn satisfy the "independence" requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and under Rule 10A-3 under the Exchange Act. Ms. Ng will be the chair of our audit committee.

        The purpose of the audit committee is to assist our board of directors with its oversight responsibilities regarding: (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor's qualifications and independence and (iv) the performance of our internal audit function and independent auditor.

        The audit committee is responsible for, among other things:

•

appointing the independent auditors and pre-approving all audit and non-audit services permitted to be performed by the independent auditors;

•

reviewing with the independent auditors any audit problems or difficulties and management's response;

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•

discussing the annual audited financial statements with management and the independent auditors;

•

reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; and

•

meeting separately and periodically with management and the independent auditors.

Compensation Committee

        Our compensation committee will consist of Ms. Ng, Mr. Tarn and Mr. Sin. Our board of directors has determined that Ms. Ng and Mr. Tarn are each an "independent director" within the meaning of Section 5605(a)(2) of the Nasdaq Listing Rules.

        Our compensation committee assists the board in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Members of our compensation committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any compensation committee meeting during which his compensation is deliberated. Our compensation committee is responsible for, among other things:

•

approving and overseeing the compensation package for our executive officers;

•

reviewing and making recommendations to our board with respect to our compensation policies and the compensation of our directors; and

•

reviewing periodically and making recommendations to the board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

Corporate Governance and Nominating Committee

        Our corporate governance and nominating committee will consist of Mr. Sin, Ms. Ng and Mr. Tarn. Our board of directors has determined that Ms. Ng and Mr. Tarn are each an "independent director" within the meaning of Section 5605(a)(2) of the Nasdaq Listing Rules.

        Our corporate governance and nominating committee assists our board of directors in identifying individuals qualified to become our directors and in determining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:

•

identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any vacancy;

•

reviewing annually with the board the current composition of the board in light of the characteristics of independence, skills, experience and availability of service to us;

•

identifying and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as the corporate governance and nominating committee itself;

•

advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any corrective action to be taken; and

•

monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

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Interested Transactions

        A director may, subject to any separate requirement for audit committee approval under applicable law or the Nasdaq Listing Rules, and unless disqualified by the chairman of the relevant Board meeting, vote in respect of any contract or transaction in which he or she is interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter.

Compensation of Directors and Executive Officers

        For the year ended December 31, 2011 and the first three months of 2012, we paid an aggregate of RMB1.3 million (US$0.2 million) and RMB376,202 (US$59,738), respectively, in cash compensation to our executive officers.

        We have not set aside or accrued any amount of cash to provide pension, retirement or other similar benefits to our officers and directors. Our PRC subsidiaries and VIE are required by law to make contributions equal to certain percentages of each employee's salary for his or her retirement benefit, medical insurance benefits, housing funds, unemployment and other statutory benefits. We contributed an aggregate of approximately RMB175,000 (US$28,000) and RMB39,712 (US$6,306) for retirement and similar benefits for our officers and directors in 2011 and the first three months of 2012, respectively.

Share Options

        In July 2010, Dragon Joyce granted options to acquire an aggregate of 0.72% of the equity interests in Dragon Joyce to Dr. Lijun Zhang, our chairman, and Mr. Hendrick Sin, our vice chairman, for an aggregate purchase price of RMB1.7 million. On October 27, 2011, Dragon Joyce repurchased these options by transferring 209,134 of our ordinary shares to each of Dr. Zhang and Mr. Sin as consideration for the share options.

        In October 2010, OWX Holding granted options to acquire an aggregate of 2.20% of the equity interests in OWX Holding to Dr. Zhang and Mr. Sin for an aggregate purchase price of RMB1.7 million. On October 28, 2011, OWX Holding repurchased these options by transferring 209,133 of our ordinary shares to each of Dr. Zhang and Mr. Sin as consideration for the share options.

        In January 2011, 3GUU BVI granted options to purchase an aggregate of 0.61% of the equity interests in 3GUU BVI to Dr. Zhang and Mr. Sin for an aggregate purchase price of RMB1.7 million. On October 29, 2011, 3GUU BVI repurchased these options by issuing 7,958.91 of its own shares to each of Dr. Zhang and Mr. Sin as consideration for the share options. On October 29, 2011, we issued 114,775 of our ordinary shares to each of Dr. Zhang and Mr. Sin in exchange for their 7,958.91 shares in 3GUU BVI.

        On February 6, 2012, we granted 18,657,185 share options to directors and executive officers. 25% of these options will vest on the first anniversary of the grant date. The exercise price of these options is the greater of US$0.605 and the per share offering price of our initial listing. The remaining 75% of these options will vest in 12 equal quarterly tranches beginning one calendar quarter after the first anniversary of the date of grant.

Restricted Share Units

        On August 24, 2011 and March 16, 2012, we issued 1,220,000 and 639,000 ordinary shares, respectively, to certain of our directors and officers at par value. Pursuant to the restricted share units subscription agreements, 25% of the restricted share units will vest upon each of the completion, the first, the second and the third anniversary of our listing. Prior to vesting, the restricted share units may

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not be transferred. Each of our directors and executive officers purchased shares that represent less than 1% of our total outstanding voting securities.

Share Option Scheme

        We adopted the Share Option Scheme, to motivate, attract, and retain employees, directors and consultants, and to promote the success of our business. The maximum number of ordinary shares which may be issued pursuant to all options under the Share Option Scheme is 30,458,855. We may seek separate shareholders' approval, as well as approval of VODone's shareholders, to grant options beyond this limit. On April 27, 2012, we obtained shareholders' approval to issue the number of shares originally approved under the Share Option Scheme without regard to shares previously issued.

        Term of the Scheme.    The Share Option Scheme is valid for ten years.

        Plan Administration.    Our board of directors will administer the Share Option Scheme, and may delegate its administrative authority to a committee of one or more members of our board or one or more of our officers, subject to certain restrictions. Any proposed grant of options to a director (other than independent directors), chief executive or substantial shareholder must be approved by all independent directors.

        Eligibility.    We may grant awards to our employees, directors, consultants or service recipients, which include those of our subsidiaries or any affiliated entities.

        Vesting Schedule.    In general, the board determines the vesting schedule of the options. The board may require a particular option holder to achieve certain performance targets specified at the time of grant before any option grant can be exercised. The options shall be valid for ten years after the initial grant.

        Option Price.    The option price shall be determined by the board on a fair and reasonable basis, taking into consideration the prevailing market conditions, our performance and the performance and/or future potential contribution of the eligible person to the success of our business, which shall be no less than the nominal value of our share on the grant date.

        Acceleration of Vesting upon Corporate Transaction.    If a general offer is made to all of our shareholders or, for so long as we remain a subsidiary of VODone, to all shareholders of VODone, holders of our options may be entitled to exercise the option in full or in part regardless of any vesting period requirements.

        Lapse of Options.    Any unexercised option shall lapse, to the extent not already exercised, automatically on the earliest of, among other things: (a) the expiry of the option period; (b) the date of termination of employment by us for cause; (c) expiry of the 30-day period from the date of voluntary resignation of the holder; (d) the date of termination of a service contract due to breach; and (e) expiry of the six-month period due to ill-health, injury, disability, death or retirement.

        Amending the Share Option Scheme.    No amendments to the Share Option Scheme shall be made which would have the effect of abrogating or altering adversely any of the subsisting rights of holders except with the consent of the holders. Subject to the above, the board may from time to time in its absolute discretion waive or amend any of the rules of the Share Option Scheme as it deems desirable, provided that, material amendments would require approval of our shareholders and, for so long as we remain a subsidiary of VODone, shareholders of VODone in general meetings.

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        The table below sets for the option grants made to our directors and executive officers pursuant to the Share Option Scheme as of the date of this prospectus, all of which were granted on February 6, 2012 and expire on February 5, 2017.

Name	Ordinary Shares Underlying Outstanding Options			Exercise Price (US$/Share)
Lijun Zhang		3,039,494	(1)	*
Hendrick Sin		3,039,495		*
Yongchao Wang		3,039,495		*
Ken Jian Xiao		3,039,495		*
Ken Fei Fu Chang		3,039,495		*
San Xie Shu Liu		564,718		*
Hupert Zhengning Hu		455,924		*
Zhenyu Hu		615,373		*
Kevin Yongning Ye		455,924		*
Henry Wai Tong Leung		455,924		*
Olivia Yuan Shan Lee		455,924		*

*

The exercise price is the greater of US$0.605 and the per share offering price of our initial listing.

(1)

Includes options held by Dr. Zhang's wife, Chun Wang.

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PRINCIPAL SHAREHOLDERS

        The following table sets forth information with respect to beneficial ownership of our ordinary shares as of the date of this prospectus by:

•

each of our directors and executive officers; and

•

each person known to us to beneficially own 3% and more of our ordinary shares.

        Except as otherwise noted, the business address of each person listed in the table is c/o China Mobile Games and Entertainment Group Limited, Block A, 15/F Huajian Building 233, Tianfu Road, Tianhe District, Guangzhou, PRC.

	Ordinary Shares Beneficially Owned Prior to This Distribution(1)					Class A Ordinary Shares Beneficially Owned After This Distribution(1)					Class B Ordinary Shares Beneficially Owned After This Distribution(1)					Total Voting Power After This Distribution(1)
Name	Number		Percent			Number		Percent(2)			Number		Percent(2)			Percent(2)
Directors and Executive Officers:
Lijun Zhang(3)		220,945,161		66.7	%		11,880,193		8.4	%		189,617,092		100	%		88.1	%
Hendrick Sin(4)		220,945,161		66.7	%		9,316,345		6.6	%		189,617,092		100	%		87.9	%
Yongchao Wang(5)		27,341,554		8.3	%		27,552,842		19.5	%		—		—			2.5	%
Ken Jian Xiao		—		—			—		—			—		—			—
Ken Fei Fu Chang		*		*			*		*			—		—			*
Estella Yi Kum Ng		—		—			—		—			—		—			—
Chen-Wen Tarn(6)		—		—			—		—			—		—			—
Haila Wang		—		—			—		—			—		—			—
San Xie Shu Liu		—		—			—		—			—		—			—
Hupert Zhengning Hu		—		—			—		—			—		—			—
Zhenyu Hu		—		—			—		—			—		—			—
Kevin Yongning Ye		—		—			—		—			—		—			—
Henry Wai Tong Leung		*		*			*		*			—		—			*
Olivia Yuan Shan Lee		*		*			*		*			—		—			*
All Directors and Executive Officers as a group(7)		258,483,830		78.1	%		49,664,800		35.1	%		189,617,092		100	%		91.6	%
Principal Shareholders:
VODone Limited(8)		211,663,466		63.9	%		—		—			189,617,092		100	%		87.0	%
King Reach Limited(9)		30,658,188		9.3	%		30,658,188		21.7	%		—		—			2.8	%
Trilogic Investments Limited(5)		27,341,554		8.3	%		27,552,842		19.5	%		—		—			2.5	%
Core Tech Resources Inc.(10)		15,450,144		4.7	%		15,450,144		10.9	%		—		—			1.4	%
PVG Venture Capital Partners (Wuxi), Limited Partnership(11)		11,035,817		3.3	%		11,035,817		7.8	%		—		—			1.0	%

*

Less than 1%.

(1)

Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act, and includes voting or investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

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(2)

Assumes 331,074,511 ordinary shares outstanding as of the date of this prospectus and 331,074,511 ordinary shares outstanding immediately after the closing of this distribution, comprised of 141,457,419 Class A ordinary shares and 189,617,092 Class B ordinary shares. Each holder of our Class B ordinary shares is entitled to five votes per Class B common share. Our Class B common shares are convertible at any time by the holder into Class A ordinary shares on a share-for-share basis.

(3)

Consists of (a) 211,663,466 ordinary shares held directly and indirectly by VODone; (b) 533,042 ordinary shares held by Dr. Zhang personally; (c) 258,790 and 213,000 restricted shares we sold to him on August 24, 2011 and March 16, 2012, respectively and (d) 8,276,863 ordinary shares held by Big Step Group Limited, or Big Step, and beneficially owned by Dr. Zhang due to that Big Step is controlled by Dr. Zhang. Dr. Zhang, our chairman and chairman of VODone, beneficially owns 371,214,113 shares of VODone, representing approximately 11.79% of VODone's shares outstanding as of September 5, 2012 with Ms. Chun Wang, Dr. Zhang's wife. As a director of VODone, Dr. Zhang has shared voting and investment control over all the shares held by VODone and therefore may be deemed to have beneficial ownership of the shares held by VODone by virtue of his status as its controlling person. See "Management—Compensation of Directors and Executive Officers—Restricted Shares."

(4)

Consists of (a) 211,663,466 ordinary shares held directly and indirectly by VODone; (b) 533,042 ordinary shares held by Mr. Sin personally; (c) 258,790 and 213,000 restricted shares we sold to him on August 24, 2011 and March 16, 2012, respectively and (d) 8,276,863 ordinary shares held by Silver Joyce International Limited, or Silver Joyce, and beneficially owned by Mr. Sin due to that Silver Joyce is controlled by Mr. Sin. As a director of VODone, Mr. Sin has shared voting and investment control over all the shares held by VODone and therefore may be deemed to share beneficial ownership of the shares held by VODone by virtue of his status as its controlling person. See "Management—Compensation of Directors and Executive Officers—Restricted Shares."

(5)

Consists of 27,341,554 ordinary shares held by Trilogic pursuant to our purchase of its ownership in 3GUU BVI, see "Our Corporate History and Structure—Our Reorganization" and "Description of Share Capital—History of Securities Issuances," and share transfers with other shareholders. Trilogic is beneficially owned by Mr. Yongchao Wang. Mr. Wang is the sole director of Trilogic, having voting and investment control over all the shares held by Trilogic and therefore may be deemed to share beneficial ownership of the shares held by Trilogic by virtue of his status as its controlling person. The registered address of Trilogic is OMC Chambers, P.O. Box 3152, Road Town, Tortola, British Virgin Islands.

(6)

Mr. Tarn is an executive manager and a member of the investment committee at PVG, and disclaims beneficial ownership of the ordinary shares owned by PVG.

(7)

Consists of (a) 533,042 shares owned by each of Dr. Lijun Zhang and Mr. Hendrick Sin personally, (b) 211,663,466 shares beneficially owned by Dr. Zhang and Mr. Sin through VODone, our principal shareholder, (c) 8,276,863 shares beneficially owned by Dr. Zhang through Big Step, (d) 8,276,863 shares beneficially owned by Mr. Sin through Silver Joyce, (e) 27,341,554 shares beneficially owned by Yongchao Wang, our vice chairman, through Trilogic and (f) 1,859,000 restricted shares we sold to certain directors and employees on August 24, 2011 and March 16, 2012. See footnotes (3), (4) and (5) above and "Management—Compensation of Directors and Executive Officers—Restricted Shares."

(8)

Pursuant to a series of transactions, see "Our Corporate History and Structure—Our Reorganization" and "Description of Share Capital—History of Securities Issuances," we issued 59,999,000, 106,500,000 and 43,500,000 ordinary shares to Action King, Dragon Joyce and OWX Holding, respectively, a portion of which were transferred to Dr. Zhang and Mr. Sin in October 2011. As 100% shareholder of each of Action King, Dragon Joyce and OWX Holding, VODone has voting and investment control over all the shares held by each of them and therefore may be deemed beneficial owner of their respective shares. VODone also owns 2,501,000 ordinary shares as our original shareholder prior to our reorganization and OWX Holding transferred 20,472,166 ordinary shares to VODone on August 15, 2012. The registered address of VODone is Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda. The registered address of Action King is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The registered address of Dragon Joyce is Newhaven Trustees (BVI) Limited of P.O. Box 933, 3^rd Floor, Omar Hodge Building, Wickhams Cay 1, Road Town, Tortola, British Virgin

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Islands. The registered address of OWX Holding is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(9)

Consists of 38,000,000 ordinary shares held by King Reach Limited pursuant to our purchase of its ownership in Beauty Wave and China Wave, see "Our Corporate History and Structure—Our Reorganization" and "Description of Share Capital—History of Securities Issuances," and share transfers with other shareholders. King Reach is beneficially owned by Beauty Legend Development Limited, which is wholly owned by Mr. Guo Hao Zhu, who is also the sole director of King Reach. Mr. Guo Hao Zhu has voting and investment control over all the shares held by King Reach and therefore may be deemed to have beneficial ownership of the shares held by King Reach by virtue of his status as its controlling person. The registered address of King Reach is P.O. Box 933, 3^rd Floor, Omar Hodge Building, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

(10)

Consists of 15,450,144 ordinary shares held by Core Tech Resources Inc., a company incorporated under the laws of the British Virgin Islands, which we issued pursuant to a stock purchase agreement dated March 21, 2012. All of the equity interests in Core Tech Resources Inc. are indirectly owned by MediaTek Inc., a public company listed on the Taiwan Stock Exchange. The registered office of MediaTek Inc. is No. 1, Dusing Rd. 1, Hsinchu Science Park, Hsinchu City, Taiwan, R.O.C., 30078.

(11)

Consists of 11,035,817 ordinary shares held by PVG Venture Capital Partners (Wuxi), Limited Partnership, a company organized under the laws of the People's Republic of China, which we issued pursuant to a stock purchase agreement dated March 21, 2012. The general partner of PVG Venture Capital Partners (Wuxi), Limited Partnership is Wuxi PVG Guolian Capital Management, Limited Partnership, a company organized under the laws of the People's Republic of China. Fred Ming Hao Wong is the registered representative of Wuxi PVG Guolian Capital Management, Limited Partnership and shares voting and investment power with respect to the shares held by PVG Venture Capital Partners (Wuxi), Limited Partnership with other members of the investment committee, namely Por Yuan Wang, Pang Yen Yang, Chen-Wen Tarn, Tao Zhao, and We Zhu. Each member of the investment committee of PVG Venture Capital Partners (Wuxi), Limited Partnership disclaims beneficial ownership of the common shares owned by PVG Venture Capital Partners (Wuxi), Limited Partnership. The registered address of PVG Venture Capital Partners (Wuxi), Limited Partnership is Room 1306-1, 13^th Floor, No. 1 Building, 530 Mansion, Li-Yuan Development Park, Wuxi, Jiangsu Province, China.

        As of the date of this prospectus, none of our outstanding ordinary shares are held by record holders in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

        Pursuant to our amended and restated memorandum and articles of association that will become effective upon the listing of the ADSs on the Nasdaq Global Market, our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to five votes per share. We will issue Class A ordinary shares represented by ADSs in this distribution. Only VODone and its affiliates, namely Dragon Joyce, DWX Holding and Action King, will hold our Class B ordinary shares.

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RELATED PARTY TRANSACTIONS

        Upon completion of this distribution, VODone will continue to be our controlling shareholder, with an indirect shareholding of 57.2% of the combined total of our outstanding Class A and Class B ordinary shares, and control of 87.0% of the voting power of the combined total of our outstanding Class A and Class B ordinary shares. VODone will continue to have the power acting alone to approve any action requiring a vote of the majority of our ordinary shares. The following is a summary of our related party transactions.

Acquisitions and Restructuring

        See "Our Corporate History and Structure—Our Corporate History" and "Our Corporate History and Structure—Our Contractual Arrangements with VIE."

Transactions with Certain Directors, Officers, Shareholders and Affiliates

        In 2009, 2010, 2011 and the first three months of 2012, we provided services to Kuailefeng, a company controlled by Dragon Joyce Group's management pursuant to an exclusive business cooperation agreement, in an aggregate amount of RMB0.1 million, RMB5.9 million, RMB4.7 million (US$0.7 million) and nil, respectively. Under this exclusive business cooperation agreement, Kuailefeng agreed to engage us as its exclusive service provider of technical platform and technical support, maintenance and other services for an annual service fee calculated based on Kuailefeng's revenues during the agreement's term of 50 years. This agreement also grants to Kuailefeng the non-exclusive right to operate and sell in-game premium features of certain of our feature phone games to third parties. We have the right to suspend or terminate this sales agent grant at any time. During the period from October 27, 2009 to December 31, 2009, in 2010 and 2011, we generated revenues in an aggregate amount of RMB17.4 million, RMB22.5 million and RMB1.4 million (US$0.2 million), respectively, pursuant to this reseller right grant. In 2010, Kuailefeng also engaged us to provide mobile phone contents installation service in December 2010.

        In 2010, we purchased services from Shenzhen Provider, Huazhongtianxun, Changshi Jiaren and Shidaixunda for their provisions of billing and collection services in our sale of in-game premium features and virtual items on feature phones, in an aggregate amount of RMB18.3 million, RMB11.1 million, RMB54,000 and RMB2.5 million, respectively. In 2011, we purchased services from these providers in an aggregate amount of RMB3.4 million (US$0.5 million), RMB2.1 million (US$0.3 million), nil and RMB2.2 million (US$0.3 million), respectively. Ken Jian Xiao, our chief executive officer, had shareholding in and control over Shenzhen Provider, which ceased to be a related party on July 11, 2011. He also had control over Huazhongtianxun, Changshi Jiaren and Shidaixunda, which ceased to be related parties on April 12, 2011.

        In the period from October 27, 2009 to December 31, 2009, we obtained temporary funding from Kuailefeng, in an aggregate amount of approximately RMB0.2 million. In 2010, we obtained temporary funding from VODone, our majority shareholder, in an aggregate amount of RMB1.2 million. The temporary funding from VODone and Kuailefeng was unsecured, interest-free and repayable on demand. The proceeds of the temporary funding from VODone were injected into OWX Beijing and Dragon Joyce Group as working capital. Prior to the commencement of this distribution, we will have repaid all of the temporary funding.

        In 2010 and 2011, Bright Way, which is controlled by OWX Group's management, purchased raw materials for the handset design products on our behalf in an aggregate amount of RMB3.6 million and RMB116,000 (US$18,400), respectively. In 2010 and 2011, we also purchased raw materials from Bright Way in the amount of RMB1.5 million and RMB658,000 (US$104,000), respectively. All balances owed to Bright Way had been fully repaid by April 2011.

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        In the period from October 27, 2009 to December 31, 2009, the acquisition consideration associated with our acquisition of Dragon Joyce paid by VODone, our majority shareholder, and the acquisition-related costs associated with our acquisition of Dragon Joyce paid by VODone, our majority shareholder, amounted to RMB217.2 million (US$34.5 million). In 2010, the acquisition consideration associated with our acquisition of substantially all of the operating assets of Bright Way and Tastech, and 70% equity interests of 3GUU BVI paid by VODone, amounted to RMB77.8 million (US$12.4 million) and RMB199.0 million (US$31.6 million), respectively. These acquisition consideration and acquisition-related costs were not refundable and were recognised as VODone's shareholder contribution.

        In the year ended December 31, 2011 and the first three months of 2012, we obtained temporary funding from VODone in the amount for RMB4.6 million (US$0.7 million) and RMB3.0 million (US$0.48 million), respectively, for payment of expenses relating to this distribution. The temporary funding from VODone was unsecured, interest-free and repayable on demand.

        On March 21, 2012, we and VODone entered into a shares purchase agreement with MediaTek, Core Tech and PVG, pursuant to which Core Tech and PVG agreed to subscribe for 15,450,144 and 11,035,817 shares of our ordinary shares, respectively, for a consideration of US$7 million and US$5 million, respectively. Core Tech's investment was made in connection with MediaTek and our intention to further develop our cooperative relationship. These ordinary shares contain a liquidation preference, anti-dilution adjustments in the event that we issue equity securities at a price per share that is lower than the initial per share price invested by them, as well as a right to put back the shares after one year at the initial purchase price plus interest. The transaction was closed on May 11, 2012.

        In June 2012, Yitongtianxia entered into a contractual arrangement with VODone Datamedia Technology Co., Ltd., an affiliate of VODone, whereby Yitongtianxia will develop and design location-based mobile phone games for VODone Telemedia Co. Ltd., a company in which Dr. Zhang holds a minority interest. In return, Yitongtianxia will receive revenue generated from these location-based mobile phone games.

Share Options

        See "Management—Compensation of Directors and Executive Officers."

Employment Agreements

        See "Management—Employment Agreements."

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DESCRIPTION OF SHARE CAPITAL

        We are a Cayman Islands exempted company and our affairs are governed by our amended and restated memorandum and articles of association and the Companies Law of the Cayman Islands and the common law of the Cayman Islands. A Cayman Islands exempted company is a company that conducts its business outside of the Cayman Islands and as such is exempted from certain requirements of the Companies Law.

        As of March 31, 2012, our authorized share capital was US$1,000,000 divided into 1,000,000,000 shares with a par value of US$0.001 per share. Our shareholders have approved an amended and restated memorandum and articles of association, which will become effective upon the the listing of the ADS, on the Nasdaq Global Market and replace our current memorandum and articles of association in its entirety. Upon the effectiveness of the amended and restated memorandum and articles of association, 750,000,000 shares will be designated as Class A ordinary shares and 250,000,000 will be designated as Class B ordinary shares.

        The following are summaries of material provisions of our proposed amended and restated memorandum and articles of association that will become effective upon the closing the listing of the ADS, on the Nasdaq Global Market and the Companies Law as they relate to the material terms of our ordinary shares.

Exempted Company

        We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

(a)

an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;



(b)

an exempted company is not required to open its register of members for inspection;



(c)

an exempted company does not have to hold an annual general meeting;



(d)

an exempted company may in certain circumstances issue no par value, negotiable or bearer shares;



(e)

an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);



(f)

an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;



(g)

an exempted company may register as a limited duration company; and



(h)

an exempted company may register as a segregated portfolio company.

Ordinary Shares

General

        Our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares shall have the same rights except for voting and conversion rights. All of our outstanding ordinary shares are fully paid. Certificates

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representing the ordinary shares are issued in registered form, meaning they are not negotiable. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares.

Dividends

        The holders of our ordinary shares are entitled to receive such dividends as may be declared by our board of directors subject to our memorandum and articles of association and the Companies Law. Dividends may be paid only out of profits, which include net earnings and retained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No dividend may be declared and paid unless our directors determine that immediately after the payment, we will be able to satisfy our liabilities as they become due in the ordinary course of business and we have funds lawfully available for such purpose.

Conversion

        Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder (as defined in our articles of association), such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares.

Voting Rights

        In respect of matters requiring shareholders' vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five votes. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of our board of directors or by any one or more shareholders who together hold 10% of our paid up voting share capital present in person or by proxy.

        A quorum required for a meeting of shareholders consists of one or more shareholders who hold in aggregate at least one-third of our paid up voting share capital at the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Although not required by the Companies Law or our amended and restated memorandum and articles of association, we expect to hold shareholders' meetings annually and such meetings may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding in aggregate at least ten percent of our ordinary shares. Advance notice of at least seven clear calendar days is required for the convening of our annual general meeting and other shareholders meetings.

        An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast in a general meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all of our shareholders, as permitted by the Companies Law and our amended and restated memorandum and articles of association. A special resolution will be required for important matters such as a change of name or making changes to our memorandum and articles of association.

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Transfer of Ordinary Shares

        Subject to the restrictions in our amended and restated memorandum and articles of association, as listed below, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

        Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any ordinary share unless:

•

the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;

•

the instrument of transfer is in respect of only one class of ordinary shares;

•

the instrument of transfer is properly stamped, if required;

•

in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; or

•

the ordinary shares transferred are free of any lien in favor of us.

        If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days' notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

Liquidation

        Pursuant to our memorandum and articles of association, on a winding up, the assets available for distribution among shareholders will be distributed in the following order:

(a)

for so long as they hold shares, Core Tech and PVG shall be entitled to receive, prior and in preference to any distribution of our surplus assets to the other shareholders, an amount equal to 100% of the initial purchase price per share held by them. If the assets available for distribution among shareholders is insufficient to permit the payment to Core Tech and PVG of the full amount due, then our entire assets available for distribution among shareholders shall be distributed ratably among Core Tech and PVG in proportion to the number of shares held by each of them; and



(b)

after distribution to Core Tech and PVG as required in the preceding paragraph, all of our remaining assets available for distribution among shareholders, if any, shall be distributed ratably among holders of ordinary shares (including Core Tech and PVG, for so long as they hold shares) on a pro rata basis.

Calls on Ordinary Shares and Forfeiture of Ordinary Shares

        Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

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Redemption of Ordinary Shares

        Under the Companies Law, we may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or by a special resolution of our shareholders provided:

(a)

no share can be redeemed unless it is fully paid up;



(b)

no share can be redeemed such that there are no shares outstanding; and



(c)

no share can be redeemed after we have commenced liquidation.

        The payment of the redemption price may be made out of profits, or, subject to us being able to pay our debts as they fall due in the ordinary course of business immediately after such payment, be made out of the share premium account or capital (including capital redemption reserve).

Variations of Rights of Shares

        All or any of the special rights attached to any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, be varied either with the unanimous written consent of the holders of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Inspection of Books and Records

        Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See "Where You Can Find More Information."

Changes in Capital

        Our shareholders may from time to time by ordinary resolutions:

•

increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;

•

consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;

•

convert all or any of our paid up shares into stock and reconvert that stock into paid up shares of any denomination;

•

sub-divide our existing shares, or any of them into shares of an amount smaller than the amount fixed by our amended and restated memorandum and articles of association provided that in the subdivision the proportion between the amount paid and the amount, if any unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived;

•

cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.

        Subject to the Companies Law, our shareholders may by special resolution reduce our share capital and any capital redemption reserve in any manner authorized by law.

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Register of Members

        Under Cayman Islands law, we must keep a register of members and there shall be entered therein:

(a)

the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member;



(b)

the date on which the name of any person was entered on the register as a member; and



(c)

the date on which any person ceased to be a member.

        Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members shall be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Upon the closing of this distribution, the register of members shall be immediately updated to reflect the transfer of the Class A ordinary shares of our company which are represented by our ADSs from VODone to The Bank of New York Mellon as the depositary. Once our register of members has been updated, the shareholders recorded in the register of members shall be deemed to have legal title to the shares set against their names.

        If the name of any person is, without sufficient cause, entered in or omitted from the register of members, or if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, the person or member aggrieved or any member or the company itself may apply to the court for an order that the register be rectified.

History of Securities Issuances

        The following is a summary of our securities issuances since our incorporation on January 20, 2011.

Ordinary Shares

        On February 26, 2011, we issued one ordinary share (without taking into account the 1,000-for-1 share split effected on August 22, 2011) to VODone for nominal consideration. On August 23, 2011, we issued to VODone a total of 2,500,000 ordinary shares at par value. On August 23, 2011, we issued to:

•

Dragon Joyce a total of 106,500,000 ordinary shares for its 100% equity interests in each of Beauty Wave and China Wave;

•

King Reach Limited and Greatfaith Group Limited 38,000,000 and 7,600,000 ordinary shares, respectively, for nominal consideration at VODone's instruction for its acquisition of 24.82% and 4.96% equity interests in Dragon Joyce held by King Reach Limited and Greatfaith Limited, respectively;

•

OWX Holding 43,500,000 ordinary shares for its 100% equity interests in OWX HK; and

•

Realphone Technology Co., Ltd 18,600,000 ordinary shares for nominal consideration at VODone's instruction for its acquisition of 29.35% equity interests in OWX Holding;

•

Action King 59,999,000 ordinary shares in exchange for its 69.58% equity interests in 3GUU BVI; and

•

Trilogic 25,800,000 ordinary shares in exchange for its 29.82% equity interests in 3GUU BVI.

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        See "Our Corporate History and Structure—Our Reorganization."

        On October 29, 2011, we issued 114,775 of our ordinary shares to each of Dr. Zhang and Mr. Sin in exchange for their 7,958.91 shares in 3GUU BVI.

        On May 11, 2012, we issued 15,450,144 and 11,035,817 shares to Core Tech and PVG, respectively, for consideration of US$7 million and US$5 million, pursuant to a share purchase agreement between us, VODone, MediaTek, Core Tech and PVG dated March 21, 2012.

        On August 15, 2012, OWX Holding transferred 20,472,166 ordinary shares to VODone.

Options and Restricted Shares

        We have granted to certain of our directors, executive officers and employees options to purchase our ordinary shares and restricted shares. As of the date of this prospectus, the aggregate number of our ordinary shares underlying our outstanding options is 25,835,712 and we have 1,859,000 outstanding restricted shares. See "Management—Compensation of Directors and Officers."

Differences in Corporate Law

        The Companies Law of the Cayman Islands is modeled after that of English Companies legislation but does not follow recent English statutory enactments. In addition, the Companies Law differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in Delaware and their shareholders.

Mergers and Similar Arrangements

        The Companies Law permits mergers and consolidations between Cayman Islands companies and mergers and acquisitions between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) "merger" means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a "consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

        In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company and (b) such other authorization, if any, as may be specified in such constituent company's articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to receive the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

        In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the

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Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

•

the statutory provisions as to the required majority vote have been met;

•

the shareholders have been fairly represented at the meeting in question;

•

the arrangement is such that may be reasonably approved; and

•

the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

        When a take over offer is made and accepted by holders of 90% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer that has been so approved unless there is evidence of fraud, bad faith or collusion.

        If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholder Suits

        In principle, we will normally be the proper plaintiff and a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected to apply and follow the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against, or derivative actions in the name of, a company to challenge:

•

an act which is illegal or ultra vires;

•

an action which requires a resolution with a qualified or special majority which has not been obtained; and

•

an act which constitutes a fraud on the minority where the wrongdoers are themselves in control of the company.

        Under Delaware law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. Delaware law expressly authorizes stockholder derivative suits on the condition that the stockholder either held the stock at the time of the transaction of which the stockholder complains, or acquired the stock thereafter by operation of law and continues to hold it throughout the duration of the suit. An individual may also commence a class action suit on behalf of himself and other similarly situated stockholders where the requirements for maintaining a class action under Delaware law have been met. A plaintiff instituting a derivative suit is required to serve a demand on the corporation before bringing suit, unless such demand would be futile.

Corporate Governance

        Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for which they serve. Under our amended and restated memorandum and articles of association, subject to any separate requirement for audit committee approval under the applicable rules of the Nasdaq Global Market or unless disqualified by the chairman of the relevant board meeting, so long as a director discloses the nature of

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his interest in any contract or arrangement in which he is interested, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.

Duties of Directors

        As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore he owes the following duties to the company:

•

a duty to act bona fide in the best interests of the company;

•

a duty not to make a profit based on his or her position as director (unless the company permits him to do so); and

•

a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party.

        A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director did not need to exhibit in the performance of his or her duties a greater degree of skill than what was reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

Interested Directors

        The Companies Law does not require a director who is interested in a transaction entered into by a Cayman company to disclose his interest nor does the Companies Law render such director liable to such company for any profit realized pursuant to such transaction. Such an obligation is imposed under our amended and restated memorandum and articles of association and a director must act in accordance with his duties at common law (as above).

Voting Rights and Quorum Requirements

        Under Cayman Islands law, the voting rights of shareholders are regulated by a company's articles of association and, in certain circumstances, the Companies Law. The articles of association will govern matters such as quorum for the transaction of business, rights of shares and majority votes required to approve any action or resolution at a meeting of the shareholders or board of directors. Under the Companies Law, certain matters must be approved by a special resolution, which is defined as two-thirds of the votes cast by shareholders present at a meeting and entitled to vote, or such higher majority as imposed by a company's articles of association; otherwise, unless the articles of association otherwise provide, the requisite majority is a simple majority of votes cast.

Indemnification

        Cayman Islands law does not limit the extent to which a company's articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such directors or officers.

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Shareholder Proposals

        Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company's articles of association. Our amended and restated memorandum and articles of association allow our shareholders holding not less than one-tenth of our voting share capital to requisition a special meeting of the shareholders, in which case the directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our amended and restated memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.

        As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders' annual general meetings. Our amended and restated memorandum and articles of association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may be determined by our directors. We, however, will hold an annual shareholders' meeting during each fiscal year, as required by the rules of the Nasdaq Global Market.

Approval of Corporate Matters by Written Consent

        The Companies Law and our amended and restated memorandum and articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

Calling of Special Shareholders Meetings

        The Companies Law does not have provisions governing the proceedings of shareholders meetings, which are usually provided in the articles of association.

Staggered Board of Directors

        The Companies Law does not contain statutory provisions that require staggered board arrangements for a Cayman Islands company. Such provisions, however, may validly be provided for in the articles of association, and we have provided for a staggered board of directors in our amended and restated memorandum and articles of association. Pursuant to such provision, one-third of the current members of our board are required to retire and stand for re-election at each annual general meeting of our company.

Issuance of Preferred Shares

        The Companies Law allows shares to be issued with preferred, deferred or other special rights, whether in regard to dividends, voting, return of share capital or otherwise. Our amended and restated memorandum and articles of association provide that the directors may allot, issue, grant options over or otherwise dispose of shares (including fractions of a share) with or without preferred, deferred or other special rights or restrictions, in one or more series, whether with regard to dividend rights, dividend rates, conversion rights, voting rights, rights and terms of redemption and liquidation preferences or otherwise and to such persons, at such times and on such other terms as they think proper.

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Anti-takeover Provisions

        The Companies Law does not prevent companies from adopting a wide range of defensive measures, such as staggered boards, blank check preferred shares, removal of directors only for cause and provisions that restrict the rights of shareholders to call meetings and submit shareholder proposals. Our amended and restated articles of association contain the following provisions which may be regarded as defensive measures: (i) a staggered board of directors and (ii) the ability to issue preferred shares.

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SHARES ELIGIBLE FOR FUTURE SALE

        Upon completion of this distribution, we will have 1,574,741 outstanding ADSs representing approximately 6.7% of our ordinary shares in issue. All of the ADSs distributed in this distribution and the ordinary shares they represent will be freely transferable by persons other than our "affiliates" without restriction or further registration under the Securities Act. Sales or perceived sales of substantial amounts of the ADSs in the public market could adversely affect prevailing market prices of the ADSs. Prior to this distribution, there has been no public market for our ordinary shares or the ADSs, and we cannot assure you that a regular trading market for the ADSs will develop. Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system. We do not expect that a trading market will develop for our ordinary shares not represented by the ADSs.

Rule 144

        In general, under Rule 144, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) will be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year will be entitled to sell those shares without regard to the provisions of Rule 144.

        In general, under Rule 144, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell, a number of shares that does not exceed the greater of:

•

1% of the number of ordinary shares then outstanding, in the form of ADSs or otherwise, which will equal approximately shares immediately after this distribution; or

•

the average weekly trading volume of the ADSs representing our ordinary shares on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

        Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

        Beginning 90 days after the date of this prospectus, persons other than affiliates who purchased ordinary shares under a written compensatory plan or contract may be entitled to sell such shares in the United States in reliance on Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell these shares in reliance on Rule 144 subject only to its manner-of-sale requirements. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

American Depositary Shares

        The Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent 14 Class A ordinary shares (or a right to receive 14 Class A ordinary shares) deposited with the principal Hong Kong office of The Hongkong and Shanghai Banking Corporation Limited, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary's corporate trust office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon's principal executive office is located at One Wall Street, New York, New York 10286.

        You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration System, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

        The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, also referred to as DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership is confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.

        As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Cayman Islands law governs shareholder rights. The depositary will be the holder of the Class A ordinary shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and all other persons indirectly holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

        The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. Directions on how to obtain copies of those documents are provided under the section headed "Where You Can Find More Information."

Dividends and Other Distributions

How will you receive dividends and other distributions on the shares?

        The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent.

•

Cash.  The depositary will convert any cash dividend or other cash distribution we pay on the Class A ordinary shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and can not be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

194

Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See "Taxation." It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.

•

Shares.  The depositary may distribute additional ADSs representing any Class A ordinary shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell Class A ordinary shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new Class A ordinary shares. The depositary may sell a portion of the distributed Class A ordinary shares sufficient to pay its fees and expenses in connection with that distribution.

•

Rights to purchase additional shares.  If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.



If the depositary makes rights available to ADS holders, it will exercise the rights and purchase the shares on your behalf. The depositary will then deposit the shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the exercise price and any other charges the rights require you to pay.


U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place.

•

Other Distributions.  The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution.

        The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.

Deposit, Withdrawal and Cancellation

How are ADSs issued?

        The depositary will deliver ADSs if you or your broker deposit Class A ordinary shares or evidence of rights to receive Class A ordinary shares with the custodian. Upon payment of its fees and expenses

195

and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

How can ADS holders withdraw the deposited securities?

        You may surrender your ADSs at the depositary's corporate trust office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, if feasible.

How do ADS holders interchange between certificated ADSs and uncertificated ADSs?

        You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

Voting Rights

How do you vote?

        ADS holders may instruct the depositary to vote the number of deposited shares their ADSs represent. The depositary will notify ADS holders of shareholders' meetings and arrange to deliver our voting materials to them if we ask it to. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary by a date set by the depositary.

Otherwise, you won't be able to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares.

        The depositary will try, as far as practical, subject to the laws of the Cayman Islands and of our articles of association or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. The depositary will only vote or attempt to vote as instructed or as described in the following paragraph.

        If we timely requested the depositary to solicit your voting instructions but no instructions are received by the date set by the depositary, depositary will consider you to instructed to give a discretionary proxy to a person designated by the depositary to vote your deposited shares and the depositary will give that proxy with respect to all matters to voted on unless we inform the depositary that:

•

we do not wish to receive that proxy,

•

substantial opposition exists or

•

the matter materially and adversely affect the rights of holders of Class A ordinary shares.

        We can not assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do if your shares are not voted as you requested.

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        If we ask for your voting instructions, we will give the depositary notice of the meeting and details of the matters to be voted upon at least 30 days prior to the meeting date and the depositary is expected to distribute to the registered holders of ADSs any notice of a shareholders' meeting received from us together with information explaining how to instruct the depositary to exercise the voting rights of the securities represented by the ADSs.

Fees and Expenses

Persons depositing or withdrawing shares or ADS holders must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•       Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property •       Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$.05 (or less) per ADS	•       Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs	•       Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
$.05 (or less) per ADSs per calendar year	•       Depositary services
Registration or transfer fees	•       Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
Expenses of the depositary	•       Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) •       converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	•       As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	•       As necessary

        The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing Class A ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

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        From time to time, the depositary may make payments to the Company to reimburse and / or share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliates of the depositary and that may earn or share fees or commissions.

Payment of Taxes

        You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes. You are required to indemnify us, the depositary and the custodian for any claims by any governmental authority relating to any tax refund, reduced tax withholding rate or other tax benefit you obtain with respect to the ADSs.

Reclassifications, Recapitalizations and Mergers

If we:

Then:

•       Change the nominal or par value of our shares •       Reclassify, split up or consolidate any of the deposited securities •       Distribute securities on the shares that are not distributed to you •       Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action

The cash, shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities. The depositary may, and will if we ask it to, distribute some or all of the cash, shares or other securities it received. It may also deliver new ADRs or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.

Amendment and Termination

How may the deposit agreement be amended?

        We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.

How may the deposit agreement be terminated?

        The depositary will terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders then outstanding at least 30 days prior to the date fixed in such notice for such termination. The depositary may also terminate the deposit agreement by mailing notice of termination to us and the ADS holders if 60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment.

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        After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property, and deliver shares and other deposited securities upon cancellation of ADSs. Four months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The depositary's only obligations will be to account for the money and other cash. After termination our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.

Limitations on Obligations and Liability

Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs

        The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

•

are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

•

are not liable if we are or it is prevented or delayed by law or circumstances beyond our control from performing our or its obligations under the deposit agreement;

•

are not liable if we or it exercises discretion permitted under the deposit agreement;

•

are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

•

have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;

•

may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person;

•

are not liable if you do not obtain the benefit of credits for non-U.S. tax paid against your income tax liability or for any tax consequences to you ow ownership of ADSs.

        In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

Requirements for Depositary Actions

        Before the depositary will deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of shares, the depositary may require:

•

payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;

•

satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

•

compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.

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        The depositary may refuse to deliver ADSs or register transfers of ADSs generally when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

Your Right to Receive the Class A Ordinary Shares Underlying your ADSs

        ADS holders have the right to cancel their ADSs and withdraw the underlying Class A ordinary shares at any time except:

•

When temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our shares.

•

When you owe money to pay fees, taxes and similar charges.

•

When it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

Pre-release of ADSs

        The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying Class A ordinary shares unless requested by us to cease doing so. This is called a pre-release of the ADSs. The depositary may also deliver Class A ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying Class A ordinary shares are delivered to the depositary. The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days' notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate to do so.

Direct Registration System

        In the deposit agreement, all parties to the deposit agreement acknowledge that

        the DRS and Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC under which the depositary may register the ownership of uncertificated ADSs, which ownership will be evidenced by periodic statements sent by the depositary to the registered holders of uncertificated ADSs. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

        In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary's reliance on and compliance with instructions

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received by the depositary through the DRS/Profile System and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

Shareholder communications; inspection of register of holders of ADSs

        The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

Disclosure of Interests

        From time to time we may request information as to the capacity in which you own ADSs and regarding the identify or any other person interested in your ADSs and the nature of that interest. You must provide any information of that kind that is requested by the depositary or by us.

Settlement of Disputes

        The deposit agreement generally requires that claims against us arising out of or relating to it, the ADSs or the deposited shares must be submitted to arbitration in accordance with the rules of the American Arbitration Association. However, claims of that kind based on or relating to the U.S. federal securities laws will be submitted to arbitration only if so elected by the claimant.

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TAXATION

The following summary of material Cayman Islands, Bermuda, Hong Kong, PRC and United States federal income tax consequences of an investment in the ADSs or ordinary shares is based upon laws and relevant interpretations thereof as of the date of this prospectus, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in the ADSs or ordinary shares, such as the tax consequences under state, local and other tax laws not addressed herein.

To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Maples and Calder, our counsel as to the laws of the Cayman Islands. To the extent that the discussion relates to matters of Bermuda tax law, it represents the opinion of Appleby (Bermuda) Limited, our counsel as to Bermuda law. To the extent that the discussion relates to matters of Hong Kong tax law, it represents the opinion of Alex Ho & Co, our counsel as to Hong Kong law. To the extent that the discussion relates to matters of PRC tax law, it represents the opinion of Guantao Law Firm, our counsel as to Chinese law. Based on the facts and subject to the limitations set forth herein, the statements of law or legal conclusions under the caption "—United States Federal Income Taxation" constitute the opinion of Kirkland & Ellis International LLP, our U.S. counsel, as to the material U.S. federal income tax consequences to U.S. Holders (as defined below) under current law of an investment in the ADSs or ordinary shares.

Cayman Islands Taxation

        The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties that may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

        Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we may obtain an undertaking from the Governor-in-Council:

•

that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations; and

•

that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures or other obligations.

        Prospective investors should consult their professional advisers on the possible tax consequences of buying, holding or selling any ADSs under the laws of their country of citizenship, residence or domicile.

        The following is a discussion on certain Cayman Islands tax consequences of an investment in the ADSs. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor's particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

        Under existing Cayman Islands laws:

•

No taxes, fees or charges are payable (either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands under the laws of the Cayman Islands in respect of this distribution.

•

Payments of dividends and capital in respect of our shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to

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any holder of our shares or ADSs, nor will gains derived from the disposal of our shares or ADSs be subject to Cayman Islands income or corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax.

Bermuda Taxation

        In Bermuda there are no taxes on profits, income or dividends, nor is there any capital gains tax, estate duty or death duty. Profits can be accumulated and it is not obligatory for a company to pay dividends.

        Stamp duty is not chargeable in respect of the incorporation, registration or licensing of an exempted company, nor, subject to certain minor exceptions, on their transactions.

Hong Kong Taxation

        The following summary of certain relevant taxation provisions under Hong Kong law is based on current law and practice and is subject to changes therein and does not constitute legal or tax advice to you. This summary does not purport to address all possible tax consequences relating to purchasing, holding or selling our ADSs, and does not take into account the specific circumstances of any particular investors, some of whom may be subject to special rules. Accordingly, holders or prospective purchasers (particularly those subject to special tax rules, such as banks, dealers, insurance companies and tax-exempt entities) should consult their own tax advisers regarding the tax consequences of purchasing, holding or selling our ADSs.

        Under the current laws of Hong Kong:

•

No profits tax is imposed in Hong Kong in respect of capital gains from the sale of the ADSs.

•

Revenue gains from the sale of ADSs by persons carrying on a trade, profession or business in Hong Kong where the gains are derived from or arise in Hong Kong from the trade, profession or business will be chargeable to Hong Kong profits tax, which is currently imposed at the rate of 16.5% on corporations and at a maximum rate of 15% on individuals and unincorporated businesses.

•

Gains arising from the sale of ADSs, where the purchases and sales of ADSs are effected outside of Hong Kong e.g. on the New York Stock Exchange, should not be subject to Hong Kong profits tax.

•

According to the current tax practice of the Hong Kong Inland Revenue Department, dividends paid by us on ADSs would not be subject to any Hong Kong tax, even if received by investors in Hong Kong.

•

No Hong Kong stamp duty is payable on the purchase and sale of the ADSs.

People's Republic of China Taxation

        On March 16, 2007, the National People's Congress, the PRC legislature, enacted the Enterprise Income Tax Law, or the New EIT Law which became effective on January 1, 2008, and on December 6, 2007, the State Council promulgated the Implementation Rules to the Enterprise Income Tax Law, or the Implementation Rules, which also became effective on January 1, 2008. Under the New EIT Law and its Implementation Rules, foreign-invested enterprises and domestic companies are subject to a uniform enterprise income tax rate of 25%, unless otherwise specified.

        In addition, dividends payable to foreign investors by PRC resident enterprises are subject to a PRC withholding tax at the rate of 10% unless the foreign investor's jurisdiction of incorporation has a tax treaty with the PRC that provides for a preferential withholding arrangement. Pursuant to the

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Double Taxation Arrangement (Hong Kong), which became effective on December 8, 2006, the withholding tax may be lowered to 5% if the PRC enterprise is at least 25% directly held by a Hong Kong enterprise. According to Circular 601, non-resident enterprises that cannot provide valid supporting documents as to "beneficial ownership" may not be approved to enjoy tax treaty benefits, and the term "beneficial owners" refers to individuals, companies or other organizations normally engaged in substantive operations. These rules also expressly exclude a "conduit company," or a company established for the purposes of avoiding or reducing tax obligations or transferring or accumulating profits and not engaged in substantive operations, such as manufacturing, sales or management, from being deemed a beneficial owner. As a result, dividends from our PRC subsidiaries paid to us through our Hong Kong subsidiaries may be subject to a reduced withholding tax rate of 5% if our Hong Kong subsidiaries are determined to be Hong Kong tax residents and beneficial owners under the Double Taxation Arrangement (Hong Kong).

        Under the New EIT Law, enterprises organized under the laws of jurisdictions outside China with their "de facto management bodies" located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The Implementation Rules define the term "de facto management body" as the management body that exercises substantial and overall control and management over the business, personnel, accounts and properties of an enterprise. Circular 82 sets out certain specific criteria for determining the location of the "de facto management bodies" of an enterprise registered outside of the PRC and funded by Chinese enterprises as controlling investors, or a Chinese Controlled Enterprise. Under Circular 82, a Chinese Controlled Enterprise shall be considered a resident enterprise if all of the following applies:

(i)

the Chinese Controlled Enterprise's major management department and personnel who are responsible for carrying out daily operations are located in the PRC;



(ii)

the department or the personnel who have the right to decide or approve the Chinese Controlled Enterprise's financial and human resource matters are located in the PRC;



(iii)

the major assets, account book, company seal and meeting minutes of the Chinese Controlled Enterprise are located or stored in the PRC; and



(iv)

the directors or management personnel holding no less than 50% voting rights of the Chinese Controlled Enterprise habitually reside in the PRC.

        Since the Company is not controlled by a PRC enterprise or a PRC enterprise group, it remains unclear whether the standards set out in the SAT Circular 82 will apply or be cited for reference when considering whether the "de facto management bodies" of the Company and its overseas subsidiaries are in the PRC or not. Furthermore, we do not believe that any of our offshore entities meet all of the conditions detailed above, as the key assets and records for these entities, including the resolutions of their respective board of directors and the resolutions of their respective shareholders, are located and maintained outside of the PRC. While we do not currently consider our company or any of our overseas subsidiaries to be a PRC resident enterprise, there is a risk that the PRC tax authorities may deem our company or any of our overseas subsidiaries as a PRC resident enterprise since a substantial majority of the members of our management team as well as the management team of some of our offshore holding companies are located in China. If the PRC tax authorities determine that our Cayman Islands holding company is a "resident enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, a 10% withholding tax may be imposed on dividends we pay to our non-PRC enterprise shareholders and, with respect to gains derived by our non-PRC enterprise shareholders, from transferring our shares or ADSs. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. See "Risk Factors—Risks Relating to Doing Business in China—We may be

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classified as a "resident enterprise" for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC Shareholders."

        Pursuant to the New EIT Law, if a non-resident enterprise derives China-sourced income, such as dividends or capital gains, that income is subject to enterprise income tax, or EIT, in the form of a withholding tax. The SAT issued the Interim Measures for Administration of Withholding EIT for Non-Resident Enterprise, effective from January 1, 2009. According to the measures, the entity or individual with the legal or contractual obligation to remit income to the non-resident enterprise is deemed as a withholding agent. The withholding agent must withhold the EIT at the time the relevant payment is made or due to be made and pay the tax within seven days from the date of withholding. Noncompliance with the prescribed procedures by a PRC withholding agent and failure of the non-resident enterprise to pay the applicable EIT must be rectified within a designated period and could result in a fine.

United States Federal Income Taxation

        The following discussion describes the material United States federal income tax consequences to a United States Holder (as defined below), under current law, of the ownership and the disposition of the ADSs or ordinary shares. For purposes of this discussion, any reference to an "ordinary share" means our Class A ordinary shares. This discussion is based on the federal income tax laws of the United States as of the date of this prospectus, including the United States Internal Revenue Code of 1986, as amended, or the Code, existing and proposed Treasury regulations promulgated thereunder, judicial authority, published administrative positions of the United States Internal Revenue Service, or IRS, and other applicable authorities, all as of the date of this prospectus. All of the foregoing authorities are subject to change, which change could apply retroactively and could significantly affect the tax consequences described below. We have not sought any ruling from the IRS with respect to the statements made and the conclusions reached in the following discussion and there can be no assurance that the IRS or a court will agree with our statements and conclusions.

        This discussion applies only to a United States Holder that holds ADSs or ordinary shares as capital assets for United States federal income tax purposes (generally, property held for investment). The discussion neither addresses the tax consequences to any particular holder nor describes all of the tax consequences applicable to persons in special tax situations, such as:

•

banks;

•

certain financial institutions;

•

insurance companies;

•

regulated investment companies;

•

real estate investment trusts;

•

brokers or dealers in stocks and securities, or currencies;

•

traders that elect to use a mark-to-market method of accounting;

•

certain former citizens or residents of the United States subject to Section 877 of the Code;

•

tax-exempt organizations and entities;

•

persons subject to the alternative minimum tax provisions of the Code;

•

persons whose functional currency is other than the United States dollar;

•

persons holding ADSs or ordinary shares as part of a straddle, hedging, conversion or integrated transaction;

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•

persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;

•

persons who acquired ADSs or ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation; or

•

partnerships or other pass-through entities, or persons holding ADSs or ordinary shares through such entities.

        The discussion below does not describe any tax consequences arising out of the Medicare tax on certain "net investment income" pursuant to the Health Care and Education Reconciliation Act of 2010.

        If a partnership (including an entity or arrangement treated as a partnership for United States federal income tax purposes) holds the ADSs or ordinary shares, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner in a partnership holding the ADSs or ordinary shares should consult its own tax advisors regarding the tax consequences of holding the ADSs or ordinary shares.

THE FOLLOWING DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-UNITED STATES TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

        For purposes of the discussion below, a "United States Holder" is a beneficial owner of the ADSs or ordinary shares that is, for United States federal income tax purposes:

•

an individual who is a citizen or resident of the United States;

•

a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

•

an estate, the income of which is subject to United States federal income taxation regardless of its source; or

•

a trust, if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more United States persons have the authority to control all of its substantial decisions or (ii) in the case of a trust that was treated as a domestic trust under the law in effect before 1997, a valid election is in place under applicable Treasury regulations to treat such trust as a domestic trust.

        The discussion below assumes that the representations contained in the deposit agreement and any related agreement are true and that the obligations in such agreements will be complied with in accordance with their terms.

The Distribution

        We have not obtained any opinion with respect to the U.S. federal income tax consequences of the distribution. Therefore, all VODone shareholders who receive ADSs should consult with their own tax advisors to determine the consequences of the distribution for U.S. federal income tax purposes, specifically as to whether or not the VODone shareholders who receive ADSs will recognize income, gain or loss by reason of the receipt of the ADSs and as to whether VODone is or has been a passive foreign investment company, or PFIC, as defined below.

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ADSs

        If you own the ADSs, then you should be treated as the owner of the underlying ordinary shares represented by those ADSs for United States federal income tax purposes. Accordingly, deposits or withdrawals of ordinary shares for ADSs should not be subject to United States federal income tax.

        The United States Treasury Department and the IRS have expressed concerns that United States holders of American depositary shares may be claiming foreign tax credits in situations where an intermediary in the chain of ownership between the holder of an American depositary share and the issuer of the security underlying the American depositary share has taken actions that are inconsistent with the ownership of the underlying security by the person claiming the credit. Such actions (for example, a pre-release of an ADS by a depositary) also may be inconsistent with the claiming of the reduced rate of tax applicable to certain dividends received by non-corporate United States holders of ADSs, including individual United States holders. Accordingly, the availability of foreign tax credits or the reduced tax rate for dividends received by non-corporate United States Holders, each discussed below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of an ADS and our company.

Dividends and Other Distributions on the ADSs or Ordinary Shares

        Subject to the passive foreign investment company rules discussed below, the gross amount of any distribution that we make to you with respect to the ADSs or ordinary shares (including any amounts withheld to reflect PRC withholding taxes) will be taxable as a dividend, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Such income (including any withheld taxes) will be includable in your gross income on the day actually or constructively received by you, if you own the ordinary shares, or by the depositary, if you own ADSs. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be treated as a "dividend" for United States federal income tax purposes. Such dividends will not be eligible for the dividends-received deduction allowed to qualifying corporations under the Code.

        Dividends received by a non-corporate United States Holder in taxable years beginning before January 1, 2013, may qualify for the lower rates of tax applicable to "qualified dividend income," if the dividends are paid by a "qualified foreign corporation" and other conditions discussed below are met. A non-United States corporation is treated as a qualified foreign corporation (i) with respect to dividends paid by that corporation on shares (or American depositary shares backed by such shares) that are readily tradable on an established securities market in the United States or (ii) if such non-United States corporation is eligible for the benefits of a qualifying income tax treaty with the United States that includes an exchange of information program. However, a non-United States corporation will not be treated as a qualified foreign corporation if it is a passive foreign investment company in the taxable year in which the dividend is paid or the preceding taxable year.

        Under a published IRS Notice, common or ordinary shares, or American depositary shares representing such shares, are considered to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Global Market, as the ADSs (but not our ordinary shares) are expected to be. Based on existing guidance, it is unclear whether the ordinary shares will be considered to be readily tradable on an established securities market in the United States, because only the ADSs, and not the underlying ordinary shares, will be listed on a securities market in the United States. We believe, but we cannot assure you, that dividends we pay on the ordinary shares that are represented by ADSs, but not on the ordinary shares that are not so represented, will, subject to applicable limitations, be eligible for the reduced rates of taxation. In addition, if we are treated as a PRC resident enterprise under the PRC tax law (see "Taxation—People's Republic of China Taxation"), then we may be eligible for the benefits of the income tax treaty between the United States and the

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PRC. If we are eligible for such benefits, then dividends that we pay on our ordinary shares, regardless of whether such shares are represented by ADSs, would, subject to applicable limitations, be eligible for the reduced rates of taxation.

        Even if dividends would be treated as paid by a qualified foreign corporation, non-corporate United States Holders will not be eligible for reduced rates of taxation if they do not hold the ADSs or ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date or if such United States Holders elect to treat the dividend income as "investment income" pursuant to Section 163(d)(4) of the Code. In addition, the rate reduction will not apply to dividends of a qualified foreign corporation if the non-corporate United States Holder receiving the dividend is obligated to make related payments with respect to positions in substantially similar or related property.

        You should consult your own tax advisors regarding the availability of the lower tax rates applicable to qualified dividend income for any dividends that we pay with respect to the ADSs or ordinary shares, as well as the effect of any change in applicable law after the date of this prospectus.

        Any PRC withholding taxes imposed on dividends paid to you with respect to ADSs or ordinary shares generally will be treated as foreign taxes eligible for credit against your United States federal income tax liability, subject to the various limitations and disallowance rules that apply to foreign tax credits generally. For purposes of calculating the foreign tax credit, dividends paid to you with respect to the ADSs or ordinary shares will be treated as income from sources outside the United States and generally will constitute passive category income. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances.

Disposition of the ADSs or Ordinary Shares

        You will recognize gain or loss on a sale or exchange of ADSs or ordinary shares in an amount equal to the difference between the amount realized on the sale or exchange and your tax basis in the ADSs or ordinary shares. Subject to the discussion under "—Passive Foreign Investment Company" below, such gain or loss generally will be capital gain or loss. Capital gains of a non-corporate United States Holder, including an individual, that has held the ADS or ordinary share for more than one year currently are eligible for reduced tax rates. The deductibility of capital losses is subject to limitations.

        Any gain or loss that you recognize on a disposition of the ADSs or ordinary shares generally will be treated as United States-source income or loss for foreign tax credit limitation purposes. However, where we are treated as a PRC resident enterprise for PRC tax purposes and PRC tax is imposed on gain from the disposition of ADSs or ordinary shares (see "Taxation—People's Republic of China Taxation"), then a United States Holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC-source income for foreign tax credit purposes. If such an election is made, the gain so treated will be treated as a separate class or "basket" of income for purposes of the foreign tax credit under Section 865(h) of the Code. You should consult your tax advisors regarding the proper treatment of gain or loss, as well as the availability of a foreign tax credit, in your particular circumstances.

Passive Foreign Investment Company

        Based on the current and anticipated value of our assets and the composition of our income and assets, we do not expect to be a passive foreign investment company, or PFIC, for United States federal income tax purposes for our current taxable year ending December 31, 2012, although we may become a PFIC in the foreseeable future. The determination of PFIC status is based on an annual determination that cannot be made until the close of a taxable year, involves extensive factual investigation, including ascertaining the fair market value of all of our assets on a quarterly basis and

208

the character of each item of income that we earn, and is subject to uncertainty in several respects. Accordingly, we cannot assure you that we will not be treated as a PFIC for our current taxable year or for any future taxable year or that the IRS will not take a contrary position. Kirkland & Ellis International LLP, our United States tax counsel, expresses no opinion with respect to our PFIC status for any taxable year or our expectations contained in this paragraph.

        A non-United States corporation such as ourselves will be treated as a PFIC for United States federal income tax purposes for any taxable year if, applying applicable look-through rules, either:

•

at least 75% of its gross income for such year is passive income; or

•

at least 50% of the value of its assets (determined based on a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income.

        For this purpose, passive income generally includes dividends, interest, royalties and rents (other than certain royalties and rents derived in the active conduct of a trade or business and not derived from a related person). The classification of certain of our income as active or passive and certain of our assets as producing active or passive income, and hence whether we expect to be or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations relating to royalty income and income from intangible assets, as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations and guidance are potentially subject to different interpretations. If the percentage of our assets treated as producing passive income increases, we may become a PFIC for the current or one or more future taxable years.

        The determination of whether we expect to be or will become a PFIC will depend in part upon the value of our goodwill and other unbooked intangibles not reflected on our balance sheet (which may depend upon the market value or the ADSs or ordinary shares) and also will be affected by how, and how quickly, we spend our liquid assets. In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our anticipated market capitalization following the listing of the ADSs on the Nasdaq Global Market. In addition, we have assumed that no offering or private placement of our ADSs or ordinary shares will take place in the current taxable year. Among other matters, if our market capitalization is less than anticipated or subsequently declines, we may be or become a PFIC for the current or future taxable years because our liquid assets and cash (which are for this purpose considered assets that produce passive income) may then represent a greater percentage of our overall assets. Further, while we believe our classification methodology and valuation approach is reasonable, it is possible that the Internal Revenue Service may challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our company being or becoming classified as a PFIC for the current or one or more future taxable years.

        We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% by value of the stock. Although the law in this regard is unclear, we treat Yingzheng as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated United States GAAP financial statements. If it were determined, however, that we are not the owner of Yingzheng for United States federal income tax purposes, the composition of our income and assets would change and we may be more likely to be treated as a PFIC.

        If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, then, unless you make a "mark-to-market" election (as discussed below), you generally will be subject to special and adverse tax rules with respect to any "excess distribution" that you receive from us and any gain that you recognize from a sale or other disposition, including a pledge, of the ADSs or ordinary shares. For this purpose, distributions that you receive in a taxable year that are greater than 125% of the average annual

209

distributions that you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these rules:

•

the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or ordinary shares;

•

the amount of the excess distribution or recognized gain allocated to the current taxable year, and to any taxable years in your holding period prior to the first taxable year in which we were treated as a PFIC, will be treated as ordinary income; and

•

the amount the excess distribution or recognized gain allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the resulting tax will be subject to the interest charge generally applicable to underpayments of tax.

        If we are a PFIC for any taxable year during which a United States Holder holds the ADSs or ordinary shares and any of our non-United States subsidiaries is also a PFIC, such United States Holder would be treated as owning a proportionate amount (by value) of the shares of each such non-United States subsidiary classified as a PFIC (each such subsidiary, a lower tier PFIC) for purposes of the application of these rules. United States Holders should consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

        If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, then in lieu of being subject to the tax and interest-charge rules discussed above, you may make an election to include gain on the ADSs or ordinary shares as ordinary income under a mark-to-market method, provided that the ADSs or ordinary shares constitute "marketable stock." Marketable stock is stock that is regularly traded on a qualified exchange or other market, as defined in applicable Treasury regulations. We expect that the ADSs, but not our ordinary shares, will be listed on the Nasdaq Global Market, which is a qualified exchange or other market for these purposes. Consequently, if the ADSs are listed on the Nasdaq Global Market and are regularly traded, and you are a holder of ADSs, we expect that the mark-to-market election would be available to you if we became a PFIC, but no assurances are given in this regard.

        Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a United States Holder may continue to be subject to the PFIC rules with respect to such United States Holder's indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal income tax purposes.

        In certain circumstances, a United States Holder of shares in a PFIC may avoid the adverse tax and interest-charge regime described above by making a "qualified electing fund" election to include in income its share of the corporation's income on a current basis. However, you may make a qualified electing fund election with respect to your ADSs or ordinary shares only if we agree to furnish you annually with a PFIC annual information statement as specified in the applicable Treasury regulations. We currently do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.

        A United States Holder that holds the ADSs or ordinary shares in any year in which we are classified as a PFIC will be required to file an annual report containing such information as the United States Treasury Department may require. You should consult your own tax advisor regarding the application of the PFIC rules to your ownership and disposition of the ADSs or ordinary shares and the availability, application and consequences of the elections discussed above.

210

Information Reporting and Backup Withholding

        Information reporting to the IRS and backup withholding (currently at a rate of 28%) generally will apply to dividends in respect of the ADSs or ordinary shares, and the proceeds from the sale or exchange of the ADSs or ordinary shares, that are paid to you within the United States (and in certain cases, outside the United States), unless you furnish a correct taxpayer identification number and make any other required certification generally on IRS Form W-9 or you otherwise establish an exemption from information reporting and backup withholding. Backup withholding is not an additional tax. Amounts withheld as backup withholding generally are allowed as a credit against your United States federal income tax liability, and you may be entitled to obtain a refund of any excess amounts withheld under the backup withholding rules if you file an appropriate claim for refund with the IRS and furnish any required information in a timely manner.

        Under legislation enacted in 2010, United States Holders who are individuals generally will be required to report our name, address and such information relating to an interest in the ADSs or ordinary shares as is necessary to identify the class or issue of which your ADSs or ordinary shares are a part. These requirements are subject to exceptions, including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions and an exception applicable if the aggregate value of all "specified foreign financial assets" (as defined in the Code) does not exceed $50,000.

        United States Holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules.

211

EXPENSES RELATING TO THIS DISTRIBUTION

        The following table sets forth the main estimated expenses in connection with this distribution:

SEC registration fee		US$	990
Nasdaq Global Market listing fee			25,000
Legal fees and expenses			2,000,000
Accounting fees and expenses			1,060,000
Printing fees			220,000
Depositary fees			75,000
Other fees and expenses			220,000
	Total	US$	3,600,990

        All amounts are estimated, except the SEC registration fee and the Nasdaq Global Market listing fee.

212

LEGAL MATTERS

        We are being represented by Kirkland & Ellis International LLP with respect to U.S. federal and New York law. The validity of our ordinary shares represented by the ADSs distributed in this distribution will be passed upon for us by Maples and Calder. Legal matters as to PRC law will be passed upon for us by Guantao Law Firm. Kirkland & Ellis International LLP may rely upon Maples and Calder with respect to matters governed by the laws of the Cayman Islands and upon Guantao Law Firm with respect to matters governed by PRC law.

EXPERTS

        The consolidated financial statements of China Mobile Games and Entertainment Group Limited (the "Successor") at December 31, 2009, 2010 and 2011, and for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011, the financial statements of Shenzhen Kuailefeng Software Development Co., Ltd. (the "Predecessor") for the period from January 1, 2009 to October 26, 2009, the combined financial statements of Bright Way Technology (Hong Kong) Limited and Shenzhen Tastech Electronic Co., Ltd. at December 31, 2009, and for the year end December 31, 2009 and the period from January 1, 2010 to October 10, 2010, and the consolidated financial statements of 3GUU Mobile Entertainment Industrial Co., Ltd. at December 31, 2009, and for the years ended December 31, 2009 and 2010, appearing in this prospectus have been audited by Ernst & Young Hua Ming, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

        The offices of Ernst & Young Hua Ming are located at 18/F Ernst & Young Tower, No. 13 Zhu Jiang East Road, Tianhe District, Guangzhou, China 510623.

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WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement (including relevant exhibits and schedules) on Form F-1 under the Securities Act with respect to our ordinary shares and a registration statement on Form F-6 under the Securities Act with respect to the ADSs. This prospectus, which constitutes a part of the registration statement on Form F-1, does not contain all of the information contained in the registration statement. You should read the registration statement and its exhibits and schedules for further information with respect to us and our ordinary shares and ADSs. Information regarding the contents of contracts or other documents described in this prospectus is not necessarily complete and you should refer to the actual contracts and documents filed as exhibits to the registration statement for more detailed and complete information.

        Immediately upon completion of this distribution we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements and annual reports to shareholders and Section 16 short-swing profit and related reporting for our officers and directors and for holders of more than 10% of our ordinary shares.

        You can inspect and copy the registration statements, reports and other information filed with the SEC at the public reference facility maintained by the SEC at 100 F. Street, N.E., Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facility.

        Our SEC filings will also be available to the public on the SEC's internet website at http://www.sec.gov.

214

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
China Mobile Games and Entertainment Group Limited
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2009, 2010 and 2011		F-3
Consolidated Statements of Comprehensive Income for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor)		F-4
Consolidated Statements of Cash Flows for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor)		F-5
Consolidated Statements of Changes in Shareholders' Equity for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor)		F-7
Notes to the Consolidated Financial Statements		F-8
Unaudited Interim Condensed Consolidated Balance Sheet as of March 31, 2012		F-81
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2011 and 2012		F-82
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2012		F-83
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2011 and 2012		F-84
Notes to the Unaudited Interim Condensed Consolidated Financial Statements		F-85
Bright Way Technology (Hong Kong) Limited and Shenzhen Tastech Electronic Co., Ltd.
Report of Independent Registered Public Accounting Firm		F-114
Combined Balance Sheet as of December 31, 2009		F-115
Combined Statements of Income and Comprehensive Income for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010		F-116
Combined Statements of Cash Flows for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010		F-117
Combined Statements of Changes in Shareholders' Deficit for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010		F-118
Notes to the Combined Financial Statements		F-119
3GUU Mobile Entertainment Industrial Co., Ltd.
Report of Independent Registered Public Accounting Firm		F-134
Consolidated Balance Sheet as of December 31, 2009		F-135
Consolidated Statements of Operations for the years ended December 31, 2009 and 2010		F-136
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2010		F-137
Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the years ended December 31, 2009 and 2010		F-138
Notes to the Consolidated Financial Statements		F-139

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of
China Mobile Games and Entertainment Group Limited

        We have audited the accompanying consolidated balance sheets of China Mobile Games and Entertainment Group Limited (the "Company" or the "Successor") as of December 31, 2009, 2010 and 2011, and the related consolidated statements of comprehensive income, cash flows and changes in shareholders' equity for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011. We have also audited the statements of comprehensive income, cash flows, and changes in shareholders' equity of Shenzhen Kuailefeng Software Development Co., Ltd. (the "Predecessor") for the period from January 1, 2009 to October 26, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Mobile Games and Entertainment Group Limited as of December 31, 2009, 2010 and 2011 and the consolidated results of its operations and its cash flows for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011 and the results of operations and cash flows of Shenzhen Kuailefeng Software Development Co., Ltd. for the period from January 1, 2009 to October 26, 2009, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young Hua Ming
Guangzhou, the People's Republic of China
April 13, 2012

F-2

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))

				As of December 31,
		Notes		2009		2010			2011			2011
				(Successor) RMB		(Successor) RMB			(Successor) RMB			(Successor) US$
ASSETS
Current assets:
	Cash and cash equivalents				5,657		104,038			187,237			29,732
	Accounts receivable		5		—		37,013			56,121			8,912
	Inventories		6		—		2,126			2,103			334
	Prepayments and other current assets		7		3,098		12,402			24,966			3,964
	Amounts due from related parties		17		12,623		17,952			1,349			214
	Deferred tax assets		15		18		1,029			1,491			237
Total current assets					21,396		174,560			273,267			43,393
Non-current assets:
	Property and equipment, net		8		468		2,009			5,435			863
	Goodwill		9		247,373		598,358			598,358			95,015
	Intangible assets, net		10		60,861		78,217			70,101			11,132
	Deferred initial public offering costs		12		—		—			2,010			319
	Deferred tax assets		15		—		500			916			146
	Other non-current assets				—		—			343			54
Total non-current assets					308,702		679,084			677,163			107,529
TOTAL ASSETS					330,098		853,644			950,430			150,922
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable				2,629		12,404			9,150			1,453
	Accrued expenses and other current liabilities		11		730		8,291			17,577			2,791
	Deferred revenue				—		—			3,894			618
	Income tax payable				83		3,130			11,115			1,765
	Dividends payable		13		—		—			63,000			10,004
	Amounts due to related parties		17		220		6,048			6,542			1,039
Total current liabilities					3,662		29,873			111,278			17,670
Non-current liabilities:
	Unrecognized tax benefits		15		—		20,872			27,844			4,421
	Deferred tax liabilities		15		15,215		66,923			12,580			1,998
	Other non-current liabilities				—		2,000			2,550			405
Total non-current liabilities					15,215		89,795			42,974			6,824
Total liabilities					18,877		119,668			154,252			24,494
Commitments and contingencies			19
Shareholders' equity:
	Ordinary shares (US$0.001 par value, 1,000,000,000 shares authorized; 212,500,000 shares issued and outstanding as of December 31, 2009 and 2010, 302,729,550 shares issued and outstanding as of December 31, 2011)		13		1,434		1,434			1,937			308
	Additional paid-in capital				217,465		501,107			709,815			112,714
	Retained earnings				6,527		35,025			84,853			13,474
	Accumulated other comprehensive loss				—		(78	)		(427	)		(68	)
Total China Mobile Games and Entertainment Group Limited's equity					225,426		537,488			796,178			126,428
Noncontrolling interests					85,795		196,488			—			—
Total shareholders' equity					311,221		733,976			796,178			126,428
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY					330,098		853,644			950,430			150,922

The accompanying notes are an integral part of the consolidated financial statements.

F-3

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

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)

			Notes		For the period from January 1, 2009 to October 26, 2009			For the period from October 27, 2009 to December 31, 2009			For the year ended December 31, 2010			For the year ended December 31, 2011			For the year ended December 31, 2011
					(Predecessor)			(Successor)			(Successor)			(Successor)			(Successor)
					RMB			RMB			RMB			RMB			US$
Net revenues (a)
		Feature phone games				67,240			17,525			110,071			142,426			22,616
		Smartphone games				—			—			—			62,368			9,904
		Handset design				—			—			15,340			38,694			6,144
Total net revenues				20		67,240			17,525			125,411			243,488			38,664
Cost of revenues (b)
	Feature phone games					(31,921	)		(5,108	)		(32,827	)		(61,337	)		(9,740	)
	Smartphone games					—			—			—			(17,974	)		(2,854	)
	Handset design					—			—			(10,083	)		(29,037	)		(4,611	)
Total cost of revenues				20		(31,921	)		(5,108	)		(42,910	)		(108,348	)		(17,205	)
Gross profit						35,319			12,417			82,501			135,140			21,459
Operating expenses:
Selling expenses						—			—			(952	)		(7,561	)		(1,201	)
General and administrative expenses						(2,536	)		(2,556	)		(11,817	)		(16,263	)		(2,582	)
Research and development expenses						(4,438	)		(226	)		(8,377	)		(24,566	)		(3,901	)
Total operating expenses						(6,974	)		(2,782	)		(21,146	)		(48,390	)		(7,684	)
Operating income						28,345			9,635			61,355			86,750			13,775
Interest income						25			—			70			927			147
Other income						—			—			—			293			47
Changes in fair value of contingently returnable consideration assets				4		—			(948	)		(2,065	)		39,446			6,264
Income before income taxes and noncontrolling interests						28,370			8,687			59,360			127,416			20,233
Income tax (expenses) benefits				15		(6,597	)		638			(18,647	)		35,927			5,705
Net income						21,773			9,325			40,713			163,343			25,938
Net income attributable to noncontrolling interests						—			2,798			12,215			11,837			1,880
Net income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders						21,773			6,527			28,498			151,506			24,058
Other comprehensive loss:
Foreign currency translation adjustment						—			—			(111	)		(278	)		(44	)
Total other comprehensive loss						—			—			(111	)		(278	)		(44	)
Total comprehensive income						21,773			9,325			40,602			163,065			25,894
Total comprehensive income attributable to noncontrolling interests						—			2,798			12,181			11,908			1,891
Total comprehensive income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders						21,773			6,527			28,421			151,157			24,003
Earnings per share:
Basic earnings per share				21		N/A			0.03			0.13			0.62			0.10
Diluted earnings per share				21		N/A			0.03			0.13			0.62			0.10
Weighted average number of ordinary shares outstanding in computing:
Basic and diluted earnings per share				21		N/A			212,500,000			212,500,000			244,594,415			244,594,415
(a) Net revenues from related parties
		Feature phone games				—			17,525			60,352			13,752			2,184
		Handset design				—			—			298			—			—
Total net revenues from related parties				17		—			17,525			60,650			13,752			2,184
(b) Cost of revenues to related parties
		Handset design				—			—			(1,454	)		(774	)		(123	)

The accompanying notes are an integral part of the consolidated financial statements.

F-4

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))

		For the period from January 1, 2009 to October 26, 2009			For the period from October 27, 2009 to December 31, 2009			For the year ended December 31, 2010			For the year ended December 31, 2011			For the year ended December 31, 2011
		(Predecessor)			(Successor)			(Successor)			(Successor)			(Successor)
		RMB			RMB			RMB			RMB			US$
Cash flows from operating activities:
Net income			21,773			9,325			40,713			163,343			25,938
Adjustments to reconcile net income to net cash generated from operating activities:
	Depreciation of property and equipment		138			25			218			1,584			252
	Amortization of intangible assets		—			2,480			10,499			19,686			3,126
	Loss on disposal of property and equipment		—			—			29			5			1
	Share-based compensation expenses		—			1,708			6,853			815			129
	Acquisition-related costs paid by shareholder		—			756			910			—			—
	Changes in fair value of contingently returnable consideration assets		—			948			2,065			(39,446	)		(6,264	)
	Deferred income tax expense (benefit)		43			(638	)		(2,946	)		(55,221	)		(8,769	)
Changes in operating assets and liabilities:
	Accounts receivable		2,446			—			(16,790	)		(19,108	)		(3,034	)
	Prepayments and other current assets		(17,814	)		—			(309	)		(3,446	)		(546	)
	Inventories		—			—			(2,126	)		23			4
	Amounts due from related parties		—			(12,623	)		(782	)		16,603			2,636
	Accounts payable		(6,057	)		2,629			4,185			(3,254	)		(517	)
	Amounts due to related parties		—			220			5,828			494			78
	Income tax payable		213			—			2,913			7,985			1,268
	Accrued expenses and other current liabilities		(56	)		824			3,420			7,275			1,155
	Unrecognized tax benefits		4,560			—			17,156			6,679			1,061
	Deferred revenue		—			—			—			3,894			618
	Other non-current liabilities		—			—			—			550			87
Net cash provided by operating activities			5,246			5,654			71,836			108,461			17,223
Cash flows from investing activities:
	Cash acquired from business acquisitions (Note 4)		—			131			26,997			—			—
	Acquisition of property and equipment		(375	)		(128	)		(341	)		(5,023	)		(798	)
	Acquisition of intangible assets		—			—			—			(11,570	)		(1,837	)
	Disposal of property and equipment		—			—			—			9			1
	Capital injection into an investee		(45	)		—			—			—			—

The accompanying notes are an integral part of the consolidated financial statements.

F-5

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))

	For the period from January 1, 2009 to October 26, 2009			For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010			For the year ended December 31, 2011			For the year ended December 31, 2011
	(Predecessor)			(Successor)		(Successor)			(Successor)			(Successor)
	RMB			RMB		RMB			RMB			US$
Net cash (used in) provided by investing activities		(420	)		3		26,656			(16,584	)		(2,634	)
Cash flows from financing activities:
Dividends paid		—			—		—			(8,400	)		(1,334	)
Net cash used in financing activities		—			—		—			(8,400	)		(1,334	)
Exchange rate effect on cash and cash equivalents		—			—		(111	)		(278	)		(44	)
Net increase in cash and cash equivalents		4,826			5,657		98,381			83,199			13,211
Cash and cash equivalents, beginning of the period/year		532			—		5,657			104,038			16,521
Cash and cash equivalents, end of the period/year		5,358			5,657		104,038			187,237			29,732
Supplemental disclosure of cash flows information:
Income taxes paid		2,137			—		1,497			4,001			635
Non-cash activities:
Business acquisitions completed by the controlling shareholder and contributed to the Group (Note 4)		—			216,435		275,879			—			—
Acquisition of noncontrolling interests (Note 1)		—			—		—			208,396			33,092
Dividend declared but not paid		—			—		—			63,000			10,004
Deemed dividend to VODone Limited ("VODone") (Note 4)		—			—		—			30,278			4,808

The accompanying notes are an integral part of the consolidated financial statements.

F-6

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares)

		Total Shenzhen Kuailefeng Software Development Co., Ltd.'s equity (Predecessor)
		Share capital		(Accumulated deficit) Retained earnings			Accumulated other comprehensive income		Noncontrolling interests		Total shareholders' equity
		RMB		RMB			RMB		RMB		RMB
Balance as of January 1, 2009			1,000		(3,821	)		—		—		(2,821	)
	Net income for the period		—		21,773			—		—		21,773
Balance as of October 26, 2009			1,000		17,952			—		—		18,952

		Total China Mobile Games and Entertainment Group Limited's equity (Successor)
		Number of shares		Ordinary shares		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Noncontrolling interests			Total shareholders' equity
				RMB		RMB		RMB			RMB			RMB			RMB
Balance as of October 27, 2009			212,500,000		1,434		215,757		—			—			82,997			300,188
	Net income for the period		—		—		—		6,527			—			2,798			9,325
	Share-based compensation expenses		—		—		1,708		—			—			—			1,708
Balance as of December 31, 2009			212,500,000		1,434		217,465		6,527			—			85,795			311,221
	Net income for the year		—		—		—		28,498						12,215			40,713
	Other comprehensive loss		—		—		—		—			(78	)		(33	)		(111	)
	Share-based compensation expenses		—		—		6,853		—			—			—			6,853
	Shareholder contribution for acquisition of subsidiaries (Notes 4(b) and 4(c))		—		—		276,789		—			—			98,511			375,300
Balance as of December 31, 2010			212,500,000		1,434		501,107		35,025			(78	)		196,488			733,976
	Net income for the year		—		—		—		151,506			—			11,837			163,343
	Other comprehensive loss		—		—		—		—			(349	)		71			(278	)
	Deemed dividend to VODone		—		—		—		(30,278	)		—			—			(30,278	)
	Dividend declared		—		—		—		(71,400	)		—			—			(71,400	)
	Share-based compensation expenses		229,550		1		814		—			—			—			815
	Acquisition of noncontrolling interests		90,000,000		502		207,894		—			—			(208,396	)		—
Balance as of December 31, 2011			302,729,550		1,937		709,815		84,853			(427	)		—			796,178
Balance as of December 31, 2011 in US$			302,729,550		308		112,714		13,474			(68	)		—			126,428

The accompanying notes are an integral part of the consolidated financial statements.

F-7

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION

        China Mobile Games and Entertainment Group Limited (the "Company" or the "Successor") was incorporated as an exempted company with limited liability in the Cayman Islands on January 20, 2011 by VODone, a company listed on the Main Board of the Stock Exchange of Hong Kong Limited (the "HK Stock Exchange"). The Company is considered a foreign entity under the laws of the People's Republic of China (the "PRC").

        The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through its subsidiaries and a variable interest entity ("VIE"), which are all located in the PRC and Hong Kong. The Company, its subsidiaries and the VIE are hereinafter collectively referred to as the "Group". The Group is principally engaged in the development, operation and sale of feature phone and smartphone games as well as the provision of handset design products and services. The Company's principal geographic market is in the PRC.

        The Company's feature phone games, handset design and smartphone games businesses were acquired through three separate transactions (the "Acquired Businesses") completed by VODone and its subsidiaries: (i) the acquisition of 70% equity interest in Dragon Joyce Limited ("Dragon Joyce") and its subsidiaries on October 27, 2009 by VODone, (ii) the acquisitions of operating assets of Bright Way Technology (Hong Kong) Limited ("Bright Way") and Shenzhen Tastech Electronic Co. Ltd. ("Tastech") on October 11, 2010 by two subsidiaries of OWX Holding Co. Ltd. ("OWX Holding"), a 70% owned subsidiary of VODone, and (iii) the acquisition of 70% equity interest in 3GUU Mobile Entertainment Industrial Co. Ltd. ("3GUU BVI") and its subsidiaries on December 31, 2010 by Action King Limited ("Action King"), a wholly-owned subsidiary of VODone. Details of each acquisition are disclosed in Note 4. The Acquired Businesses were operated by VODone from their respective acquisition date to the date of the Group's reorganization on August 23, 2011 (the "Reorganization").

Reorganization transactions

        In preparation for its planned initial public offering ("IPO"), the following transactions were undertaken to reorganize the legal structure of the Group. On August 23, 2011, pursuant to a series of share swap agreements, the Company issued (i) 106,500,000 new ordinary shares to Dragon Joyce to acquire Dragon Joyce's equity interest in its subsidiaries (the "Dragon Joyce Group"), (ii) 43,500,000 new ordinary shares to OWX Holding to acquire OWX Holding's equity interest in its subsidiaries (the "OWX Group"), (iii) 59,999,000 new ordinary shares to Action King to acquire Action King's equity interests in 3GUU BVI and its subsidiaries (the "3GUU Group"), and (iv) 90,000,000 new ordinary shares to the noncontrolling interest holders of Dragon Joyce, OWX Holding and 3GUU BVI to acquire their equity interests in the Dragon Joyce Group, the OWX Group and the 3GUU Group, respectively. As a result of the Reorganization, the Company effectively acquired 70% and 30% of the equity interests in each of the Dragon Joyce Group, the OWX Group and the 3GUU Group from VODone and the noncontrolling interest holders, respectively. After the Reorganization, (i) Dragon Joyce, OWX Holding and Action King became wholly-owned subsidiaries of VODone and collectively own 70.2% of the equity interest in the Company whilst the former noncontrolling interest holders collectively own the remaining 29.8% equity interest of the Company; and (ii) the Dragon Joyce Group, the OWX Group and the 3GUU Group became wholly-owned subsidiaries of the Company. Dragon

F-8

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Joyce, OWX Holding and Action King were investment holding companies and had no operations since inception.

        Prior to the Reorganization, the Company, the Dragon Joyce Group, the OWX Group and the 3GUU Group had the same controlling shareholder in VODone. In substance, existing sister operating entities, the Dragon Joyce Group, the OWX Group and the 3GUU Group, have been reorganized as subsidiaries of the Company and the transaction was accounted for as a legal reorganization of entities under common control, in a manner similar to a pooling-of-interest. Accordingly, the assets and liabilities of the parties to the Reorganization have been stated at their historical amounts in the accompanying consolidated financial statements.

        The Company accounted for the purchase of the remaining 30% equity interest of the Dragon Joyce Group, the OWX Group and the 3GUU Group from the noncontrolling interest holders on August 23, 2011 as an equity transaction in accordance with Accounting Standards Codification ("ASC") topic 810 ("ASC 810"), Consolidation. The difference between the consideration paid by the Company to the noncontrolling interest holders and the carrying amount of the noncontrolling interest in the Dragon Joyce Group, the OWX Group and the 3GUU Group was recognized in additional paid-in capital.

VIE arrangement

        Prior to being acquired by VODone on December 31, 2010, Guangzhou Yitongtianxia Software Development Co., Ltd. ("Yitongtianxia"), a wholly-owned subsidiary of 3GUU BVI, entered into a series of contractual arrangements ("VIE Arrangement") with Guangzhou Yingzheng Information Technology Co., Ltd. ("Yingzheng") and its shareholders on October 28, 2009, whereby Yitongtianxia obtained effective control over Yingzheng through (i) the ability to exercise all the rights of Yingzheng's shareholders pursuant to the exclusive call option agreement, the equity pledge agreement and the agreement for voting proxies, (ii) the rights to absorb substantially all of the economic residual benefits pursuant to the exclusive technology services and market promotion agreement, the technology services agreement and two supplementary agreements and (iii) the obligation to fund all of the expected losses of Yingzheng pursuant to the loan agreement and a supplementary agreement. As a result, Yitongtianxia has been determined to be the primary beneficiary of Yingzheng. Accordingly, in accordance with SEC Regulation SX-3A-02 and ASC 810, the Company, through Yitongtianxia, has consolidated the operating results of Yingzheng from the date of acquisition of Yitongtianxia on December 31, 2010. As more fully described below, 3GUU BVI replaced Yitongtianxia as the primary beneficiary of Yingzheng on December 16, 2011. The reason for entering into the VIE Arrangement is to comply with PRC laws and regulations that (i) prohibit direct foreign control in companies involved in Internet content provision and telecommunication businesses and (ii) restrict an offshore company controlled or established by a PRC enterprise or natural person to acquire its PRC affiliates.

F-9

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The significant terms of the VIE Arrangement are listed below:

Exclusive call option agreement

        Pursuant to the exclusive call option agreement among Yitongtianxia, Yingzheng and its shareholders, Yitongtianxia and its shareholders irrevocably granted Yitongtianxia, or its designated persons, an exclusive option to purchase, when and to the extent permitted under PRC law, part of or the entire equity interests of Yingzheng. The exercise price is the minimum price permitted by PRC law. The exclusive option agreement will remain effective until the exclusive option is exercised to purchase the entire equity interest of Yingzheng.

Equity pledge agreement

        Pursuant to the equity pledge agreement between Yitongtianxia and Yingzheng's shareholders, Yingzheng's shareholders have pledged their entire equity interest in Yingzheng to Yitongtianxia to guarantee the performance of Yingzheng's obligations under the exclusive technology services and market promotion agreement. If Yingzheng breaches its contractual obligations under the exclusive technology services and market promotion agreement, Yitongtianxia, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interest. Yingzheng's shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interest in Yingzheng without the prior consent of Yitongtianxia. Unless Yitongtianxia terminates the agreement, the equity pledge agreement will remain effective until (i) Yingzheng fulfills all the obligations prescribed in the exclusive call option agreement, the exclusive technology services and market promotion agreement, the agreement for voting proxies and the loan agreement or (ii) Yitongtianxia acquires the entire equity interest of Yingzheng.

Exclusive technology services and market promotion agreement

        Pursuant to the exclusive technology services and market promotion agreement between Yitongtianxia and Yingzheng, Yitongtianxia has the exclusive and irrevocable right to provide to Yingzheng various technology and market promotion services related to the mobile phone games business. In return, Yingzheng is required to pay Yitongtianxia a service fee in an amount as determined at the sole discretion of Yitongtianxia. Unless Yitongtianxia terminates the agreement, the exclusive technology services and market promotion agreement will remain effective until the dissolution of Yitongtianxia in accordance with the applicable PRC laws. Business taxes relating to technology services and market promotion fees charged by Yitongtianxia are recorded as cost of revenues in the consolidated statements of income and comprehensive income.

Technology services agreement

        Pursuant to the technology services agreement dated August 6, 2010 between Yitongtianxia and Yingzheng and the supplementary agreement dated January 6, 2011, Yitongtianxia agreed to provide Yingzheng with technology support and market promotion services related to Yingzheng's smartphone games business. Yingzheng agreed to distribute 40% of its income generated from the game products developed under the technology services agreement, after deducting taxes and expenses, to

F-10

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Yitongtianxia on a monthly basis from August 6, 2010 to August 5, 2013. Upon expiration, the technology services agreement will be automatically renewed unless Yitongtianxia, in its sole discretion, disagrees.

Agreement for voting proxies

        Pursuant to the agreement for voting proxies among Yitongtianxia, Yingzheng and its shareholders, Yingzheng's shareholders irrevocably assign their full voting rights in Yingzheng to Yitongtianxia. Yingzheng's shareholders entrusted Yitongtianxia their rights to attend shareholders' meetings and to vote on their behalf on all of the matters that require shareholders' approval. Unless Yitongtianxia terminates the agreement, the agreement for voting proxies will remain effective in the same effective period as the exclusive call option agreement, the equity pledge agreement, the exclusive technology services and market promotion agreement and the loan agreement. On December 16, 2011, Yitongtianxia re-assigned the rights underlying the agreement for voting proxies to 3GUU BVI as more fully described below.

Loan agreement

        Pursuant to the loan agreement between Yitongtianxia and Yingzheng's shareholders, Yitongtianxia extended loans of an aggregate principal amount of RMB20,000 to Yingzheng's shareholders to enable them to pay the registered capital of Yingzheng. Yingzheng's shareholders will repay the loans by transferring their legal ownership in Yingzheng to Yitongtianxia when permitted by PRC law. The loan agreement is effective for 10 years and will automatically extend for another 10 years unless Yitongtianxia, in its sole discretion, disagrees. As of December 31, 2010 and 2011, Yingzheng's shareholders have not drawn down any loans from Yitongtianxia.

Supplementary agreements

        On December 30, 2010, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to determine the calculation of management fee to be paid to Yitongtianxia. Pursuant to this supplementary agreement, Yingzheng has agreed to pay an annual management fee to Yitongtianxia based on annual revenue of Yingzheng minus actual operating costs, other costs of Yingzheng, which include fees paid under the technology services agreement, and taxes paid by Yingzheng.

        On August 23, 2011, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to memorialize certain terms previously agreed amongst Yitongtianxia, Yingzheng and its shareholders. While this supplementary agreement was signed in 2011, the terms, intent and substance of all the agreements above remained unchanged. Pursuant to the supplementary agreement: (i) before Yitongtianxia can legally exercise the option to acquire Yingzheng, Yingzheng's shareholders cannot declare any dividends or distribute any residual profits without the consent of Yitongtianxia; (ii) any funds, including but not limited to dividends distributed out of Yingzheng's residual profits, received by Yingzheng's shareholders or any persons designated by Yingzheng's shareholders, shall be remitted in full to Yitongtianxia; (iii) the consideration received by Yingzheng's shareholders upon the exercise of the exclusive call option agreement by Yitongtianxia must be immediately remitted to Yitongtianxia or

F-11

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

any persons designated by Yitongtianxia; (iv) Yitongtianxia is obligated to provide continuous financial support to Yingzheng for operations; and (v) Yitongtianxia has the unilateral right to change the service fee amount under the exclusive technology services and market promotion agreement. The obligation to provide continuous financial support to Yingzheng for operations by Yitongtianxia was agreed to be terminated by both parties on August 23, 2011.

        On December 16, 2011, 3GUU BVI agreed to provide unlimited financial support to Yingzheng for its operations. In addition, pursuant to a power of attorney agreement entered into between Yitongtianxia and 3GUU BVI, Yitongtianxia re-assigned the rights to attend Yingzheng shareholders' meetings and to vote on all of the matters in Yingzheng that require shareholders' approval irrevocably entrusted to it by shareholders of Yingzheng to 3GUU BVI. As a result of the reassignment of power of attorney from Yitongtianxia to 3GUU BVI and the provision of unlimited financial support from 3GUU BVI to Yingzheng, 3GUU BVI replaced Yitongtianxia to have the power to direct the activities of Yingzheng that most significantly impact Yingzheng's economic performance and the obligation to absorb the expected losses of Yingzheng. Yitongtianxia essentially only retains the right to receive the expected residual returns of Yingzheng. 3GUU BVI and Yitongtianxia, as a group of related parties, have held all of the variable interests of Yingzheng since December 16, 2011. 3GUU BVI has been determined to be most closely associated with Yingzheng within the group of related parties and replaced Yitongtianxia as the primary beneficiary of Yingzheng on December 16, 2011.

F-12

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The carrying amounts and classifications of the assets and liabilities of Yingzheng are as follows:

	As of December 31,
	2010		2011		2011
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents		16,827		27,272		4,331
Accounts receivable		12,915		10,292		1,634
Prepayments and other current assets		289		718		114
Deferred tax assets		504		1,076		171
Total current assets		30,535		39,358		6,250
Non-current assets:
Property and equipment, net		862		2,861		454
Intangible assets, net		11,717		13,425		2,132
Deferred tax assets		500		896		142
Total non-current assets		13,079		17,182		2,728
Total assets		43,614		56,540		8,978
LIABILITIES
Current liabilities:
Accounts payable		5,590		1,332		212
Accrued expenses and other current liabilities		3,153		5,020		797
Deferred revenue		—		876		139
Income tax payable		134		237		38
Total current liabilities		8,877		7,465		1,186
Non-current liabilities:
Unrecognized tax benefits		3,061		4,315		685
Other non-current liabilities		2,000		2,150		341
Total non-current liabilities		5,061		6,465		1,026
Total liabilities		13,938		13,930		2,212

F-13

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The financial performance and cash flows of Yingzheng are as follows:

	For the year ended December 31, 2011
	RMB			US$
Net revenues		51,969			8,252
Net loss		(403	)		(64	)
Net cash provided by operating activities		22,723			3,608
Net cash used in investing activities		(12,278	)		(1,950	)
Net cash provided by financing activities		—			—

        As of December 31, 2011, there was no pledge or collateralization of the assets of Yingzheng and the Company has not provided any financial support that it was not previously contractually required to provide to Yingzheng. There were no assets of Yingzheng that can only be used to settle its obligations. Creditors of Yingzheng have no recourse to the general credit of 3GUU BVI, which is the primary beneficiary of Yingzheng.

Basis of presentation

        On October 27, 2009, immediately prior to VODone acquiring 70% equity interest in Dragon Joyce (Note 4(a)), substantially all of the operating assets related to the feature phone games business owned by Shenzhen Kuailefeng Software Development Co., Ltd. ("Kuailefeng" or the "Predecessor") were acquired by Huiyou, a wholly-owned subsidiary of Dragon Joyce, pursuant to a sale and purchase agreement dated October 9, 2009 entered into between Huiyou and Kuailefeng (the "Purchase Agreement"). Kuailefeng was designated as a predecessor of the Company in accordance with Rule 405 of Regulation C, as (i) the Dragon Joyce Group had no operations prior to the acquisition of the mobile phone games business from Kuailefeng on October 27, 2009 and (ii) the Company succeeded to the mobile phone games business of Kuailefeng through the acquisition of the Dragon Joyce Group on October 27, 2009 and the Company's own operations prior to the succession was insignificant relative to the operations acquired. The Company was the successor to Kuailefeng subsequent to the date of acquisition of the Dragon Joyce Group on October 27, 2009. For the period from January 1, 2009 to October 26, 2009, the Predecessor only engaged in the sale of in-game premium features of mobile phone games on feature phones.

        These financial statements present the consolidated financial position, results of operations and cash flows of the Successor and the results of operations and cash flows of Kuailefeng as the Predecessor in accordance with United States generally accepted accounting principles ("U.S. GAAP").

        The consolidated financial statements as of December 31, 2009, 2010, and 2011 and for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011 include the financial position, results of operations and cash flows for the Company on a successor basis. The accompanying financial statements of the Predecessor for the period from January 1, 2009 to October 26, 2009 include the full results of operations and cash flows of Kuailefeng, as the Company

F-14

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

acquired and succeeded to substantially all of Kuailefeng's key operating assets through the acquisition of the Dragon Joyce Group.

        The consolidated financial statements of the Successor reflect the new basis of accounting in accordance with ASC topic 805 ("ASC 805"), Business Combinations. The application of fresh start accounting represents the termination of the Predecessor reporting entity and the creation of the Successor reporting entity with a new basis of accounting. Accordingly, the results for the year ended December 31, 2009 are presented as two distinct periods and a vertical black line is shown to separate the Company's consolidated financial statements from those of the Predecessor for the period prior to October 27, 2009. The results of the Successor are not comparable to the results of the Predecessor due to the difference in the new basis of presentation.

        As of December 31, 2011, the Company's subsidiaries consisted of the following entities:

Name	Place of incorporation	Date of establishment / acquisition		Percentage of ownership			Principal activities
Beauty Wave Limited ("Beauty Wave")	British Virgin Islands ("BVI")		October 27, 2009		100	%	Investment holding
China Wave Group Limited ("China Wave")	BVI		October 27, 2009		100	%	Investment holding
Uni-Force Development Limited ("Uni-Force")	Hong Kong		October 27, 2009		100	%	Investment holding
Huiyou Digital (Shenzhen) Ltd. ("Huiyou")	The PRC		October 27, 2009		100	%	Development, operation and sale of mobile phone games
Beijing Dongganlefeng Information Technology Co., Ltd. ("Donggan")	The PRC		October 27, 2009		100	%	Development, operation and sale of mobile phone games
Beijing Longyuebaifu Information Technology Co., Ltd. ("Longyue")	The PRC		October 27, 2009		100	%	Development, operation and sale of mobile phone games
Shenzhen Douwan Network Technology Co., Ltd. ("Shenzhen Douwan")	The PRC		April 19, 2010		100	%	Development, operation and sale of mobile phone games
Shenzhen Yikechuanghui Technology Co., Ltd. ("Yikechuanghui")	The PRC		October 21, 2010		100	%	Development, operation and sale of mobile phone games
Shenzhen Qilewuxian Software Development Co. Ltd. ("Qilewuxian")	The PRC		April 19, 2010		100	%	Development, operation and sale of mobile phone games
OWX Hong Kong Limited ("OWX HK")	Hong Kong		December 28, 2009		100	%	Provision of handset design products and services
OWX (Beijing) Technology Co., Ltd. ("OWX Beijing")	The PRC		September 3, 2010		100	%	Investment holding
Shenzhen Zhongtuokechuang Technology Co., Ltd. ("Zhongtuo")	The PRC		November 18, 2010		100	%	Provision of handset design products and services
3GUU BVI	BVI		December 31, 2010		100	%	Investment holding
3GUU Mobile Entertainment Co. Limited ("3GUU HK")	Hong Kong		December 31, 2010		100	%	Investment holding
Yitongtianxia	The PRC		December 31, 2010		100	%	Development, operation and sale of mobile phone games

F-15

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        As of December 31, 2011, the Company consolidated the following VIE:

Name	Place of incorporation	Date of establishment / acquisition	Percentage of ownership		Principal activities
Yingzheng	The PRC	December 31, 2010		—	Development, operation and sale of mobile phone games

Principles of consolidation

        The consolidated financial statements include the financial statements of the Company, its subsidiaries and a VIE, for which a subsidiary of the Company is the primary beneficiary. The results of the subsidiaries are consolidated from the date on which the Group obtained control and are continued to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when the Company holds a majority of the voting equity interest in an entity. However, if the Company demonstrates its ability to control the entity through the power to direct the activities of the entity that most significantly impact the entity's economic performance and the obligation to absorb losses of the entity that could potentially be significant to the entity or the right to receive benefits from the entity that could potentially be significant to the entity, then the entity is consolidated.

        All significant intercompany balances and transactions among the Company, its subsidiaries and VIE have been eliminated upon consolidation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

        The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, revenue recognition, allowance for doubtful accounts, provision for inventory obsolescence, estimates of useful life for property and equipment and intangible assets, valuation allowance for deferred tax assets, allocation of purchase price, uncertain tax positions, share-based compensation and consolidation of variable interest entity. Actual results could differ significantly from those estimates.

Foreign currency

        Based on the criteria of ASC topic 830 ("ASC 830"), Foreign Currency Matters, the Company determined its functional currency to be the United States Dollars ("US$"). The Company's subsidiaries located in the BVI determined their functional currency to be the US$. The Company's subsidiaries located in Hong Kong determined their functional currency to be the Hong Kong Dollars ("HK$"), with the exception of OWX HK and 3GUU HK which determined their functional currency to be US$. The Company's subsidiaries and VIE located in the PRC determined their functional currency to be the RMB. The Company uses the RMB as its reporting currency.

F-16

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Each entity in the Group maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the consolidated statements of income and comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange rates at the dates of the initial transactions.

        The assets and liabilities of the Company's subsidiaries located outside of the PRC are translated into RMB at the exchange rates prevailing at the balance sheet date. The consolidated statements of comprehensive income of these entities are translated into RMB at the weighted average exchange rates for the year. The resulting translation gains (losses) are recorded in accumulated other comprehensive income as a component of shareholders' equity.

        For the purpose of the consolidated statements of cash flows, cash flows of the Company's subsidiaries located outside of the PRC are translated into RMB at the exchange rates prevailing on the dates of the cash flows. Frequently recurring cash flows of these entities which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

Convenience translation

        Amounts in US$ are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 to RMB6.2975 on March 30, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

Cash and cash equivalents

        Cash and cash equivalents consist of cash on hand and demand deposits placed with banks or other financial institutions with original maturity of three months or less at the date of purchase and are unrestricted as to withdrawal and use.

Accounts receivable and allowance for doubtful accounts

        Accounts receivable are carried at net realizable value. In general, collateral is not required and interest is not charged on accounts receivable. An allowance for doubtful accounts is recorded when collection of the full amount is no longer probable. In evaluating the collectability of receivable balances, the Group considers specific evidence including the aging of the receivable, the customer's payment history, its current credit-worthiness and current economic trends. Accounts receivable are written off after all collection efforts have ceased.

F-17

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventories

        Inventories consist of raw materials that are used for the provision of handset design products and services and are stated at the lower of cost or market value. Costs of raw materials are based on purchase costs and are determined by the weighted average method.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation and are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Office equipment	3 - 5 years
Motor vehicles	4 years
Leasehold improvement	shorter of lease terms or 3 years

        Repair and maintenance costs are charged to expense when incurred, whereas the costs of renewals and betterment that extend the useful life of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of comprehensive income.

Goodwill

        Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. In accordance with ASC topic 350 ("ASC 350"), Intangibles—Goodwill and Other, goodwill is not amortized, but rather is tested for impairment annually or more frequently if indicators of impairment present. The Group assigns and assesses goodwill for impairment at the reporting unit level. The Group determines that each reporting unit is identified at the operating segment level.

        The performance of the impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined by computing the future discounted cash flows expected to be generated by the reporting unit. If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, the Group performs the second step of the goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss. The annual goodwill impairment test is performed on December 31 of each year. No goodwill impairment was recognized for any of the periods presented.

Intangible assets

        Intangible assets, including computer software, mobile games and platforms, acquired customer relationship and capitalized mobile game product development costs, are carried at cost less

F-18

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

accumulated amortization. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic lives of the intangible assets as follows:

Computer software	5 years
Mobile games and platforms	1 - 6 years
Acquired customer relationship	7 years
Mobile game product development costs	3 years

        Computer software purchased from third-party vendors is capitalized and amortized on a straight-line basis over the estimated useful life of five years.

        Mobile games and platforms purchased from third-party vendors are capitalized and amortized on a straight-line basis over the estimated economic lives which range from one to five years while mobile games and platforms acquired in business combinations are recorded at fair value at the date of acquisition and amortized on a straight-line basis over the remaining estimated economic lives which range from three to six years.

        Customer relationships acquired in business combinations are related to the ability to sell existing services to existing customers of the acquiree. Acquired customer relationships are recognized at fair value at the date of acquisition using a valuation technique based on expected income and amortized on a straight-line basis over the remaining estimated economic lives of seven years.

        The Group recognizes costs to develop its mobile game products in accordance with ASC topic 985 ("ASC 985"), Software. Mobile game product development costs consist primarily of payroll, depreciation and other overhead expenses incurred by the Group to develop, maintain, monitor and manage the Group's mobile gaming products. Costs incurred for the development of mobile game products prior to the establishment of technological feasibility are expensed when incurred and are included in product development expenses. Once a mobile game product has reached technological feasibility, all subsequent mobile game product development costs are capitalized until the product is available for marketing. Technological feasibility is evaluated on a product-by-product basis, but typically encompasses both technical design and game design documentation and only occurs when the mobile games have a proven ability to operate in a mobile game environment. The amount of mobile game development costs qualifying for capitalization as intangible assets was amortized over the estimated life of the corresponding mobile games, which is determined to be three years.

Impairment of long-lived assets

        The Group evaluates its long-lived assets, including property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable in accordance with ASC topic 360 ("ASC 360"), Property, Plant and Equipment. When these events occur, the Group evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If

F-19

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. Long-lived assets are grouped at the lowest level for which there are identifiable cash flows and are largely independent of the cash flows of the other assets when assessing impairment. No impairment of long-lived assets was recognized for any of the periods presented.

Fair value of financial instruments

        Financial instruments of the Group primarily include cash and cash equivalents, accounts receivables, amounts due from related parties, contingently returnable consideration assets, accounts payable and amounts due to related parties. As of December 31, 2009, 2010 and 2011, the carrying values of these financial instruments, other than the contingently returnable consideration assets, approximated their fair values due to the short-term maturity of these instruments. The contingently returnable consideration assets were recorded at fair value as determined on the respective days of business acquisition and subsequently adjusted to the fair value at each reporting date (Note 4). The Group determined the fair values of the contingently returnable consideration assets with the assistance of an independent valuation firm.

        The Company applies ASC topic 820 ("ASC 820"), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.

        ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—	Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—	Unobservable inputs which are supported by little or no market activity.

        ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

        In accordance with ASC 820, the Group measures the fair value of the contingently returnable consideration assets using an income approach based on inputs that are unobservable in the market.

F-20

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Assets measured at fair value on a recurring basis as of December 31, 2009 are summarized below:

	Quoted price in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	RMB		RMB		RMB
Contingently returnable consideration assets		—		—		2,865

        Assets measured at fair value on a recurring basis as of December 31, 2010 are summarized below:

	Quoted price in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	RMB		RMB		RMB
Contingently returnable consideration assets		—		—		7,770

        Assets measured at fair value on a recurring basis as of December 31, 2011 are summarized below:

	Quoted price in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	RMB		RMB		RMB		US$
Contingently returnable consideration assets		—		—		16,938		2,690

        The following table presents a reconciliation of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period from October 27, 2009 to December 31, 2009 (Successor) and the year ended December 31, 2010 (Successor) and 2011

F-21

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(Successor). The Predecessor had no Level 3 financial instruments measured at fair value on a recurring or a non-recurring basis for the period from January 1, 2009 to October 26, 2009.

		Contingently returnable consideration assets
		RMB
Balance as of October 27, 2009			—
	Recognized during the period		3,813
	Realized or unrealized loss		(948	)
Balance as of December 31, 2009			2,865
	Recognized during the year		6,970
	Realized or unrealized loss		(2,065	)
Balance as of December 31, 2010			7,770
	Recognized during the year		—
	Realized or unrealized gain		39,446
	Settlement (Note 4)		(30,278	)
Balance as of December 31, 2011			16,938
Balance as of December 31, 2011 in US$			2,690
The amount of total loss for the period from October 27, 2009 to December 31, 2009 (Successor) included in earnings			(948	)
The amount of total loss for the year ended December 31, 2010 (Successor) included in earnings			(2,065	)
The amount of total gain for the year ended December 31, 2011 (Successor) included in earnings			39,446

        Realized and unrealized gain (loss) for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011 was recorded as "Changes in fair value of contingently returnable consideration assets" in the consolidated statements of comprehensive income.

Revenue Recognition

        Revenues of the Group are derived from the development, operation and sale of in-game premium feature of mobile phone games as well as the provision of handset design products and services. For each of the significant sources of revenue stated below, revenue is recognized only when the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the goods have been delivered or the services have been rendered; (iii) the price or fees are fixed or determinable; and (iv) collectability is reasonably assured.

F-22

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i)    Feature phone games

        The Group generates feature phone games revenues principally from the sale of in-game premium features of mobile phone games on feature phones.

(a)    Single player games

        The Group entered into service arrangements with feature phone manufacturers to pre-install its self-developed single player games or application platforms onto the feature phones before they reach mobile phone game players. Mobile phone game players can access the pre-installed single player games directly or download the single player games through the pre-installed application platform on the feature phones without additional charges. Single player games are offered on a free-for-trial basis where the mobile phone game players may purchase in-game premium features to extend the duration of the game or to enjoy additional functions of the game. All chargeable in-game premium features on feature phones are considered consumed immediately upon purchase. Any unused premium features cannot be carried forward after the mobile phone game players exit the game. When mobile phone game players leave the game they are currently playing and perform other functions on the feature phones, the previously purchased but unused premium features can no longer be accessed and are therefore completely consumed.

        The Group contracts with mobile phone service providers, who in turn contract with mobile network operators, for billing and collection services offered to mobile phone game players who have purchased in-game premium features. The mobile network operators and the mobile service providers have a contractual relationship in which mobile network operators grant rights to mobile service providers to deliver digital content such as feature phone games, news alerts, finance information, logos and ringtones to mobile phone users. The mobile network operators are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players while the mobile phone service providers are entitled to profit sharing based on a prescribed percentage of the net proceeds collected from the mobile network operators. Since the Group does not have a direct contractual relationship with the mobile network operators, the net proceeds after deducting the amounts shared by the mobile network operators and the mobile phone service providers represent the amount of revenue to be recognized by the Group.

        The Group has information generated from its internal system on the number of in-game premium features sold each month to estimate the amount of collectable net proceeds and to recognize single-player feature phone games revenues. Differences between its estimates and the actual amounts confirmed by the mobile phone service providers have historically been insignificant. Generally, the Group receives billing confirmations from each of the mobile phone service providers within 30 to 120 days after the end of each month. The Group pays service fees, which are recognized as cost of revenues, to the feature phone manufacturers based on a prescribed percentage of the estimated net proceeds or a prescribed fixed fee per mobile phone activated by mobile phone game players.

        Collectability is considered reasonably assured as the Group deals with only reputable mobile phone service providers and performs thorough credit assessment on the mobile phone service providers prior to entering into a business relationship with them. Historically, the Group has not experienced any significant defaults for payment.

F-23

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Based on the above, the Group recognizes the estimated proceeds to be received from the mobile phone service providers as single-player feature phone games revenues, using data generated from its internal system, when the goods are delivered based on consumption of in-game premium features by mobile phone game players. The difference between the estimated proceeds and the actual amounts confirmed by the mobile phone service providers is recognized in the consolidated statements of comprehensive income when billing confirmations are received by the Group.

(b)    Mobile social games

        Under the free-to-play model for mobile social games, mobile phone game players can download mobile phone games, obtain game accounts and play the basic functions of the mobile games free of charge but may purchase game points for in-game premium features to enhance their game-playing experience. The purchased in-game premium features can be freely traded amongst game players within the applicable game as long as consumption of the items has not commenced. Mobile phone game players can purchase game points by either charging their account with mobile network operators directly or buying prepaid cards issued by mobile network operators. The prepaid cards can be converted into a pre-specified number of game points for consumption. Upon delivery of game points purchased directly from mobile network operators or converted from prepaid cards to mobile phone game players, the Group initially classifies these amounts as deferred revenue. For purposes of determining when the service has been provided to the mobile phone game players, the Group has determined that an implied obligation exists to the mobile phone game players who purchased game points to provide an enhanced game-playing experience over the average playing period of the mobile phone game players. The Company, using data generated from its internal system, estimates the average playing period from the first time the mobile phone game players purchase game points through the period when the game players have not logged into the game for over two consecutive months. Mobile phone game players are deemed to be inactive if they have not logged into the game for two consecutive months.

        The Group contracts with third-party payment platforms for billing, collection and transmission services offered to mobile phone game players who have purchased game points. The Group also contracts with mobile application and software websites to distribute its mobile social games by providing platforms for mobile phone game players to download such games. The third-party payment platforms are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since the Group does not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the third-party payment platforms represent the amount of revenue to be recognized by the Group.

        The Group has information generated from its internal system on the number of game points sold each month to estimate the amount of collectable net proceeds and to recognize mobile social games revenues. Differences between its estimates and the actual amounts confirmed by the third-party payment platforms have historically been insignificant. Generally, within 30 days after the end of each month, the Group receives billing confirmations from each of the third-party payment platforms confirming the amount of net proceeds to be received by the Group. The Group pays service fees to the mobile application and software websites.

F-24

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Collectability is considered reasonably assured as the Group deals with only reputable third-party payment platforms and performs thorough credit assessment on the third-party payment platforms prior to entering into a business relationship with them. Historically, the Group has not experienced any significant defaults for payment.

        Based on the above, the Group recognizes the estimated net proceeds to be received from the third-party payment platforms for the sale of game points of the mobile social games, using data generated from its internal system, as deferred revenue upon delivery of game points to mobile phone game players. Deferred revenue is recognized as feature phone games revenue ratably over the estimated average playing period of the paying mobile phone game players of three months, starting from the point in time when game points are delivered to the mobile phone game players. As the mobile social games are under a free-to-play model and revenue is only generated from paying mobile phone game players when they purchase game points for in-game premium features, the Group focuses solely on the playing period of paying mobile phone game players when estimating the period over which revenue is being recognized. The Group determines the estimated average playing period of paying mobile phone game players, which is the time period between the paying mobile phone game players' first purchase and last log in, for each significant game based on historical player usage patterns and game playing behavior. The Group's internal system tracks each of the paying mobile phone game players' purchase and log in history for each significant game to generate data to estimate the average playing period for the Group's population of paying mobile phone game players. Future usage patterns may differ from the historical usage patterns on which the Group's revenue recognition policy is based. The Group monitors the operational statistics and usage patterns of its online game and modifies the expected life span when materially different. The difference between the estimated proceeds and the actual amount confirmed by the third-party payment platforms is recognized in the consolidated statements of comprehensive income when billing confirmations are received by the Group and all revenue recognition criteria are met.

        Game points can be purchased at a discount if mobile phone game players purchase the game points with prepaid cards issued by mobile network operators or during promotional activities organized by the Group. The Group accounts for such discounts in accordance with ASC subtopic 605-50 ("ASC 605-50"), Revenue Recognition: Customer Payments and Incentives. Such discounts are initially accounted for as a reduction of deferred revenue. As a result, deferred revenue includes the value of both discounted and undiscounted game points, which are subsequently recognized as revenue on a weighted average basis when the Group provides future services to enhance mobile phone game players' playing experience.

(ii)    Handset design

        The Group generates handset design revenues from the provision of comprehensive handset design solutions to mobile phone manufacturers and mobile phone content providers. Handset design solutions include (a) operating system software and hardware design with one-year post-contract customer support ("PCS") service; (b) printed circuit board with operating system software and optional assembly service; and (c) mobile phone contents installation service. Operating system software and hardware designs with PCS services are provided to mobile phone manufacturers for either a fixed fee or a variable fee based on the units of production by the mobile phone manufacturers at a prescribed

F-25

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

unit price. Printed circuit boards with operating system software are sold to mobile phone manufacturers for a fixed unit price. Mobile phone contents installation services are rendered to mobile phone content providers for a prescribed percentage of the mobile phone content providers' net profits.

        In assessing its arrangements with multiple deliverables and arrangements that include software elements for the periods presented, the Group adopted Accounting Standards Update ("ASU") No. 2009-13 ("ASU 2009-13"), Revenue Recognition—Multiple-Deliverable Revenue Arrangements, and ASU No. 2009-14 ("ASU 2009-14"), Certain Revenue Arrangements that Include Software Elements, on a retrospective basis. In accordance with ASU 2009-13, the total arrangement consideration is allocated to each unit of accounting based on its relative selling price which is determined based on the entity's best estimate of the selling price for that deliverable when vendor-specific evidence and third-party evidence of selling price do not exist. In accordance with ASU 2009-14, software contained on the tangible product which is essential to the tangible product's functionality is excluded from the scope of software accounting guidance in ASC subtopic 985-605 ("ASC 985-605"), Software: Revenue Recognition. The Group believes retrospective adoption provides the most comparable and useful financial information for financial statement users, is more consistent with the information the Group's management uses to evaluate its business, and better reflects the underlying economic performance of the Group. The adoption of ASU 2009-13 and ASU 2009-14 did not have a significant impact on the Group's financial position or results of operations.

(a)    Operating system software and hardware design with PCS service

        The Group and the mobile phone manufacturers sign an agreement containing the significant terms of the provision of operating system software and hardware design with PCS service to evidence that an arrangement exists. The Group recognizes handset design revenues derived from operating system software and hardware design and PCS service concurrently in accordance with ASC 985-605, as (i) the PCS fee is included with the initial arrangement fee for operating system software and hardware design; (ii) the PCS is for one year or less; (iii) the PCS costs is estimated to be insignificant and (iv) unspecified upgrades or enhancements offered during PCS arrangements historically have been and are expected to be minimal and infrequent. Therefore, delivery of operating system software and hardware design with PCS service occurs upon receipt and acceptance of the operating system software and hardware design by the mobile phone manufacturers. The Group performs credit assessment on the mobile phone manufacturers prior to signing the agreements to ensure collectability is reasonably assured. Accordingly, revenues from the provision of operating system software and hardware design and PCS service are recognized upon (i) the mobile phone manufacturers accepting the handset design solutions if the arrangement is based on a fixed fee or (ii) the mobile phone manufactures accepting the handset design solutions and confirming their monthly units of production to the Group if the arrangement is based on a variable fee derived from the units of production by the mobile phone manufacturers at a prescribed unit price. The Group has not provided any refunds in the past and does not intend to provide refunds in the future to the mobile phone manufacturers.

(b)    Printed circuit board with operating system software and optional assembly service

        Printed circuit boards with operating system software and optional assembly services are multiple element arrangements comprising printed circuit boards, assembly services and operating system

F-26

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

software specifically designed for the printed circuit boards. Since the operating system software is essential to the functionality of the printed circuit board, the transaction is outside the scope of software accounting guidance in ASC 985-605 in accordance with ASU 2009-14. Accordingly, the Group accounted for the sale of printed circuit boards with operating system software and optional assembly service as a multiple deliverables arrangement in accordance with ASU 2009-13. Each of the printed circuit board, operating system software and assembly service represents a separate unit of accounting.

        The Group and the mobile phone manufacturers sign an agreement containing the significant terms of the sale of printed circuit board with operating system software to evidence that an arrangement exists. The agreement also stipulates whether the mobile phone manufacturers engage the Group to perform assembly service on the printed circuit board. The Group delivers the assembled printed circuit boards together with the operating system software installed to mobile phone manufacturers if the Group is engaged to perform assembly service; whereas the Group normally delivers the operating system software prior to the printed circuit board to the mobile phone manufacturers if the Group is not engaged to perform assembly service. Therefore, delivery of printed circuit boards with operating system software and optional assembly services occurs upon receipt and acceptance of all deliverables by the mobile phone manufacturers. The Group performs credit assessment on the mobile phone manufacturers prior to signing the agreements to ensure collectability is reasonably assured. The purchase price is fixed because the unit price is stipulated in the signed sales agreement and no concessions such as discounts, rebates, refunds or other price changes are provided subsequently. However, the mobile phone manufacturers only pay the agreed purchase price upon receipt of all of the deliverables in the arrangement. The Group outsources the assembly of printed circuit boards and installation of operating system software to original equipment manufacturers ("OEM") and pays manufacturing fees, which are recognized as cost of revenues, based on a prescribed fixed fee per unit manufactured.

        In accordance with ASU 2009-13 and ASC subtopic 605-25 ("ASC 605-25"), Revenue Recognition: Multiple-Element Arrangements, the amount allocable to the delivered units or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Since the amount allocable to the operating system software is contingent upon the delivery of printed circuit board and the related assembly service, if any, revenues from the sale of printed circuit board with operating system software and optional assembly service are recognized only upon delivery of the final deliverable.

(c)    Mobile phone contents installation service

        Mobile phone contents installation service does not require significant production, modification or customization of the mobile phone contents received from the mobile phone content providers. Persuasive evidence of the arrangement is documented in a contract signed by the mobile phone content providers and the Group. Delivery of mobile phone contents installation service occurs when the mobile phone contents are installed on the mobile device circuit boards by the OEM. The mobile phone contents installation service fees are fixed and non-refundable once the mobile phone content providers confirm their monthly net profits to the Group. Collectability is considered reasonably assured as the Group deals with only reputable mobile phone content providers and performs thorough credit assessment on the mobile phone content providers prior to entering into a business relationship

F-27

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

with them. Historically, the Group has not experienced any significant defaults for payment. Accordingly, the Group recognizes revenues from mobile phone contents installation services when the services are delivered and the fees are fixed upon receipt of the monthly net profits confirmations from mobile phone content providers.

(iii)    Smartphone games

        The Group generates smartphone games revenues from the sale of in-game premium features of self-developed mobile social games as well as from the sale of self-developed and purchased single player games on smartphones. The Group operates mobile social games and single player games under a free-to-play model and a subscription based model, respectively.

(a)    Mobile social games

        Under the free-to-play model for mobile social games, mobile phone game players can download mobile phone games, obtain game accounts and play the basic functions of the mobile games free of charge but may purchase game points for in-game premium features to enhance their game-playing experience. The purchased in-game premium features can be freely traded amongst game players within the applicable game as long as consumption of the items has not commenced. Mobile phone game players can purchase game points by either charging their account with mobile network operators directly or buying prepaid cards issued by mobile network operators. The prepaid cards can be converted into a pre-specified number of game points for consumption. Upon delivery of game points purchased directly from mobile network operators or converted from prepaid cards to mobile phone game players, the Group initially classifies these amounts as deferred revenue. For purposes of determining when the service has been provided to the mobile phone game players, the Group has determined that an implied obligation exists to the mobile phone game players who purchased game points to provide an enhanced game-playing experience over the average playing period of the mobile phone game players. The Company, using data generated from its internal system, estimates the average playing period from the first time the mobile phone game players purchase game points through the period when the game players have not logged into the game for over two consecutive months. Mobile phone game players are deemed to be inactive if they have not logged into the game for two consecutive months.

        The Group contracts with mobile network operators and third-party payment platforms for billing, collection and transmission services offered to mobile phone game players who have purchased game points. The Group also contracts with mobile application and software websites to distribute its mobile social games by providing platforms for mobile phone game players to download such games. The mobile network operators and third-party payment platforms are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since the Group does not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the mobile network operators and the third-party payment platforms represent the amount of revenue to be recognized by the Group.

F-28

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The Group has information generated from its internal system on the number of game points sold each month to estimate the amount of collectable net proceeds and to recognize mobile social games revenues. Differences between its estimates and the actual amounts confirmed by the mobile network operators and the third-party payment platforms have historically been insignificant. Generally, within 30 days after the end of each month, the Group receives billing confirmations from each of the mobile network operators and third-party payment platforms confirming the amount of net proceeds to be received by the Group. The Group pays service fees to the mobile application and software websites.

        Collectability is considered reasonably assured as the Group deals with only reputable mobile network operators and third-party payment platforms and performs thorough credit assessment on the mobile network operators and the third-party payment platforms prior to entering into a business relationship with them. Historically, the Group has not experienced any significant defaults for payment.

        Based on the above, the Group recognizes the estimated net proceeds to be received from the mobile network operators and the third-party payment platforms for the sale of game points of the mobile social games, using data generated from its internal system, as deferred revenue upon delivery of game points to mobile phone game players. Deferred revenue is recognized as smartphone games revenue ratably over the estimated average playing period of the paying mobile phone game players of three months, starting from the point in time when game points are delivered to the mobile phone game players. As the mobile social games are under a free-to-play model and revenue is only generated from paying mobile phone game players when they purchase game points for in-game premium features, the Group focuses solely on the playing period of paying mobile phone game players when estimating the period over which revenue is being recognized. The Group determines the estimated average playing period of paying mobile phone game players, which is the time period between the paying mobile phone game players' first purchase and last log in, for each significant game based on historical player usage patterns and game playing behavior. The Group's internal system tracks each of the paying mobile phone game players' purchase and log in history for each significant game to generate data to estimate the average playing period for the Group's population of paying mobile phone game players. Future usage patterns may differ from the historical usage patterns on which the Group's revenue recognition policy is based. The Group monitors the operational statistics and usage patterns of its online game and modifies the expected life span when materially different. The difference between the estimated proceeds and the actual amount confirmed by the mobile network operators and third-party payment platforms is recognized in the consolidated statements of comprehensive income when billing confirmations are received by the Group and all revenue recognition criteria are met.

        Game points can be purchased at a discount if mobile phone game players purchase the game points with prepaid cards issued by mobile network operators or during promotional activities organized by the Group. The Group accounts for such discounts in accordance with ASC 605-50, Revenue Recognition: Customer Payments and Incentives. Such discounts are initially accounted for as a reduction of deferred revenue. As a result, deferred revenue includes the value of both discounted and undiscounted game points, which are subsequently recognized as revenue on a weighted average basis when the Group provides future services to enhance mobile phone game players' playing experience.

F-29

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b)    Single player game

        Under the subscription based model for single player games, mobile phone game players can either subscribe to a monthly plan to download a fixed number of single player games from mobile network operators for a fixed subscription fee per month or download each single player game based on a fixed price per game.

        The Group contracts with mobile network operators for billing, collection and transmission services offered to mobile phone game players who have purchased single player games. In addition, the Group purchases games from third-party game developers. The mobile network operators are entitled to profit sharing based on a prescribed percentage of the gross amount charged by the mobile network operators to the mobile phone game players. Since the Group does not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the mobile network operators represent the amount of revenue to be recognized by the Group. The Group has information generated from its internal system on the number of monthly plan subscriptions and single-player games downloaded each month to estimate the amount of collectable net proceeds and to recognize single-player games revenues. Differences between its estimates and the actual amounts confirmed by the mobile network operators have historically been insignificant. Generally, within 30 days after the end of each month, the Group receives billing confirmations from each of the mobile network operators confirming the amount of net proceeds to be received by the Group. The Group pays content fees to third-party game developers, which are recognized as cost of revenues, based on a prescribed percentage of the net proceeds confirmed by the mobile network operators.

        Based on the above, the Group recognizes single-player smartphone games revenues when the goods are delivered based on download of games by mobile phone game players or at the end of the subscription period. The difference between the estimated proceeds and the actual amounts confirmed by the mobile network operators is recognized in the consolidated statements of comprehensive income when billing confirmations are received by the Group.

        The Group determines whether to record single player smartphone games revenues using the gross or net method of reporting in accordance with ASC subtopic 605-45 ("ASC 605-45"), Revenue Recognition: Principal Agent Considerations. Determining whether revenue should be reported gross or net is based on an assessment of various factors, the primary factors being whether the Group is acting as the principal in offering services to the customer or whether the Group is acting as an agent in the transaction. The Group has determined that it is acting as the principal in offering services as the Group (i) is the primary obligor in the arrangement; (ii) has latitude in establishing the selling price; (iii) has discretion in suppliers selection; and (iv) has involvement in the determination of product specifications. Therefore, the Group has the primary responsibility of fulfillment and acceptability of the single-player games and recognizes the net proceeds to be received from the mobile network operators as smartphone games revenue on a gross basis. The amounts attributable to third-party game developers in the form of content fees are recognized as cost of revenues.

(iv)    Business taxes and surcharges

        The Group is subject to business taxes and surcharges levied on services provided in the PRC. Business taxes and surcharges for the period from January 1, 2009 to October 26, 2009 (Predecessor),

F-30

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor) were RMB2,305, RMB53, RMB6,127 and RMB11,749 (US$1,866), respectively. In accordance with ASC 605-45, the Group recognized revenues net of all such business taxes and surcharges.

Cost of revenues

        Cost of revenues primarily consists of service fees paid to feature phone manufacturers for the installation of the Group's self-developed mobile phone games or application platforms onto the manufactures' feature phones, purchase costs of printed circuit boards and manufacturing fees paid to OEMs for the assembly of printed circuit boards and mobile phone contents installation service, service fees paid to mobile application and software websites for the distribution of the Group's mobile social games and single player games by providing platforms for mobile phone game players to download such games, and content fees paid to third-party game developers for the development of the Group's single player games designed for smartphones. These costs are expensed as incurred except for the portion that is based on a prescribed percentage of the Group's revenues, which are recorded as cost of revenues upon revenue recognition by the Group when billing confirmations are received as more fully described above.

        In addition, cost of revenues includes staff salaries, network infrastructure fee, utilities, amortization of intangible assets, operating expenses directly related to the development, operation and sale of mobile phone games as well as the provision of handset design products and services, and the 5% business tax for technology services and market promotion fees charged by Yitongtianxia to Yingzheng.

Research and development

        Research and development expenses include payroll, employee benefits and other headcount-related expenses associated with product development. Research and development expenses for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor) were RMB4,438, RMB226, RMB8,377 and RMB24,566 (US$3,901), respectively.

Leases

        In accordance with ASC topic 840 ("ASC 840"), Leases, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exists: (a) ownership is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least 75% of the property's estimated remaining economic life or (d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over their lease term. The Group had no capital leases for any of the periods presented. The Group leases certain office facilities under non-cancelable operating leases and recorded total rental expenses of RMB149, nil, RMB295 and RMB1,081 (US$172)

F-31

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

for the period from January 1 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor), and the years ended December 31, 2010 (Successor) and 2011 (Successor), respectively.

Income taxes

        The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 ("ASC 740"), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss carryforwards, and credits using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

        The Group applies ASC 740 to account for uncertainty in income taxes. ASC 740 provides the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Group's estimated liability for unrecognized tax benefits and the related interest and penalties are periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. In future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of comprehensive income.

Share-based compensation

        In accordance with ASC topic 718 ("ASC 718"), Compensation—Stock Compensation, the Company determines whether a share option or a restricted share unit ("RSU") should be classified and accounted for as a liability award or an equity award. All grants of share options to employees classified as equity awards are measured at the grant date based on the fair value of the awards and are recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. All grants of share options or RSUs to employees classified as liability awards are remeasured at the end of each reporting period until the date of settlement with an adjustment for fair value recorded to the current period expenses in order to properly reflect the cumulative expense based on the current fair value of the vested options or RSUs. The Group has elected to recognize share-based compensation using the straight-line method for all share-based awards issued. The Company uses the Black-Scholes option pricing valuations model and the binomial option pricing valuations model in determining the fair value of the equity awards and the liability awards granted, respectively.

        ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based

F-32

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and are adjusted to reflect future change in circumstances and facts, if any.

Earnings per share

        In accordance with ASC topic 260 ("ASC 260"), Earnings Per Share, basic earnings per ordinary share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per ordinary share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Securities issued by a subsidiary that enable their holders to obtain the subsidiary's ordinary shares are included in the consolidated earnings per share computations based on the Group's holding of the subsidiary's securities.

Comprehensive income

        Comprehensive income is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC topic 220 ("ASC 220"), Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group's comprehensive income includes net income and cumulative foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income. The Company early adopted ASU No. 2011-05 ("ASU 2011-05"), Comprehensive Income (Topic 220), Presentation of Comprehensive Income, in the year ended December 31, 2011 by presenting items of net income and other comprehensive income in one continuous statement, the Consolidated Statements of Comprehensive Income. Prior years' comparative information has been rearranged to conform to the presentation in accordance with ASU 2011-05.

Government grants

        Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized in the consolidated statements of comprehensive income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to the consolidated statements of comprehensive income in proportion to the depreciation of the related assets. The Group received a government grant of RMB2,000 and RMB150 (US$24) during the years ended December 31, 2010 and 2011, respectively, for the development of mobile network game platforms from a PRC municipal government authority. As of December 31, 2011, the RMB2,150 (US$341) government grant was classified as other non-current liabilities, as the Group did not expect all considerations attached to the government grant will be complied with during the succeeding twelve-month period from the balance sheet date.

F-33

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segment reporting

        In accordance with ASC topic 280 ("ASC 280"), Segment Reporting, the Group's chief operating decision maker has been identified as the chief executive officer, who reviews operating results of the business when making decisions about allocating resources and assessing performance for the Group. Prior to January 1, 2010, the Group consisted of only one segment relating to feature phone games. On October 11, 2010, the handset design segment was added with the acquisitions of operating assets of Bright Way and Tastech; and on December 31, 2010, the smartphone game segment was added with the acquisition of 3GUU BVI (Note 4). The accounting policies used in its segment reporting are the same as those used in the preparation of the Group's consolidated financial statements. The Group does not allocate any assets to its feature phone games, smartphone games and handset design businesses as management does not use this information to measure the performance of the reportable segments. As substantially all of the Group's long-lived assets and revenues are in and derived from the PRC, geographical segments are not presented.

Recent issued accounting standards

        In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2011-04 ("ASU 2011-04"), Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. ASU 2011-04 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Group does not expect the adoption of ASU 2011-04 will have a significant effect on its consolidated financial statements.

        In June 2011, the FASB issued ASU No. 2011-05 ("ASU 2011-05"), Comprehensive Income (Topic 220), Presentation of Comprehensive Income, which eliminates the current option to report other comprehensive income ("OCI") and its components in the statements of shareholders' equity. Instead, an entity will be required to present items of net income and OCI in one continuous statement or in two separate, but consecutive, statements. In December 2011, the FASB issued ASU No. 2011-12 ("AUS 2011-12"), Comprehensive Income (Topic 220), Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers the ASU 2011-05 requirement that companies present reclassification adjustments for each component of OCI in both net income and OCI on the face of the financial statements and the requirement to report reclassification adjustments in interim periods. The amendments in ASU 2011-05 and ASU 2011-12 should be applied retrospectively and are effective for fiscal years and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company early adopted ASU 2011-05 in the year ended December 31, 2011 by presenting items of net income and OCI in one continuous statement, the Consolidated Statements of Comprehensive Income. Prior years' comparative information has been rearranged to conform to the presentation in accordance with ASU 2011-05.

        In September 2011, the FASB issued ASU No. 2011-08 ("ASU 2011-08"), Intangibles—Goodwill and Other ("ASC 350"), which is intended to reduce the cost and complexity of the annual goodwill

F-34

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

impairment test by providing entities an option to perform a "qualitative" assessment to determine whether further impairment testing is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Group does not expect the adoption of ASU 2011-08 will have a significant effect on its consolidated financial statements.

3. CONCENTRATION OF RISKS

Concentration of credit risk

        Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and amounts due from related parties. As of December 31, 2009, 2010 and 2011, substantially all of the Group's cash and cash equivalents were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality.

        Accounts receivable are typically unsecured and derived from revenue earned from customers in the PRC and Hong Kong, which are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances. The Group maintains reserves for estimated credit losses, which have generally been within its expectations.

        Amounts due from related parties are typically unsecured, interest-free and repayable on demand. In evaluating the collectability of the amounts due from related parties balance, the Group considers many factors, including the related parties' repayment history and their credit-worthiness. An allowance for doubtful accounts is made when collection of the full amount is no longer probable.

Concentration of customers

        Approximately 73% of total net revenues were derived from one customer, namely Beijing Tailinaite Communication Technology Co., Ltd., for the period from January 1, 2009 to October 26, 2009 (Predecessor). Approximately 13% of total net revenues were derived from one customer, namely Shenzhen Chuangshi Interactive Technology Co., Ltd., for the year ended December 31, 2010 (Successor). Approximately 19% of total net revenues were derived from one customer, namely China Mobile Communications Corporation Jiangsu Ltd., for the year ended December 31, 2011 (Successor). For the period from October 27, 2009 to December 31, 2009 (Successor), none of the customers contributed more than 10% of the Group's total net revenues on an individual basis.

        Approximately nil, 100%, 55% and 6% of total net revenues for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor), respectively, were derived from related parties (Note 16).

F-35

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

3. CONCENTRATION OF RISKS (Continued)

Concentration of suppliers

        Approximately 17% and 14% of the Group's raw materials were purchased from two suppliers, namely Think Star Electronic Stock Co., Ltd. and Bright Way Technology (Hong Kong) Limited, respectively, for the year ended December 31, 2010 (Successor). Approximately 15% and 14% of the Group's raw materials were purchased from Xiang Hai Electronic Co., Ltd and Shi Jian Electronic Co., Ltd for the year ended December 31, 2011 (Successor). There was no purchase of raw materials for the period from January 1, 2009 to October 26, 2009 (Predecessor) and the period from October 27, 2009 to December 31, 2009 (Successor). Approximately 84%, 51%, 73.2% and 63.1% of the Group's cost of sales attributable to feature phones were paid to Ouyinhua Information Consulting Co., Ltd. ("Ouyinhua"), for service provided to pre-install mobile phone games on feature phones for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor), and the years ended December 31, 2010 and 2011, respectively. Failure to develop or maintain the relationships with these suppliers or Ouyinhua may affect the Group's ability to manufacture its products or may decrease the number of handsets pre-installed with the Group's feature phone games. Any disruption in the supply of raw materials or the provision of pre-installation services to the Group may adversely affect the Group's business, financial condition and results of operations.

Current vulnerability due to certain other concentrations

        The Group's operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC's political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective.

Currency convertibility risk

        The Group transacts the majority of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People's Bank of China (the "PBOC"). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers' invoices, shipping documents and signed contracts. Additionally, the value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

F-36

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

3. CONCENTRATION OF RISKS (Continued)

Foreign currency exchange rate risk

        From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The appreciation of the RMB against US$ was approximately 0.1%, nil, 3% and 5% for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor), respectively. On June 19, 2010, the People's Bank of China announced the end of the RMB's de facto peg to US$, a policy which was instituted in late 2008 in the face of the global financial crisis, to further reform the RMB exchange rate regime and to enhance the RMB exchange rate flexibility. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market. While the international reaction to the appreciation of the RMB has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and potentially more significant appreciation of the RMB against the US$.

Other business risk

        The PRC laws and regulations require that an entity obtain an Internet Publishing License and an Online Culture Operation License from the relevant PRC government authorities in order to operate in online mobile game business. One of the Company's subsidiaries, Huiyou, has historically operated in the development of online mobile games without obtaining the required licenses from the relevant PRC government authorities. The developed online mobile games were licensed to Yingzheng, the VIE, which operated the online mobile games in its own name and paid commissions to Huiyou in return. The relevant PRC governmental authorities may deem the activities of Huiyou to be the operation of online games without obtaining the required licenses, which may subject the Group to penalties, and require the Group to make costly changes to its business model and materially disrupt its business. However, in the opinion of management, Huiyou's current business model does not violate applicable PRC laws and regulations and the likelihood of penalties is remote.

4. BUSINESS ACQUISITIONS

(a)    Acquisition of Dragon Joyce

        On October 27, 2009, VODone acquired 70% of the equity interest in Dragon Joyce and the Dragon Joyce Group for an aggregate purchase price of RMB35,249 (HK$40,000) cash and 100,789,333 ordinary shares of VODone. The VODone ordinary shares are contingently returnable in whole or in part to VODone if the income before tax of the Dragon Joyce Group for the period from October 1, 2009 to December 31, 2011 does not meet certain predetermined performance targets. The Company classifies the right to the return of the transferred VODone ordinary shares as an asset in accordance with ASC 805. Dragon Joyce was an investment holding company and had no operation since inception. In connection with the Reorganization (Note 1), the entire equity interest in the Dragon Joyce Group held by Dragon Joyce was transferred to the Company. The results of operations of the Dragon Joyce Group have been included in the Company's consolidated financial statements since October 27, 2009. As a result of the acquisition, the Company is expected to expand its mobile phone games business in the PRC.

F-37

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the Dragon Joyce Group totaled RMB295,619, which consisted of the following:

	RMB
Cash		35,249
VODone ordinary shares (100,789,333 shares)		181,186
Less: contingently returnable consideration asset		(3,813	)
30% noncontrolling interest in the Dragon Joyce Group		82,997
		295,619

        The fair value of the 100,789,333 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB3,813.

        The Company, with the assistance of an independent valuation firm, estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 12.59% for which the Company has made reference to historical volatilities of several comparable companies. As of December 31, 2009, 2010 and 2011, the fair value of the contingently returnable consideration asset was RMB2,865, RMB1,070 and nil, respectively. A loss of RMB948, RMB1,795 and a gain of RMB11,701 (US$1,858) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of income for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011, respectively. As the income before tax of the Dragon Joyce Group for the year ended December 31, 2011 did not meet the predetermined performance targets, 15,477,154 VODone ordinary shares amounting to RMB12,771 must be returned to VODone by the original shareholders of Dragon Joyce. The remittance of VODone ordinary shares was accounted for as deemed dividend distribution in the consolidated statements of shareholders' equity.

        The fair value of the 30% noncontrolling interest in the Dragon Joyce Group is estimated to be RMB82,997. The fair value of the 30% noncontrolling interest was estimated by deriving the fair value of the acquired business including a control premium as a whole and then subtracting the considerations transferred by VODone for the 70% controlling interest. The fair value of the acquired business was estimated using the income approach. As the Dragon Joyce Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on (i) a discount rate of 22.55%, (ii) long-term sustainable growth rate of 3%, (iii) financial multiples of companies in the same industry as the Dragon Joyce Group and (iv) adjustment because of the lack of marketability that market participants would consider when estimating the fair value of the Dragon Joyce Group.

F-38

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition on October 27, 2009.

	Final RMB
Cash and cash equivalents		131
Prepayment and other current assets		332
Property and equipment		365
Intangible assets		63,341
Total identifiable assets acquired		64,169
Accrued expenses and other current liabilities		5
Income tax payable		83
Deferred tax liabilities		15,835
Total liabilities assumed		15,923
Net identifiable assets acquired		48,246
Goodwill		247,373
Net assets acquired		295,619

        The RMB63,341 of acquired intangible assets are subject to a weighted-average useful life of six years. Those definite-lived intangible assets include acquired customer relationships of RMB26,860, with an estimated useful life of seven years, and mobile games and platforms of RMB36,481, with an estimated useful life of six years.

        The RMB247,373 of goodwill was assigned to the feature phone games segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the Dragon Joyce Group. None of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2009 and 2010, there were no changes in the recognized amounts of goodwill resulting from the acquisition of the Dragon Joyce Group.

        The Group recognized RMB756 of acquisition-related costs that were expensed in the period ended December 31, 2009. These costs are included in "General and administrative expenses" in the consolidated statements of income and comprehensive income. The costs associated with issuing and registering the VODone ordinary shares issued as consideration in the acquisition of the Dragon Joyce Group were insignificant.

F-39

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The amounts of revenue and earnings of the Dragon Joyce Group included in the Company's consolidated statements of income and comprehensive income for the period from the acquisition date on October 27, 2009 to December 31, 2009 and the year ended December 31, 2010 are as follows:

	For the period from October 27, 2009 to December 31, 2009
	RMB
Net revenues		17,525
Net income		10,273

(b)    Acquisitions of operating assets of Bright Way and Tastech

        On October 11, 2010, OWX HK and OWX Beijing, wholly-owned subsidiaries of OWX Holding, acquired the operating assets of Bright Way and Tastech, respectively, for an aggregate purchase price of RMB20,000 cash and 28,694,372 ordinary shares of VODone. The VODone ordinary shares are contingently returnable in whole or in part to VODone if the income before tax of the OWX Group for the period from September 1, 2010 to December 31, 2012 does not meet certain predetermined performance targets. The Company classifies the right to the return of the transferred VODone ordinary shares as an asset in accordance with ASC 805. OWX Holding, OWX HK and OWX Beijing were investment holding companies and had no operation since inception. In connection with the Reorganization (Note 1), the entire equity interest in the OWX Group held by OWX Holding was transferred to the Company. The presentation of Bright Way and Tastech is combined to show the economic substance of the two transactions as a whole. The acquisitions of operating assets of Bright Way and Tastech met the definition of a business acquisition and the results of operations of the acquired businesses have been included in the Company's consolidated financial statements since October 11, 2010. As a result of the acquisitions, the Company is expected to expand its handset design business in the PRC.

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the OWX Group totaled RMB101,323, which consisted of the following:

	RMB
Cash		20,000
VODone ordinary shares (28,694,372 shares)		57,463
Less: contingently returnable consideration asset		(5,231	)
30% equity interest in the OWX Group		29,091
		101,323

        The fair value of the 28,694,372 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB5,231.

F-40

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The Company, with the assistance of an independent valuation firm, estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 11.78% for which the Company has made reference to historical volatilities of several comparable companies. As of December 31, 2010 and 2011, the fair value of the contingently returnable consideration asset was RMB4,961 and RMB15,341 (US$2,436), respectively. A loss of RMB270 and a gain of RMB27,887 (US$4,428) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of comprehensive income for the years ended December 31, 2010 and 2011, respectively. As the income before tax of the OWX Group for the year ended December 31, 2011 did not meet the predetermined performance targets, 21,217,611 VODone ordinary shares amounting to RMB17,507 must be returned to VODone by the original shareholders of Bright Way and Tastech. The remittance of VODone ordinary shares was accounted for as deemed dividend distribution in the consolidated statements of shareholders' equity.

        The fair value of the 30% noncontrolling interest in the OWX Group is estimated to be RMB29,091 using the income approach. As the OWX Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on (i) a discount rate of 22.21%, (ii) long-term sustainable growth rate of 3%, (iii) financial multiples of companies in the same industry as the OWX Group and (iv) adjustment because of the lack of marketability that market participants would consider when estimating the fair value of the OWX Group.

        The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition on October 11, 2010.

	Final RMB
Property and equipment		190
Intangible assets		16,078
Amounts due from a related party		4,547
Total identifiable assets acquired		20,815
Deferred tax liabilities		2,653
Total liabilities assumed		2,653
Net identifiable assets acquired		18,162
Goodwill		83,161
Net assets acquired		101,323

        The RMB16,078 of acquired intangible assets are acquired customer relationships with an estimated useful life of seven years.

F-41

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The RMB83,161 of goodwill was assigned to the handset design segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Bright Way and Tastech. None of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2010 and 2011, there were no changes in the recognized amounts of goodwill resulting from the acquisitions of operating assets of Bright Way and Tastech.

        The Group recognized RMB306 of acquisition-related costs that were expensed in the year ended December 31, 2010. These costs are included in "General and administrative expenses" in the consolidated statements of comprehensive income. The costs associated with issuing and registering the VODone ordinary shares issued as consideration in the acquisitions of operating assets of Bright Way and Tastech were insignificant.

        The amounts of revenue and earnings of the acquired businesses of Bright Way and Tastech included in the Company's consolidated statements of comprehensive income from the acquisition date on October 11, 2010 to December 31, 2010 are as follows:

	RMB
Net revenues		15,340
Net income		660

(c)    Acquisition of 3GUU BVI

        On December 31, 2010, Action King, a wholly-owned subsidiary of VODone, acquired 70% of the equity interest in the 3GUU Group for an aggregate purchase price of RMB58,475 (HK$68,796) cash and 68,600,000 ordinary shares of VODone. The VODone ordinary shares are contingently returnable in whole or in part to VODone if the income before tax of the 3GUU Group for the period from December 1, 2010 to December 31, 2013 does not meet certain predetermined performance targets. The Company classifies the right to the return of the transferred VODone ordinary shares as an asset in accordance with ASC 805. In connection with the Reorganization (Note 1), the entire equity interest in the 3GUU Group held by Action King was transferred to the Company. Since the acquisition occurred on December 31, 2010, no results of operations of the 3GUU Group are included in the Group's consolidated financial statements for the year ended December 31, 2010. As a result of the acquisition, the Company is expected to further expand its mobile phone games business in the PRC.

        The acquisition date fair value of the consideration transferred, net of the contingently returnable consideration assets, and the 30% noncontrolling interest in the 3GUU Group totaled RMB266,097, which consisted of the following:

	RMB
Cash		58,475
VODone ordinary shares (68,600,000 shares)		139,941
Less: contingently returnable consideration asset		(1,739	)
30% noncontrolling interest in the 3GUU Group		69,420
		266,097

F-42

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The fair value of the 68,600,000 shares of VODone issued was determined based on the closing market price of VODone's ordinary shares on the acquisition date. The fair value of the contingently returnable consideration asset at the acquisition date was RMB1,739.

        The Company, with the assistance of an independent valuation firm, estimated the fair value of the contingently returnable consideration asset using the Black-Scholes model. The Black-Scholes model requires the input of a highly subjective assumption, the expected volatility of the income before income taxes of 11.78% for which the Company has made reference to historical volatilities of several comparable companies. As of December 31, 2010 and 2011, the fair value of the contingently returnable consideration asset was RMB1,739 and RMB1,597 (US$254), respectively. A loss of RMB142 (US$22) resulted from the change in fair value of the contingently returnable consideration asset was recognized in the consolidated statements of comprehensive income for the year ended December 31, 2011. As the income before tax of the 3GUU Group for the year ended December 31, 2011 met the predetermined performance targets, the original shareholders of the 3GUU Group are not required to return any VODone ordinary shares to VODone as of December 31, 2011.

        The fair value of the 30% noncontrolling interest in the 3GUU Group is estimated to be RMB69,420. The fair value of the 30% noncontrolling interest was estimated by deriving the fair value of the acquired business including a control premium as a whole and then subtracting the considerations transferred by Action King Limited for the 70% controlling interest. The fair value of the acquired business was estimated using the income approach. As the 3GUU Group is a group of private entities, the fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates are based on (i) a discount rate of 22.97%, (ii) long-term sustainable growth rate of 3%, (iii) financial multiples of companies in the same industry as the 3GUU Group and (iv) adjustment because of the lack of marketability that market participants would consider when estimating the fair value of the 3GUU Group.

        During the year ended December 31, 2011, the Company finalized the purchase price allocation for the acquisition of the 3GUU Group and retrospectively adjusted the December 31, 2010 consolidated balance sheet to increase goodwill and deferred tax liabilities by RMB47,033 as if they were recorded on the acquisition date.

F-43

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

        The following table presents the details of the preliminary purchase price allocation reported as of December 31, 2010, the adjustments made in the year ended December 31, 2011 and the final purchase price allocation.

	Preliminary December 31, 2010 RMB		Adjustment RMB			Final December 31, 2010 RMB
Cash and cash equivalents		26,997		—			26,997
Accounts receivable		20,222		—			20,222
Prepayment and other current assets		372		—			372
Deferred tax assets, current portion		641		—			641
Property and equipment		1,258		—			1,258
Intangible assets		11,777		—			11,777
Deferred tax assets, non-current portion		500		—			500
Indemnification assets		3,716		—			3,716
Total identifiable assets acquired		65,483		—			65,483
Accounts payable		5,590		—			5,590
Accrued expenses and other current liabilities		4,140		—			4,140
Income tax payable		134		—			134
Unrecognized tax benefits		3,716		—			3,716
Other non-current liabilities		2,000		—			2,000
Deferred tax liabilities		4,597		47,033			51,630
Total liabilities assumed		20,177		47,033			67,210
Net identifiable assets (liabilities) assumed		45,306		(47,033	)		(1,727	)
Goodwill		220,791		47,033			267,824
Net assets acquired		266,097		—			266,097

        The RMB11,777 of acquired intangible assets are subject to a weighted-average useful life of three years. Those definite-lived intangible assets include mobile games and platforms of RMB10,828, with an estimated useful life of three years, mobile game development costs of RMB941, with an estimated useful life of three years and computer software of RMB8, with an estimated useful life of five years.

        The RMB267,824 of goodwill was assigned to the smartphone mobile games segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the 3GUU Group. None of the goodwill is expected to be deductible for income tax purposes.

        Indemnification assets represent the indemnification provided by the selling shareholders of the 3GUU Group for uncertainties about the settlement amount of unrecognized tax benefits related to the pre-acquisition period. The Group recognized RMB3,716 of indemnification assets at the acquisition date, which was the fair value measured using assumptions consistent with those used to measure the

F-44

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

4. BUSINESS ACQUISITIONS (Continued)

indemnified item. A gain of RMB293 (US$47) resulted from the change in fair value of the indemnification assets was recognized in the consolidated statements of comprehensive income for the year ended December 31, 2011.

        The Group recognized RMB604 of acquisition-related costs that were expensed in the year ended December 31, 2010. These costs are included in "General and administrative expenses" in the consolidated statements of income. The costs associated with issuing and registering the VODone ordinary shares issued as consideration in the acquisition of the 3GUU Group were insignificant.

(d)    Pro forma consolidated financial information

        The following unaudited pro forma consolidated financial information reflects the results of the operations of the Group for the years ended December 31, 2009 and 2010, as if the acquisitions of the Dragon Joyce Group, the operating assets of Bright Way and Tastech, and the 3GUU Group described above had been completed as of January 1, 2009. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisitions actually taken place on the date indicated and may not be indicative of future operating results. These amounts have been calculated after applying the Company's accounting policies and the pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.

	For the year ended December 31,
	2009		2010
	RMB (unaudited)		RMB (unaudited)
Net revenues		163,305		268,821
Net income		40,486		62,557
Basic and diluted earnings per share		0.13		0.21

F-45

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

5. ACCOUNTS RECEIVABLE

        Accounts receivable and the related allowance for doubtful accounts are summarized as follows:

	As of December 31,
	2009		2010		2011		2011
	(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Accounts receivable		—		37,013		56,121		8,912
Less: Allowance for doubtful accounts		—		—		—		—
Accounts receivable, net		—		37,013		56,121		8,912

        The Group does not offer extended payment terms and all accounts receivable are non-interesting bearing. The Group offers credit terms ranging from three to nine months to customers with long-term relationship and good credit history. As of December 31, 2011, all of the accounts receivable balances were within their credit terms. No allowance for doubtful accounts was recognized as of December 31, 2009, 2010 and 2011.

6. INVENTORIES

        Inventories are summarized as follows:

	As of December 31,
	2009		2010		2011		2011
	(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Raw materials		—		2,126		2,103		334

        No inventory obsolescence provision was recognized as of December 31, 2009, 2010 and 2011.

7. PREPAYMENTS AND OTHER CURRENT ASSETS

        Prepayments and other current assets consist of the following:

	As of December 31,
	2009		2010		2011		2011
	(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Contingently returnable consideration assets (Note 4)		2,865		7,770		16,938		2,690
Indemnification assets from a business acquisition (Note 4(c))		—		3,716		4,009		637
Deposits for office leases		5		319		213		34
Advances to employees		—		276		386		61
Prepaid expenses		—		213		3,171		504
Others		228		108		249		38
Total		3,098		12,402		24,966		3,964

F-46

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

8. PROPERTY AND EQUIPMENT, NET

        Property and equipment and the related accumulated depreciation are summarized as follows:

	As of December 31,
	2009			2010			2011			2011
	(Successor) RMB			(Successor) RMB			(Successor) RMB			(Successor) US$
Office equipment		493			2,160			5,515			875
Leasehold improvement		—			—			1,585			252
Motor vehicles		—			88			88			14
Property and equipment, cost		493			2,248			7,188			1,141
Less: Accumulated depreciation		(25	)		(239	)		(1,753	)		(278	)
Property and equipment, net		468			2,009			5,435			863

        Depreciation expenses, which were recorded in general and administrative expenses, for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor) were RMB138, RMB25, RMB218 and RMB1,584 (US$252), respectively.

9. GOODWILL

        Changes in the carrying amount of goodwill for the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor) are as follows:

	Feature phone games		Smartphone games		Handset design		Total
	RMB		RMB		RMB		RMB
Balance as of October 27, 2009		—		—		—		—
Goodwill acquired during the period		247,373		—		—		247,373
Impairment		—		—		—		—
Balance as of December 31, 2009		247,373		—		—		247,373
Goodwill acquired during the year		—		267,824		83,161		350,985
Impairment		—		—		—		—
Balance as of December 31, 2010		247,373		267,824		83,161		598,358
Goodwill acquired during the year		—		—		—		—
Impairment		—		—		—		—
Balance as of December 31, 2011		247,373		267,824		83,161		598,358
Balance as of December 31, 2011 in US$		39,281		42,529		13,205		95,015

        During the year ended December 31, 2011, the Company finalized the purchase price allocation for the acquisition of the 3GUU Group and retrospectively adjusted the December 31, 2010

F-47

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

9. GOODWILL (Continued)

consolidated balance sheet to increase goodwill by RMB47,033 as if it was recorded on the acquisition date (note 4(c)).

        Goodwill is not deductible for tax purposes and is not amortized but tested for impairment at least annually.

10. INTANGIBLE ASSETS, NET

        Intangible assets and the related accumulated amortization are summarized as follows:

		As of December 31,
		2009			2010			2011			2011
		(Successor) RMB			(Successor) RMB			(Successor) RMB			(Successor) US$
Cost or fair value at acquisition:
	Computer software		—			8			1,581			251
	Mobile games and platforms		36,481			47,309			56,429			8,961
	Acquired customer relationship		26,860			42,938			42,939			6,818
	Mobile game product development costs		—			941			1,817			289
			63,341			91,196			102,766			16,319
Accumulated amortization:
	Computer software		—			—			(201	)		(32	)
	Mobile games and platforms		(1,521	)		(4,805	)		(20,524	)		(3,259	)
	Acquired customer relationship		(959	)		(8,174	)		(11,506	)		(1,827	)
	Mobile game product development costs		—			—			(434	)		(69	)
			(2,480	)		(12,979	)		(32,665	)		(5,187	)
Total			60,861			78,217			70,101			11,132

        Amortization expenses, which were recorded in cost of revenues, for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor) were nil, RMB2,480, RMB10,499 and RMB19,686 (US$3,126), respectively.

        The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	RMB		US$
2012		21,400		3,398
2013		16,015		2,543
2014		13,598		2,159
2015		11,644		1,849
2016		5,691		904
Total		68,348		10,853

F-48

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

        Accrued expenses and other current liabilities consist of the following:

	As of December 31,
	2009		2010		2011		2011
	(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Advances from customers		—		703		564		90
Accrued payroll and welfare payable		142		4,911		10,053		1,596
Business tax and other taxes payable		585		2,293		3,802		604
Accrued initial public offering costs		—		—		2,010		319
Others		3		384		1,148		182
Total		730		8,291		17,577		2,791

        Advances from customers represent cash payments received from customers in advance of the delivery of handset design products and services. The advances are applied towards the purchase price and recognized as revenue when the conditions for revenue recognition have been met. Advances from customers are non-interest bearing and refundable if the Group fails to perform.

12. DEFERRED INITIAL PUBLIC OFFERING COSTS

        Direct costs incurred by the Company attributable to its initial public offering of ordinary shares in the United States have been deferred and will be charged against the gross proceeds received from such offering. Such costs include legal and other professional fees related to the offering.

13. SHARE CAPITAL

        On January 20, 2011, the Company issued one share of ordinary share with par value of US$1.00 to VODone in connection with the incorporation of the Company.

        On August 22, 2011, the Company restructured its share capital to increase the authorized capital to 1,000,000 ordinary shares with a per share par value of US$1.00 from 50,000 ordinary shares with a per share par value of US$1.00. In addition, on August 22, 2011, each of the existing issued and authorized ordinary shares of US$1.00 per share each was divided into 1,000 ordinary shares of US$0.001 per share each.

        On August 23, 2011, the Company effected a 2,500,000 ordinary shares rights offering to its existing shareholder, VODone, for a subscription price of US$0.001 per ordinary share. Since the ordinary shares were issued for nominal consideration, the offering contains a bonus element that is accounted for similar to a stock dividend in accordance with ASC 260. In addition, as more fully described in Note 1, pursuant to a legal reorganization of entities under common control on August 23, 2011, the Company issued 209,999,000 new ordinary shares to Dragon Joyce, OWX Holding and Action King to acquire their equity interests in the Dragon Joyce Group, the OWX Group and the 3GUU Group, respectively.

F-49

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

13. SHARE CAPITAL (Continued)

        All ordinary share and per share information are adjusted retroactively for the above described change in share capital and ordinary shares rights offering, for all periods presented. As of December 31, 2011, 1,000,000,000 ordinary shares were authorized and 302,729,550 ordinary shares were issued and outstanding.

        The Company did not pay or declare any dividends on ordinary shares in the period from October 27, 2009 to December 31, 2009 and the year ended December 31, 2010. On December 8, 2011, the Company's board of directors declared cash dividend of RMB71,400 to certain shareholders of the Group based on the undistributed retained earnings of the Dragon Joyce Group and the OXW Group and their respective shareholding in these entities at the time of the Reorganization. As of December 31, 2011, RMB63,000 (US$10,004) of the dividend declared remained unpaid. The payment of dividends in the future will be contingent upon the Group's revenues and earnings, if any, capital requirements and general financial condition subsequent to the completion of a business combination. The payment of dividends will be subject to the discretion of the Company's board of directors and subject to the requirements of Cayman Islands' laws.

14. RESTRICTED NET ASSETS

        The Company's ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries and VIE. Relevant PRC statutory laws and regulations permit payments of dividends by the Group's PRC subsidiary and VIE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company's PRC subsidiaries and VIE.

        In accordance with the PRC Regulations on Enterprises with Foreign Investment and their articles of association, a foreign invested enterprise established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise's PRC statutory accounts. A foreign invested enterprise is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise's PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Huiyou, Donggan, Longyue, Shenzhen Douwan, Qilewuxian, Yikechuanghui, OWX Beijing, Zhongtuo and Yitongtianxia were established as a foreign invested enterprise and therefore are subject to the above mandated restrictions on distributable profits.

        Additionally, in accordance with the Company Law of the PRC, a domestic enterprise is required to provide statutory common reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise's PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the board of directors, from the profits determined in accordance with the enterprise's PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable

F-50

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

14. RESTRICTED NET ASSETS (Continued)

as cash dividends. Yingzheng was established as a domestic invested enterprise and therefore is subject to the above mandated restrictions on distributable profits.

        As a result of these PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Company's PRC subsidiaries and VIE are restricted in their ability to transfer a portion of their net assets in the form of dividend payments, loans or advances to the Company. The amounts restricted include paid-in capital and statutory reserve funds of the Company's PRC subsidiaries and the net assets of the VIE, as determined pursuant to PRC generally accepted accounting principles, totaling RMB44,808 (US$7,115) as of December 31, 2011. Therefore, in accordance with Rules 504 and 4.08(e)(3) of Regulation S-X, the condensed parent company only financial statements as of December 31, 2009, 2010 and 2011 and for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011 are disclosed in Note 23.

15. INCOME TAXES

Cayman Islands

        Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

British Virgin Islands

        Under the current laws of the British Virgin Islands, Beauty Wave, China Wave and 3GUU BVI are not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

        Uni-Force, OWX HK and 3GUU HK are subject to Hong Kong corporate income tax at a rate of 16.5% on the assessable profits arising in Hong Kong. In addition, upon payments of dividends by these entities to their shareholders, no Hong Kong withholding tax will be imposed.

China

        Pursuant to the PRC Corporate Income Tax Law (the "CIT Law") and relevant implementation regulations that became effective on January 1, 2008, the Company's subsidiaries and VIE located in the PRC are generally subject to enterprise income taxes ("EIT") at a unified statutory tax rate of 25%, unless preferential tax status is granted by the tax authorities to allow the entities to be subject to a reduced income tax rate.

        An entity recognized as a qualified new software development enterprise is entitled to enjoy tax exemption for two years and 50% EIT rate reduction for the subsequent three years. In accordance with Guofa 2007 circular No. 39, an entity with a preferential tax rate prior to January 1, 2008 will continue to enjoy its remaining tax holiday granted prior to the effectiveness of the CIT Law. In May

F-51

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

15. INCOME TAXES (Continued)

2007, Yingzheng obtained the new software development enterprise status. Thus, Yingzheng is entitled to enjoy tax exemption from 2006 to 2007 and a 50% reduced EIT rate of 12.5% from 2008 to 2010. In May 2009, Donggan obtained the new software development enterprise status, with retroactive effect to 2008. Thus, Donggan was entitled to enjoy tax exemption from 2008 to 2009 and a 50% reduced EIT rate of 12.5% from 2010 to 2012. However, as Donggan was dormant during the year ended December 31, 2011, Donggan was not entitled to enjoy any tax holiday in accordance with the CIT Law. As a result, the applicable EIT rate for Donggan was 25% in 2011. Shenzhen Douwan adopted the methodology of deemed profits basis in 2011 and was subject to EIT at a statutory income tax rate of 25% on its deemed profits calculated at 30% of its net revenues.

        The CIT Law treats enterprises established outside of the PRC with "effective management and control" located in the PRC as PRC resident enterprises for tax purposes. The term "effective management and control" is generally defined as exercising management and control over the business, personnel, accounting, properties, etc. of an enterprise. The Company and its subsidiaries located in jurisdictions outside of the PRC, if considered a PRC resident enterprise for tax purposes, would be subject to the PRC enterprise income tax at the rate of 25% on their worldwide income commencing on January 1, 2008. As of December 31, 2009, 2010 and 2011, the Company has not accrued for PRC tax on such basis as the Group's non-PRC entities had zero assessable profits in the PRC for the period after January 1, 2008. The Group will continue to monitor the tax status with regards to the PRC tax resident enterprise regulation of its non-PRC entities.

        Under the CIT Law, dividends paid by PRC enterprises out of profits earned after December 31, 2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.

        The Group's tax years 2006 through 2011 remain open to examination by the tax authorities as of December 31, 2011.

        Income before income taxes consists of:

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Cayman Islands		—		—		—		34,263		5,441
Hong Kong		—		—		9,407		6,585		1,046
The PRC		28,370		8,687		49,953		86,568		13,746
Total		28,370		8,687		59,360		127,416		20,233

F-52

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

15. INCOME TAXES (Continued)

        The current and deferred components of the income tax (benefit) expense appearing in the consolidated statements of income and comprehensive income are as follows:

	For the period from January 1, 2009 to October 27, 2009		For the period from October 27, 2009 to December 31, 2009			For the year ended December 31, 2010			For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB			(Successor) RMB			(Successor) RMB			(Successor) US$
Current tax expense		6,554		—			21,593			19,294			3,064
Deferred tax expense (benefit)		43		(638	)		(2,946	)		(55,221	)		(8,769	)
		6,597		(638	)		18,647			(35,927	)		(5,705	)

        A reconciliation of income taxes computed at the PRC statutory tax rate of 25% to the effective income tax provision is as follows:

	For the period from January 1, 2009 to October 26, 2009			For the period from October 27, 2009 to December 31, 2009			For the year ended December 31, 2010			For the year ended December 31, 2011
	(Predecessor)			(Successor)			(Successor)			(Successor)			(Successor)
	RMB			RMB			RMB			RMB			US$
Income before income taxes		28,370			8,687			59,360			127,416			20,233
Income tax expenses computed at the PRC statutory tax rate of 25%		7,093			2,172			14,840			31,854			5,058
Foreign tax rate differential		—			853			2,408			(10,565	)		(1,678	)
Deemed profits taxation basis differential* in Shenzhen Douwan		—			—			—			(18,118	)		(2,877	)
Nondeductible expenses		77			3			98			2,983			474
Non-taxable income		(573	)		—			(33	)		—			—
Withholding tax on dividend distribution		—			—			—			7,000			1,112
Tax holidays		—			(3,663	)		(11	)		—			—
Outside basis differences in the VIE		—			—			—			(51,432	)		(8,167	)
Current/deferred rate differential		—			(18	)		471			(108	)		(17	)
Valuation allowance		—			15			811			1,073			170
Interest and penalties on unrecognized tax benefits		—			—			63			1,386			220
Income tax provision		6,597			(638	)		18,647			(35,927	)		(5,705	)

F-53

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

15. INCOME TAXES (Continued)

        * Deemed taxation basis differential represents the difference in income tax expenses calculated at the PRC statutory tax rate of 25% on income before taxes versus on deemed profits calculated at 30% of net revenue. Shenzhen Douwan adopted the methodology of deemed profits basis in 2011.

        Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred taxes are as follows:

		As of December 31,
		2009			2010			2011			2011
		(Successor) RMB			(Successor) RMB			(Successor) RMB			(Successor) US$
Deferred tax assets, current portion:
	Accrued expenses		18			1,151			1,774			282
	Net operating loss carry forwards		—			8			—			—
	Less: Valuation allowance		—			(130	)		(283	)		(45	)
Deferred tax assets, current portion, net			18			1,029			1,491			237
Deferred tax assets, non-current portion:
	Intangible assets and property and equipment		—			—			388			62
	Government grants		—			500			538			85
	Net operating loss carry forwards		25			706			1,616			257
	Less: Valuation allowance		(25	)		(706	)		(1,626	)		(258	)
Deferred tax assets, non-current portion, net			—			500			916			146
Deferred tax liabilities, non-current portion:
	Intangible assets		15,215			15,491			12,580			1,998
	Outside basis differences in the VIE		—			51,432			—			—
Deferred tax liabilities, non-current portion, net			15,215			66,923			12,580			1,998

        As of December 31, 2009, 2010 and 2011, the Group recorded a valuation allowance on its deferred tax assets that is sufficient to reduce the deferred tax assets to the amount that is more-likely-than-not to be realized.

        Aggregate undistributed earnings of the Group's subsidiaries located in the PRC that are available for distribution to non-PRC tax resident parent companies at December 31, 2009, 2010 and 2011 are considered to be indefinitely reinvested under ASC subtopic 740-30 ("ASC 740-30"), Income Taxes: Other Considerations or Special Areas. Accordingly, the amount of unrecognized deferred tax liabilities for temporary differences related to investments in PRC subsidiaries is not determined because such a determination is not practical.

        Deferred tax liabilities arising from (i) aggregate undistributed earnings of Yingzheng, a VIE of the Group, that are available for distribution to Yitongtianxia, its PRC tax resident parent company and (ii) the difference between the book basis and the tax basis in the investment in Yingzheng were RMB4,399 and RMB47,033 as of December 31, 2010, respectively. The registered shareholders of

F-54

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

15. INCOME TAXES (Continued)

Yingzheng are contractually required to remit dividends received from Yingzheng to Yitongtianxia. This distribution chain results in (i) a taxable dividend from Yingzheng to its registered shareholders and (ii) a taxable contribution to Yitongtianxia when the proceeds are remitted to Yitongtianxia by the registered shareholders. The tax impact on the future cash distribution is recognized in deferred tax liabilities as an outside basis difference. On December 16, 2011, 3GUU BVI, a BVI entity, replaced Yitongtianxia, a PRC entity, as the primary beneficiary of Yingzheng (Note 1). As management is asserting indefinite reinvestment of undistributed earnings of the Group's foreign subsidiaries located in the PRC, the deferred tax liabilities arising from the aggregate undistributed earnings of Yingzheng and the difference between the book basis and the tax basis in the investment in Yingzheng were reversed during the year ended December 31, 2011.

Unrecognized tax benefits

        For the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor), the years ended December 31, 2010 (Successor) and 2011 (Successor), the Group has unrecognized tax benefits of RMB4,560, nil, RMB20,929 and RMB28,014 (US$4,448), respectively, of which nil, nil, RMB57 and RMB170 (US$27) are presented on a net basis against the deferred tax assets related to tax loss carryforwards on the face of the consolidated balance sheet. The unrecognized tax benefits recognized by the Group were mainly caused by the accounting error, different methodologies of deemed profits basis adopted, and errors in tax adjustments made in tax filing. RMB4,560, nil, RMB20,929 and RMB28,014 (US$4,448) for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor), respectively, of unrecognized tax benefits would impact the effective tax rate, if recognized. Included in the balance as of December 31, 2009, 2010 and 2011 were RMB25, RMB836 and RMB1,909 (US$303), respectively, of tax positions that if recognized will result in deferred tax assets for which a full valuation allowance will be made. It is possible that the amount of unrecognized tax benefits will change in the next twelve months, pending factors including changes in the amount of the PRC statutory taxable income due to the application and interpretation of the PRC tax law. However, an estimate of the range of the possible change cannot be made at this time.

F-55

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

15. INCOME TAXES (Continued)

        A roll-forward of accrued unrecognized tax benefits, excluding interest and penalties, is as follows:

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB			(Successor) US$
			(Successor) RMB
Balance at the beginning of period/year		—		—		—		19,563			3,106
Increases from business acquisitions (Note 4)		—		—		2,470		—			—
Increases related to tax positions taken in the current period/year		4,560		—		17,093		5,699			905
Offset by net operating loss		—		—		—		(170	)		(27	)
Balance at the end of period/year		4,560		—		19,563		25,092			3,984

        For the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor), the Group recorded income tax expenses for interest and penalties related to its unrecognized tax benefits of nil, nil, RMB63 and RMB1,093 (US$173), respectively. For the years ended December 31, 2010 (Successor) and 2011 (Successor), the Group assumed interest and penalties related to unrecognized tax benefit of RMB1,303 and RMB293 (US$47) in connection with the acquisition of the 3GUU Group (Note 4).

        As of December 31, 2011, the Company had net operating losses of RMB6,435 (US$1,022) from several of its subsidiaries, which can be carried forward to offset future net profit for income tax purposes. The net operating loss carry-forwards as of December 31, 2011 will expire in years 2012 to 2016 if not utilized.

        The aggregate amount and per share effect of tax holidays and preferential tax rates are as follows:

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Aggregate amount		—		3,663		11		—		—
Effect on basic and diluted earnings per share:
Basic and diluted		—		0.02		—		—		—

F-56

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS

Share Option Scheme

        On October 31, 2011, the Company's board of directors approved the 2011 Share Option Scheme (the "2011 Share Option Scheme"). On November 15, 2011, the Company's shareholders approved the 2011 Share Option Scheme. Under the 2011 Share Option Scheme, the Company may issue up to 30,394,955 ordinary shares of the Company to its employees, directors and consultants. The purpose of the 2011 Share Option Scheme is to provide additional incentive and motivation to its employees, directors and consultants, through an equity interest in the Company, to work towards enhancing the value and benefit of the Company. The contractual period of the options granted under the 2011 Share Option Scheme is 10 years. As of December 31, 2011, no options were granted under the 2011 Share Option Scheme.

(a)    VODone share options

        In connection with the acquisition of the Dragon Joyce Group, on October 12, 2009, VODone granted options to purchase 5,000,000 ordinary shares of VODone to an employee of the Dragon Joyce Group, who subsequently became an employee of the Group on October 27, 2009 upon the consummation of the Dragon Joyce Group acquisition, at an exercise price of HK$1.68 (RMB1.48) per share. The 5,000,000 options are non-forfeitable, immediately vested and have a contractual life of five years. On November 4, 2010, VODone granted options to purchase 5,900,000 ordinary shares of VODone to certain employees of the Group at an exercise price of HK$2.25 (RMB1.93) per share. The 5,900,000 options are immediately vested and have a contractual life of three years. In accordance with ASC 718, the accounting grant date for options issued on October 12, 2009 and November 4, 2010 was October 18, 2009 and November 18, 2010, respectively, when VODone and the employees reached a mutual understanding of the key terms and conditions of the awards.

        The share options granted by VODone to the Group's employees are classified as equity awards which are measured based on the grant date fair value. The fair value of the 5,000,000 options with accounting grant date on October 18, 2009 was not subject to remeasurement when the grantee became an employee of the Group on October 27, 2009, as the options are non-forfeitable and vested immediately upon issuance. Since the options were granted by VODone to the Group's employees for their provision of service to the Group, the compensation cost is recognized in the Group's financial statements with a corresponding credit to additional paid-in capital, representing VODone's capital contribution. Since the share options are immediately vested, share-based compensation costs of RMB1,708 for the 5,000,000 options granted and RMB2,741 for the 5,900,000 options granted were immediately recognized on October 27, 2009 and November 18, 2010, respectively.

F-57

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

        The following table summarizes the share options granted by VODone to the Group's employees during the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor):

Options granted to employees		Number of shares			Weighted-average exercise price per share		Weighted-average grant-date fair value per share		Weighted-average remaining contractual term		Aggregate intrinsic value
					RMB		RMB		Years		RMB
Outstanding, October 27, 2009			—
	Granted		5,000,000			1.48		0.34
Outstanding, December 31, 2009			5,000,000
	Granted		5,900,000			1.93		0.47
	Exercised		(4,700,000	)		1.50		0.34
Outstanding, December 31, 2010			6,200,000			1.89		0.46
	Granted		—
	Exercised		—
Outstanding, December 31, 2011			6,200,000			1.89		0.46		1.89		—
Vested at December 31, 2011			6,200,000			1.89		0.46		1.89		—
Exercisable at December 31, 2011			6,200,000			1.89		0.46		1.89		—

        The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying awards and the fair value of VODone's ordinary shares as of December 31, 2011, for those awards that have an exercise price below the fair value of VODone's ordinary shares.

        The weighted-average fair value of the options granted by VODone to the employees of the Group during the period from October 27, 2009 to December 31, 2009 (Successor) and the year ended December 31, 2010 (Successor) were HK$0.39 and HK$0.55 (US$0.07), respectively. The total fair value of options classified as equity awards vested during the period from October 27, 2009 to December 31, 2009 (Successor) and the year ended December 31, 2010 (Successor) was RMB1,708 and RMB2,741 (US$435), respectively.

        The grant date fair value of the equity awards granted by VODone to the Group's employees was estimated using the Black-Scholes option pricing model with the following assumptions:

	October 18, 2009			November 18, 2010
Risk-free interest rate		0.17	%		0.26	%
Dividend yield		—			0.6	%
Expected volatility range		62.67	%		53.12	%
Weighted average expected life		1 year			1 year
Estimated forfeiture rate		—			—

F-58

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

(b)    Dragon Joyce and OWX Holding options

        On July 30, 2010, Dragon Joyce granted options to purchase 0.724% of the equity interest in Dragon Joyce to certain non-employee directors of the Dragon Joyce Group at an exercise price of RMB1,738. On October 26, 2010, OWX Holding granted options to purchase 2.198% of OWX Holding to certain non-employee directors of the OWX Group at an exercise price of RMB1,723. These options are vested immediately and have a contractual life of two years.

        The functional currency of Dragon Joyce and OWX Holding is US$. In accordance with ASC 718, as these awards contained an exercise price denominated in RMB, which is different from the functional currency of Dragon Joyce and OWX Holding, before the modification, these share options are dual indexed to foreign exchange and the shares of Dragon Joyce and OWX Holding. Accordingly, the share options granted by Dragon Joyce and OWX Holding are accounted for as liability awards that are remeasured at fair value at the end of each reporting period until the date of settlement.

        On October 27, 2011, the Company settled the granted options to purchase 0.436% of the equity interest in Dragon Joyce by issuing 418,268 ordinary shares of the Company to certain grantees. Concurrently, the Company modified the exercised price of the remaining granted options to purchase 0.288% of the equity interest in Dragon Joyce from RMB to US$. The fair values of the 418,268 ordinary shares of the Company and the granted options to purchase 0.436% of the equity interest in Dragon Joyce were the same on the date of settlement. On October 28, 2011, the Company settled the granted options to purchase 1.285% of the equity interest in OWX Holding by issuing 418,266 ordinary shares of the Company to certain grantees. Concurrently, the Company modified the exercised price of the remaining granted options to purchase 0.913% of the equity interest in OWX Holding from RMB to US$. The fair values of the 418,266 ordinary shares of the Company and the granted options to purchase 1.285% of the equity interest in OWX Holding were the same on the date of settlement. The modification resulted in the liability awards being reclassified as equity awards, as the share options were no longer dual indexed to foreign exchange and the shares of Dragon Joyce and OWX Holding.

        The fair value of the options was RMB3,771, RMB4,112 and RMB3,935 at the grant dates, December 31, 2010 and settlement dates, respectively. RMB4,112 was recorded as compensation cost with a corresponding credit to additional paid-in capital as shareholders' contribution during the year ended December 31, 2010. A reversal of compensation cost of RMB177 (US$29) was recorded with a corresponding debit to additional paid-in capital as reduction of shareholders' contribution during the year ended December 31, 2011. The modification of the currency in which the exercise price of the share options is denominated in did not result in any incremental fair value; thus, no additional share based compensation cost was recognized and the RMB3,935 balance was reclassified from liability to additional paid-in capital in equity upon modification.

F-59

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

        The grant date, December 31, 2010 and the modification date fair value of the liability awards granted by Dragon Joyce was estimated using the binomial option pricing model with the following assumptions:

	July 30, 2010			December 31, 2010			October 27, 2011
Risk-free interest rate		2.28	%		3.28	%		3.04	%
Dividend yield		—			—			—
Expected volatility range		59.00	%		48.42	%		50.19	%
Weighted average expected life		2 year			1.58 year			0.76 year
Suboptimal exercise factor		3			3			3
Estimated forfeiture rate		—			—			—
Fair value of 0.724% of the equity interest in Dragon Joyce		RMB2,952			RMB3,547			RMB4,269

        The grant date and December 31, 2010 and modification date fair value of the liability awards granted by OWX Holding was estimated using the binomial option pricing model with the following assumptions:

	October 26, 2010			December 31, 2010			October 28, 2011
Risk-free interest rate		2.34	%		3.32	%		3.07	%
Dividend yield		—			—			—
Expected volatility range		56.00	%		41.05	%		60.82	%
Weighted average expected life		2 year			1.82 year			0.99 year
Suboptimal exercise factor		3			3			3
Estimated forfeiture rate		—			—			—
Fair value of 2.198% of the equity interest in OWX Holding		RMB3,722			RMB3,722			RMB2,895

(c)    3GUU BVI options

        On January 3, 2011, 3GUU BVI granted options to purchase 0.610% of the equity interest in 3GUU BVI to certain non-employee directors of the 3GUU Group at an exercise price of RMB1,708. These options are vested immediately and have a contractual life of two years.

        The functional currency of 3GUU BVI is US$. In accordance with ASC 718, as these awards contained an exercise price denominated in RMB, which is different from the functional currency of 3GUU BVI, these share options are dual indexed to foreign exchange and the shares of 3GUU BVI. Accordingly, the share options granted by 3GUU BVI are accounted for as liability awards that are remeasured at fair value at the end of each reporting period until the date of settlement.

        On October 29, 2011, the Company settled all of the granted options to purchase 0.610% of the equity interest in 3GUU BVI by (i) issuing 15,917.82 newly issued ordinary shares of 3GUU BVI to the grantees and (ii) exchanging the 15,917.82 ordinary shares of 3GUU BVI with 229,550 newly issued ordinary shares of the Company. The fair values of the 15,917.82 ordinary shares of 3GUU BVI,

F-60

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

229,550 ordinary shares of the Company and the granted options to purchase 0.610% of the equity interest in 3GUU BVI were the same on the date of settlement.

        The fair value of the options granted by 3GUU BVI was RMB661 and RMB992 at the grant date and settlement date, respectively. RMB992 (US$158) was recorded as compensation cost with a corresponding credit to long-term liability during the year ended December 31, 2011.

        The grant date and settlement date fair value of the liability awards granted by 3GUU BVI was estimated using the binomial option pricing model with the following assumptions:

	January 3, 2011		October 29, 2011
Risk-free interest rate		3.34%		3.14%
Dividend yield		—		—
Expected volatility range		52.74%		47.02%
Weighted average expected life		2 year		1.18 year
Suboptimal exercise factor		3		3
Estimated forfeiture rate		—		—
Fair value of 0.610% of the equity interest in 3GUU BVI		RMB1,883		RMB2,523

(d)    Restricted share units

        On August 24, 2011, the Company granted 1,220,000 RSUs to certain employees and directors at the subscription price of US$0.001 per share. The transferability of the 1,220,000 RSUs is restricted. Pursuant to the RSU subscription agreement, 25% of the RSUs will vest and become transferable upon each of: (i) the consummation of the IPO of the securities of the Company on an internationally recognized stock exchange (the "IPO Date"); (ii) the first anniversary of the IPO Date; (iii) the second anniversary of the IPO Date; and (iv) the third anniversary of the IPO Date. If the IPO is not consummated by December 31, 2014, the Company is obligated to repurchase all of the RSUs at the purchase price of US$0.001 per share. There is a service condition in addition to the performance condition attached to the vesting of the RSUs, as the unvested restricted shares shall be subject to repurchase in the event of the termination of service unless otherwise agreed by the Company and the grantees.

        The RSUs are classified as equity awards which are measured based on the grant date fair value of RMB3.98 (US$0.63) per share. Since a performance condition of an IPO is attached with the vesting of the RSUs, share based compensation cost will not be recorded before the performance condition of an IPO is met. Accordingly, no compensation expense was recognized for the year ended December 31, 2011. As of December 31, 2011, the unrecognized compensation expenses for the RSUs are RMB4,856 (US$771).

F-61

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

        The following table summarizes the RSUs granted by Company during the year ended December 31, 2011 (Successor):

RSUs granted by the Company	Outstanding RSUs		Weighted Average Grant Date Fair Value
			RMB
Unvested, January 1, 2011		—		—
Granted		1,220,000		4,856
Vested		—		—
Forfeited		—		—
Unvested, December 31, 2011		1,220,000		4,856

(e)    Determining fair value of awards

        The Company, with the assistance of an independent valuation firm, estimated the grant date fair value of the options granted by VODone using the Black-Scholes option pricing model and the options granted by Dragon Joyce, OWX Holding and 3GUU BVI using a binomial option pricing model. The subsequent measurement of fair value of the options granted by Dragon Joyce, OWX Holding and 3GUU BVI was estimated using a binomial option pricing model with the assistance of an independent valuation firm. The binomial model requires the input of highly subjective assumptions, including the expected stock price volatility, the expected price multiple at which the holder is likely to exercise share options and the expected employee forfeiture rate. The Company uses historical data and future expectations to estimate forfeiture rate. The volatility assumption of the VODone options was estimated based on implied volatility and historical volatility of VODone's share price. For expected volatility of the Dragon Joyce, OWX Holding and 3GUU BVI options, the Company has made reference to historical volatilities of several comparable companies. The risk-free rate for periods within the contractual life of the options of VODone is based on yield on in effect at the grant date on Exchange Fund Notes as indicated by Hong Kong Monetary Authority. The risk-free rate for periods within the contractual life of the options of Dragon Joyce, OWX Holding and 3GUU BVI is based on the market yield of China Government Bond. The dividend yield is based on the expected pay-out ratio.

        The fair value of the VODone ordinary shares was determined based on the closing market price of the shares at the measurement date. The Company estimated the grant date fair value of the RSUs based on the fair value of the Company's ordinary shares, which was determined to be the sum of the fair value of Dragon Joyce, OWX Holding and 3GUU BVI. The Company determined the fair value of the Dragon Joyce, OWX Holding and 3GUU BVI equity interests at the measurement date with the assistance of an independent valuation firm using a generally accepted valuation methodology, which incorporates certain assumptions including the financial results and growth trends of Dragon Joyce, OWX Holding and 3GUU BVI. The expected share option life was estimated based on the resulting output of the binomial option pricing model. The option awards are not transferable and the grantees

F-62

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

16. SHARE-BASED PAYMENTS (Continued)

have a limited amount of time subsequent to their termination of employment or service to exercise the options. These post-vesting restrictions are considered in the binomial option pricing model as a suboptimal exercise factor.

        Total share-based compensation expense of equity and liability awards granted to the Group's employees and directors was recorded in "General and administrative expenses" in the consolidated statements of comprehensive income.

17. RELATED PARTY TRANSACTIONS

(a)    Related parties

Name of related parties	Relationship with the Group
VODone	The ultimate holding company
Dragon Joyce	An immediate holding company
OWX Holding	An immediate holding company
Action King	An immediate holding company
Kuailefeng	A company controlled by management of Dragon Joyce
Bright Way	A company controlled by management of OWX Holding
King Reach Limited	A noncontrolling shareholder of the Group before August 23, 2011 and a shareholder of the Company since August 23, 2011
Greatfaith Group Limited	A noncontrolling shareholder of the Group before August 23, 2011 and a shareholder of the Company since August 23, 2011
Shenzhen Provider Technology Co., Ltd. ("Shenzhen Provider")	A company controlled by a director of the Company, which ceased to be a related party on July 11, 2011
Shenzhen Huazhongtianxun Technology Co., Ltd. ("Huazhongtianxun")	A company controlled by a director of the Company, which ceased to be a related party on April 12, 2011
Beijing Changshi Jiaren Technology Development Co., Ltd. ("Changshi Jiaren")	A company controlled by a director of the Company, which ceased to be a related party on April 12, 2011
Beijing Shidaixunda Technology Co., Ltd. ("Shidaixunda")	A company controlled by a director of the Company, which ceased to be a related party on April 12, 2011
Mr. Wang Yongchao	A director of 3GUU BVI

F-63

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

(b)    The Group had the following related party transactions for the periods presented:

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Revenue from exclusive technical support services on feature phone games provided to:
Kuailefeng		—		101		5,939		4,661		740
		—		101		5,939		4,661		740

        The Group entered into an exclusive technical support services agreement with Kuailefeng on October 9, 2009, pursuant to which Kuailefeng agreed to engage the Group as its exclusive provider of technical platform and technical support, maintenance and other services for an annual service fee based on a prescribed percentage of Kuailefeng's revenue. The exclusive technical support services agreement has a term of 50 years and can be terminated by the Group at any time.

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Revenue from exclusive reseller right on feature phone games provided to:
Kuailefeng		—		17,424		22,488		1,424		226
		—		17,424		22,488		1,424		226

        The Group entered into two separate agent agreements with Kuailefeng in December 2009 and January 2010, pursuant to which the Group granted Kuailefeng the right to operate and sell in-game premium features of certain feature phone games of the Group in exchange for a fee of RMB17,424, RMB22,488 and RMB1,424 (US$226) for the period from October 27, 2009 to December 31, 2009 and

F-64

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

the years ended December 31, 2010 and 2011, respectively. The 2009 and 2010 agreements have a term of 1 month and 2 years, respectively.

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Feature phone games revenue from related mobile phone service providers:
Shenzhen Provider		—		—		18,264		3,352		533
Huazhongtianxun		—		—		11,132		2,072		329
Changshi Jiaren		—		—		54		—		—
Shidai Xunda		—		—		2,475		2,243		356
		—		—		31,925		7,667		1,218

        The Group entered into agreements with Shenzhen Provider, Huazhongtianxun, Changshi Jiaren and Shidai Xunda for billing and collection services as mobile phone service providers in the sale of in-game premium features of feature phone games. The agreements were made in the Group's ordinary course of business and based on terms identical to those with unrelated mobile phone service providers.

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Temporary funding provided by:
Kuailefeng		—		220		—		—		—
VODone		—		—		1,231		4,551		723
		—		220		1,231		4,551		723

        The temporary funding from VODone and Kuailefeng was unsecured, interest-free and repayable on demand. The proceeds of the temporary funding from Kuailefeng were injected into Dragon Joyce as working capital. The proceeds of the temporary funding from VODone were injected into OWX Beijing as working capital and were used for payment of expenses relating to the initial public offering for the years ended December 31, 2010 and 2011, respectively.

F-65

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Revenue from mobile phone contents installation service provided to:
Kuailefeng		—		—		298		—		—

        The Group entered into a contract with Kuailefeng in 2010, pursuant to which Kuailefeng agreed to engage the Group to provide mobile phone contents installation service in December 2010 for a service fee of RMB298.

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Raw materials purchased on behalf by:
Bright Way		—		—		3,553		116		18
Raw materials purchased from:
Bright Way		—		—		1,454		658		105

        During the years ended December 31, 2010 and 2011, Bright Way purchased raw materials amounted to RMB3,553 and RMB116 (US$18), respectively, on behalf of the Group for its handset design products.

        During the years ended December 31, 2010 and 2011, the Group purchased raw materials amounted to RMB 1,454 and RMB658 (US$105), respectively, from Bright Way.

F-66

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB			(Successor) US$
Share-based compensation expenses incurred on behalf by:
VODone		—		1,708		2,741		—			—
Dragon Joyce		—		—		1,970		610			97
OWX Holding		—		—		2,142		(787	)		(126	)
		—		1,708		6,853		(177	)		(29	)

        During the period from October 27, 2009 to December 31, 2009 and the year ended December 31, 2010, VODone granted share options to certain non-employee directors of the Group. Compensation costs of RMB1,708 and RMB2,741, were recognized with a corresponding credit to additional paid-in-capital as shareholders' contribution for the period from October 27, 2009 to December 31, 2009 and the year ended December 31, 2010, respectively. During the year ended December 31, 2011, VODone did not grant share options to any employees or non-employees directors of the Group.

        During the year ended December 31, 2010, Dragon Joyce and OWX Holding granted share options to certain non-employee directors of the Group. Compensation costs of RMB4,112 were recognized with a corresponding credit to additional paid-in-capital as shareholders' contribution for the year ended December 31, 2010. During the year ended December 31, 2011, a reversal of

F-67

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

compensation costs of RMB177 (US$28) was recognized with a corresponding debit to additional paid-in capital as reduction of shareholders' contribution (Note 16(b)).

	For the period from January 1, 2009 to October 26, 2009		For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31 2011
	(Predecessor) RMB		(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Acquisition consideration paid on behalf by:
VODone		—		216,435		275,879		—		—
Acquisition-related costs paid on behalf by:
VODone		—		756		910		—		—
Deemed dividend to:
VODone		—		—		—		30,278		4,808

        During the period from October 27, 2009 to December 31, 2009, VODone paid purchase considerations of RMB216,435 on behalf of the Group for the acquisition of the 70% equity interests in the Dragon Joyce Group. During the year ended December 31, 2010, VODone paid purchase considerations of RMB77,463 and RMB198,416 on behalf of the Group for the acquisitions of the operating assets of Bright Way and Tastech, and the 70% equity interests in 3GUU BVI, respectively. These amounts paid on behalf by VODone are recognized in additional paid-in-capital as a shareholder's contribution.

        During the period from October 27, 2009 to December 31, 2009 and the year ended December 31, 2010, VODone paid acquisition-related costs of RMB756 and RMB910, respectively, on behalf of the Company. These amounts paid on behalf by VODone are recognized in additional paid-in-capital as a shareholder's contribution.

F-68

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

17. RELATED PARTY TRANSACTIONS (Continued)

(c)    The Group had the following related party balances as of December 31, 2009, 2010 and 2011:

	As of December 31,
	2009		2010		2011		2011
	(Successor) RMB		(Successor) RMB		(Successor) RMB		(Successor) US$
Amounts due from related parties:
Kuailefeng		12,619		4,382		1,347		214
Bright Way		—		3,298		—		—
VODone		—		1		—		—
King Reach Limited		3		3		—		—
Greatfaith Group Limited		1		1		—		—
Shenzhen Provider		—		4,921		—		—
Huazhongtianxun		—		2,677		—		—
Changshi Jiaren		—		57		—		—
Mr. Wang Yongchao		—				2		—
Shidaixunda		—		2,612		—		—
Total		12,623		17,952		1,349		214
Amounts due to related parties:
VODone		—		1,041		6,490		1,031
Kuailefeng		220		—		—		—
Bright Way		—		5,007		52		8
Total		220		6,048		6,542		1,039

        All balances with related parties as of December 31, 2009, 2010 and 2011 were unsecured, non-interest bearing and repayable on demand.

18. EMPLOYEE DEFINED CONTRIBUTION PLAN

        Full time employees of the Company's subsidiaries and VIE in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Full time employees of the Predecessor participate in the same government mandated defined contribution plan. Chinese labor regulations require that the PRC subsidiaries and VIE of the Group make contributions to the government for these benefits based on a specific percentage of the employees' salaries up to a maximum of three times the average annual salary for the city in which the subsidiary operates for the prior year. The Company's subsidiaries and VIEs have no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were RMB725, RMB48, RMB1,583 and RMB4,961 (US$788) for the period from January 1, 2009 to October 26, 2009 (Predecessor), the period from October 27, 2009 to December 31, 2009 (Successor) and the years ended December 31, 2010 (Successor) and 2011 (Successor), respectively.

F-69

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

19. COMMITMENTS AND CONTINGENCIES

(a)    Operating lease commitments

        As of December 31, 2011, the Group had minimum lease payments under non-cancelable operating leases with initial terms in excess of one year as follows:

	RMB		US$
2012		3,614		574
2013		2,931		465
2014		2,737		435
2015		2,507		398
2016		343		54
		12,132		1,926

        The Group's lease arrangements have no renewal options, rent escalation clauses, restrictions or contingent rents and are all conducted with third parties.

(b)    Variable interest entity structure

        In the opinion of management, (i) the ownership structure of the Company and its VIE is in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIE and its shareholder are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Group's business operations are in compliance with existing PRC laws and regulations in all material respects.

        However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Group and its contractual arrangements with its VIE are found to be in violation of any existing or future PRC laws and regulations, the Group may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. Further, should the ownership structure of the Group under the current VIE arrangement is challenged by the PRC authorities while the foreign investment restrictions over the telecommunications sector remain effective, the Group would need to restructure its ownership structure. In that case, the Group may still be able to (i) develop mobile games in China and own the copyright for those mobile games; (ii) grant to the VIE, or any other Chinese company that possesses the necessary regulatory licenses, copyright licenses to operate the Company's games in China and collect royalties from the VIE or such other Chinese company; (iii) use the Group's technology, expertise and experience to provide technological services and support to the VIE in exchange for service fees; and (iv) require the registered shareholders of the VIE to pledge their equity interests in the VIE in favor of the Group to secure the VIE's performance under these agreements. However, following such a restructuring, the Group would not be able to adopt or rely on the VIE arrangements and thus, would not be able to exercise effective control over the VIE. Such a loss of control could materially and adversely affect the Group's business, financial condition, results of operations and ability to consolidate the VIE. In the opinion of management, the likelihood of loss in respect of the

F-70

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

19. COMMITMENTS AND CONTINGENCIES (Continued)

Group's current ownership structure or the contractual arrangements with its VIE is remote based on current facts and circumstances.

        In addition, the registered shareholders of the VIE are the Company's officers or employees. If conflicts of interest arise between these shareholders' duties to the Company and the VIE, these shareholders may not act in the Company's best interests and conflicts of interest may not be resolved in the Company's favor. In addition, these shareholders may breach or cause the VIE to breach or refuse to renew its existing contractual arrangements that allow the Company to exercise effective control over it and to receive economic benefits from it. If certain shareholders of the VIE do not comply with their fiduciary duties to the Company as its designated directors, or if the Company cannot resolve any conflicts of interest or disputes between the Company and such shareholders or any future beneficial owners of the VIE, the Company would have to rely on legal proceedings to remedy the situation, which could result in disruption of the Company's business and substantial uncertainty as to the outcome of any such legal proceedings. Further, these remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. For example, the Company may have to resort to administrative and court proceedings to enforce the legal protection that the Company enjoys either by law or contract. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection the Company enjoys than in more developed legal systems. These uncertainties may impede the Company's ability to enforce the contracts it has entered into with the VIE and its shareholders and the Group's ability to consolidate the VIE. To more efficiently manage the relationship between the Company and the VIE, the Company is in the process of transferring all of the equity interests in the VIE to Dr. Lijun Zhang, our chairman, and entering into contractual arrangements with Dr. Lijun Zhang and the VIE.

(c)    Income taxes

        As of December 31, 2011, the Group has recognized RMB27,844 (US$4,421) accrual for unrecognized tax benefits (Note 15). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. As of December 31, 2011, the Group classified the accrual for unrecognized tax benefits as a non-current liability.

20. SEGMENT REPORTING

        In accordance with ASC 280, the Group's chief operating decision maker has been identified as the chief executive officer, who reviews operating results of the business when making decisions about allocating resources and assessing performance for the Group. Prior to January 1, 2010, the Group consisted of only one segment relating to feature phone games. On October 11, 2010, the handset design segment was added with the acquisitions of the operating assets of Bright Way and Tastech; and on December 31, 2010, the smartphone game segment was added with the acquisition of 70% equity interest in the 3GUU Group (Note 4). The accounting policies used in its segment reporting are the

F-71

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

20. SEGMENT REPORTING (Continued)

same as those used in the preparation of the Group's consolidated financial statements. The Group does not allocate any assets to its feature phone games, smartphone games and handset design businesses as management does not use this information to measure the performance of the reportable segments. As substantially all of the Group's long-lived assets and revenues are in and derived from the PRC, geographical segments are not presented.

        The Predecessor's segment information for the period from January 1, 2009 to October 26, 2009 is as follows:

	Feature phone games			Unallocated		Total
	RMB			RMB		RMB
Net revenues		67,240			—		67,240
Cost of revenues		(31,921	)		—		(31,921	)
Gross profit		35,319			—		35,319
General and administrative expenses		(2,536	)		—		(2,536	)
Research and development expenses		(4,438	)		—		(4,438	)
Interest income		25			—		25
Income before income taxes		28,370			—		28,370
Income tax expenses		(6,597	)		—		(6,597	)
Net income		21,773			—		21,773
Total assets		315,356			—		315,356
Total liabilities		15,923			—		15,923
Capital expenditure		375			—		375
Depreciation and amortization expenses		138			—		138

F-72

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

20. SEGMENT REPORTING (Continued)

        The Group's segment information as of December 31, 2009 and for the period from October 27, 2009 to December 31, 2009 (Successor) is as follows:

	Feature phone games			Unallocated			Total
	RMB			RMB			RMB
Net revenues		17,525			—			17,525
Cost of revenues		(5,108	)		—			(5,108	)
Gross profit		12,417			—			12,417
General and administrative expenses		(2,556	)		—			(2,556	)
Research and development expenses		(226	)		—			(226	)
Changes in fair value of contingently returnable consideration assets		—			(948	)		(948	)
Income before income taxes		9,635			(948	)		8,687
Income tax benefits		638			—			638
Net income		10,273			(948	)		9,325
Total assets		330,098			—			330,098
Total liabilities		18,877			—			18,877
Capital expenditure		128			—			128
Depreciation and amortization expenses		2,505			—			2,505

F-73

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

20. SEGMENT REPORTING (Continued)

        The Group's segment information as of and for year ended December 31, 2010 (Successor) is as follows:

	Feature phone games			Smartphone games		Handset design			Unallocated			Total
	RMB			RMB		RMB			RMB			RMB
Net revenues		110,071			—		15,340			—			125,411
Cost of revenues		(32,827	)		—		(10,083	)		—			(42,910	)
Gross profit		77,244			—		5,257			—			82,501
Selling expenses		(952	)		—		—			—			(952	)
General and administrative expenses		(9,001	)		—		(2,816	)		—			(11,817	)
Research and development expenses		(8,377	)		—		—			—			(8,377	)
Interest income		70			—		—			—			70
Changes in fair value of contingently returnable consideration assets		—			—		—			(2,065	)		(2,065	)
Income before income taxes		58,984			—		2,441			(2,065	)		59,360
Income tax expenses		(16,866	)		—		(1,781	)		—			(18,647	)
Net income		42,118			—		660			(2,065	)		40,713
Total assets		396,440			335,094		122,110			—			853,644
Total liabilities		39,563			67,265		12,840			—			119,668
Capital expenditure		341			—		—			—			341
Depreciation and amortization expense		10,136			8		573			—			10,717

F-74

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

20. SEGMENT REPORTING (Continued)

        The Group's segment information as of and for the year ended December 31, 2011 (Successor) is as follows:

	Feature phone games						Smartphone games						Handset design						Unallocated						Total
	RMB			USD			RMB			USD			RMB			USD			RMB			USD			RMB			USD
Net revenues		142,426			22,616			62,368			9,904			38,694			6,144			—			—			243,488			38,664
Cost of revenues		(61,337	)		(9,740	)		(17,974	)		(2,854	)		(29,037	)		(4,611	)		—			—			(108,348	)		(17,205	)
Gross profit		81,089			12,876			44,394			7,050			9,657			1,533			—			—			135,140			21,459
Selling expenses		(659	)		(105	)		(6,618	)		(1,051	)		(284	)		(45	)		—			—			(7,561	)		(1,201	)
General and administrative expenses		(4,505	)		(715	)		(2,817	)		(447	)		(2,653	)		(421	)		(6,288	)		(999	)		(16,263	)		(2,582	)
Research and development expenses		(17,489	)		(2,777	)		(7,077	)		(1,124	)		—			—			—			—			(24,566	)		(3,901	)
Interest income		396			63			525			83			6			1			—			—			927			147
Other income		—			—			293			47			—			—			—			—			293			47
Changes in fair value of contingently returnable consideration assets		—			—			—			—			—			—			39,446			6,264			39,446			6,264
Income before income taxes		58,832			9,342			28,700			4,558			6,726			1,068			33,158			5,265			127,416			20,233
Income tax expenses		(4,644	)		(738	)		42,142			6,692			(1,571	)		(249	)		—			—			35,927			5,705
Net income		54,188			8,604			70,842			11,250			5,155			819			33,158			5,265			163,343			25,938
Total assets		454,572			72,183			371,294			58,959			116,831			18,552			7,733			1,228			950,430			150,922
Total liabilities		45,480			7,222			29,704			4,717			8,557			1,359			70,511			11,196			154,252			24,494
Capital expenditure		3,595			571			12,824			2,036			174			28			—			—			16,593			2,635
Depreciation and amortization expense		10,759			1,708			8,102			1,287			2,409			383			—			—			21,270			3,378

F-75

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

21. EARNINGS PER SHARE

        Basic and diluted earnings per share for the period from October 27, 2009 to December 31, 2009, the years ended December 31, 2010 and 2011 are calculated as follows:

	For the period from October 27, 2009 to December 31 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	RMB		RMB		RMB			US$
	(Successor)		(Successor)		(Successor)			(Successor)
Numerator for basic and diluted earnings per share:
Numerator for basic earnings per share—Net income attributable to ordinary shareholders		6,527		28,498		151,506			24,058
Net adjustment for dilutive effect of subsidiary issued share-based options		—		—		(30	)		(5	)
Numerator for diluted earnings per share		6,527		28,498		151,476			24,053
Denominator for basic and diluted earnings per share:
Weighted average number of ordinary shares outstanding		212,500,000		212,500,000		244,594,415			244,594,415
Basic earnings per share		0.03		0.13		0.62			0.10
Diluted earnings per share		0.03		0.13		0.62			0.10

        For the period from October 27, 2009 to December 31, 2009 and the year ended December 31, 2010, the Group did not have any securities outstanding which could potentially dilute basic earnings per share. For the year ended December 31, 2011, the share options granted by 3GUU BVI are included in the computation of diluted earnings per share; whereas the RSUs granted by the Company are excluded from the computation of diluted earnings per share, as the attached performance condition has not been met as of December 31, 2011.

22. SUBSEQUENT EVENTS

        In accordance with ASC topic 855 ("ASC 855"), Subsequent Events, the Group evaluated subsequent events through April 13, 2012, which was the date that the consolidated financial statements were filed with the Securities and Exchange Commission on Form F-1.

(a)    Option granted to employees of the Company or employees of VODone

        On February 6, 2012, the Company granted options under the 2011 Share Option Scheme to purchase 23,404,120 and 2,431,592 ordinary shares of the Company to its employees and employees of VODone, respectively, at an exercise price of US$0.605 per share with a contractual life of five years. Twenty-five percent of the share options are vested and exercisable by each grantee on the first anniversary of the date of grant. The remaining 75% of the share options are vested and exercisable by each grantee in 12 equal quarterly tranches beginning one calendar quarter after the first anniversary of the date of grant. Since VODone, the ultimate holding company of the Company, is a publicly listed

F-76

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

22. SUBSEQUENT EVENTS (Continued)

company on the Main Board of the HK Stock Exchange, it or its subsidiary is prohibited to grant share options with exercise price lower than the new issue price of shares on listing unless otherwise approved or waived by the HK Stock Exchange. Any share option granted by the Company during the period commencing six months before the first confidential filing date on Form F-1, or its equivalent for listing on the HK Stock Exchange or an overseas stock exchange, up to the listing date are subject to the above requirement. Except for any waivers that may be granted by the HK Stock Exchange, the exercise price of any share option granted during such period shall be adjusted to a price not lower than the new issue price as the Company's board of directors may deem appropriate. In the event that the listing shall not take place, the above exercise price of US$0.605 remains unchanged.

(b)    Issuance of restricted shares

        On February 6, 2012, the Company's board of directors approved the issuance of 639,000 restricted shares to certain senior management and directors at a subscription price of US$0.001 per share. Twenty-five percent of the restricted shares are vested upon each of: (i) the consummation of the IPO of the securities of the Company on an internationally recognized stock exchange (the "IPO Date"); (ii) the first anniversary of the IPO Date; (iii) the second anniversary of the IPO Date; and (iv) the third anniversary of the IPO Date. If the IPO is not consummated by December 31, 2014, the Company is required to repurchase all of the restricted shares at a purchase price of US$0.001 per share. Unless otherwise agreed by the Company and the grantees, the unvested restricted shares shall be subject to repurchase in the event of the termination of service.

(c)    Establishment of subsidiaries

        On February 14, 2012, the Company established four wholly-owned subsidiaries in the BVI, namely HYD Holding Limited, OWX Group Limited, OWX Development Limited and 3GUU Holding Limited, to act as intermediate holding companies for the Dragon Joyce Group, the OWX Group and the 3GUU Group.

(d)    Share purchase agreement

        On March 21, 2012, the Company entered into a share purchase agreement with Core Tech Resources Inc. ("Core Tech") and PVG Venture Capital Partners (Wuxi) ("PVG") to issue 15,450,144 and 11,035,817 ordinary shares (the "Investor Shares") at a consideration of US$7 million and US$5 million, respectively. In the event that (i) the IPO is consummated on or prior to the first anniversary of the consummation of the sale and issuance of the Investor Shares and the market capitalization of the IPO is below US$300,000 or (ii) the IPO has not been consummated on or prior to the first anniversary of the consummation of the sale and issuance of the Investor Shares ("Put Exercise Event"), Core Tech and PVG (collectively the "Investors") shall have the option, jointly and not severally, to require the Company to purchase all but not less than all of the Investor Shares held by the Investors by providing a notice to the Company within twenty days of the occurrence of the Put Exercise Event. Market capitalization was defined as the price per share of the ordinary shares of the Company first offered and sold on the IPO, multiplied by the total number of issued and outstanding ordinary shares immediately following the closing of the IPO.

F-77

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

23. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

        Under PRC laws and regulations, the Company's PRC subsidiaries and VIE are restricted in their ability to transfer certain of their net assets to the Company in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves of the Company's PRC subsidiaries and the net assets of the VIE, as determined pursuant to PRC generally accepted accounting principles, totaling RMB44,808 (US$7,115) as of December 31, 2011. The following is the condensed financial information of the Company on a parent-company only basis:

Condensed balance sheets

		As of December 31,
		2009		2010			2011			2011
		RMB		RMB			RMB			US$
ASSETS
Current assets:
	Cash and cash equivalents		—		—			42			7
	Dividends receivable		—		—			63,000			10,004
	Prepayments and other current assets		—		—			5,722			909
Total current assets			—		—			68,764			10,920
Non-current assets:
	Investments in subsidiaries and a VIE		225,426		537,488			795,913			126,385
	Deferred initial public offering costs		—		—			2,010			319
Total non-current assets			225,426		537,488			797,923			126,704
TOTAL ASSETS			225,426		537,488			866,687			137,624
Accrued expenses and other current liabilities			—		—			2,010			319
Dividends payable			—		—			63,000			10,004
Amount due to a related party			—		—			5,499			873
TOTAL LIABILITIES			—		—			70,509			11,196
Shareholders' Equity:
	Ordinary shares (US$0.001 par value, 1,000,000,000 shares authorized; 212,500,000 share issued and outstanding as of December 31, 2009 and 2010, 302,729,550 shares issued and outstanding as of December 31, 2011)		1,434		1,434			1,937			308
	Additional paid-in capital		217,465		501,107			709,815			112,714
	Retained earnings		6,527		35,025			84,853			13,474
	Accumulated other comprehensive loss		—		(78	)		(427	)		(68	)
Total shareholders' equity			225,426		537,488			796,178			126,428
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			225,426		537,488			866,687			137,624

F-78

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

23. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

Condensed statements of income

	For the period from October 27, 2009 to December 31, 2009			For the year ended December 31, 2010			For the year ended December 31, 2011
	RMB			RMB			RMB			US$
Net revenues		—			—			—
Cost of revenues		—			—			—
Gross profit		—			—			—
General and administrative expenses		(1,708	)		(2,741	)		(5,296	)		(841	)
Total operating expenses		(1,708	)		(2,741	)		(5,296	)		(841	)
Operating loss		(1,708	)		(2,741	)		(5,296	)		(841	)
Changes in fair value of contingently returnable consideration assets		(948	)		(2,065	)		39,446			6,264
Equity in profits of subsidiaries and a VIE		9,183			33,304			117,356			18,635
Net income		6,527			28,498			151,506			24,058

Condensed statements of cash flows

	For the period from October 27, 2009 to December 31, 2009		For the year ended December 31, 2010		For the year ended December 31, 2011
	RMB		RMB		RMB			US$
Net cash provided by operating activities		—		—		—			—
Net cash provided by investing activities		—		—		8,400			1,334
Net cash used in financing activities		—		—		(8,358	)		(1,327	)

(a)    Basis of presentation

        In the parent-company only financial statements, the Company's investment in subsidiaries and VIE is stated at cost plus equity in undistributed earnings of subsidiaries and VIE since inception. The parent-company only condensed financial statements should be read in conjunction with the Company's consolidated financial statements.

        For the presentation of the parent-company only condensed financial information, the Company records its investment in subsidiaries and VIE, which it effectively controls through contractual agreements, under the equity method of accounting as prescribed in ASC topic 323 ("ASC 323"), Investments—Equity Method and Joint Ventures. Such investment is presented as "Investment in subsidiaries and VIE" in the balance sheets and share of the subsidiaries' and VIE's profits is presented as "Equity in profits of subsidiaries and VIE" in the statements of income.

F-79

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED AND PREDECESSOR

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB"), U.S. Dollars ("US$") and Hong Kong Dollars ("HK$"),
except for number of shares and per share data)

23. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

        Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in the parent-company only financial statements.

(b)    Commitments

        The Company does not have any significant commitments or long-term obligations as of December 31, 2009, 2010 and 2011.

F-80

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))

				As of December 31,			As of March 31,
		Notes		2011			2012			2012
				RMB			RMB			US$
ASSETS
Current assets:
	Cash and cash equivalents				187,237			133,925			21,266
	Accounts receivable		4		56,121			54,695			8,685
	Inventories		5		2,103			1,566			249
	Prepayments and other current assets		6		24,966			36,715			5,833
	Amounts due from related parties		16		1,349			14			2
	Deferred tax assets				1,491			1,530			243
Total current assets					273,267			228,445			36,278
Non-current assets:
	Property and equipment, net		7		5,435			5,329			846
	Goodwill		8		598,358			598,358			95,015
	Intangible assets, net		9		70,101			66,226			10,516
	Deferred initial public offering costs		10		2,010			2,147			341
	Deferred tax assets				916			1,786			284
	Other non-current assets				343			343			54
Total non-current assets					677,163			674,189			107,056
TOTAL ASSETS					950,430			902,634			143,334
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable				9,150			10,474			1,663
	Accrued expenses and other current liabilities		11		17,577			13,119			2,083
	Deferred revenue				3,894			6,150			977
	Income tax payable				11,115			3,875			616
	Dividends payable				63,000			—			—
	Amounts due to related parties		16		6,542			9,467			1,504
Total current liabilities					111,278			43,085			6,843
Non-current liabilities:
	Unrecognized tax benefits		14		27,844			28,269			4,489
	Deferred tax liabilities				12,580			11,846			1,881
	Other non-current liabilities				2,550			2,550			405
Total non-current liabilities					42,974			42,665			6,775
Total liabilities					154,252			85,750			13,618
Commitments and contingencies			18
Shareholders' equity:
	Ordinary shares (US$0.001 par value, 1,000,000,000 shares authorized; 302,729,550 shares issued and outstanding as of December 31, 2011 and March 31, 2012)		12		1,937			1,937			308
	Additional paid-in capital				709,815			714,016			113,381
	Retained earnings				84,853			101,365			16,096
	Accumulated other comprehensive loss				(427	)		(434	)		(69	)
Total shareholders' equity					796,178			816,884			129,716
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY					950,430			902,634			143,334

The accompanying notes are an integral part of the consolidated financial statements.

F-81

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 three months ended March 31,
		Notes		2011			2012			2012
				RMB			RMB			US$
Net revenues (a)
	Feature phone games				37,210			35,437			5,627
	Smartphone games				11,755			16,095			2,556
	Handset design				8,718			2,801			445
Total net revenues					57,683			54,333			8,628
Cost of revenues (b)
	Feature phone games				(13,734	)		(17,873	)		(2,838	)
	Smartphone games				(4,004	)		(3,678	)		(584	)
	Handset design				(4,660	)		(2,780	)		(441	)
Total cost of revenues					(22,398	)		(24,331	)		(3,863	)
Gross profit					35,285			30,002			4,765
Operating expenses:
Selling expenses					(1,186	)		(2,160	)		(343	)
General and administrative expenses					(3,974	)		(5,907	)		(938	)
Research and development expenses					(3,935	)		(8,597	)		(1,365	)
Total operating expenses					(9,095	)		(16,664	)		(2,646	)
Operating income					26,190			13,338			2,119
Interest income					136			292			46
Other income					18			113			18
Changes in fair value of contingently returnable consideration assets					(760	)		7,131			1,132
Income before income taxes and noncontrolling interests					25,584			20,874			3,315
Income tax expenses			14		(8,682	)		(2,053	)		(326	)
Net income					16,902			18,821			2,989
Net income attributable to noncontrolling interests					5,071			—			—
Net income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders					11,831			18,821			2,989
Other comprehensive loss:
Foreign currency translation adjustment					(129	)		(7	)		(1	)
Total other comprehensive loss					(129	)		(7	)		(1	)
Comprehensive income					16,773			18,814			2,988
Comprehensive income attributable to noncontrolling interests					5,032			—			—
Comprehensive income attributable to China Mobile Games and Entertainment Group Limited's ordinary shareholders					11,741			18,814			2,988
Earnings per share:
Basic earnings per share			20		0.06			0.06			0.01
Diluted earnings per share			20		0.06			0.06			0.01
Weighted average number of ordinary shares outstanding in computing:
Basic earnings per share			20		212,500,000			302,729,550			302,729,550
Diluted earnings per share			20		212,500,000			302,729,550			302,729,550
(a) Net revenues from related parties Feature phone games			16		10,245			—			—
(b) Cost of revenues to related parties Handset design			16		617			—			—

The accompanying notes are an integral part of the consolidated financial statements.

F-82

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))

		For the three months ended March 31,
		2011			2012			2012
		RMB			RMB			US$
Cash flows from operating activities:
Net income			16,902			18,821			2,989
Adjustments to reconcile net income to net cash generated from operating activities:
	Depreciation of property and equipment		231			620			98
	Amortization of intangible assets		4,563			5,784			919
	Loss on disposal of an intangible asset		—			75			12
	Share-based compensation expenses		1,284			1,892			300
	Changes in fair value of contingently returnable consideration assets		760			(7,131	)		(1,132	)
	Deferred income tax expense (benefit)		926			(1,643	)		(261	)
Changes in operating assets and liabilities:
	Accounts receivable		(15,488	)		1,426			226
	Prepayments and other current assets		(473	)		(4,505	)		(715	)
	Inventories		(388	)		537			85
	Amounts due from related parties		300			1,335			212
	Accounts payable		(3,011	)		1,324			210
	Amounts due to related parties		(3,224	)		2,788			443
	Income tax payable		6,237			(7,240	)		(1,149	)
	Deferred revenue		2,743			2,256			358
	Accrued expenses and other current liabilities		1,305			(4,258	)		(677	)
	Unrecognized tax benefits		19			312			50
Net cash provided by operating activities			12,686			12,393			1,968
Cash flows from investing activities:
	Acquisition of property and equipment		(1,750	)		(514	)		(82	)
	Acquisition of intangible assets		(270	)		(2,184	)		(347	)
Net cash used in investing activities			(2,020	)		(2,698	)		(429	)
Cash flows from financing activities:
	Dividends paid		—			(63,000	)		(10,004	)
Net cash used in financing activities			—			(63,000	)		(10,004	)
	Exchange rate effect on cash and cash equivalents		(129	)		(7	)		(1	)
Net increase (decrease) in cash and cash equivalents			10,537			(53,312	)		(8,466	)
Cash and cash equivalents, beginning of the period			104,038			187,237			29,732
Cash and cash equivalents, end of the period			114,575			133,925			21,266

The accompanying notes are an integral part of the consolidated financial statements.

F-83

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for number of shares)

		Total China Mobile Games and Entertainment Group Limited's equity
		Number of shares		Ordinary shares		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Noncontrolling interests			Total shareholders' equity
				RMB		RMB		RMB			RMB			RMB			RMB
Balance as of January 1, 2011			212,500,000		1,434		501,107		35,025			(78	)		196,488			733,976
	Net income for the period		—		—		—		11,831			—			5,071			16,902
	Other comprehensive loss		—		—		—		—			(88	)		(41	)		(129	)
	Share-based compensation expenses		—		—		572		—			—			—			572
Balance as of March 31, 2011			212,500,000		1,434		501,679		46,856			(166	)		201,518			751,321
Balance as of January 1, 2012			302,729,550		1,937		709,815		84,853			(427	)		—			796,178
	Net income for the period		—		—		—		18,821			—			—			18,821
	Other comprehensive loss		—		—		—		—			(7	)		—			(7	)
	Share-based compensation expenses		—		—		1,892		—			—			—			1,892
	Deemed dividend to VODone (Note 15)		—		—		2,309		(2,309	)		—			—			—
Balance as of March 31, 2012			302,729,550		1,937		714,016		101,365			(434	)		—			816,884
Balance as of March 31, 2012 in US$			302,729,550		308		113,381		16,096			(69	)		—			129,716

The accompanying notes are an integral part of the consolidated financial statements.

F-84

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION

        The accompanying unaudited interim condensed consolidated financial statements of China Mobile Games and Entertainment Group Limited (the "Company"), its subsidiaries and a variable interest entity ("VIE"), collectively referred to as the "Group", were prepared on a basis substantially consistent with the Group's audited financial statements for the year ended December 31, 2011. These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, these unaudited interim condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements.

        In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair presentation of the Group's consolidated financial position at March 31, 2012, and the Group's consolidated results of operations, cash flows and changes in shareholders' equity for the three months ended March 31, 2011 and 2012. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of results to be expected for the full year. The consolidated balance sheet as of December 31, 2011 was derived from the audited consolidated financial statements at that date but does not include all of the disclosures required by U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements and notes thereto should be read in conjunction with the Group's audited consolidated financial statements and related notes for the period from October 27, 2009 to December 31, 2009 and the years ended December 31, 2010 and 2011.

        The Group is principally engaged in the development, operation and sale of feature phone and smartphone games as well as the provision of handset design products and services. The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through its subsidiaries and a VIE, which are all located in the People's Republic of China (the "PRC"). The Company's principal geographic market is in the PRC. The Company's feature phone games, handset design and smartphone games businesses were acquired through three separate transactions (the "Acquired Businesses") completed by VODone Limited ("VODone") and its subsidiaries: (i) the acquisition of 70% equity interest in Dragon Joyce Limited ("Dragon Joyce") and its subsidiaries on October 27, 2009 by VODone, (ii) the acquisitions of operating assets of Bright Way Technology (Hong Kong) Limited ("Bright Way") and Shenzhen Tastech Electronic Co. Ltd. ("Tastech") on October 11, 2010 by two subsidiaries of OWX Holding Co. Ltd. ("OWX Holding"), a 70% owned subsidiary of VODone, and (iii) the acquisition of 70% equity interest in 3GUU Mobile Entertainment Industrial Co. Ltd. ("3GUU BVI") and its subsidiaries on December 31, 2010 by Action King Limited ("Action King"), a wholly-owned subsidiary of VODone. The Acquired Businesses were operated by VODone from their respective acquisition date to the date of the Group's reorganization on August 23, 2011 (the "Reorganization").

Reorganization transactions

        In preparation for its planned initial public offering ("IPO"), the following transactions were undertaken to reorganize the legal structure of the Group. On August 23, 2011, pursuant to a series of share swap agreements, the Company issued (i) 106,500,000 new ordinary shares to Dragon Joyce to

F-85

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

acquire Dragon Joyce's equity interest in its subsidiaries (the "Dragon Joyce Group"); (ii) 43,500,000 new ordinary shares to OWX Holding to acquire OWX Holding's equity interest in its subsidiaries (the "OWX Group"); (iii) 59,999,000 new ordinary shares to Action King to acquire Action King's equity interests in 3GUU BVI and its subsidiaries (the "3GUU Group"); and (iv) 90,000,000 new ordinary shares to the noncontrolling interest holders of Dragon Joyce, OWX Holding and 3GUU BVI to acquire their equity interests in the Dragon Joyce Group, the OWX Group and the 3GUU Group, respectively. As a result of the Reorganization, the Company effectively acquired 70% and 30% of the equity interests in each of the Dragon Joyce Group, the OWX Group and the 3GUU Group from VODone and the noncontrolling interest holders, respectively. After the Reorganization, (i) Dragon Joyce, OWX Holding and Action King became wholly-owned subsidiaries of VODone and collectively own 70.2% of the equity interest in the Company whilst the former noncontrolling interest holders collectively own the remaining 29.8% equity interest of the Company; and (ii) the Dragon Joyce Group, the OWX Group and the 3GUU Group became wholly-owned subsidiaries of the Company. Dragon Joyce, OWX Holding and Action King were investment holding companies and had no operations since inception.

        Prior to the Reorganization, the Company, the Dragon Joyce Group, the OWX Group and the 3GUU Group had the same controlling shareholder in VODone. In substance, existing sister operating entities, the Dragon Joyce Group, the OWX Group and the 3GUU Group, have been reorganized as subsidiaries of the Company and the transaction was accounted for as a legal reorganization of entities under common control, in a manner similar to a pooling-of-interest. Accordingly, the assets and liabilities of the parties to the Reorganization have been stated at their historical amounts in the accompanying unaudited interim condensed consolidated financial statements.

        The Company accounted for the purchase of the remaining 30% equity interest of the Dragon Joyce Group, the OWX Group and the 3GUU Group from the noncontrolling interest holders on August 23, 2011 as an equity transaction in accordance with Accounting Standards Codification ("ASC") topic 810 ("ASC 810"), Consolidation. The difference between the consideration paid by the Company to the noncontrolling interest holders and the carrying amount of the noncontrolling interest in the Dragon Joyce Group, the OWX Group and the 3GUU Group was recognized in additional paid-in capital.

VIE arrangement

        Prior to being acquired by VODone on December 31, 2010, Guangzhou Yitongtianxia Software Development Co., Ltd. ("Yitongtianxia"), a wholly-owned subsidiary of 3GUU BVI, entered into a series of contractual arrangements ("VIE Arrangement") with Guangzhou Yingzheng Information Technology Co., Ltd. ("Yingzheng") and its shareholders on October 28, 2009, whereby Yitongtianxia obtained effective control over Yingzheng through (i) the ability to exercise all the rights of Yingzheng's shareholders pursuant to the exclusive call option agreement, the equity pledge agreement and the agreement for voting proxies, (ii) the rights to absorb substantially all of the economic residual benefits pursuant to the exclusive technology services and market promotion agreement, the technology services agreement and two supplementary agreements and (iii) the obligation to fund all of the

F-86

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

expected losses of Yingzheng pursuant to the loan agreement and a supplementary agreement. As a result, Yitongtianxia has been determined to be the primary beneficiary of Yingzheng. Accordingly, in accordance with SEC Regulation SX-3A-02 and ASC 810, the Company, through Yitongtianxia, has consolidated the operating results of Yingzheng from the date of acquisition of Yitongtianxia on December 31, 2010. As more fully described below, 3GUU BVI replaced Yitongtianxia as the primary beneficiary of Yingzheng on December 16, 2011. The reason for entering into the VIE Arrangement is to comply with PRC laws and regulations that (i) prohibit direct foreign control in companies involved in Internet content provision and telecommunication businesses and (ii) restrict an offshore company controlled or established by a PRC enterprise or natural person to acquire its PRC affiliates.

        The significant terms of the VIE Arrangement are listed below:

Exclusive call option agreement

        Pursuant to the exclusive call option agreement among Yitongtianxia, Yingzheng and its shareholders, Yitongtianxia and its shareholders irrevocably granted Yitongtianxia, or its designated persons, an exclusive option to purchase, when and to the extent permitted under PRC law, part of or the entire equity interests of Yingzheng. The exercise price is the minimum price permitted by PRC law. The exclusive option agreement will remain effective until the exclusive option is exercised to purchase the entire equity interest of Yingzheng.

Equity pledge agreement

        Pursuant to the equity pledge agreement between Yitongtianxia and Yingzheng's shareholders, Yingzheng's shareholders have pledged their entire equity interest in Yingzheng to Yitongtianxia to guarantee the performance of Yingzheng's obligations under the exclusive technology services and market promotion agreement. If Yingzheng breaches its contractual obligations under the exclusive technology services and market promotion agreement, Yitongtianxia, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interest. Yingzheng's shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interest in Yingzheng without the prior consent of Yitongtianxia. Unless Yitongtianxia terminates the agreement, the equity pledge agreement will remain effective until (i) Yingzheng fulfills all the obligations prescribed in the exclusive call option agreement, the exclusive technology services and market promotion agreement, the agreement for voting proxies and the loan agreement or (ii) Yitongtianxia acquires the entire equity interest of Yingzheng.

Exclusive technology services and market promotion agreement

        Pursuant to the exclusive technology services and market promotion agreement between Yitongtianxia and Yingzheng, Yitongtianxia has the exclusive and irrevocable right to provide to Yingzheng various technology and market promotion services related to the mobile phone games business. In return, Yingzheng is required to pay Yitongtianxia a service fee in an amount as determined at the sole discretion of Yitongtianxia. Unless Yitongtianxia terminates the agreement, the exclusive technology services and market promotion agreement will remain effective until the

F-87

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

dissolution of Yitongtianxia in accordance with the applicable PRC laws. Business taxes relating to technology services and market promotion fees charged by Yitongtianxia are recorded as cost of revenues in the consolidated statements of comprehensive income.

Technology services agreement

        Pursuant to the technology services agreement dated August 6, 2010 between Yitongtianxia and Yingzheng and the supplementary agreement dated January 6, 2011, Yitongtianxia agreed to provide Yingzheng with technology support and market promotion services related to Yingzheng's smartphone games business. Yingzheng agreed to distribute 40% of its income generated from the game products developed under the technology services agreement, after deducting taxes and expenses, to Yitongtianxia on a monthly basis from August 6, 2010 to August 5, 2013. Upon expiration, the technology services agreement will be automatically renewed unless Yitongtianxia, in its sole discretion, disagrees.

Agreement for voting proxies

        Pursuant to the agreement for voting proxies among Yitongtianxia, Yingzheng and its shareholders, Yingzheng's shareholders irrevocably assign their full voting rights in Yingzheng to Yitongtianxia. Yingzheng's shareholders entrusted Yitongtianxia their rights to attend shareholders' meetings and to vote on their behalf on all of the matters that require shareholders' approval. Unless Yitongtianxia terminates the agreement, the agreement for voting proxies will remain effective in the same effective period as the exclusive call option agreement, the equity pledge agreement, the exclusive technology services and market promotion agreement and the loan agreement. On December 16, 2011, Yitongtianxia re-assigned the rights underlying the agreement for voting proxies to 3GUU BVI as more fully described below.

Loan agreement

        Pursuant to the loan agreement between Yitongtianxia and Yingzheng's shareholders, Yitongtianxia extended loans of an aggregate principal amount of RMB20,000 to Yingzheng's shareholders to enable them to pay the registered capital of Yingzheng. Yingzheng's shareholders will repay the loans by transferring their legal ownership in Yingzheng to Yitongtianxia when permitted by PRC law. The loan agreement is effective for 10 years and will automatically extend for another 10 years unless Yitongtianxia, in its sole discretion, disagrees. As of December 31, 2011 and March 31, 2012, Yingzheng's shareholders have not drawn down any loans from Yitongtianxia.

Supplementary agreements

        On December 30, 2010, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to determine the calculation of management fee to be paid to Yitongtianxia. Pursuant to this supplementary agreement, Yingzheng has agreed to pay an annual management fee to Yitongtianxia based on annual revenue of Yingzheng minus actual operating costs, other costs of

F-88

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Yingzheng, which include fees paid under the technology services agreement, and taxes paid by Yingzheng.

        On August 23, 2011, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to memorialize certain terms previously agreed amongst Yitongtianxia, Yingzheng and its shareholders. While this supplementary agreement was signed in 2011, the terms, intent and substance of all the agreements above remained unchanged. Pursuant to the supplementary agreement: (i) before Yitongtianxia can legally exercise the option to acquire Yingzheng, Yingzheng's shareholders cannot declare any dividends or distribute any residual profits without the consent of Yitongtianxia; (ii) any funds, including but not limited to dividends distributed out of Yingzheng's residual profits, received by Yingzheng's shareholders or any persons designated by Yingzheng's shareholders, shall be remitted in full to Yitongtianxia; (iii) the consideration received by Yingzheng's shareholders upon the exercise of the exclusive call option agreement by Yitongtianxia must be immediately remitted to Yitongtianxia or any persons designated by Yitongtianxia; (iv) Yitongtianxia is obligated to provide continuous financial support to Yingzheng for operations; and (v) Yitongtianxia has the unilateral right to change the service fee amount under the exclusive technology services and market promotion agreement. The obligation to provide continuous financial support to Yingzheng for operations by Yitongtianxia was agreed to be terminated by both parties on August 23, 2011.

        On December 16, 2011, 3GUU BVI agreed to provide unlimited financial support to Yingzheng for its operations. In addition, pursuant to a power of attorney agreement entered into between Yitongtianxia and 3GUU BVI, Yitongtianxia re-assigned the rights to attend Yingzheng shareholders' meetings and to vote on all of the matters in Yingzheng that require shareholders' approval irrevocably entrusted to it by shareholders of Yingzheng to 3GUU BVI. 3GUU BVI and Yitongtianxia, as a group of related parties, have held all of the variable interests of Yingzheng since December 16, 2011. 3GUU BVI has been determined to be most closely associated with Yingzheng within the group of related parties, as 3GUU BVI has the power to direct the activities of Yingzheng pursuant to the power of attorney agreement and the obligation to absorb the expected losses of Yingzheng through the unlimited financial support. As a result, Yitongtianxia ceased to be and 3GUU BVI became the primary beneficiary of Yingzheng on December 16, 2011.

F-89

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The carrying amounts and classifications of the assets and liabilities of Yingzheng are as follows:

	As of December 31,		As of March 31,
	2011		2012		2012
	RMB		RMB		US$
ASSETS
Current assets:
Cash and cash equivalents		27,272		30,973		4,918
Accounts receivable		10,292		8,448		1,341
Prepayments and other current assets		718		3,326		528
Deferred tax assets		1,076		1,076		171
Total current assets		39,358		43,823		6,958
Non-current assets:
Property and equipment, net		2,861		2,675		425
Intangible assets, net		13,425		13,029		2,069
Deferred tax assets		896		896		142
Total non-current assets		17,182		16,600		2,636
Total assets		56,540		60,423		9,594
LIABILITIES
Current liabilities:
Accounts payable		1,332		1,380		219
Accrued expenses and other current liabilities		5,020		4,875		774
Income tax payable		237		184		29
Deferred revenue		876		1,214		193
Total current liabilities		7,465		7,653		1,215
Non-current liabilities:
Unrecognized tax benefits		4,315		4,315		685
Other non-current liabilities		2,150		2,150		341
Total non-current liabilities		6,465		6,465		1,026
Total liabilities		13,930		14,118		2,241

F-90

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The financial performance and cash flows of Yingzheng are as follows:

	For three months ended March 31,
	2011			2012
	RMB			RMB			US$
Net revenues		12,632			11,377			1,807
Net income		6,404			3,697			587
Net cash provided by operating activities		72			5,942			944
Net cash used in investing activities		(893	)		(2,241	)		(356	)
Net cash provided by financing activities		—			—			—

        As of March 31, 2012, there was no pledge or collateralization of the assets of Yingzheng and the Company has not provided any financial support that it was not previously contractually required to provide to Yingzheng. There were no asset of Yingzheng that can only be used to settle its obligations. Creditors of Yingzheng have no recourse to the general credit of 3GUU BVI, which is the primary beneficiary of Yingzheng.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        The accounting policies used for the preparation of the unaudited interim condensed consolidated financial statements as of March 31, 2012 and for the three months ended March 31, 2011 and 2012 are consistent with those set out in the consolidated financial statements as of December 31, 2009, 2010 and 2011 and for the period from October 27, 2009 to December 31, 2010 and the years ended December 31, 2010 and 2011.

Use of estimates

        The preparation of the unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the unaudited interim condensed consolidated financial statements include, but are not limited to, revenue recognition, allowance for doubtful accounts, provision for inventory obsolescence, estimates of useful life for property and equipment and intangible assets, valuation allowance for deferred tax assets, allocation of purchase price, uncertain tax positions, share-based compensation and consolidation of variable interest entity. Actual results could differ significantly from those estimates.

F-91

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Convenience translation

        Amounts in US$ are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 to RMB6.2975 on March 31, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

Fair value of financial instruments

        Financial instruments of the Group primarily include cash and cash equivalents, accounts receivable, amounts due from related parties, contingently returnable consideration assets, accounts payable and amounts due to related parties. As of December 31, 2011 and March 31, 2012, the carrying values of these financial instruments, other than the contingently returnable consideration assets, approximated their fair values due to the short-term maturity of these instruments. The contingently returnable consideration assets were recorded at fair value as determined on the respective days of business acquisition and subsequently adjusted to the fair value at each reporting date. The Group determined the fair values of the contingently returnable consideration assets with the assistance of an independent valuation firm.

        The Company applies ASC topic 820 ("ASC 820"), Fair Value Measurements and Disclosures, in measuring fair value. In accordance with ASC 820, the Group measures the fair value of the contingently returnable consideration assets using an income approach based on inputs that are unobservable in the market.

        Assets measured at fair value on a recurring basis as of March 31, 2012 are summarized below:

	Quoted price in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	RMB		RMB		RMB		US$
Contingently returnable consideration assets		—		—		24,069		3,822

        The fair value of the contingently returnable consideration assets as of March 31, 2012 was estimated using the Black-Scholes option pricing model with the following assumptions:

	March 31, 2012
Expected volatility rate		45.3	%
Income before tax of the OWX Group for 2012		14,600
Income before tax of the 3GUU Group for 2012		56,100
Income before tax of the 3GUU Group for 2013		79,400

        Generally, an increase in the expected volatility rate utilized in the fair value measurement of the contingently returnable consideration assets will result in a positive fair value adjustment and an

F-92

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

increase in the fair value measurement. Conversely, a decrease in the expected volatility rate will result in a negative fair value adjustment and a decrease in the fair value measurement. An increase in the income before tax utilized in the fair value measurement of the contingently returnable consideration assets will result in a negative fair value adjustment and a decrease in the fair value measurement. Conversely, a decrease in the income before tax will result in a positive fair value adjustment and an increase in the fair value measurement.

        The following table presents a reconciliation of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2012.

		Contingently returnable consideration assets
		(Unaudited) RMB
Balance as of January 1, 2012			16,938
	Recognized during the period		—
	Realized or unrealized gain		7,131
Balance as of March 31, 2012			24,069
Balance as of March 31, 2012 in US$			3,822
The amount of total gain for the three months ended March 31, 2012 included in earnings			7,131

        Realized and unrealized gain for the three months ended March 31, 2012 was recorded as "Changes in fair value of contingently returnable consideration assets" in the unaudited interim condensed consolidated statements of comprehensive income.

Revenue Recognition

(i)

Business taxes and surcharges

        The Group is subject to business taxes and surcharges levied on services provided in the PRC. Business taxes and surcharges for the three months ended March 31, 2011 and 2012 were RMB2,712 and RMB3,349 (US$532), respectively. In accordance with ASC Subtopic 605-45 ("ASC605-45"), Revenue Recognition: Principle Agent Considerations, the Group recognized revenues net of all such business taxes and surcharges.

Research and development

        Research and development expenses include payroll, employee benefits and other headcount related expenses associated with product development. Research and development expense for the three months ended March 31, 2011 and 2012 were RMB3,935 and RMB8,597 (US$1,365), respectively.

F-93

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Leases

        In accordance with ASC topic 840 ("ASC 840"), Leases, leases are classified at the inception date as either a capital lease or an operating lease. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over their lease term. The Group had no capital leases for any of the periods presented. The Group leases certain office facilities under non-cancelable operating leases and recorded total rental expenses of RMB676 and RMB1,235 (US$196) for three months ended March 31, 2011 and 2012, respectively.

Share based compensation

        In accordance with ASC topic 718 ("ASC 718"), Compensation—Stock Compensation, the Company determines whether a share option or a restricted share unit ("RSU") should be classified as and accounted for as a liability award or an equity award. All grants of share options or RSUs to employees classified as equity awards are measured at the grant date based on the fair value of the awards and are recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. All grants of share options or RSUs to employees classified as liability awards are remeasured at the end of each reporting period until the date of settlement with an adjustment for fair value recorded to the current period expenses in order to properly reflect the cumulative expense based on the current fair value of the vested options or RSUs. The Group has elected to recognize share-based compensation on share-based awards with service condition on a straight-line method over the requisite service period. For share-based awards with performance or market condition, compensation cost is recognized only if it is probable that the performance or market condition will be achieved. The Group recognizes share-based compensation on share-based awards with performance or market condition using the accelerated method if the awards are subject to graded vesting.

3. CONCENTRATION OF RISKS

Concentration of customers

        Approximately 19.7% and 17.3% of total net revenues were derived from one customer, namely Jiang Su Mobile Communications Co., Ltd., for the three months ended March 31, 2011 and 2012, respectively.

        Approximately 17.8% and nil of total net revenues were derived from related parties for the three months ended March 31, 2011 and 2012, respectively (Note 16).

F-94

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

Concentration of suppliers

        Approximately 47.8% and 52.4% of the Group's cost of revenues attributable to feature phone games were paid to Ouyinhua Information Consulting Co., Ltd. ("Ouyinhua") for the pre-installation of mobile phone games services provided to the Dragon Joyce Group for the three months ended March 31, 2011 and 2012, respectively.

        Approximately 27.2% and 21.4% of the Group's raw materials were purchased from two suppliers, namely Xiang Hai Electronic Co., Ltd. and Shenzhen Linkconn Electronics Co., Ltd., respectively, for the three months ended March 31, 2011. Approximately 20.6% and 18.3% of the Group's raw materials were purchased from Shi Jian Electronic Co., Ltd. and Xiang Hai Electronic Co., Ltd. for the three months ended March 31, 2012. Failure to develop or maintain the relationships with these suppliers or Ouyinhua may affect the Group's ability to manufacture its products or may decrease the number of handsets pre-installed with the Group's feature phone games. Any disruption in the supply of raw materials or the provision of pre-installation services to the Group may adversely affect the Group's business, financial condition and results of operations.

4. ACCOUNTS RECEIVABLE

        Accounts receivable and the related allowance for doubtful accounts are summarized as follows:

	As of December 31, 2011		As of March 31, 2012		As of March 31, 2012
	RMB		RMB		US$
Accounts receivable		56,121		54,695		8,685
Less: Allowance for doubtful accounts		—		—		—
Accounts receivable, net		56,121		54,695		8,685

        The Group does not offer extended payment terms and all accounts receivable are non-interesting bearing. The Group offers credit terms ranging from three to nine months to customers with long-term relationship and good credit history. No allowance for doubtful accounts was recognized as of December 31, 2011 and March 31, 2012.

5. INVENTORIES

        Inventories are summarized as follows:

	As of December 31, 2011		As of March 31, 2012		As of March 31, 2012
	RMB		RMB		US$
Raw materials		2,103		1,566		249

        No inventory obsolescence provision was recognized as of December 31, 2011 and March 31, 2012.

F-95

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

6. PREPAYMENTS AND OTHER CURRENT ASSETS

        Prepayments and other current assets consist of the following:

	As of December 31, 2011		As of March 31, 2012		As of March 31, 2012
	RMB		RMB		US$
Contingently returnable consideration assets		16,938		24,069		3,822
Indemnification assets from a business acquisition		4,009		4,122		654
Deposits for office leases		213		171		27
Advances to employees		386		316		50
Prepaid expenses		3,171		6,866		1,090
Others		249		1,171		190
Total		24,966		36,715		5,833

7. PROPERTY AND EQUIPMENT, NET

        Property and equipment and the related accumulated depreciation are summarized as follows:

	As of December 31, 2011			As of March 31, 2012			As of March 31, 2012
	RMB			RMB			US$
Office equipment		5,515			6,029			957
Motor vehicles		88			88			14
Leasehold improvement		1,585			1,585			252
Property and equipment, cost		7,188			7,702			1,223
Less: Accumulated depreciation		(1,753	)		(2,373	)		(377	)
Property and equipment, net		5,435			5,329			846

        Depreciation expenses were RMB231 and RMB620 (US$98) for the three months ended March 31, 2011 and 2012, respectively.

        Depreciation expenses have been reported in the following accounts:

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
General and administrative expenses		113		363		57
Research and development expenses		118		257		41
Total		231		620		98

F-96

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

8. GOODWILL

        Goodwill of RMB598,358 (US$95,015) as of December 31, 2011 and March 31, 2012 represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired relating to the acquisitions of (i) Dragon Joyce on October 27, 2009; (ii) operating assets of Bright Way and Tastech on October 11, 2010; and (iii) 3GUU BVI on December 31, 2010. Goodwill is not deductible for tax purposes and is not amortized but tested for impairment at least annually.

9. INTANGIBLE ASSETS, NET

        Intangible assets and the related accumulated amortization are summarized as follows:

		As of December 31, 2011			As of March 31, 2012			As of March 31, 2012
		RMB			RMB			US$
Cost:
	Computer software		1,581			1,291			205
	Mobile games and platforms		56,429			58,143			9,233
	Acquired customer relationship		42,939			42,938			6,818
	Mobile game product development costs		1,817			2,278			362
			102,766			104,650			16,618
Accumulated amortization:
	Computer software		(201	)		(251	)		(40	)
	Mobile games and platforms		(20,524	)		(24,465	)		(3,885	)
	Acquired customer relationship		(11,506	)		(13,038	)		(2,070	)
	Mobile game product development costs		(434	)		(670	)		(107	)
			(32,665	)		(38,424	)		(6,102	)
Total			70,101			66,226			10,516

        Amortization expenses, which were recorded in cost of revenues, were RMB4,563 and RMB5,784 (US$919) for the three months ended March 31, 2011 and 2012, respectively.

        The estimated annual amortization expenses for the five fiscal years succeeding March 31, 2012 are as follows:

	RMB		US$
April 1, 2012 to December 31, 2012		16,496		2,619
2013		16,865		2,678
2014		13,695		2,175
2015		11,597		1,842
2016		5,651		897
Total		64,304		10,211

F-97

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

10. DEFERRED INITIAL PUBLIC OFFERING COSTS

        Direct costs incurred by the Company attributable to its initial public offering of ordinary shares in the United States have been deferred and will be charged against the gross proceeds received from such offering. Such costs include legal and other professional fees related to the offering.

11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

        Accrued expenses and other current liabilities consist of the following:

	As of December 31, 2011		As of March 31, 2012		As of March 31, 2012
	RMB		RMB		US$
Advances from customers		564		302		48
Accrued payroll and welfare payable		10,053		9,562		1,519
Business tax and other taxes payable		3,802		2,477		394
Accrued initial public offering costs		2,010		—		—
Others		1,148		778		122
Total		17,577		13,119		2,083

        Advances from customers represent cash payments received from customers in advance of the delivery of handset design products and services. The advances are applied towards the purchase price and recognized as revenue when the conditions for revenue recognition have been met. Advances from customers are non-interest bearing and refundable if the Group fails to perform.

12. SHARE CAPITAL

        On January 20, 2011, the Company issued one share of ordinary share with par value of US$1.00 to VODone in connection with the incorporation of the Company.

        On August 22, 2011, the Company restructured its share capital to increase the authorized capital to 1,000,000 ordinary shares with a per share par value of US$1.00 from 50,000 ordinary shares with a per share par value of US$1.00. In addition, on August 22, 2011, each of the existing issued and authorized ordinary shares of US$1.00 per share each was divided into 1,000 ordinary shares of US$0.001 per share each.

        On August 23, 2011, the Company effected a 2,500,000 ordinary shares rights offering to its existing shareholder, VODone, for a subscription price of US$0.001 per ordinary share. Since the ordinary shares were issued for nominal consideration, the offering contains a bonus element, measured as the difference between the subscription price of US$0.001 per share and the fair value of the shares subscribed of US$0.62 per share. The bonus element is accounted for similar to a stock dividend, using a method to adjust for the fair value of the theoretical ex-rights in accordance with ASC topic 260 ("ASC 260"), Earnings Per Share. In addition, as more fully described in Note 1, pursuant to a legal reorganization of entities under common control on August 23, 2011, the Company issued 209,999,000 new ordinary shares to Dragon Joyce, OWX Holding and Action King to acquire their equity interests in the Dragon Joyce Group, the OWX Group and the 3GUU Group, respectively.

F-98

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

12. SHARE CAPITAL (Continued)

        All ordinary share and per share information are adjusted retroactively for the above described change in share capital and ordinary shares rights offering, for all periods presented. As of December 31, 2011 and March 31 2012, 1,000,000,000 ordinary shares were authorized and 302,729,550 ordinary shares were issued and outstanding.

        On December 8, 2011, the Company's board of directors declared cash dividend of RMB71,400 to certain shareholders of the Group based on the undistributed retained earnings of the Dragon Joyce Group and the OWX Group and their respective shareholding in these entities at the time of the Reorganization. As of December 31, 2011, RMB63,000 (US$10,004) of the declared dividends remained unpaid. The remaining balance was fully paid on February 9, 2012. The payment of dividends in the future will be contingent upon the Group's revenues and earnings, if any, capital requirements and general financial condition. The payment of dividends will be subject to the discretion of the Company's board of directors and subject to the requirements of Cayman Islands' laws.

13. RESTRICTED NET ASSETS

        As a result of the PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Company's PRC subsidiaries and VIE are restricted in their ability to transfer a portion of their net assets in the form of dividend payments, loans or advances to the Company. The amounts restricted include paid-in capital and statutory reserve funds of the Company's PRC subsidiaries and the net assets of the VIE, as determined pursuant to PRC generally accepted accounting principles, totaling RMB41,834 (US$6,643) as of March 31, 2012.

14. INCOME TAXES

        The Group's effective tax rate was 34% and 10% for the three months ended March 31, 2011 and 2012, respectively. The decrease in the effective tax rate for the three months ended March 31, 2012 primarily reflected the impact of the preferential tax treatment received by Huiyou as a new software development enterprise, which is entitled to enjoy tax exemption from 2012 to 2013 and a 50% reduced EIT rate of 12.5% from 2014 to 2016. The aggregate amount and per share effect of the tax holidays and preferential tax rates obtained by Huiyou were RMB2,644 and RMB0.01 per share, respectively, for the three months ended March 31, 2012.

        As of December 31, 2011 and March 31, 2012, the Group recorded unrecognized tax benefits of RMB28,014 and RMB28,439 (US$4,516), respectively, of which RMB170 and RMB170 (US$27) are presented on a net basis against the deferred tax assets related to tax loss carryforwards on the face of the consolidated balance sheet. The Group has no additional unrecognized tax benefits relating to uncertain tax positions except for accrual for interest and penalties related to tax positions taken in prior years of RMB425 (US$67) for the three months ended March 31, 2012. The Group does not expect its unrecognized tax benefits will increase significantly within the next 12 months.

15. SHARE-BASED PAYMENTS

(a)

Options granted to employees of the Group and VODone

F-99

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

15. SHARE-BASED PAYMENTS (Continued)

        On February 6, 2012, the Company granted options under the 2011 Share Option Scheme to purchase 23,404,120 and 2,431,592 ordinary shares of the Company to its employees and employees of VODone, respectively, at an exercise price of US$0.605 per share. These share options have a contractual life of five years. Pursuant to the share options agreement, (i) 25% of the share options are vested and exercisable by each grantee on the first anniversary of the date of grant; and (ii) the remaining 75% of the share options are vested and exercisable by each grantee in 12 equal quarterly tranches beginning one calendar quarter after the first anniversary of the date of grant. Since VODone, the ultimate holding company of the Company, is a publicly listed company on the Main Board of the Stock Exchange of Hong Kong Limited (the "HK Stock Exchange"), it or its subsidiary is prohibited to grant share options with exercise price lower than the new issue price of shares on listing unless otherwise approved or waived by the HK Stock Exchange. Any share option granted by the Company during the period commencing six months before the first confidential filing date on Form F-1, or its equivalent for listing on the HK Stock Exchange or an overseas stock exchange, up to the listing date are subject to the above requirement. Except for any waivers that may be granted by the HK Stock Exchange, the exercise price of any share option granted during such period shall be adjusted to a price not lower than the new issue price as the Company's board of directors may deem appropriate. The exercise price of the share options shall be adjusted to the price of the listing if the price of the listing exceeds $0.605 per share, whereas the exercise price of the share options shall remain unchanged if the price of the listing is less than $0.605 per share or a listing does not take place.

        In accordance with ASC 718, the accounting grant date for these share options was February 6, 2012, as the Company and the grantees reached a mutual understanding of the key terms and conditions of the awards when the grantees began to be adversely affected by subsequent changes in the price of the Company's ordinary shares. The share options granted to the Group's employees are classified as equity awards which are measured based on the grant date fair value. As a market condition in which the exercise price varies with the price of the Company's ordinary shares is attached to the share options, the market condition was considered in the estimate of their grant-date fair value. The fair value of each of the share options granted by the Company was RMB0.95 at the grant date. Compensation cost for these awards with a market condition granted to employees of the Group amounting to RMB22,230 (USD3,530) is recognized ratably for each vesting tranche, using the accelerated attribution method, over the requisite service period regardless of whether the market condition is satisfied. The total fair value of share options granted to employees of the Group vested during the three months ended March 31, 2012 was RMB1,892 (US$300).

        ASC 718 does not apply to awards granted by an entity to employees of its controlling parent company. As a result, ASC 718 is not applicable to the share options granted by the Company to employees of VODone on February 6, 2012. However, since VODone, as the controlling parent of the Company, can always direct the Company to grant share-based awards to its employees, the Company measured the fair value of the shares options granted to employees of VODone at the grant date and recognized that amount as a dividend to VODone without regard to whether the options are subject to vesting provisions. While this is not consistent with the measurement model for share-based awards granted to nonemployees described in ASC topic 505-50 ("ASC 505-50"), Equity-Equity-Based Payments to Non-Employees, the Company considered the departure from ASC 505-50 was not unreasonable

F-100

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

15. SHARE-BASED PAYMENTS (Continued)

given that the grant of share options to employees of VODone was a capital transaction rather than compensation. Accordingly, the grant-date fair value of the share options granted to employees of VODone amounting to RMB2,309 (US$367) was recorded as a one-time deemed dividend distribution to shareholder during the three months ended March 31, 2012.

        The following table summarizes the share options granted to the Group's employees during the three months ended March 31, 2012:

Options granted to employees		Number of shares		Weighted-average exercise price per share		Weighted-average grant-date fair value per share		Weighted-average remaining contractual term		Aggregate intrinsic value
				RMB		RMB		Years		RMB
Outstanding, January 1, 2012			—
	Granted		23,404,120		3.81		0.95		4.85
	Exercised		—
Outstanding, March 31, 2012			23,404,120		3.81		0.95		4.85		—
Vested at March 31, 2012			—
Exercisable at March 31, 2012			—

        The following table summarizes the share options granted to the employees of VODone during the three months ended March 31, 2012:

Options granted to employees		Number of shares		Weighted-average exercise price per share		Weighted-average grant-date fair value per share		Weighted-average remaining contractual term		Aggregate intrinsic value
				RMB		RMB		Years		RMB
Outstanding, January 1, 2012			—
	Granted		2,431,592		3.81		0.95		4.85
	Exercised		—
Outstanding, March 31, 2012			2,431,592		3.81		0.95		4.85		—
Vested at March 31, 2012			—
Exercisable at March 31, 2012			—

        The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying awards and the fair value of the Company's ordinary shares as of March 31, 2012, for those awards that have an exercise price below the fair value of the Company's ordinary shares.

        As of March 31, 2012, total unrecognized share-based compensation cost of RMB20,338 (USD3,230), net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.07 years. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures. To the extent the actual forfeiture rate is different from original estimate, actual share-based compensation costs related to these awards may be different from expectation.

F-101

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

15. SHARE-BASED PAYMENTS (Continued)

        The grant date fair value of the equity awards granted employees of the Group and VODone was estimated using the Monte Carlo simulation model with the following assumptions:

	February 6, 2012
Risk-free interest rate		0.75	%
Dividend yield		2.00	%
Expected volatility rate		51.64	%
Weighted-average expected life		5.00
Estimated forfeiture rate		—
Fair value of the Company's ordinary shares		3.25

(b)

Restricted share units

        On March 16, 2012, the Company granted 639,000 RSUs, with a performance condition of an IPO attached, to certain senior management and directors at a subscription price of US$0.001 per share. The transferability of the 639,000 RSUs is restricted. Pursuant to the RSU subscription agreement, 25% of the RSUs shall vest and become transferable upon each of: (i) the consummation of the IPO of the securities of the Company on an internationally recognized stock exchange (the "IPO Date"); (ii) the first anniversary of the IPO Date; (iii) the second anniversary of the IPO Date; and (iv) the third anniversary of the IPO Date. If the IPO is not consummated by December 31, 2014, the Company is required to repurchase all of the restricted shares at a purchase price of US$0.001 per share. There is a service condition in addition to the performance condition attached to the vesting of the RSUs, as the unvested restricted shares shall be subject to repurchase in the event of the termination of service unless otherwise agreed by the Company and the grantees.

        The RSUs are classified as equity awards which are measured based on the grant date fair value of RMB3.35 (US$0.53) per share. Since a performance condition of an IPO is attached with the vesting of the RSUs, share based compensation cost will not be recorded before the performance condition of an IPO is met. Accordingly, no compensation expense was recognized for the three months ended March 31, 2012.

        The following table summarizes the RSUs granted by Company during the three months ended March 31, 2012:

RSUs granted by the Company	Outstanding RSUs		Weighted Average Grant Date Fair Value
			RMB
Unvested, January 1, 2012		1,220,000		4,856
Granted		639,000		2,130
Vested		—		—
Forfeited		—		—
Unvested, March 31, 2012		1,859,000		6,986

F-102

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

15. SHARE-BASED PAYMENTS (Continued)

        As of March 31, 2012, the unrecognized compensation expenses for the RSUs were RMB6,986 (US$1,109).

(c)

Determining fair value of awards

        The Company, with the assistance of an independent valuation firm, estimated the grant-date fair value of the options granted to its employees and the employees of VODone using the Monte Carlo simulation model. The Monte Carlo simulation model requires the input of highly subjective assumptions, including the expected stock price volatility, risk-free interest rate, dividend yield, weighted-average expected life of the options and expected employee forfeiture rate. The Company uses historical data and future expectations to estimate forfeiture rate. For expected volatility of the options, the Company has made reference to the historical volatilities of several comparable companies. The risk-free rate for periods within the contractual life of the options is based on the US Treasury Bonds and other market information at the time of grant. The estimated fair value of the ordinary shares, at the option grant date, was determined with assistance from an independent valuation firm.

        The Company estimated the grant-date fair value of the RSUs based on the fair value of the Company's ordinary shares, which was determined to be the sum of the fair value of Dragon Joyce, OWX Holding and 3GUU BVI. The Company determined the fair value of the Dragon Joyce, OWX Holding and 3GUU BVI equity interests at the measurement date with the assistance of an independent valuation firm using a generally accepted valuation methodology, which incorporates certain assumptions including the financial results and growth trends of Dragon Joyce, OWX Holding and 3GUU BVI. The expected share option life was estimated based on the resulting output of the binomial option pricing model. The option awards are not transferable and the grantees have a limited amount of time subsequent to their termination of employment or service to exercise the options. These post-vesting restrictions are considered in the binomial option pricing model as a suboptimal exercise factor.

        Total share-based compensation expense of awards granted to the Group's employees and directors was recorded in "General and administrative expenses" in the consolidated statements of comprehensive income.

F-103

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

16. RELATED PARTY TRANSACTIONS

(a)

Related parties

Name of related parties	Relationship with the Group
VODone	The ultimate holding company
Dragon Joyce	An immediate holding company
OWX Holding	An immediate holding company
Action King	An immediate holding company
Kuailefeng	A company controlled by management of Dragon Joyce
Bright Way	A company controlled by management of OWX Holding
King Reach Limited	A noncontrolling shareholder of the Group before August 23, 2011 and a shareholder of the Company since August 23, 2011
Greatfaith Group Limited	A noncontrolling shareholder of the Group before August 23, 2011 and a shareholder of the Company since August 23, 2011
Shenzhen Provider Technology Co., Ltd. ("Shenzhen Provider")	A company controlled by a director of the Company, which ceased to be a related party on July 11, 2011
Shenzhen Huazhongtianxun Technology Co., Ltd. ("Huazhongtianxun")	A company controlled by a director of the Company, which ceased to be a related party on April 12, 2011
Beijing Shidaixunda Technology Co., Ltd. ("Shidaixunda")	A company controlled by a director of the Company, which ceased to be a related party on April 12, 2011
Mr. Wang Yongchao	A director of 3GUU BVI

(b)

The Group had the following related party transactions for the periods presented:

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Revenue from exclusive technical support services on feature phone games provided to:
Kuailefeng		2,450		—		—
		2,450		—		—

        The Group entered into an exclusive technical support services agreement with Kuailefeng on October 9, 2009, pursuant to which Kuailefeng agreed to engage the Group as its exclusive provider of technical platform and technical support, maintenance and other services for an annual service fee

F-104

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

16. RELATED PARTY TRANSACTIONS (Continued)

based on a prescribed percentage of Kuailefeng's revenue. The exclusive technical support services agreement was terminated by the Group at the end of 2011.

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Revenue from exclusive reseller right on feature phone games provided to:
Kuailefeng		1,414		—		—
		1,414		—		—

        The Group entered into an agent agreement with Kuailefeng in January 2010, pursuant to which the Group granted Kuailefeng the right to operate and sell in-game premium features of certain feature phone games of the Group in exchange for a fixed fee of RMB1,414 for the three months ended March 31, 2011. The agent agreement was terminated by the Group at the end of 2011.

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Feature phone games revenue from related mobile phone service providers:
Shenzhen Provider		2,066		—		—
Huazhongtianxun		2,072		—		—
Shidaixunda		2,243		—		—
		6,381		—		—

        The Group entered into agreements with Shenzhen Provider, Huazhongtianxun and Shidai Xunda for billing and collection services as mobile phone service providers in the sale of in-game premium features of feature phone games. The agreements were made in the Group's ordinary course of business and based on terms identical to those with unrelated mobile phone service providers.

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Temporary funding provided by:
VODone		—		2,997		476

F-105

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

16. RELATED PARTY TRANSACTIONS (Continued)

        The temporary funding from VODone was unsecured, interest-free and repayable on demand. The proceeds of the temporary funding from VODone were used for payment of expenses relating to the initial public offering for the three months ended March 31, 2012.

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Raw materials purchased on behalf by:
Bright Way		116		—		—
Raw materials purchased from:
Bright Way		501		—		—

        During the three months ended March 31, 2011 and 2012, Bright Way purchased raw materials amounting to RMB116 and nil, respectively, on behalf of the Group for its handset design products.

        During the three months ended March 31, 2011 and 2012, the Group purchased raw materials amounting to RMB501 and nil, respectively, from Bright Way.

	For the three months ended March 31, 2011		For the three months ended March 31, 2012
	RMB		RMB		US$
Share-based compensation expenses incurred on behalf by:
Dragon Joyce		277		—		—
OWX Holding		295		—		—
Total		572		—		—

        During the three months ended March 31, 2011, Dragon Joyce and OWX Holding granted share options to certain non-employee directors of the Group. Compensation costs of RMB572 were recognized with a corresponding credit to additional paid-in-capital as shareholders' contribution for the three months ended March 31, 2011.

F-106

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

16. RELATED PARTY TRANSACTIONS (Continued)

(c)

The Group had the following related party balances as of December 31, 2011 and March 31, 2012:

	As of December 31, 2011		As of March 31, 2012
	RMB		RMB		US$
Amounts due from related parties:
Kuailefeng		1,347		—		—
Mr. Wang Yongchao		2		14		2
Total		1,349		14		2
Amounts due to related parties:
VODone		6,490		9,467		1,504
Bright Way		52		—		—
Total		6,542		9,467		1,504

        All balances with related parties as of December 31, 2011 and March 31, 2012 were unsecured, non-interest bearing and repayable on demand.

17. EMPLOYEE DEFINED CONTRIBUTION PLAN

        Full time employees of the Company's subsidiaries and VIE in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiaries and VIE of the Group make contributions to the government for these benefits based on a specific percentage of the employees' salaries up to a maximum of three times the average annual salary for the city in which the subsidiary operates for the prior year. The Company's subsidiaries and VIE have no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were RMB1,276 and RMB1,863 (US$296) for the three months ended March 31, 2011 and 2012, respectively.

F-107

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

18. COMMITMENTS AND CONTINGENCIES

(a)

Operating lease commitments

As of March 31, 2012, the Group had minimum lease payments under non-cancelable operating leases with initial terms in excess of one year as follows:

	RMB		US$
April 1, 2012 to December 31, 2012		2,499		397
2013		2,932		466
2014		2,737		435
2015		2,507		398
2016		514		82
Total		11,189		1,778

        The Group's lease arrangements have no renewal options, rent escalation clauses, restrictions or contingent rents and are all conducted with third parties.

(b)

Variable interest entity structure

        In the opinion of management, (i) the ownership structure of the Company and its VIE is in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIE and its shareholder are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Group's business operations are in compliance with existing PRC laws and regulations in all material respects.

        However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Group and its contractual arrangements with its VIE are found to be in violation of any existing or future PRC laws and regulations, the Group may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. Further, should the ownership structure of the Group under the current VIE arrangement is challenged by the PRC authorities while the foreign investment restrictions over the telecommunications sector remain effective, the Group would need to restructure its ownership structure. In that case, the Group may still be able to (i) develop mobile games in China and own the copyright for those mobile games; (ii) grant to the VIE, or any other Chinese company that possesses the necessary regulatory licences, copyright licences to operate the Company's games in China and collect royalties from the VIE or such other Chinese company; (iii) use the Group's technology, expertise and experience to provide technological services and support to the VIE in exchange for service fees; and (iv) require the registered shareholders of the VIE to pledge their equity interests in the VIE in favor of the Group to secure the VIE's performance under these agreements. However, following such a restructuring, the Group would not be able to adopt or rely on the VIE arrangements and thus, would not be able to exercise effective control over the VIE. Such a loss of control could materially and adversely affect the Group's business, financial condition, results of operations and

F-108

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

18. COMMITMENTS AND CONTINGENCIES (Continued)

ability to consolidate the VIE. In the opinion of management, the likelihood of loss in respect of the Group's current ownership structure or the contractual arrangements with its VIE is remote based on current facts and circumstances.

        In addition, the registered shareholders of the VIE are the Company's officers or employees. If conflicts of interest arise between these shareholders' duties to the Company and the VIE, these shareholders may not act in the Company's best interests and conflicts of interest may not be resolved in the Company's favor. In addition, these shareholders may breach or cause the VIE to breach or refuse to renew its existing contractual arrangements that allow the Company to exercise effective control over it and to receive economic benefits from it. If certain shareholders of the VIE do not comply with their fiduciary duties to the Company as its designated directors, or if the Company cannot resolve any conflicts of interest or disputes between the Company and such shareholders or any future beneficial owners of the VIE, the Company would have to rely on legal proceedings to remedy the situation, which could result in disruption of the Company's business and substantial uncertainty as to the outcome of any such legal proceedings. Further, these remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. For example, the Company may have to resort to administrative and court proceedings to enforce the legal protection that the Company enjoys either by law or contract. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection the Company enjoys than in more developed legal systems. These uncertainties may impede the Company's ability to enforce the contracts it has entered into with the VIE and its shareholders and the Group's ability to consolidate the VIE. To more efficiently manage the relationship between the Company and the VIE, the Company is in the process of transferring all of the equity interests in the VIE to Dr. Lijun Zhang, our chairman, and entering into contractual arrangements with Dr. Lijun Zhang and the VIE.

(c)

Income taxes

        As of March 31, 2012, the Group has recognized RMB28,269 (US$4,489) accrual for unrecognized tax benefits. The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. As of March 31, 2012, the Group classified the accrual for unrecognized tax benefits as a non-current liability.

F-109

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

19. SEGMENT REPORTING

        The Group's segment information as of and for the three months ended March 31, 2011 is as follows:

	Feature phone games			Smartphone games			Handset design			Unallocated			Total
	RMB			RMB			RMB			RMB			RMB
Net revenues		37,210			11,755			8,718			—			57,683
Cost of revenues		(13,734	)		(4,004	)		(4,660	)		—			(22,398	)
Gross profit		23,476			7,751			4,058			—			35,285
Selling expenses		—			(1,166	)		(20	)		—			(1,186	)
General and administrative expenses		(1,435	)		(1,523	)		(1,016	)		—			(3,974	)
Research and development expenses		(2,922	)		(1,013	)		—			—			(3,935	)
Interest income		64			72			—			—			136
Other income		—			18			—			—			18
Changes in fair value of contingently returnable consideration assets		—			—			—			(760	)		(760	)
Income before income taxes		19,183			4,139			3,022			(760	)		25,584
Income tax expenses		(5,176	)		(2,433	)		(1,073	)		—			(8,682	)
Net income		14,007			1,706			1,949			(760	)		16,902
Total assets		416,002			292,058			121,796			—			829,856
Total liabilities		46,486			22,094			9,955			—			78,535
Capital expenditure		1,108			842			70			—			2,020
Depreciation and amortization expense		2,542			1,659			593			—			4,794

F-110

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

19. SEGMENT REPORTING (Continued)

        The Group's segment information as of and for the three months ended March 31, 2012 is as follows:

	Feature phone games						Smartphone games						Handset design						Unallocated						Total
	RMB			US$			RMB			US$			RMB			US$			RMB			US$			RMB			US$
Net revenues		35,437			5,627			16,095			2,556			2,801			445			—			—			54,333			8,628
Cost of revenues		(17,873	)		(2,838	)		(3,678	)		(584	)		(2,780	)		(441	)		—			—			(24,331	)		(3,863	)
Gross profit		17,564			2,789			12,417			1,972			21			4			—			—			30,002			4,765
Selling expenses		—			—			(2,199	)		(349	)		39			6			—			—			(2,160	)		(343	)
General and administrative expenses		(1,190	)		(189	)		(934	)		(148	)		(1,040	)		(165	)		(2,743	)		(436	)		(5,907	)		(938	)
Research and development expenses		(5,963	)		(947	)		(2,634	)		(418	)		—			—			—			—			(8,597	)		(1,365	)
Interest income		107			17			182			28			3			1			—			—			292			46
Other income		—			—			113			18			—			—			—			—			113			18
Changes in fair value of contingently returnable consideration assets		—			—			—			—			—			—			7,131			1,132			7,131			1,132
Income (loss) before income taxes		10,518			1,670			6,945			1,103			(977	)		(154	)		4,388			696			20,874			3,315
Income tax expenses		(1,275	)		(202	)		(830	)		(132	)		52			8			—			—			(2,053	)		(326	)
Net income (loss)		9,243			1,468			6,115			971			(925	)		(146	)		4,388			696			18,821			2,989
Total assets		389,803			61,899			388,426			61,680			122,238			19,411			2,167			344			902,634			143,334
Total liabilities		39,750			6,313			32,368			5,140			5,157			819			8,475			1,346			85,750			13,618
Capital expenditure		430			69			2,268			360			—			—			—			—			2,698			429
Depreciation and amortization expense		2,773			441			2,987			474			644			102			—			—			6,404			1,017

F-111

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

20. EARNINGS PER SHARE

        Basic and diluted earnings per share for the three months ended March 31, 2011 and 2012 are calculated as follows:

	For the three months ended March 31, 2011			For the three months ended March 31, 2012
	RMB			RMB		US$
Numerator for basic and diluted earnings per share:
Numerator for basic earnings per share—Net income attributable to ordinary shareholders		11,831			18,821		2,989
Net adjustment for dilutive effect of subsidiary issued share-based options		(5	)		—		—
Numerator for diluted earnings per share		11,826			18,821		2,989
Denominator for basic and diluted earnings per share:
Weighted average number of ordinary shares outstanding used in calculating basic earnings per share		212,500,000			302,729,550		302,729,550
Dilutive effect of convertible securities:
Share-based awards		—			—		—
Weighted average number of ordinary shares outstanding used in calculating dilutive earnings per share		212,500,000			302,729,550		302,729,550
Basic earnings per share		0.06			0.06		0.01
Diluted earnings per share		0.06			0.06		0.01

        For the three months ended March 31, 2012, (i) all of the share options granted by the Company were excluded in the computation of diluted earnings per share because their effects would have been anti-dilutive and (ii) the RSUs granted were excluded from the computation of diluted earnings per share, as the attached performance condition has not been met as of March 31, 2012.

21. SUBSEQUENT EVENTS

        In accordance with ASC topic 855 ("ASC 855"), Subsequent Events, the Group evaluated subsequent events through September 7, 2012, which was the date that the unaudited interim condensed consolidated financial statements were filed with the Securities and Exchange Commission on Form F-1.

Issuance of contingently redeemable ordinary shares

        On March 21, 2012, the Company entered into a share purchase agreement with Core Tech Resources Inc. and PVG Venture Capital Partners (Wuxi) (collectively, the "Investors") to issue 15,450,144 and 11,035,817 contingently redeemable ordinary shares (the "Investor Shares") at RMB2.85 (US$0.45) per share for a total consideration of RMB44,083 (US$7,000) and RMB31,488 (US$5,000),

F-112

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares and per share data)

21. SUBSEQUENT EVENTS (Continued)

respectively. In the event that (i) the IPO is consummated on or prior to the first anniversary of the consummation of the sale and issuance of the Investor Shares and the market capitalization of the IPO is below US$300,000 or (ii) the IPO has not been consummated on or prior to the first anniversary of the consummation of the sale and issuance of the Investor Shares ("Put Exercise Event"), the Investors shall have the option, jointly and not severally, to require the Company to purchase all but not less than all of the Investor Shares held by the Investors by providing a notice to the Company within twenty days of the occurrence of the Put Exercise Event. Market capitalization was defined as the price per share of the ordinary shares of the Company first offered and sold on the IPO, multiplied by the total number of issued and outstanding ordinary shares immediately following the closing of the IPO. The consideration was received from the Investors and 26,485,961 contingently redeemable ordinary shares were issued on May 14, 2012.

Tax holiday granted to Yitongtianxia

        In April 2012, Yitongtianxia obtained the "new software development enterprise" tax status, with retroactive effect to 2011. As a result, Yitongtianxia was entitled to tax exemption from 2011 to 2012 and a 50% reduced EIT rate of 12.5% from 2013 to 2015.

Memorandum of Understanding with MediaTek Inc.

        On July 30, 2012, the Company entered into a memorandum of understanding with MediaTek Inc. ("MediaTek") to indirectly acquire 51% of the business of Vogins Network Technology (Shanghai) Limited Co., Ltd. ("Vogins Shanghai"), which provides a development platform that application developers and mobile device makers can utilize to develop products that are compatible with different mobile handset platforms. Under this memorandum of understanding, the Company will inject funds of approximately US$1,020 for 51% of the equity interest in a new joint venture entity ("JV BVI"), with the remaining 49% equity interest held by Vogins Technology Co. Limited ("Vogins BVI"), a wholly-owned subsidiary of MediaTek. JV BVI will form an indirectly wholly-owned subsidiary ("JV WFOE") in China, which will then enter into a series of agreements with Vogins BVI and Vogins Shanghai under which JV WFOE will purchase the existing business and assets of Vogins Shanghai. Vogins BVI will also pledge its equity interest in Vogins Shanghai to JV WFOE to secure the performance of Vogins Shanghai's obligations under the series of agreements. The Company or one of its subsidiaries will make a prepayment of US$400 to Vogins Shanghai on behalf of JV WFOE for the purchases of the business and assets of Vogins Shanghai under the series of agreements. The Company has the right to appoint three out of the five directors on the board of JV BVI and JV WFOE.

Modification on the vesting condition of restricted shares

        As approved by the board of directors on August 20, 2012, the Company modified the original vesting conditions of the restricted shares granted by the Company on August 24, 2011 and March 16, 2012 to be: 25% of the restricted shares will vest upon each of: (i) the consummation of listing (the "Listing") of the securities of the Company on an internationally recognized stock exchange (the "Listing Date"); (ii) the first anniversary of the Listing Date; (iii) the second anniversary of the Listing Date; and (iv) the third anniversary of the Listing Date. Except for the vesting conditions, other conditions of the restricted shares remained unchanged.

F-113

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Bright Way Technology (Hong Kong) Limited and
Shenzhen Tastech Electronic Co., Ltd.

        We have audited the accompanying combined balance sheet of Bright Way Technology (Hong Kong) Limited and Shenzhen Tastech Electronic Co., Ltd. (together, the "Group") as of December 31, 2009, and the related statements of income and comprehensive income, and cash flows for the year end December 31, 2009 and the period from January 1, 2010 to October 10, 2010. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Group's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Bright Way Technology (Hong Kong) Limited and Shenzhen Tastech Electronic Co., Ltd. at December 31, 2009 and the combined results of their operations and their cash flows for the year end December 31, 2009 and the period from January 1, 2010 to October 10, 2010, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young Hua Ming
Guangzhou, the People's Republic of China
August 25, 2011

F-114

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

COMBINED BALANCE SHEET

(Amounts in thousands of Renminbi ("RMB"))

	Notes		As of December 31, 2009
			RMB
ASSETS
Current assets
Cash and cash equivalents				3,006
Accounts receivable		4		1,492
Prepayments and other current assets		5		5,629
Inventories		6		3,238
Deferred tax assets		9		490
Total current assets				13,855
Non-current assets
Property and equipment, net		7		148
Total non-current assets				148
Total assets				14,003
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable				1,286
Accrued expenses and other current liabilities		8		6,851
Income tax payable				35
Total current liabilities				8,172
Non-current liabilities
Unrecognized tax benefits		9		18,816
Total non-current liabilities				18,816
Total liabilities				26,988
Commitments and contingencies		11
Shareholders' deficit
Combined paid-in capital				1,009
Accumulated deficit				(13,994	)
Total shareholders' deficit				(12,985	)
Total liabilities and shareholders' deficit				14,003

The accompanying notes are an integral part of the financial statements.

F-115

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in thousands of Renminbi ("RMB"))

		Notes		For the year ended December 31, 2009			For the period from January 1, 2010 to October 10, 2010
				RMB			RMB
Revenues					60,765			82,587
Cost of revenues					(44,685	)		(66,032	)
Gross profit					16,080			16,555
Operating expenses
	Selling expenses				(21	)		(32	)
	General and administrative expenses				(3,541	)		(2,077	)
Total operating expenses					(3,562	)		(2,109	)
Operating income					12,518			14,446
	Interest income				13			20
Income before income taxes					12,531			14,466
Income tax expenses			9		(6,230	)		(5,159	)
Net income and comprehensive income					6,301			9,307

The accompanying notes are an integral part of the financial statements.

F-116

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

COMBINED STATEMENTS OF CASH FLOWS

(Amounts in thousands of Renminbi ("RMB"))

			For the year ended December 31, 2009			For the period from January 1, 2010 to October 10, 2010
			RMB			RMB
Cash flows from operating activities:
Net income				6,301			9,307
Adjustments to reconcile net income to net cash generated from operating activities:
	Depreciation of property and equipment			133			92
	Loss on disposal of property and equipment			—			7
	Allowance for doubtful accounts			—			260
	Deferred tax benefit			(167	)		(55	)
Changes in operating assets and liabilities:
		Accounts receivable		(1,492	)		(6,296	)
		Prepayments and other current assets		(5,588	)		(8,423	)
		Inventories		(3,235	)		(1,094	)
		Amounts due from a related party		—			(107	)
		Accounts payable		1,286			401
		Income tax payable		(84	)		1,330
		Unrecognized tax benefits		6,236			3,835
		Accrued expenses and other current liabilities		3,364			939
Net cash provided by operating activities				6,754			196
Cash flows from investing activities:
Acquisition of property and equipment				(150	)		(140	)
Net cash used in investing activities				(150	)		(140	)
Cash flows from financing activities:
	Payment of dividends			(6,000	)		(250	)
	Issuance of ordinary shares			9			—
Net cash used in financing activities				(5,991	)		(250	)
Net increase (decrease) in cash and cash equivalents				613			(194	)
Cash and cash equivalents at the beginning of year/period				2,393			3,006
Cash and cash equivalents at the end of year/period				3,006			2,812

The accompanying notes are an integral part of the financial statements.

F-117

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

(Amounts in thousands of Renminbi ("RMB"))

		Combined paid-in capital		Accumulated deficit			Total shareholders' deficit
Balance as of January 1, 2009			1,000		(14,295	)		(13,295	)
Comprehensive income:
	Net income		—		6,301			6,301
Additional paid-in capital upon the incorporation of Bright Way			9		—			9
Dividends to shareholders			—		(6,000	)		(6,000	)
Balance as of December 31, 2009			1,009		(13,994	)		(12,985	)
Comprehensive income:
	Net income		—		9,307			9,307
Dividends to shareholders			—		(250	)		(250	)
Balance as of October 10, 2010			1,009		(4,937	)		(3,928	)

The accompanying notes are an integral part of the financial statements.

F-118

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

1. ORGANIZATION AND BASIS OF PRESENTATION

        Bright Way Technology (Hong Kong) Limited ("Bright Way") was incorporated on March 25, 2009 as a limited liability company in Hong Kong with share capital of RMB9 (HK$10). Mr. Zhenning Hu owns 100% of the equity interest in Bright Way since its inception.

        Shenzhen Tastech Electronic Co., Ltd. ("Tastech") was incorporated on March 27, 2007 as a limited liability company in the People's Republic of China (the "PRC") with registered capital of RMB1,000. Mr. Zhenning Hu and Mr. Yixun Kuang have owned 41% and 59% of the equity interest in Tastech, respectively, since January 9, 2008.

        On October 11, 2010, VODone Limited ("VODone"), through its wholly-owned subsidiaries, acquired substantially all of the operating assets of Bright Way and Tastech for an aggregate purchase consideration of RMB20,000 cash and 28,694,372 ordinary shares of VODone. These combined financial statements include the accounts of Bright Way and Tastech (together, the "Group"), as both entities were under common management for the periods presented.

        The Group is principally engaged in the provision of handset design products and services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

        The financial statements of the Group have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). All intercompany accounts and transactions have been eliminated in combination.

Use of estimates

        The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the Group's financial statements include, but are not limited to, revenue recognition, allowance for doubtful accounts, provision for inventory obsolescence, estimates of useful lives of property and equipment, realization of deferred tax assets and unrecognized tax benefits. Actual results could significantly differ from those estimates.

Foreign currency

        Based on the criteria of ASC topic 830 ("ASC 830"), Foreign Currency Matters, the Group determined its functional currency to be the RMB. Each entity in the Group maintains its financial records in its own functional currency. The Group uses the RMB as its reporting currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the combined statements of income and comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange rates at the dates of the initial transactions.

F-119

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and cash equivalents

        Cash and cash equivalents include cash on hand and short-term deposits with original maturity of three months or less at the date of purchase. Cash and cash equivalents are unrestricted as to withdrawal and use.

Accounts receivable and allowance for doubtful accounts

        Accounts receivable are carried at net realizable value. In general, collateral is not required and interest is not charged on accounts receivable. An allowance for doubtful accounts is recorded when collection of the full amount is no longer probable. In evaluating the collectability of receivable balances, the Group considers specific evidence including the age of the balance, the customers' payment history, its current credit-worthiness and current economic trends. Accounts receivable balances are written off after all collection efforts have ceased.

Inventories

        Inventories consist of raw materials that are used for the provision of handset design products and services and are stated at the lower of cost or market value. Costs of raw materials are based on purchase costs and are determined by the weighted average method.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation and are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Office equipment	3 - 5 years
Motor vehicles	4 years

        Repair and maintenance costs are charged to expense as incurred, whereas the costs of renewals and betterment that extend the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the combined statements of income and comprehensive income.

Impairment of long-lived Assets

        The Group evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable in accordance with ASC topic 360 ("ASC 360"), Property, Plant and Equipment. When these events occur, the Group evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to

F-120

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

be generated by the assets, when the market prices are not readily available. No impairment of long-lived assets was recognized for any of the periods presented.

Fair value of financial instruments

        The Group's financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The carrying values of these financial instruments approximate their fair values due to their short-term maturity.

        The Group applies ASC topic 820 ("ASC 820"), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and required disclosures to be provided on fair value measurements.

        ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—	Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—	Unobservable inputs which are supported by little or no market activity.

        ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

        The Group had no financial instruments measured at fair value on a recurring or non-recurring basis during any of the periods presented.

Revenue recognition

        Revenues of the Group are derived from the provision of handset design products and services. For each of the significant sources of revenue stated below, revenue is recognized only when the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the goods have been delivered or the services have been rendered; (iii) the price or fees are fixed or determinable; and (iv) collectability is reasonably assured.

        The Group generates handset design revenues from the provision of comprehensive handset design solutions to mobile phone manufacturers and mobile phone content providers.

        Handset design solutions include (a) operating system software and hardware design with one-year post-contract customer support ("PCS") service; (b) printed circuit board with operating system software and optional assembly service; and (c) mobile phone contents installation service. Operating

F-121

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

system software designs with PCS services are provided to mobile phone manufacturers for either a fixed fee or a variable fee based on the units of production by the mobile phone manufacturers at a prescribed unit price. Printed circuit boards with operating system software are sold to mobile phone manufacturers for a fixed unit price. Mobile phone contents installation services are rendered to mobile phone content providers for a prescribed percentage of the mobile phone content providers' net profits.

        In assessing its arrangements with multiple deliverables and arrangements that include software elements for the periods presented, the Group adopted Accounting Standards Update ("ASU") No. 2009-13 ("ASU 2009-13"), Revenue Recognition—Multiple-Deliverable Revenue Arrangements, and ASU No. 2009-14 ("ASU 2009-14"), Certain Revenue Arrangements that Include Software Elements, on a retrospective basis. In accordance with ASU 2009-13, the total arrangement consideration is allocated to each unit of accounting based on its relative selling price which is determined based on the entity's best estimate of the selling price for that deliverable when vendor-specific evidence and third party evidence of selling price do not exist. In accordance with ASU 2009-14, software contained on the tangible product which is essential to the tangible product's functionality is excluded from the scope of software accounting guidance in ASC subtopic 985-605 ("ASC 985-605"), Software: Revenue Recognition. The Group believes retrospective adoption provides the most comparable and useful financial information for financial statement users, is more consistent with the information the Group's management uses to evaluate its business, and better reflects the underlying economic performance of the Group. The early adoption of ASU 2009-13 and ASU 2009-14 did not have a significant impact on the Group's financial position or results of operations.

(a)    Operating system software and hardware design with PCS service

        The Group and the mobile phone manufacturers sign an agreement containing the significant terms of the provision of operating system software and hardware design with PCS service to evidence that an arrangement exists. The Group recognizes handset design revenues derived from operating system software and hardware design and PCS service concurrently in accordance with ASC 985-605, as (i) the PCS fee is included with the initial arrangement fee for operating system software and hardware design; (ii) the PCS is for one year or less; (iii) the PCS costs is estimated to be insignificant and (iv) unspecified upgrades or enhancements offered during PCS arrangements historically have been and are expected to be minimal and infrequent. Therefore, delivery of operating system software and hardware design with PCS service occurs upon receipt and acceptance of the operating system software and hardware design by the mobile phone manufacturers. The Group performs credit assessment on the mobile phone manufacturers prior to signing the agreements to ensure collectability is reasonably assured. Accordingly, revenues from the provision of operating system software and hardware design and PCS service are recognized upon (i) the mobile phone manufacturers accepting the handset design solutions if the arrangement is based on a fixed fee or (ii) the mobile phone manufactures accepting the handset design solutions and confirming their monthly units of production to the Group if the arrangement is based on a variable fee derived from the units of production by the mobile phone manufacturers at a prescribed unit price. For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, revenues generated from operating system software and hardware design with PCS service were nil and RMB3,503, respectively.

F-122

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b)    Printed circuit board with operating system software and optional assembly service

        Printed circuit boards with operating system software and optional assembly services are multiple element arrangements comprising printed circuit boards, assembly services and operating system software specifically designed for the printed circuit boards. Since the operating system software is essential to the functionality of the printed circuit board, the transaction is outside the scope of software accounting guidance in ASC 985-605 in accordance with ASU 2009-14. Accordingly, the Group accounted for the sale of printed circuit boards with operating system software and optional assembly service as a multiple deliverables arrangement in accordance with ASU 2009-13. Each of the printed circuit board, operating system software and assembly service represents a separate unit of accounting.

        The Group and the mobile phone manufacturers sign an agreement containing the significant terms of the sale of printed circuit board with operating system software to evidence that an arrangement exists. The agreement also stipulates whether the mobile phone manufacturers engage the Group to perform assembly service on the printed circuit board. The Group delivers the assembled printed circuit boards together with the operating system software installed to mobile phone manufacturers if the Group is engaged to perform assembly service; whereas the Group normally delivers the operating system software prior to the printed circuit board to the mobile phone manufacturers if the Group is not engaged to perform assembly service. Therefore, delivery of printed circuit boards with operating system software and optional assembly services occurs upon receipt and acceptance of all deliverables by the mobile phone manufacturers. The Group performs credit assessment on the mobile phone manufacturers prior to signing the agreements to ensure collectability is reasonably assured. The purchase price is fixed because the unit price is stipulated in the signed sales agreement and no concessions such as discounts, rebates, refunds or other price changes are provided subsequently. However, the mobile phone manufacturers only pay the agreed purchase price upon receipt of all of the deliverables in the arrangement. The Group outsources the assembly of printed circuit boards and installation of operating system software to original equipment manufacturers ("OEM") and pays manufacturing fees, which are recognized as cost of revenues, based on a prescribed fixed fee per unit manufactured.

        In accordance with ASU 2009-13 and ASC subtopic 605-25 ("ASC 605-25"), Revenue Recognition: Multiple-Element Arrangements, the amount allocable to the delivered units or units of accounting is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions. Since the amount allocable to the operating system software is contingent upon the delivery of printed circuit board and the related assembly service, if any, revenues from the sale of printed circuit board with operating system software and optional assembly service are recognized only upon delivery of the final deliverable. For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, revenues generated from printed circuit board with operating system software and optional assembly service were RMB50,464 and RMB72,505, respectively.

(c)    Mobile phone contents installation service

        Mobile phone contents installation service does not require significant production, modification or customization of the mobile phone contents received from the mobile phone content providers.

F-123

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Persuasive evidence of the arrangement is documented in a contract signed by the mobile phone content providers and the Group. Delivery of mobile phone contents installation service occurs when the mobile phone contents are installed on the mobile device circuit boards by the OEM. The mobile phone contents installation service fees are fixed and non-refundable once the mobile phone continent providers confirm their monthly net profits to the Group. Collectability is considered reasonably assured as the Group deals with only reputable mobile phone content providers and performs thorough credit assessment on the mobile phone content providers prior to entering into a business relationship with them. Historically, the Group has not experienced any significant defaults for payment. Accordingly, the Group recognizes revenues from mobile phone contents installation services when the services are delivered and the fees are fixed upon receipt of the monthly net profits confirmations from mobile phone content providers. For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, revenues generated from mobile phone contents installation service were RMB10,301 and RMB6,579, respectively.

(d)    Business taxes and surcharges

        The Group is subject to business taxes and surcharges levied on services provided in the PRC. Business taxes and surcharges for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010 were RMB554 and RMB353, respectively. In accordance with ASC subtopic 605-45 ("ASC 605-45"), Revenue Recognition: Principal Agent Considerations, the Group recognized revenues net of all such business taxes and surcharges.

Cost of revenues

        Cost of revenue primarily consists of purchase costs of printed circuit boards and manufacturing fees paid to OEMs for the assembly of printed circuit boards and mobile phone contents installation service. These costs are expensed as incurred except for the portion that is based on a prescribed percentage of the Group's revenues, which are recorded as cost of revenues upon revenue recognition by the Group when billing confirmations are received as more fully described above. In addition, cost of revenues includes staff salaries, utilities and operating expenses directly related to the provision of handset design products and services.

Income taxes

        The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 ("ASC 740"), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss carryforwards, and credits using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

        The Group applies ASC 740 to account for uncertainty in income taxes. ASC 740 provides the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Group's estimated liability for unrecognized tax benefits and the related interest and penalties are periodically assessed for

F-124

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. In future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the combined statements of income and comprehensive income.

Segment reporting

        In accordance with ASC topic 280 ("ASC 280"), Segment Reporting, the Group operates and manages its business as a single operating and reportable segment. As the Group's long-term assets and revenues are substantially all located in and derived from the PRC, no geographic segments are presented.

Leases

        In accordance with ASC topic 840 ("ASC 840"), Leases, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exists: (a) ownership is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least 75% of the property's estimated remaining economic life, or (d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over their lease term. The Group leases certain office facilities under non-cancelable operating leases and recorded total rental expenses of RMB231 and RMB244 for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, respectively. The Group had no capital lease for any of the periods presented.

Comprehensive income

        Comprehensive income is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC topic 220 ("ASC 220"), Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group's comprehensive income is equivalent to its net income.

Recent accounting pronouncements

        In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2010-06 ("ASU 2010-06"), Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (i) the different classes of assets and liabilities measured at fair value,

F-125

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ii) the valuation and input techniques used, (iii) the activity in Level 3 fair value measurements, and (iv) the transfers among Levels 1, 2 and 3. The requirements for new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about Level 3 activity of purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Group does not expect the adoption of ASU 2010-06 on the disclosures about Level 3 activity of purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements will have a significant effect on its financial statements.

        In May 2011, the FASB issued ASU No. 2011-04 ("ASU 2011-04"), Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. ASU 2011-04 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Group does not expect the adoption of ASU 2011-04 will have a significant effect on its consolidated financial statements.

3. CONCENTRATION OF RISKS

Concentration of credit risk

        Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and amounts due from employees (Note 5). As of December 31, 2009, substantially all of the Group's cash and cash equivalents were deposited in financial institutions located in PRC, which management believes are of high credit quality.

        Accounts receivable are typically unsecured and mainly derived from revenue earned from customers in the PRC, which are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances. The Group maintains reserves for estimated credit losses, which have generally been within its expectations.

        Amounts due from employees represent sales proceeds of the Group, collected by the Group's employees on behalf of the Group. The balances are unsecured, interest-free and repayable on demand. The Group employs several measures to ensure that the employees' personal bank accounts are under the Group's control, for example, keeping a record of the account numbers, passwords, online login information and monitoring the account activities constantly.

F-126

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

3. CONCENTRATION OF RISKS (Continued)

Concentration of customers

        The Group currently generates a substantial portion of its revenue from a limited number of customers. Approximately 27%, 24% and 13% of total revenues were derived from three individual customers, namely Shenzhen Hong Kong Karasnn Co., Ltd., Shenzhen Hongdaxun Technology Co., Ltd., and Shenzhen Baichengyi Electon Co., Ltd., respectively, for the period from January 1, 2010 to October 10, 2010. Approximately 44% and 15% of total revenues were derived from two individual customers, namely Shenzhen Hong Kong Karasnn Co., Ltd. and Shenzhen Hongdaxun Technology Co., Ltd., respectively, for the year ended December 31, 2009.

Concentration of suppliers

        A significant portion of the Group's raw materials are obtained from its largest supplier, who accounted for 14% of the Group's total raw material purchases for the year ended December 31, 2009. For the period from January 1, 2010 to October 10, 2010, none of the suppliers contributed more than 10% of the Group's total raw material purchases on an individual basis. Failure to develop or maintain the relationships with these suppliers may affect the Group's ability to manufacture its products. Any disruption in the supply of the raw materials to the Group may adversely affect the Group's business, financial condition and results of operations.

Current vulnerability due to certain other concentrations

        The Group's operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC's political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective.

Currency convertibility risk

        The Group transacts the majority of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People's Bank of China (the "PBOC"). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into United States dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers' invoices, shipping documents and signed contracts. Additionally, the value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

F-127

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

3. CONCENTRATION OF RISKS (Continued)

Foreign currency exchange rate risk

        From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The appreciation of the RMB against the US$ was approximately 0.1% and 3% for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, respectively. On June 19, 2010, the People's Bank of China announced the end of the RMB's de facto peg to the US$, a policy which was instituted in late 2008 in the face of the global financial crisis, to further reform the RMB exchange rate regime and to enhance the RMB exchange rate flexibility. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market. While the international reaction to the appreciation of the RMB has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and potentially more significant appreciation of the RMB against the US$.

4. ACCOUNTS RECEIVABLE

        Accounts receivable and the related allowance for doubtful accounts are summarized as follows:

	As of December 31, 2009
	RMB
Accounts receivable		1,492
Less: Allowance for doubtful accounts		—
Accounts receivable, net		1,492

        The Group does not offer extended payment terms and all of the accounts receivable are non-interest bearing. As of December 31, 2009, all of the accounts receivable were due from third party customers and were within their credit terms.

5. PREPAYMENTS AND OTHER CURRENT ASSETS

        Prepayments and other current assets consist of the following:

	As of December 31, 2009
	RMB
Deposits		38
Amounts due from employees		5,438
Advances to suppliers		48
Others receivable		105
Total		5,629

F-128

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

6. INVENTORIES

        Inventories are summarized as follows:

	As of December 31, 2009
	RMB
Raw materials		3,238

        No inventory obsolescence provision was recognized as of December 31, 2009.

7. PROPERTY AND EQUIPMENT, NET

        Property and equipment and the related accumulated depreciation are summarized as follows:

	As of December 31, 2009
	RMB
Office equipment		276
Motor vehicles		269
Property and equipment, cost		545
Less: Accumulated depreciation		(397	)
Property and equipment, net		148

        For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, depreciation expenses of RMB133 and RMB92, respectively, were recorded in general and administrative expenses.

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

        Accrued expenses and other current liabilities consist of the following:

	As of December 31, 2009
	RMB
Advances from customers		803
Accrued payroll and welfare payable		1,113
Business tax and other taxes payable		4,935
Total		6,851

        Advances from customers represent cash payments received from customers in advance of the delivery of handset design products and services. The advances are applied towards the purchase price and recognized as revenue when the conditions for revenue recognition have been met. Advances from customers are non-interest bearing and refundable if the Group fails to perform.

F-129

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

9. INCOME TAXES

Hong Kong

        Bright Way is subject to Hong Kong corporate income tax at a rate of 16.5% on the assessable profits arising in Hong Kong.

China

        Pursuant to the PRC Corporate Income Tax Law (the "CIT Law") and relevant implementation regulations that became effective on January 1, 2008, enterprises located in the PRC are generally subject to enterprise income taxes ("EIT") at a unified statutory tax rate of 25%, unless preferential tax status is granted by the tax authorities to allow the entities to be subject to a reduced income tax rate.

        Under the CIT Law, dividends paid by PRC enterprises out of profits earned after December 31, 2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.

        The current and deferred components of the income tax (benefit) expense appearing in the combined statements of income and comprehensive income are as follows:

	For the year ended December 31, 2009			For the period from January 1, 2010 to October 10, 2010
	RMB			RMB
Current tax expense		6,397			5,214
Deferred tax benefit		(167	)		(55	)
		6,230			5,159

        A reconciliation of income taxes of the Group computed at the respective statutory tax rate of Bright Way and Tastech to the effective income tax provision is as follows:

	For the year ended December 31, 2009			For the period from January 1, 2010 to October 10, 2010
	RMB			RMB
Income before income taxes		12,531			14,466
Income tax expenses computed at the respective statutory tax rate		2,464			2,647
Nondeductible expenses		266			115
Preferential tax rate		(572	)		(352	)
Current/deferred rate differential		(53	)		(45	)
Interest and penalties on unrecognized tax benefits		4,125			2,794
Total		6,230			5,159

F-130

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

9. INCOME TAXES (Continued)

Deferred taxes

        Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred taxes for the Group are as follows:

		As of December 31, 2009
		RMB
Deferred tax assets, current portion:
	Accrual expenses		221
	Business taxes		269
Deferred tax assets, current portion, net			490

Unrecognized tax benefits

        The Group recorded unrecognized tax benefits of RMB18,822 and RMB22,652, as of December 31, 2009 and October 10, 2010, respectively, of which RMB6 and nil are presented on a net basis against the deferred tax assets related to tax loss carryforwards on the face of the combined balance sheet. The unrecognized tax benefits recognized by the Group were mainly caused by under reporting of taxable income in tax filings. For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, RMB18,822 and RMB22,652, respectively, would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will change in the next twelve months, pending factors including changes in the amount of the PRC and Hong Kong statutory taxable income due to the application and interpretation of the PRC and Hong Kong tax laws. However, an estimate of the range of the possible change cannot be made at this time.

        A roll-forward of accrued unrecognized tax benefits, excluding interest and penalties, is as follows:

	For the year ended December 31, 2009		For the period from January 1, 2010 to October 10, 2010
	RMB		RMB
Balance at the beginning of the year/period		3,116		5,233
Increases related to tax positions taken in the current year/period		2,117		1,093
Decreases due to settlement		—		(58	)
Balance at the end of the year/period		5,233		6,268

        For the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, the Group recorded income tax expenses for interest and penalties related to its uncertain tax benefits of RMB4,125 and RMB2,794, respectively. As of December 31, 2009, the Group classified the unrecognized tax benefits as non-current liabilities.

F-131

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

10. RELATED PARTY TRANSACTIONS

        The principal related parties with which the Group had transactions during the periods presented are as follows:

Name of related parties	Relationship with the Group
Shenzhen Zhongtwokechuang Technology Co., Ltd. ("Zhongtuo")	A company controlled by management of Tastech
Yixun Kuang	A director and shareholder of Tastech

        The Group had the following related party transactions for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010:

	For the year ended December 31, 2009		For the period from January 1 to October 10, 2010
	RMB		RMB
Office rental deposit paid on behalf of the Group by:
Zhongtuo		—		107
Sale proceeds collected on behalf of the Group by:
Yixun Kuang		7,401		—
Repayment of sales proceeds collected on behalf of the Group by:
Yixun Kuang		7,401		—

        The Group did not have any related party balances as of December 31, 2009.

11. COMMITMENTS AND CONTINGENCIES

(a)    Operating lease commitments

        As of December 31, 2009, the Group had minimum lease payments under non-cancelable operating leases with initial terms in excess of one year as follows:

	RMB
2010		226
2011 and hereafter		—
		226

        The Group's lease arrangements do not contain renewal options, rent escalation clauses, restrictions or contingent rents and are all conducted with third parties.

F-132

BRIGHT WAY TECHNOLOGY (HONG KONG) LIMITED AND
SHENZHEN TASTECH ELECTRONIC CO., LTD.

NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and Hong Kong Dollar ("HK$"))

11. COMMITMENTS AND CONTINGENCIES (Continued)

(b)    Income taxes

        As of December 31, 2009, the Group recognized RMB5,233 accrual for unrecognized tax benefits (Note 9). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. The Group classified the accrual for unrecognized tax benefits as non-current liabilities.

12. EMPLOYEE DEFINED CONTRIBUTION PLAN

        Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Group make contributions to the government for these benefits based on certain percentages of the employees' salaries up to a maximum of three times the average annual salary for the city in which the Group operates for the prior year. The Group has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were RMB367 and RMB367 for the year ended December 31, 2009 and the period from January 1, 2010 to October 10, 2010, respectively.

13. SUBSEQUENT EVENTS

        In accordance with ASC topic 855 ("ASC 855"), Subsequent Events, the Group evaluated subsequent events through August 25, 2011, which was the date that the consolidated financial statements were filed with the Securities and Exchange Commission on Form F-1. There were no significant subsequent events occurred between October 10, 2010 and August 25, 2011.

F-133

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
3GUU Mobile Entertainment Industrial Co., Ltd.

        We have audited the accompanying consolidated balance sheet of 3GUU Mobile Entertainment Industrial Co., Ltd. (the "Company") as of December 31, 2009, and the related consolidated statements of operations, changes in shareholders' equity (deficit) and cash flows for the years ended December 31, 2009 and 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of 3GUU Mobile Entertainment Industrial Co., Ltd. as of December 31, 2009 and the consolidated results of its operations and its cash flows for the years ended December 31, 2009 and 2010, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young Hua Ming
Guangzhou, the People's Republic of China
August 25, 2011

F-134

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

CONSOLIDATED BALANCE SHEET

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares)

	Notes		As of December 31, 2009
			RMB
ASSETS
Current assets
Cash and cash equivalents				27,782
Accounts receivable		4		1,678
Prepayments and other current assets		5		1,657
Deferred tax assets		11		427
Total current assets				31,544
Non-current assets
Property and equipment, net		6		1,704
Intangible assets, net		7		946
Deferred tax assets		11		500
Total non-current assets				3,150
TOTAL ASSETS				34,694
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable				1,623
Accrued expenses and other current liabilities		8		2,823
Income tax payable				91
Deferred revenue				3,166
Derivative financial liabilities		2		23,748
Total current liabilities				31,451
Non-current liabilities
Other non-current liabilities		9		2,638
Total non-current liabilities				2,638
Total liabilities				34,089
Commitments and contingencies		13
Convertible redeemable preferred shares
Series A (par value US$0.01; 1,849,315 shares authorized, issued and outstanding as of December 31, 2009)		10		61,457
Shareholders' deficit
Ordinary shares (par value US$0.01; 5,000,000 shares authorized, issued and outstanding as of December 31, 2009)				341
Receivables from issuance of ordinary shares				(328	)
Additional paid-in capital				24,071
Accumulated deficit				(84,967	)
Accumulated other comprehensive income				31
Total shareholders' deficit				(60,852	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT				34,694

The accompanying notes are an integral part of the consolidated financial statements.

F-135

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi ("RMB"))

		Notes		For the year ended December 31, 2009			For the year ended December 31, 2010
				RMB			RMB
Net revenues					17,775			63,989
Cost of revenues					(8,430	)		(30,536	)
Gross profit					9,345			33,453
Operating expenses:
	Selling and marketing expenses				(4,274	)		(7,365	)
	General and administrative expenses				(4,497	)		(6,523	)
Total operating expenses					(8,771	)		(13,888	)
Operating income					574			19,565
Interest income					10			176
Other income, net					266			1,112
Changes in fair value of derivative financial liabilities			2		(17,364	)		1,711
(Loss) income before income taxes					(16,514	)		22,564
Income tax expenses			11		(60	)		(7,491	)
Net (loss) income					(16,574	)		15,073
Less:
Changes in redemption value of Series A convertible redeemable preferred shares					(61,457	)		—
Net (loss) income attributable to ordinary shareholders					(78,031	)		15,073

The accompanying notes are an integral part of the consolidated financial statements.

F-136

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of Renminbi ("RMB"))

		For the year ended December 31, 2009			For the year ended December 31, 2010
		RMB			RMB
Cash flows from operating activities:
Net (loss) income			(16,574	)		15,073
Adjustments to reconcile net (loss) income to net cash generated from operating activities:
	Depreciation of property and equipment		826			1,075
	Amortization of intangible assets		1,321			1,784
	Allowance for doubtful accounts		41			—
	Loss on disposal of property and equipment		—			13
	Deferred tax (benefit) expense		(472	)		4,184
	Changes in fair value of derivative financial liabilities		17,364			(1,711	)
Changes in operating assets and liabilities:
	Accounts receivable		(1,533	)		(18,543	)
	Prepayments and other current assets		(715	)		1,285
	Accounts payable		1,319			3,966
	Accrued expenses and other current liabilities		1,482			1,317
	Income tax payable		91			43
	Deferred revenue		3,166			(33	)
	Other non-current liabilities		2,442			3,078
Net cash provided by operating activities			8,758			11,531
Cash flows from investing activities:
	Acquisition of property and equipment		(560	)		(642	)
	Acquisition of intangible assets		(1,312	)		(11,674	)
Net cash used in investing activities			(1,872	)		(12,316	)
Cash flows from financing activities:
Proceeds from issuance of ordinary shares			13			—
Proceeds from issuance of Series A convertible redeemable preferred shares			20,486			—
Net cash provided by financing activities			20,499			—
Net increase (decrease) in cash and cash equivalents			27,385			(785	)
Cash and cash equivalents, beginning of the year			397			27,782
Cash and cash equivalents, end of the year			27,782			26,997
Supplemental disclosure of cash flows information:
Income tax paid			186			—

The accompanying notes are an integral part of the consolidated financial statements.

F-137

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

(Amounts in thousands of Renminbi ("RMB"), except for number of shares)

		Number of ordinary shares		Ordinary shares		Receivables from issuance of ordinary shares			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit			Total shareholders' equity (deficit)
				RMB					RMB		RMB		RMB			RMB
Balance as of January 1, 2009			5,000,000		341		(328	)		9,987		—		(6,936	)		3,064
Comprehensive loss:
Net loss			—		—		—			—		—		(16,574	)		(16,574	)
Foreign currency translation adjustment			—		—		—			—		31		—			31
	Total comprehensive loss																(16,543	)
Changes in redemption value of Series A convertible redeemable preferred shares			—		—		—			—		—		(61,457	)		(61,457	)
Beneficial conversion feature of Series A convertible redeemable preferred shares			—		—		—			14,071		—		—			14,071
Additional paid-in capital upon establishment of the Company			—		—		—			13		—		—			13
Balance as of December 31, 2009			5,000,000		341		(328	)		24,071		31		(84,967	)		(60,852	)
Comprehensive income:
Net income			—		—		—			—		—		15,073			15,073
Foreign currency translation adjustments			—		—		—			—		2,563		—			2,563
	Total comprehensive income																17,636
Issuance of ordinary shares upon conversion of Series A convertible redeemable preferred shares			1,849,315		127		—			80,803		—		—			80,930
Balance as of December 31, 2010			6,849,315		468		(328	)		104,874		2,594		(69,894	)		37,714

The accompanying notes are an integral part of the consolidated financial statements.

F-138

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION

        3GUU Mobile Entertainment Industrial Co., Ltd. (the "Company") was incorporated as an exempted limited liability company in the British Virgin Islands (the "BVI") on July 2, 2009. Mr. Yongchao Wang ("Mr. Wang"), who owns 76% of the equity interest in the Company, is the Company's ultimate controlling shareholder. The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through its subsidiaries and a variable interest entity ("VIE"), which are located in Hong Kong and the People's Republic of China (the "PRC"). The Company, its subsidiaries and the variable interest entity are hereinafter collectively referred to as the "Group". The Group is principally engaged in the development, operation and sale of mobile games on smartphones in the PRC.

        The Group was acquired by Action King Limited ("Action King"), a wholly-owned subsidiary of VODone Limited ("VODone"), on December 31, 2010. Prior to being acquired by VODone, the Company's subsidiaries considered of the following entities:

Company	Date of establishment	Place of establishment	Percentage of ownership by the Company			Principal activities
3GUU Mobile Entertainment Co. Limited ("3GUU HK")	July 6, 2009	Hong Kong		100	%	Investment holding
Guangzhou Yitongtianxia Software Development Co., Ltd. ("Yitongtianxia")	October 20, 2009	The PRC		100	%	Development operation and sale of mobile phone game

        In addition, the Company consolidated the following VIE:

Company	Date of establishment		Place of establishment	Percentage of ownership by the Company		Principal activities
Guangzhou Yingzheng Information Technology Co., Ltd. ("Yingzheng")		April 8, 2004	The PRC		—	Development, operation and sale of mobile game

        As more fully described below, the Company, through a series of transactions which are accounted for as a reorganization of entities under common control in a manner similar to a pooling of interest, became the ultimate parent entity of its wholly-owned subsidiaries and VIE on October 28, 2009 (the "Reorganization"). Accordingly, these consolidated financial statements reflect the historical operations of the Group as if the current organization structure had existed since January 1, 2009.

F-139

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Reorganization transactions

        Prior to the Reorganization, the Group's operations were conducted through Yingzheng, an entity incorporated under the Company Law of the PRC on April 8, 2004. Yingzheng has been controlled by Mr. Wang since June 12, 2007. The following transactions were undertaken to reorganize the legal structure of the Group. The Company incorporated 3GUU HK on July 6, 2009. 3GUU HK has been a wholly-owned subsidiary of the Company since its inception. Yitongtianxia was incorporated by 3GUU HK in the PRC as a wholly foreign-owned enterprise on October 20, 2009. Yitongtianxia was formed to render exclusive technology and market promotion services to Yingzheng.

        To comply with PRC law and regulations that (i) prohibit direct foreign control in companies involved in internet content provision and telecommunication businesses and (ii) restrict an offshore company controlled or established by a PRC enterprise or natural person to acquire its PRC affiliates, Yitongtianxia entered into a series of contractual arrangements ("VIE Arrangements") with Yingzheng and its shareholders, on October 28, 2009, whereby Yitongtianxia obtained effective control over Yingzheng through (i) the ability to exercise all the rights of Yingzheng's shareholders pursuant to the exclusive call option agreement, the equity pledge agreement and the agreement for voting proxies, (ii) the rights to absorb substantially all of the economic residual benefits pursuant to the exclusive technology services and market promotion agreement, the technology services agreement and two supplementary agreements and (iii) the obligation to fund all of the expected losses of the Yingzheng pursuant to the loan agreement and a supplementary agreement. As a result, Yitongtianxia has been determined to be the primary beneficiary of Yingzheng. In accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification ("ASC") topic 810 ("ASC 810"), Consolidation, the Company, through Yitongtianxia, consolidates the operating results of Yingzheng. Since the VIE Arrangements were entered into between entities under common control, the transaction has been accounted for at historical cost and as if it took place on January 1, 2009 in a manner similar to a pooling-of-interest.

VIE Arrangements

        The significant terms of the VIE Arrangements are listed below:

Exclusive call option agreement

        Pursuant to the exclusive call option agreement among Yitongtianxia, Yingzheng and its shareholders, Yitongtianxia and its shareholders irrevocably granted Yitongtianxia , or its designated persons, an exclusive option to purchase, when and to the extent permitted under PRC law, part of or the entire equity interests in Yingzheng. The exercise price is the minimum price permitted by PRC law. The exclusive call option agreement will remain effective until terminated as agreed upon by the parties thereto.

Equity pledge agreement

        Pursuant to the equity pledge agreement between Yitongtianxia and Yingzheng's shareholders, Yingzheng's shareholders have pledged their entire equity interest in Yingzheng to Yitongtianxia to

F-140

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

guarantee the performance of Yingzheng's obligations under the exclusive technology services and market promotion agreement. If Yingzheng breaches its contractual obligations under the exclusive technology services and market promotion agreement, Yitongtianxia, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interest. Yingzheng's shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interest in Yingzheng without the prior consent of Yitongtianxia. The equity pledge agreement will remain effective until terminated as agreed upon by the parties thereto.

Exclusive technology services and market promotion agreement

        Pursuant to the exclusive technology services and market promotion agreement between Yitongtianxia and Yingzheng, Yitongtianxia has the exclusive and irrevocable right to provide to Yingzheng various technology and market promotion services related to the mobile phone games business. In return, Yingzheng is required to pay Yitongtianxia a service fee in an amount as determined at the sole discretion of Yitongtianxia. The exclusive technology services and market promotion agreement will remain effective until terminated as agreed upon by the parties thereto. Business taxes relating to management, technology services and market promotion fees charged by Yitongtianxia are recorded as cost of revenues in the consolidated statements of operations.

Technology Services Agreement

        Pursuant to the technology services agreement dated August 6, 2010 between Yitongtianxia and Yingzheng and the supplementary agreement dated January 6, 2011, Yitongtianxia agreed to provide Yingzheng with technology support and market promotion services related to Yingzheng's smartphone games business. Yingzheng agreed to distribute 40% of its income generated from the game products developed under the technology services agreement, after deducting taxes and expenses, to Yitongtianxia on a monthly basis from August 6, 2010 to August 5, 2013, with automatic renewal provisions.

Agreement for voting proxies

        Pursuant to the agreement for voting proxies among Yitongtianxia, Yingzheng and its shareholders, Yingzheng's shareholders irrevocably assign their full voting rights in Yingzheng to Yitongtianxia. Yingzheng's shareholders entrusted Yitongtianxia their rights to attend shareholders' meetings and to vote on their behalf on all of the matters that require shareholders' approval. The agreement for voting proxies will remain effective until terminated as agreed upon by the parties thereto.

F-141

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Loan agreement

        Pursuant to the loan agreement between Yitongtianxia and Yingzheng's shareholders, Yitongtianxia extended loans of an aggregate principal amount of RMB20,000 to Yingzheng's shareholders to enable them to pay the registered capital of Yingzheng. Yingzheng's shareholders will repay the loans by transferring their legal ownership in Yingzheng to Yitongtianxia when permitted by PRC law. The loan agreement is effective for 10 years and will automatically extend for another 10 years as agreed upon by the parties thereto. As of December 31, 2010, Yingzheng's shareholders have not drawn down any loans from Yitongtianxia.

Supplementary agreements

        On December 30, 2010, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to determine the calculation of management fee to be paid to Yitongtianxia. Pursuant to this supplementary agreement, Yingzheng has agreed to pay an annual management fee to Yitongtianxia based on annual revenue of Yingzheng minus actual operating costs, other costs of Yingzheng, which include fees paid under the technology services agreement, and taxes paid by Yingzheng.

        On August 23, 2011, Yitongtianxia entered into a supplementary agreement with Yingzheng and its shareholders to memorialize certain terms previously agreed amongst Yitongtianxia, Yingzheng and its shareholders. While this supplementary agreement was signed in 2011, the terms, intent and substance of all the agreements above remained unchanged. Pursuant to the supplementary agreement: (i) before Yitongtianxia can legally exercise the option to acquire Yingzheng, Yingzheng's shareholders cannot declare any dividends or distribute any residual profits without the consent of Yitongtianxia; (ii) any funds, including but not limited to dividends distributed out of Yingzheng's residual profits, received by Yingzheng's shareholders or any persons designated by Yingzheng's shareholders, shall be remitted in full to Yitongtianxia; (iii) the consideration received by Yingzheng's shareholders upon the exercise of the exclusive call option agreement by Yitongtianxia must be immediately remitted to Yitongtianxia or any persons designated by Yitongtianxia; (iv) Yitongtianxia is obligated to provide continuous financial support to Yingzheng for operations; and (v) Yitongtianxia has the unilateral right to change the service fee amount under the exclusive technology services and market promotion agreement. The obligation to provide continuous financial support to Yingzheng for operations by Yitongtianxia was agreed to be terminated by both parties on August 23, 2011.

F-142

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The carrying amounts and classifications of the assets and liabilities of Yingzheng are as follows:

	As of December 31, 2009
	RMB
ASSETS
Current assets:
Cash and cash equivalents		7,359
Accounts receivable		1,678
Prepayments and other current assets		1,449
Deferred tax assets		415
Total current assets		10,901
Non-current assets:
Property and equipment, net		1,539
Intangible assets, net		946
Deferred tax assets		500
Total non-current assets		2,985
Total assets		13,886
LIABILITIES
Current liabilities:
Accounts payable		1,607
Accrued expenses and other current liabilities		2,814
Income tax payable		91
Deferred revenue		3,166
Total current liabilities		7,678
Non-current liabilities:
Other non-current liabilities		2,638
Total non-current liabilities		2,638
Total liabilities		10,316

F-143

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

1. ORGANIZATION AND BASIS OF PRESENTATION (Continued)

        The financial performance and cash flows of Yingzheng are as follows:

	For the year ended December 31, 2009		For the year ended December 31, 2010
	RMB		RMB
Net revenues		17,775		57,156
Net income		857		17,078
Net cash provided by operating activities		6,220		21,344
Net cash provided by (used in) investing activities		742		(11,876	)
Net cash provided by financing activities		—		—

        As of December 31, 2009, there was no pledge or collateralization of the assets of Yingzheng and the Company has not provided any financial support that it was not previously contractually required to provide to Yingzheng. There were no assets of Yingzheng that can only be used to settle its obligations. Creditors of Yingzheng have no recourse to the general credit of Yitongtianxia, which is the primary beneficiary of Yingzheng.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

        The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP").

Principles of consolidation

        The consolidated financial statements of the Group include the financial statements of the Company, its subsidiaries and a VIE, for which a subsidiary of the Company is the primary beneficiary. The results of the subsidiaries are consolidated from the date on which the Group obtained control and are continued to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when the Company holds a majority of the voting equity interest in an entity. However, if the Company demonstrates its ability to control the entities through the power to direct the activities of the entity that most significantly impact the entity's economic performance and the obligation to absorb losses of the entities that could potentially be significant to the entity or the rights receive benefits from the entity that could potentially be significant to the entity, then the entity is consolidated.

        All significant intercompany balances and transactions among the Company, its subsidiaries and VIE have been eliminated upon consolidation.

F-144

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of estimates

        The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the Group's financial statements include, but are not limited to, revenue recognition, useful lives of property and equipment, intangible assets, realization of deferred tax assets, share-based compensation expenses and uncertain income tax positions. Actual results could materially differ from those estimates.

Foreign currency

        Based on the criteria of ASC topic 830 ("ASC 830"), Foreign Currency Matters, the Company determined its functional currency to be the United States Dollars ("US$"). 3GUU HK determined its functional currency to be the US$. The Company's subsidiary and VIE located in the PRC determined their functional currency to be the RMB. The Company uses the RMB as its reporting currency.

        Each entity in the Group maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are including the consolidated statements of income and comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchanges rates at the dates of the initial transactions.

        The assets and liabilities of the Company's subsidiaries located outside of the PRC are translated into RMB at the exchange rates prevailing at the balance sheet date. The consolidated statements of operations of these entities are translated into RMB at the weighted average exchange rates for the year. The resulting translation gains (losses) are recorded in accumulated other comprehensive income as a component of shareholders' equity.

        For the purpose of the consolidated statements of cash flows, cash flows of Company's subsidiaries located outside of the PRC are translated into RMB at the exchange rates prevailing on the dates of the cash flows. Frequently recurring cash flows of these entities which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

Cash and cash equivalents

        Cash and cash equivalents include cash on hand and short-term deposits with original maturity of three months or less at the date of purchase. Cash and cash equivalents are unrestricted as to withdrawal and use.

F-145

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts receivable and allowance for doubtful accounts

        Accounts receivable are carried at net realizable value. In general, collateral is not required and interest is not charged on accounts receivable. An allowance for doubtful accounts is recorded when collection of the full amount is no longer probable. In evaluating the collectability of receivable balances, the Group considers specific evidence including the aging of the receivable, the customer's payment history, its current credit-worthiness and current economic trends. Accounts receivable are written off after all collection efforts have ceased.

Property and equipment, net

        Property and equipment are stated at cost less accumulated depreciation and are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Office equipment 3 - 5 years

        Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extend the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of operations.

Intangible assets, net

        Intangible assets, including computer software, mobile games and platforms, and capitalized mobile game product development costs, are carried at cost less accumulated amortization. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic lives of the intangible assets as follows:

Computer software	5 years
Mobile games and platforms	1 - 5 years
Mobile game product development costs	3 years

        The Group recognizes costs to develop its mobile game products in accordance with ASC topic 985 ("ASC 985"), Software. Mobile game product development costs consist primarily of payroll, depreciation and other overhead expenses incurred by the Group to develop, maintain, monitor and manage the Group's mobile gaming products. Costs incurred for the development of mobile game products prior to the establishment of technological feasibility are expensed when incurred and are included in product development expenses. Once an online game product has reached technological feasibility, all subsequent mobile game product development costs are capitalized until the product is available for marketing. Technological feasibility is evaluated on a product-by-product basis, but typically encompasses both technical design and game design documentation and only occurs when the mobile games have a proven ability to operate in a mobile game environment. The amount of online game development costs qualifying for capitalization as intangible assets was amortized over the estimated life of the corresponding mobile games, which is determined to be three years.

F-146

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of long-lived assets

        The Group evaluates its long-lived assets, including property and equipment and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable in accordance with ASC topic 360 ("ASC 360"), Property, Plant and Equipment. When these events occur, the Group evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the asset group over its fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. No impairment of long-lived assets was recognized for any of the periods presented.

Fair value of financial instruments

        The Group's financial instruments include cash and cash equivalents, accounts receivable, accounts payable, amounts due from related parties, amounts due to related parties, convertible redeemable preferred shares and the related derivative financial liabilities. The carrying values of these financial instruments, other than the convertible redeemable preferred shares and the related derivative financial liabilities, approximate their fair values due to their short-term maturities. The convertible redeemable preferred shares were initially recorded at issue price net of issuance costs. The Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of the convertible redeemable preferred shares to equal the redemption value at the end of each reporting period (Note 10). The derivative financial liabilities were recorded at fair value as determined on the issuance date and subsequently adjusted to the fair value at each reporting date (Note 10). The Group determined the fair values of the convertible redeemable preferred shares and the related derivative financial liabilities with the assistance of an independent third party valuation firm.

        The Group applies ASC topic 820 ("ASC 820"), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.

        ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—	Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—	Unobservable inputs which are supported by little or no market activity.

        ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices

F-147

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

        In accordance with ASC 820, the Group measures the fair value of the derivative financial liabilities using an income approach based on inputs that are unobservable in the market.

        Liabilities measured at fair value on a recurring basis as of December 31, 2009 are summarized below:

	Quoted price in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	RMB		RMB		RMB
Derivative financial liabilities		—		—		23,748

        The following table presents a reconciliation of the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2009 and 2010.

		Derivatives financial liabilities
		RMB
Balance as of January 1, 2009			—
	Recognized during the year		6,384
	Realized or unrealized loss		17,364
Balance as of December 31, 2009			23,748
	Recognized during the year		—
	Realized or unrealized gain		(1,711	)
	Reclassified to additional paid-in capital upon conversion of the Series A convertible redeemable preferred shares		(21,321	)
	Foreign currency translation adjustment		(716	)
Balance as of December 31, 2010			—
The amount of total loss for the year ended December 31, 2009 included in earnings			(17,364	)
The amount of total gain for the year ended December 31, 2010 included in earnings			1,711

        Realized and unrealized gain (loss) for the years ended December 31, 2009 and 2010 was recorded as "Changes in fair value of derivative financial liabilities" in the consolidated statements of operations.

F-148

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition

        Revenues of the Group are derived from the development, operation and sale of in-game premium feature of mobile games on smartphones. For each of the significant sources of revenue stated below, revenue is recognized only when the following four criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the service has been rendered; (iii) the fees are fixed or determinable; (iv) collectability is reasonably assured.

        The Group generates smartphone games revenues from the sale of in-game premium features of self-developed mobile social games as well as from the sale of self-developed and purchased single-player games on smartphones. The Group operates mobile social games and single player games under a free-to-play model and a subscription-based model, respectively.

(a)    Mobile social games

        Under the free-to-play model for mobile social games, mobile phone game players can download mobile phone games, obtain game accounts and play the basic functions of the mobile games free of charge but may purchase game points for in-game premium features to enhance their game-playing experience. The purchased in-game premium features can be freely traded amongst game players within the applicable game as long as consumption of the items has not commenced. Mobile phone game players can purchase game points by either charging their account with mobile network operators directly or buying prepaid cards issued by mobile network operators. The prepaid cards can be converted into a pre-specified number of game points for consumption. Upon delivery of game points purchased directly from mobile network operators or converted from prepaid cards to mobile phone game players, the Group initially classifies these amounts as deferred revenue. For purposes of determining when the service has been provided to the mobile phone game players, the Group has determined that an implied obligation exists to the mobile phone game players who purchased game points to provide an enhanced game-playing experience through the consumption or trading of purchased in-game premium features over the estimated life of the mobile phone game players.

        The Group contracts with mobile network operators and third-party payment platforms for billing, collection and transmission services offered to mobile phone game players who have purchased game points. The Group also contracts with mobile application and software websites to distribute its mobile social games by providing platforms for mobile phone game players to download such games. The mobile network operators and third-party payment platforms are entitled to profit sharing based on a prescribed percentage of the gross proceeds collected from the mobile phone game players. Since the Group does not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the mobile network operators and the third-party payment platforms represent the amount of revenue to be recognized by the Group.

        The Group has information generated from its internal system on the number of game points sold each month to estimate the amount of collectable net proceeds and to recognize mobile social games revenues. Differences between its estimates and the actual amounts confirmed by the mobile network operators and the third-party payment platforms have historically been insignificant. Generally, within 30 days after the end of each month, the Group receives billing confirmations from each of the mobile

F-149

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

network operators and third-party payment platforms confirming the amount of net proceeds to be received by the Group. The Group pays service fees to the mobile application and software websites.

        Collectability is considered reasonably assured as the Group deals with only reputable mobile network operators and third-party payment platforms and performs thorough credit assessment on the mobile network operators and the third-party payment platforms prior to entering into a business relationship with them. Historically, the Group has not experienced any significant defaults for payment.

        Based on the above, the Group recognizes the estimated net proceeds to be received from the mobile network operators and the third-party payment platforms for the sale of game points of the mobile social games, using data generated from its internal system, as deferred revenue upon delivery of game points to mobile phone game players. Deferred revenue is recognized as smartphone games revenue ratably over the estimated average playing period of the paying mobile phone game players of three months. As the mobile social games are under a free-to-play model and revenue is only generated from paying mobile phone game players when they purchase game points for in-game premium features, the Company focuses solely on the play period of paying mobile phone game players when estimating the period over which revenue is being recognized. The Group determines the estimated average playing period of paying mobile phone game players, which is the time period between the paying mobile phone game players' first purchase and last log in, for each significant game based on historical player usage patterns and game playing behavior. The Group's internal system tracks each of the paying mobile phone game players' purchase and log in history for each significant game to generate data to estimate the average playing period for the Group's population of paying mobile phone game players. Future usage patterns may differ from the historical usage patterns on which the Group's revenue recognition policy is based. The Group monitors the operational statistics and usage patterns of its online game and modifies the expected life span when materially different. The difference between the estimated proceeds and the actual amount confirmed by the mobile network operators and third-party payment platforms is recognized in the consolidated statements of operations when billing confirmations are received by the Group and all revenue recognition criteria are met.

        Game points can be purchased at a discount if mobile phone game players purchase the game points with prepaid cards issued by mobile network operators or during promotional activities organized by the Group. The Group accounts for such discounts in accordance with ASC subtopic 605-50 ("ASC 605-50"), Revenue Recognition: Customer Payments and Incentives. Such discounts are initially accounted for as a reduction of deferred revenue. As a result, deferred revenue includes the value of both discounted and undiscounted game points, which are subsequently recognized as revenue on a weighted average basis when the Group provides future services to enhance mobile phone game players' playing experience.

(b)    Single-player game

        Under the subscription-based model for single-player games, mobile phone game players can either subscribe to a monthly plan to download a fixed number of single-player games from mobile network operators for a fixed subscription fee per month or download each single-player game based on a fixed price per game.

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The Group contracts with mobile network operators for billing, collection and transmission services offered to mobile phone game players who have purchased single-player games. In addition, the Group purchases games from third-party game developers. The mobile network operators are entitled to profit sharing based on a prescribed percentage of the gross proceeds collected from their mobile phone game players. Since the Group does not have a direct contractual relationship with the mobile phone game players, the net proceeds after deducting the amounts shared by the mobile network operators represent the amount of revenue to be recognized by the Group. The Group has information generated from its internal system on the number of monthly plan subscriptions and single-player games downloaded each month to estimate the amount of collectable net proceeds and to recognize single-player games revenues. Differences between its estimates and the actual amounts confirmed by the mobile network operators have historically been insignificant. Generally, within 30 days after the end of each month, the Group receives billing confirmations from each of the mobile network operators confirming the amount of net proceeds to be received by the Group. The Group pays content fees to third-party game developers, which are recognized as cost of revenues, based on a prescribed percentage of the net proceeds confirmed by the mobile network operators.

        Based on the above, the Group recognizes single-player smartphone games revenues when the goods are delivered based on download of games by mobile phone game players or at the end of the subscription period. The difference between the estimated proceeds and the actual amounts confirmed by the mobile network operators is recognized in the consolidated statements of operations when billing confirmations are received by the Group.

        The Group determines whether to record single-player smartphone games revenues using the gross or net method of reporting in accordance with ASC subtopic 605-45 ("ASC 605-45"), Revenue Recognition: Principal Agent Considerations. Determining whether revenue should be reported gross or net is based on an assessment of various factors, the primary factors being whether the Group is acting as the principal in offering services to the customer or whether the Group is acting as an agent in the transaction. The Group has determined that it is acting as the principal in offering services as the Group (i) is the primary obligor in the arrangement; (ii) has latitude in establishing the selling price; (iii) has discretion in suppliers selection; and (iv) has involvement in the determination of product specifications. Therefore, the Group has the primary responsibility of fulfillment and acceptability of the single-player games and recognizes the net proceeds to be received from the mobile network operators as smartphone games revenue on a gross basis. The amounts attributable to third-party game developers in the form of content fees are recognized as cost of revenues.

(c)    Business taxes and surcharges

        The Group is subject to business taxes and surcharges levied on services provided in the PRC. Business taxes and surcharges for the years ended December 31, 2009 and 2010 were RMB805 and RMB2,333, respectively. In accordance with ASC 605-45, the Group recognized revenues net of all such business taxes and surcharges.

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cost of revenues

        Cost of revenues are expensed as incurred, which primarily consists of service fees paid to mobile application and software websites for the distribution of the Group's mobile social games and single player games by providing platforms for mobile phone game players to download such games, and content fees paid to third-party game developers for the development of the Group's single-player games designed for smartphones.

        In addition, cost of revenues includes staff salaries, network infrastructure fee, utilities, amortization of intangible assets and capitalized software development costs, operating expenses directly related to the development, operation and sale of mobile phone games, and the 5% business tax for technology services and market promotion fees charged by Yitongtianxia to its VIE.

Advertising expenses

        Advertising expenses are expensed when incurred and are included in selling and marketing expenses in the consolidated statements of operations. Advertising expenses were RMB970 and RMB3,626 for the years ended December 31, 2009 and 2010, respectively.

Research and Development

        Research and development expenses include payroll, employee benefits and other headcount-related expenses associated with product development. Research and development expenses, which are included in general and administrative expenses in the consolidated statements of operations, amounted to RMB2,384 and RMB2,500 for the years ended December 31, 2009 and 2010, respectively.

Leases

        In accordance with ASC topic 840 ("ASC 840"), Leases, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exists: (a) ownership is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least 75% of the property's estimated remaining economic life or (d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over their lease term. The Group had no capital leases for any of the periods presented. The Group leases certain office facilities under non-cancelable operating leases and recorded total rental expenses of RMB725 and RMB1,324 for the years ended December 31, 2009 and 2010, respectively.

Income taxes

        The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 ("ASC 740"), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

liabilities, net operating loss carryforwards, and credits using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

        The Group applies ASC 740 to account for uncertainty in income taxes. ASC 740 provides the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Group's estimated liability for unrecognized tax benefits and the related interest and penalties are periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. In future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.

Comprehensive income

        Comprehensive income is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group's comprehensive income includes net income and cumulative foreign currency translation adjustments and is presented in the consolidated statements of changes in shareholders' equity (deficit).

Government grants

        Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized in the consolidated statements of income and comprehensive income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to the consolidated statements of income and comprehensive income in proportion to the depreciation of the related assets. During the year ended December 31, 2010, the Group received a government grant of RMB2,000 for the development of mobile network game platforms from a PRC municipal government authority. As of December 31, 2010, the RMB2,000 government grant was classified as other non-current liabilities, as the Group did not expect all considerations attached to the government grant will be complied with during the succeeding twelve-month period from the balance sheet date.

F-153

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segment reporting

        In accordance with ASC topic 280 ("ASC 280"), Segment Reporting, the Company operates and manages its business as a single segment. As the Company's long-term assets and revenues are substantially all located in and derived from the PRC, no geographic segments are presented.

Recent accounting pronouncements

        In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2010-06 ("ASU 2010-06"), Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (i) the different classes of assets and liabilities measured at fair value, (ii) the valuation and input techniques used, (iii) the activity in Level 3 fair value measurements, and (iv) the transfers among Levels 1, 2 and 3. The requirements for new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about Level 3 activity of purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Group does not expect the adoption of ASU 2010-06 on the disclosures about Level 3 activity of purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements will have a significant effect on its financial statements.

        In May 2011, the FASB issued ASU No. 2011-04 ("ASU 2011-04"), Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. ASU 2011-04 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Group does not expect the adoption of ASU 2011-04 will have a significant effect on its consolidated financial statements.

3. CONCENTRATION OF RISKS

Concentration of credit risk

        Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents and accounts receivable. As of December 31, 2009, substantially all of the Group's cash and cash equivalents were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality.

        Accounts receivable are typically unsecured and derived from revenue earned from customers in the PRC and Hong Kong, which are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances. The Group maintains reserves for estimated credit losses, which have generally been within its expectations.

F-154

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

3. CONCENTRATION OF RISKS (Continued)

Concentration of customers

        The Group currently generates a substantial portion of its net revenues from a limited number of customers. Approximately 98% of total net revenues for the year ended December 31, 2009 were derived from one individual customer, namely China Mobile Communication Group (Jiangsu Branch). Approximately 87% of total net revenues for the year ended December 31, 2010 were derived from one individual customer, namely China Mobile Communication Group (Jiangsu Branch). Due to the Group's dependence on a limited number of customers, any negative events or deterioration in financial strength with the customers or deterioration of relationship with the customers, may cause material loss to the Group and have a material adverse effect on the Group's financial condition and results of operations.

Current vulnerability due to certain other concentrations

        The Group's operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC's political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective.

Currency convertibility risk

        The Group transacts the majority of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People's Bank of China (the "PBOC"). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into United States dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers' invoices, shipping documents and signed contracts. Additionally, the value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

Foreign currency exchange rate risk

        From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The appreciation of the RMB against US$ was approximately 0.1% and 3% for the years ended December 31, 2009 and 2010, respectively. On June 19, 2010, the People's Bank of China announced the end of the RMB's de facto peg to US$, a policy which was instituted in late 2008 in the face of the global financial crisis, to further reform the RMB exchange

F-155

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

3. CONCENTRATION OF RISKS (Continued)

rate regime and to enhance the RMB exchange rate flexibility. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market. While the international reaction to the appreciation of the RMB has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and potentially more significant appreciation of the RMB against the US$.

Other business risk

        The PRC laws and regulations require that an entity should obtain an Internet Publishing License and an Online Culture Operation License from the relevant PRC government authorities in order to operate in online mobile game business. One of the Company's subsidiaries, Huiyou, has historically operated in the development of online mobile games without obtaining the required licenses from the relevant PRC government authorities. The developed online mobile games were licensed to Yingzheng, the VIE, which operated the online mobile games in its own name and paid commissions to Huiyou in return. The relevant PRC governmental authorities may deem the activities of Huiyou to be the operation of online games without obtaining the required licenses, which may subject the Group to penalties, and require the Group to make costly changes to its business model and materially disrupt its business. However, management believes that Huiyou's current business model does not violate applicable PRC laws and regulations.

4. ACCOUNTS RECEIVABLE

        Accounts receivable and the related allowance for doubtful accounts are summarized as follows:

	As of December 31, 2009
	RMB
Accounts receivable		1,678
Less: Allowance for doubtful accounts		—
Accounts receivable, net		1,678

        Movement in allowance for doubtful accounts:

	For the year ended December 31, 2009
	RMB
Balance at beginning of year		—
Additional provisions		41
Write-offs		(41	)
Balance at end of year		—

F-156

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

4. ACCOUNTS RECEIVABLE (Continued)

        The Group does not offer extended payment terms and all of the accounts receivable are non-interest bearing. As of December 31, 2009, all of the accounts receivable were due from third party customers and were within their credit terms.

5. PREPAYMENTS AND OTHER CURRENT ASSETS

        Prepayments and other current assets consist of the following:

	As of December 31, 2009
	RMB
Prepaid expenses		1,265
Advances to employees		374
Rental deposits		6
Others		12
Total		1,657

6. PROPERTY AND EQUIPMENT, NET

        Property and equipment and its related accumulated depreciation are summarized as follows:

	As of December 31, 2009
	RMB
Property and equipment, cost
Office equipment		4,426
Less: Accumulated depreciation		(2,722	)
Property and equipment, net		1,704

        Depreciation expenses, which were recorded in general and administrative expenses, were RMB826 and RMB1,075 for the years ended December 31, 2009 and 2010, respectively.

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

7. INTANGIBLE ASSETS, NET

        Intangible assets and the related accumulated amortization are summarized as follows:

		As of December 31, 2009
		RMB
Cost:
	Computer software		22
	Purchased mobile games and platforms		2,265
	Mobile game product development costs		397
			2,684
Accumulated amortization:
	Computer software		(10	)
	Purchased mobile games and platforms		(1,601	)
	Mobile game product development costs		(127	)
			(1,738	)
Total			946

        Amortization expenses for the years ended December 31, 2009 and 2010 were RMB1,321 and RMB1,784, respectively. Amortization expenses have been reported in the following accounts:

	For the year ended December 31, 2009		For the year ended December 31, 2010
	RMB		RMB
Cost of revenues		1,313		1,780
General and administrative expenses		8		4
Total		1,321		1,784

        For the year ended December 31, 2010, the Group acquired mobile games and platforms amounted to RMB11,436 and recognized amortization expenses of RMB1,678. The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	RMB
2011		5,910
2012		4,718
2013		168
2014		117
2015		7
Total		10,920

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

        Accrued expenses and other current liabilities consist of the following:

	As of December 31, 2009
	RMB
Accrued payroll and welfare payable		2,132
Business tax and other taxes payables		314
Others		377
Total		2,823

9. OTHER NON-CURRENT LIABILITIES

	As of December 31, 2009
	RMB
Government grant		2,000
Unrecognized tax benefits and related interest and penalties		638
Total		2,638

10. CONVERTIBLE REDEEMABLE PREFERRED SHARES

        On October 28, 2009, the Company issued 1,849,315 Series A convertible redeemable preferred shares ("Series A Preferred Shares"), representing 27% of the equity interest of the Company on a fully-diluted basis, for an aggregate purchase price of RMB20,486 (US$3,000), or US$1.6222 per share.

        On December 31, 2010, all Series A Preferred Shares were converted into ordinary shares of the Company.

        The significant terms of the Series A Preferred Shares are summarized below.

Conversion rights

        The holders of the Series A Preferred Shares shall have conversion rights as follow:

•

Optional conversion:    Each Series A Preferred Share shall be convertible at the option of the holder, at any time after the date of issuance of such share, into ordinary shares as determined by dividing the issuance price by the applicable conversion price. The initial Series A Preferred Share conversion price is the original issuance price, subject to conversion price adjustments specified in the Series A Preferred Shares agreement.

•

Automatic conversion:    All of the Series A Preferred Share shall automatically be converted into ordinary shares at the then effective Series A Preferred Shares conversion price upon the closing of a qualified initial public offering (the "Qualified IPO"), as defined in the Series A Preferred Shares agreement.

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3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

10. CONVERTIBLE REDEEMABLE PREFERRED SHARES (Continued)

Dividends

        Pursuant to the Series A Preferred Shares agreement, no dividends shall be paid on any other class of shares of the Company, unless and until a dividend in like amount is paid in full on each Series A Preferred Share on an if-converted basis. In addition, the holders of the Series A Preferred Shares shall be entitled to receive any non-cash dividends declared by the Company's board of directors on an if-converted basis.

        If the Qualified IPO has not occurred before October 28, 2013, the holders of Series A Preferred Shares shall have the right to receive a cumulative dividend in preference to any dividend on the ordinary shares or any other class or series of shares at the rate of 6% of the subscription price per annum calculated from the closing date on October 28, 2009 (the "Contingent Dividend Right").

Voting rights

        The holder of each Series A Preferred Share shall be entitled to the number of votes equal to the number of shares of ordinary shares into which such Series A Preferred Share could be converted based on the then applicable conversion rate and having voting rights and powers equal to the voting rights and powers of the ordinary shares.

Liquidation preference

        In the event of any liquidation, dissolution or winding up of the Company or any deemed liquidation event as defined in the Series A Preferred Shares agreement, the holders of the Series A Preferred Shares are entitled to receive, prior to any distribution of assets to other equity holders, up to a total amount of 150% of the original issuance price (the "Liquidation Preference Amount"). After the Liquidation Preference Amount has been paid, the remaining assets are distributed among all classes of stockholders on an if-converted basis.

Redemption

        Pursuant to the Series A Preferred Shares agreement, Series A Preferred Shares are subject to redemption as follows:

•

At any time after October 28, 2014, upon written election by the holders of Series A Preferred Shares, the Company is obligated to redeem such holders' Series A Preferred Shares in cash by paying the redemption price equal to 300% of the issuance price of the Series A Preferred Shares plus all accrued or declared but unpaid dividends on such shares prior to the redemption date.

•

If any indemnified event as defined in the Series A Preferred Shares agreement occurs, upon written election by the holders of Series A Preferred Shares, the Company is obligated to redeem such holders' Series A Preferred Shares in cash by paying the redemption price calculated in accordance with a predetermined formula plus all accrued or declared but unpaid dividends on such shares prior to the redemption date.

F-160

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

10. CONVERTIBLE REDEEMABLE PREFERRED SHARES (Continued)

Business revenue and net income covenants

        If the consolidated results of the Company fail to reach any of the business targets stipulated in the Series A Preferred Shares agreement, the holders of the Series A Preferred Share have the rights to receive a compensation (the "Business Target Non-Achievement Compensation") by requesting (i) the Company to pay the Business Target Non-Achievement Compensation, as calculated in accordance with a predetermined formula through dividend distribution, (ii) the founders of the Company to pay the Business Target Non-Achievement Compensation in cash, or (iii) the Company to issue new Series A Preferred Shares with a fair value equal to the amount of the Business Target Non-Achievement Compensation (the "Covenant Right").

Accounting for Series A Preferred Shares

        The Series A Preferred Shares have been classified as mezzanine equity as they can be redeemed at the option of the holders on or after an agreed upon date.

        The initial carrying value of the Series A Preferred Shares is the issuance price of the preferred shares at the date of issuance. The holders of the Series A Preferred Shares have the ability to convert the instrument into the Company's ordinary shares. The Company evaluated the embedded conversion option in the Series A Preferred Shares to determine if there were any embedded derivatives requiring bifurcation and to determine if there were any beneficial conversion features. The conversion option of the preferred shares does not qualify for bifurcation accounting because the conversion option is clearly and closely related to the host instrument and the underlying ordinary shares are not publicly traded nor readily convertible into cash.

        Beneficial conversion features exist when the conversion price of the convertible redeemable preferred shares is lower than the fair value of the ordinary shares at the commitment date. When a beneficial conversion feature exists as of the commitment date, its intrinsic value is bifurcated from the carrying value of the preferred shares as a contribution to additional paid-in capital. The resulting discount to the convertible redeemable preferred shares is then accreted to the redemption value using the effective interest method as a deemed dividend through retained earnings. The Company determined the fair value of ordinary shares with the assistance of an independent third party valuation firm.

        On October 28, 2009, the most favorable conversion price used to measure the beneficial conversion feature for the Series A Preferred Shares was US$1.62. A beneficial conversion feature of RMB14,071 (US$2,065) was recognized through a credit to additional paid-in capital because the fair value per ordinary share at the commitment date was US$2.74, which was more than the most favorable conversion price.

        After the beneficial conversion features was bifurcated from the initial carrying value of the Series A Preferred shares upon issuance, the remaining proceeds from issuance from the carrying value of the preferred shares. It is from these proceeds that any embedded derivative is bifurcated. The Covenant Right and the Contingent Dividend Right met the definition of a derivative in accordance with ASC topic 815 ("ASC 815"), Derivatives and Hedging. Accordingly, the Covenant Right and the

F-161

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

10. CONVERTIBLE REDEEMABLE PREFERRED SHARES (Continued)

Contingent Dividend Right were bifurcated from the carrying value of the Series A Preferred Shares on the issuance date as a compound derivative liability with a fair value of RMB6,384 (US$935).

        The carrying value of the Series A Preferred Shares was nil on October 28, 2009 after the recognition of the beneficial conversion feature and the bifurcation of the compound derivative liability. The discount of RMB14,071 (US$2,065) resulting from the accounting for the beneficial conversion option was fully amortized on the date of issuance of October 28, 2009, which is the earliest conversion date, as the Series A Preferred Shares do not have a stated redemption date. The changes in fair value of the derivative liabilities are recognized through the statements of operations. An expense of RMB17,364 and an income of RMB1,711 resulted from the change in fair value of the derivative liabilities was recognized in the statements of operations for the years ended December 31, 2009 and 2010, respectively. The Company determined the fair value of the derivative liabilities with the assistance of an independent third-party valuation firm.

        The Company concluded that the Series A Preferred Shares were not redeemable at December 31, 2009, but it was probable that the Series A Preferred Shares will become redeemable. The Group chose to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the Series A Preferred Shares to equal the redemption value at the end of each reporting period. An accretion charge of RMB61,457 (US$9,000) was recorded as a reduction of income available to ordinary shareholders for the year ended December 31, 2009.

        As of December 31, 2009, no dividends were declared by the Company on the Series A Preferred Shares.

        The carrying value of the Series A Preferred Shares as of December 31, 2009 is as follows:

	RMB
Balance as of January 1, 2009		—
Add: Issuance of preferred shares		20,486
Less: Beneficial conversion feature		(14,071	)
Less: Compound derivative liability		(6,384	)
Add: Changes in redemption value		61,457
Foreign currency translation adjustment		(31	)
Balance as of December 31, 2009		61,457

        Upon conversion of the Series A Preferred Shares into ordinary shares, the carrying amounts of the Series A Preferred Shares and the compound derivative liability were reclassified into equity.

F-162

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

11. INCOME TAXES

British Virgin Islands

        Under the current laws of the British Virgin Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

        3GUU HK is subject to Hong Kong corporate income tax at a rate of 16.5% on the assessable profits arising in Hong Kong. In addition, upon payments of dividends by 3GUU HK to its shareholders, no Hong Kong withholding tax will be imposed.

China

        Pursuant to the PRC Corporate Income Tax Law (the "CIT Law") and relevant implementation regulations that became effective on January 1, 2008, the Company's subsidiaries and VIE located in the PRC are generally subject to enterprise income taxes ("EIT") at a unified statutory tax rate of 25%, unless preferential tax status is granted by the tax authorities to allow the entities to be subject to a reduced income tax rate.

        An entity recognized as a qualified new software development enterprise is entitled to enjoy tax exemption for two years and 50% EIT rate reduction for the subsequent three years. In accordance with Guofa 2007 circular No. 39, an entity with a preferential tax rate prior to January 1, 2008 will continue to enjoy its remaining tax holiday granted prior to the effectiveness of the CIT Law. In May 2007, Yingzheng obtained the new software development enterprise status. Thus, Yingzheng is entitled to enjoy tax exemption from 2006 to 2007 and a 50% reduced EIT rate of 12.5% from 2008 to 2010.

        The CIT Law treats enterprises established outside of the PRC with "effective management and control" located in the PRC as PRC resident enterprises for tax purposes. The term "effective management and control" is generally defined as exercising management and control over the business, personnel, accounting, properties, etc. of an enterprise. The Company and its subsidiary located in jurisdictions outside of the PRC, if considered a PRC resident enterprise for tax purposes, would be subject to the PRC enterprise income tax at the rate of 25% on their worldwide income commencing on January 1, 2008. As of December 31, 2009, the Company has not accrued for PRC tax on such basis as the Group's non-PRC entities had zero assessable profits in the PRC for the period after January 1, 2008. The Group will continue to monitor the tax status with regards to the PRC tax resident enterprise regulation of its non-PRC entities.

        Under the CIT Law, dividends paid by PRC enterprises out of profits earned after December 31, 2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries.

        The tax years 2005 through 2010 for the PRC subsidiary and VIE remain open to examination by the tax authorities as of December 31, 2010.

F-163

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

11. INCOME TAXES (Continued)

        (Loss) Income before income taxes consists of:

	For the year ended December 31, 2009			For the year ended December 31, 2010
	RMB			RMB
BVI		(17,365	)		1,711
Hong Kong		(48	)		—
PRC		899			20,853
Total		(16,514	)		22,564

        The current and deferred components of the income tax expense appearing in the consolidated statements of operations are as follows:

	For the year ended December 31, 2009			For the year ended December 31, 2010
	RMB			RMB
Current tax expense		532			3,307
Deferred tax (benefit) expense		(472	)		4,184
Income tax expense		60			7,491

        The reconciliation of income taxes computed at the PRC statutory tax rate of 25% to the effective income tax provision is as follows:

	For the year ended December 31, 2009			For the year ended December 31, 2010
	RMB			RMB
(Loss) income before income taxes		(16,514	)		22,564
Income tax (benefit) expenses computed at the PRC statutory tax rate of 25%		(4,129	)		5,641
Foreign tax rate differential		4,346			(428	)
Nondeductible expenses		223			65
Nontaxable income		—			(4,616	)
Tax holiday		(226	)		(176	)
Investment basis difference in VIE		—			4,399
Current/deferred rate differential		(330	)		(53	)
Unrecognized tax benefits		—			1,594
Interest and penalties on unrecognized tax benefits		176			1,065
Income tax provision		60			7,491

F-164

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

11. INCOME TAXES (Continued)

        Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred taxes are as follows:

		As of December 31, 2009
		RMB
Deferred tax assets, current portion:
	Accrual expenses		416
	Net operating loss carry forwards		11
	Less: Valuation allowance		—
Deferred tax assets, current portion, net			427
Deferred tax assets, non-current portion:
	Net operating losses carry forwards		500
	Less: Valuation allowance		—
Deferred tax assets, non-current portion, net			500

        As of December 31, 2009, the Group had net operating losses of RMB61 which can be carried forward to offset future net profit for income tax purposes. The net operating losses carry-forwards as of December 31, 2009 will expire in year 2014 if not utilized.

        Aggregate undistributed earnings of the Group's subsidiary located in the PRC that are available for distribution to the non-PRC tax resident parent company at December 31, 2009 are considered to be indefinitely reinvested under ASC subtopic 740-30 ("ASC 740-30"), Income Taxes: Other Considerations or Special Areas. Accordingly, the amount of unrecognized deferred tax liabilities for temporary differences related to investments in PRC subsidiary is not determined because such a determination is not practical.

        For the year ended December 31, 2009, the Group has unrecognized tax benefits of RMB638. The unrecognized tax benefits recognized by the Company were mainly caused by the accounting error for under reporting of profits and error made in tax adjustments in tax filing. For the year ended December 31, 2009, unrecognized tax benefits of RMB638 would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will change in the next twelve months, pending factors including changes in the amount of the PRC statutory taxable income due to the application and interpretation of the PRC tax law. However, an estimate of the range of the possible change cannot be made at this time.

F-165

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

11. INCOME TAXES (Continued)

        A roll-forward of accrued unrecognized tax benefits, excluding interest and penalties, is as follows:

	For the year ended December 31, 2009
	RMB
Balance at the beginning of year		135
Additions related to tax positions taken in the current year		266
Balance at the end of year		401

        During the years ended December 31, 2009 and 2010, the Group recorded income tax expenses for interest and penalties related to its unrecognized tax benefits of RMB176 and RMB1,065, respectively. Accrued interest and penalties related to unrecognized tax benefits were RMB237 as of December 31, 2009.

12. EMPLOYEE DEFINED CONTRIBUTION PLAN

        Full time employees of the Company's subsidiary and VIE in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiaries of the Group make contributions to the government for these benefits based on certain percentages of the employees' salaries up to maximum of three times the average annual salary for the city in which the subsidiaries operate for the prior year. The Company's subsidiary and VIE have no legal obligation for the benefits beyond the contributions made. The total amount of such employee benefits, which were expensed as incurred, were RMB907 and RMB1,039 for the years ended December 31, 2009 and 2010, respectively.

13. COMMITMENTS AND CONTINGENCIES

(a)    Operating lease commitments

        As of December 31, 2010, the Group had minimum lease payments under non-cancelable operating leases with initial terms in excess of one year as follows:

	RMB
2011		724
2012		555
2013		555
2014		555
2015		370
Thereafter		—
		2,759

        The Company's lease arrangements do not contain renewal options, rent escalation clauses, restrictions or contingent rents and are all conducted with third parties, and binding, and will not result

F-166

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

13. COMMITMENTS AND CONTINGENCIES (Continued)

in any violation of PRC laws or regulations currently in effect; and (iii) the Group's business operations are in compliance with existing PRC laws and regulations in all material respects.

        However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with Yingzheng are found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company's current ownership structure or the contractual arrangements with Yingzheng is remote based on current facts and circumstances.

(b)    Variable interest entity structure

        In the opinion of management, (i) the ownership structure of the Company and its VIE is in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIE and its shareholder are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Group's business operations are in compliance with existing PRC laws and regulations in all material respects.

        However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Group and its contractual arrangements with its VIE are found to be in violation of any existing or future PRC laws and regulations, the Group may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Group's current ownership structure or the contractual arrangements with its VIE is remote based on current facts and circumstances.

        In addition, the registered shareholders of the VIE are the Company's officers or employees. If conflicts of interest arise between these shareholders' duties to the Company and the VIE, these shareholders may not act in the Company's best interests and conflicts of interest may not be resolved in the Company's favor. In addition, these shareholders may breach or cause the VIE to breach or refuse to renew its existing contractual arrangements that allow the Company to exercise effective control over it and to receive economic benefits from it. If certain shareholders of Yingzheng do not comply with their fiduciary duties to the Company as its designated directors, or if the Company cannot resolve any conflicts of interest or disputes between the Company and such shareholders or any future beneficial owners of the VIE, the Company would have to rely on legal proceedings to remedy the situation, which could result in disruption of the Company's business and substantial uncertainty as to the outcome of any such legal proceedings. Further, these remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. For example, the Company may have to resort to administrative and court proceedings to enforce the legal protection that the Company enjoys either by law or contract. Since PRC administrative and court authorities have significant discretion in

F-167

3GUU MOBILE ENTERTAINMENT INDUSTRIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"),
except for number of shares)

13. COMMITMENTS AND CONTINGENCIES (Continued)

interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection the Company enjoys than in more developed legal systems. These uncertainties may impede the Company's ability to enforce the contracts it has entered into with the VIE and its shareholders.

(c)    Income taxes

        As of December 31, 2009 the Company has recognized RMB401 accrual for unrecognized tax benefits (Note 11). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. As of December 31, 2009, the Group classified the accrual for unrecognized tax benefits as a non-current liability.

14. SUBSEQUENT EVENTS

        In accordance with ASC topic 855 ("ASC 855"), Subsequent Events, the Group evaluated subsequent events through August 25, 2011, which was the date that the consolidated financial statements were issued and filed with the Securities and Exchange Commission on Form F-1.

(a)    3GUU BVI options

        On January 3, 2011, 3GUU BVI granted options to purchase 0.610% of the equity interest in 3GUU BVI to certain non-employee director of the 3GUU Group at an exercise price of RMB1,708. These options are vested immediately and have a contractual life of two years.

F-168

China Mobile Games and Entertainment Group Limited

                        , 2012

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6.    Indemnification of Directors and Officers.

        Cayman Islands law does not limit the extent to which a company's articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as provisions that indemnify against civil fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association provide for indemnification of officers and directors for losses, damages, costs and expenses incurred or sustained by them in connection with the execution or discharge of their duties, powers, authorities or discretions as directors or officers of our company, to the fullest extent permissible under the Cayman Companies Law.

        Pursuant to the indemnification agreements the form of which was filed as Exhibit 10.2 to this registration statement, we have agreed to indemnify our directors and officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being directors or officers.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 7.    Recent Sales of Unregistered Securities.

        During the past three years, we have issued and sold the securities listed below (including options to acquire our ordinary shares) without registering the securities under the Securities Act. None of these transactions involved any underwriting discounts or commissions or any public offering. As a foreign issuer without substantial U.S. market interest in our securities, we issued our ordinary shares through private placements outside the United States to non-U.S. persons and without any directed selling efforts in the United States and otherwise in compliance with all applicable conditions of Regulation S. Accordingly, we believe that each of the issuances below was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act. In addition we believe that the issuance of restricted shares below was also exempt from registration under the Securities Act in reliance on Rule 701, which allows an issuer that is not at the time of grant subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and is not an investment

II-1

company to make grants of securities pursuant to a written compensatory benefit plan or contract relating to compensation.

Purchaser	Date of Sale or Issuance	Number of Securities	Consideration	Underwriting Discount and Commission
VODone Limited	February 26, 2011	1,000 ordinary share	Nominal consideration	N/A
	August 23, 2011	2,500,000 ordinary shares	US$2,500	N/A
Dragon Joyce Limited	August 23, 2011	106,500,000 ordinary shares	N/A(1)	N/A
King Reach Limited	August 23, 2011	38,000,000 ordinary shares	N/A(2)	N/A
Greatfaith Group Limited	August 23, 2011	7,600,000 ordinary shares	N/A(3)	N/A
OWX Holding Co. Ltd.	August 23, 2011	43,500,000 ordinary shares	N/A(4)	N/A
Realphone Technology Co., Ltd	August 23, 2011	18,600,000 ordinary shares	N/A(5)	N/A
Action King Limited	August 23, 2011	59,999,000 ordinary shares	N/A(6)	N/A
Trilogic Investments Limited	August 23, 2011	25,800,000 ordinary shares	N/A(7)	N/A
Employees	August 24, 2011	1,220,000 restricted shares	US$1,200(8)	N/A
	March 16, 2012	639,000 restricted shares	US$639(9)	N/A
Core Tech Resources Inc.	May 11, 2012	15,450,144 ordinary shares	US$7,000,000	N/A
PVG Venture Capital Partners (Wuxi), Limited Partnership	May 11, 2012	11,035,817 ordinary shares	US$5,000,000	N/A

(1)

Representing purchase price for our 100% equity interests in each of Beauty Wave Limited and China Wave Group Limited pursuant to the swap agreement dated August 23, 2011.

(2)

Representing purchase price for VODone's acquisition of 25% equity interests in Dragon Joyce Limited pursuant to the swap agreement dated August 23, 2011.

(3)

Representing purchase price for VODone's acquisition of 5% equity interests in Dragon Joyce Limited pursuant to the swap agreement dated August 23, 2011.

(4)

Representing purchase price for our 100% equity interests in OWX Hong Kong Limited pursuant to the swap agreement dated August 23, 2011.

(5)

Representing purchase price for VODone's acquisition of 30% equity interests in OWX Holding Co. Ltd. pursuant to the swap agreement dated August 23, 2011.

(6)

Representing purchase price for our 70.0% equity interests in 3GUU Mobile Industrial Co., Ltd. pursuant to the swap agreement dated August 23, 2011.

(7)

Representing purchase price for our 30% equity interests in 3GUU Mobile Industrial Co., Ltd. pursuant to the swap agreement dated August 23, 2011.

(8)

Representing purchase price for the restricted shares we issued to our directors and officers on August 24, 2011.

(9)

Representing purchase price for the restricted shares we issued to our directors and officers on March 16, 2012.

Item 8.   Exhibits and Financial Statement Schedules.

(a)

Exhibits

        See Exhibit Index beginning on pages II-5 of this registration statement.

(b)

Financial Statement Schedules

        Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or the notes thereto.

Item 9.    Undertakings.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in

II-2

Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

        (1)   For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

        (2)   For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Guangzhou, China, on September 7, 2012.

China Mobile Games and Entertainment Group Limited
By:	/s/ Ken Jian Xiao
	Name:	Ken Jian Xiao
	Title:	Chief Executive Officer

        Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities indicated on September 7, 2012.

Signature	Title
* Name: Lijun Zhang	Chairman of the board
/s/ Hendrick Sin Name: Hendrick Sin	Vice-chairman of the board
* Name: Yongchao Wang	Vice-chairman of the board
* Name: Ken Jain Xiao	Director and Chief Executive Officer (Principal executive officer)
/s/ Ken Fei Fu Chang Name: Ken Fei Fu Chang	Director and Chief Financial Officer (Principal financial and accounting officer)
Name: Chen-Wen Tarn	Director
* Name: Kate Ledyard, on behalf of Law Debenture Corporate Services Inc Title: Manager	Authorized U.S. Representative

*By: /s/ Ken Fei Fu Chang
Name: Ken Fei Fu Chang
Attorney-in-fact

II-4

China Mobile Games and Entertainment Group Limited

EXHIBIT INDEX

Exhibit Number		Description of Document
	3.1†	Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect
	3.2†	Form of Amended and Restated Memorandum and Articles of Association of the Registrant (effective upon the closing of this distribution)
	4.1†	Registrant's Specimen American Depositary Receipt (included in Exhibit 4.3)
	4.2†	Registrant's Specimen Certificate for ordinary shares
	4.3†	Form of Deposit Agreement, among the Registrant, the depositary and holder of the American Depositary Receipts
	5.1†	Opinion of Maples and Calder regarding the validity of the ordinary shares being registered and certain Cayman Islands tax matters
	8.1†	Opinion of Maples and Calder regarding certain Cayman Islands tax matters (included in Exhibit 5.1)
	8.2†	Opinion of Kirkland & Ellis International LLP regarding certain U.S. federal income tax matters
	8.3†	Opinion of Guantao Law Firm regarding certain PRC tax matters
	8.4	Opinion of Appleby (Bermuda) Limited regarding certain Bermuda tax matters
	8.5†	Opinion of Alex Ho & Co regarding certain Hong Kong tax matters
	10.1†	Form of Employment Agreement
	10.2†	Form of Indemnification Agreement
	10.3†	English translation of Share Purchase Agreement among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited and VODone Limited dated October 9, 2009
	10.4†	English translation of Supplementary Agreement to Share Purchase Agreement among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited and VODone Limited dated October 21, 2009
	10.5†	English translation of Shareholders Agreement among Dragon Joyce Limited, King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited and VODone Limited dated October 9, 2009
	10.6†	English translation of Equity Pledge Agreement among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited, VODone Limited and Dragon Joyce Limited dated October 9, 2009
	10.7†	English translation of Supplementary Agreement to Equity Pledge Agreement among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited, VODone Limited and Dragon Joyce Limited dated October 21, 2009
	10.8†	English translation of Asset Purchase Agreement among OWX Hong Kong Limited, Bright Way Technology (Hong Kong) Limited, Yixun Kuang and Zhenning Hu dated September 30, 2010

II-5

Exhibit Number		Description of Document
	10.9†	English translation of Equity Pledge Agreement among Yixun Kuang, Zhenning Hu and VODone Limited dated September 30, 2010
	10.10†	English translation of Supplementary Agreement to Equity Pledge Agreement among Yixun Kuang, Zhenning Hu and VODone Limited dated October 11, 2010
	10.11†	English translation of Shareholders Agreement among Yixun Kuang, Zhenning Hu, VODone Limited and OWX Holding Co. Ltd. dated October 11, 2010
	10.12†	English translation of Assignment Agreement among OWX Hong Kong Limited, OWX Holding Co., Ltd., VODone Limited, Bright Way Technology (Hong Kong) Limited, Yixun Kuang and Zhenning Hu dated October 11, 2010
	10.13†	English translation of Asset Purchase Agreement among OWX (Beijing) Technology Co., Ltd. and Shenzhen Tastech Electronics Co., Ltd. dated September 30, 2010
	10.14†	English translation of Share Purchase Agreement among Trilogic Investments Limited, CMHJ Technology Fund II, L.P., Natixis Ventech China AB, Action King Limited, 3GUU Mobile Entertainment Industrial Co.,  Ltd., Yongchao Wang, Feng Zheng, De Liang and VODone Limited dated December 29, 2010
	10.15†	English translation of Shareholders Agreement among Yongchao Wang, Trilogic Investments Limited, Action King Limited and 3GUU Mobile Entertainment Industrial Co., Ltd. dated December 31, 2010
	10.16†	Share Pledge Agreement among Trilogic Investments Limited, CMHJ Technology Fund II, L.P., Natixis Ventech China AB and Yongchao Wang dated December 31, 2010
	10.17†	English translation of Technology Services Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated August 6, 2010
	10.18†	English translation of Supplementary Agreement to Technology Services Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated December 30, 2011
	10.19†	English translation of Exclusive Technology Services and Market Promotion Services Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co.,  Ltd. dated October 28, 2009
	10.20†	English translation of Supplementary Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated January 6, 2011
	10.21	English translation of Agreement for Voting Proxies among Yongchao Wang, Haiyan Shi, De Liang, Feng Zheng, Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated October 28, 2009
	10.22†	English translation of Supplementary Agreement among Yongchao Wang, De Liang, Feng Zheng, Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated December 30, 2010
	10.23†	English translation of Option Agreement among Guangzhou Yitongtianxia Software Development Co., Ltd., Yongchao Wang, Haiyan Shi, De Liang and Feng Zheng dated October 28, 2009

II-6

Exhibit Number		Description of Document
	10.24†	English translation of Loan Agreement among Guangzhou Yitongtianxia Software Development Co., Ltd., Yongchao Wang, Haiyan Shi, De Liang and Feng Zheng dated October 28, 2009
	10.25†	English translation of Supplementary Agreement to Loan Agreement among Guangzhou Yitongtianxia Software Development Co., Ltd., Yongchao Wang, De Liang and Feng Zheng dated December 30, 2011
	10.26†	English translation of Letter of Undertaking by Yongchao Wang to Action King Limited dated December 30, 2010
	10.27†	English translation of Supplementary Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd., Guangzhou Yingzheng Information Technology Co., Ltd., Yongchao Wang, De Liang and Feng Zheng dated August 23, 2011
	10.28†	English translation of Equity Pledge Agreement between Yongchao Wang, Haiyan Shi, De Liang, Feng Zheng, Guangzhou Yitongtianxia Software Development Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated October 28, 2009
	10.29†	English translation of Supplementary Agreement between 3GUU Mobile Entertainment Industrial Co., Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated December 16, 2011
	10.30†	English translation of Agreement on Issues regarding Shareholder Voting Proxy among Guangzhou Yingzheng Information Technology Co., Ltd., Guangzhou Titongtianxia Software Development Co., Ltd., 3GUU Mobile Entertainment Industrial Co., Ltd., Yongchao Wang, Feng Zheng and De Liang dated December 16, 2011
	10.31†	English translation of Asset Purchase Agreement between Huiyou Digital (Shenzhen) Co., Ltd. and Shenzhen Kuailefeng Software Development Co., Ltd. dated October 9, 2009
	10.32†	English translation of Exclusive Business Cooperation Agreement between Huiyou Digital (Shenzhen) Co., Ltd. and Shenzhen Kuailefeng Software Development Co., Ltd. dated October 9, 2009
	10.33†	English translation of Cooperation Agreement, as amended, for Mobile Phone Game Product Preinstalling Technology (Profit Sharing Mode) between Shenzhen Ouyinhua Information Consulting Co., Ltd. and Huiyou Digital (Shenzhen) Co., Ltd. dated August 23, 2011
	10.34†	English translation of Cooperation Agreement between Huiyou Digital (Shenzhen) Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated August 22, 2011
	10.35†	Share Swap Agreement among King Reach Limited, Greatfaith Group Limited, VODone Limited and China Mobile Games and Entertainment Group Limited dated August 23, 2011
	10.36†	Share Mortgage Agreement and Amendment Deed among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited, and VODone Limited dated August 23, 2011 relating to the Share Purchase Agreement made by and entered between King Reach Limited, Great Faith Group Limited, All Strong Investments Limited, and VODone Limited dated October 9, 2009
	10.37†	Share Swap Agreement among Dragon Joyce Limited and China Mobile Games and Entertainment Group Limited dated August 23, 2011

II-7

Exhibit Number		Description of Document
	10.38†	Deed of Release among King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited, VODone Limited and Dragon Joyce Limited dated August 23, 2011 in connection with the Share Pledge dated October 9, 2009 and as amended by the Supplemental Share Pledge dated October 21, 2009 made by and entered between King Reach Limited, Greatfaith Group Limited, Allstrong Investments Limited, VODone Limited and Dragon Joyce Limited
	10.39†	Share Swap Agreement among OWX Holding Co. Ltd. and China Mobile Games and Entertainment Group Limited dated August 23, 2011
	10.40†	Share Swap Agreement among Realphone Technology Co., Ltd., VODone Limited and China Mobile Games and Entertainment Group Limited dated August 23, 2011
	10.41†	Share Mortgage Agreement among Realphone Technology Co., Ltd and VODone Limited dated August 23, 2011
	10.42†	Amendment Deed among OWX Holding Co. Ltd, Bright Way Technology (Hong Kong) Limited, Realphone Technology Co., Ltd and OWX Hong Kong Limited dated August 23, 2011 relating to the Asset Purchase Agreement dated September 30, 2010 made by and entered among OWX Hong Kong Limited, Bright Way Technology (Hong Kong) Limited, Yixun Kuang and Zhenning Hu as amended by the deed of novation dated October 11, 2010 and the second deed of novation dated December 20, 2010
	10.43†	Deed of Release between Realphone Technology Co., Ltd and VODone Limited dated August 23, 2011 in connection with the Share Pledge dated September 30, 2011 made by and between Yixun Kuang and Zhenning Hu as amended by the supplemental agreement dated October 11, 2010 and the deed of novation dated December 20, 2010
	10.44†	Share Swap Agreement between Action King Limited, Trilogic Investments Limited, China Mobile Games and Entertainment Group Limited and VODone Limited dated August 23, 2011
	10.45†	Share Mortgage Agreement among Trilogic Investments Limited and VODone Limited dated August 23, 2011
	10.46†	Amendment Deed among Trilogic Investments Limited, CMHJ Technology Fund II, L.P., Natixis Ventech China AB, Action King Limited, 3GUU Mobile Entertainment Industrial Co., Ltd, Yongchao Wang, Feng Zheng, De Liang and VODone Limited dated August 23, 2011 relating to the Share Purchase Agreement dated December 29, 2010 made and entered between Trilogic Investments Limited, CMHJ Technology Fund II, L.P., Natixis Ventech China AB, Action King Limited, 3GUU Mobile Entertainment Industrial Co., Ltd, Yongchao Wang, Feng Zheng, De Liang and VODone Limited
	10.47†	Share Option Scheme
	10.48†	Form of Amended and Restated Subscription Agreement between China Mobile Games and Entertainment Group Limited and directors or executive officers
	10.49†	Non-compete Agreement between China Mobile Games and Entertainment Group Limited and VODone Limited dated October 21, 2011
	10.50†	Amendment to Non-compete Agreement between China Mobile Games and Entertainment Group Limited and VODone Limited dated August 15, 2012
	10.51†	Administrative Services Agreement between VODone Limited and China Mobile Games and Entertainment Group Limited dated October 21, 2011

II-8

Exhibit Number		Description of Document
	10.52†	English translation of Cooperation Agreement Regarding China Mobile Game Business between China Mobile Group, Jiangsu Co. Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated July 19, 2010
	10.53†	English translation of SP Cooperation Agreement Regarding China Mobile Cellphone Game Business between China Mobile Group, Jiangsu Co. Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated October 16, 2010
	10.54†	English translation of SP Cooperation Agreement Regarding China Mobile Cellphone Game Business between China Mobile Group, Jiangsu Co. Ltd. and Guangzhou Yingzheng Information Technology Co., Ltd. dated December 20, 2011
	10.55†	Share Purchase Agreement among VODone Limited, China Mobile Games and Entertainment Group Limited, Core Tech Resources Inc., MediaTek Inc. and PVG Venture Capital Partners (Wuxi), Limited Partnership dated March 21, 2012
	10.56†	English translation of Supplemental Payment Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and VODone Datamedia Technology Co. Ltd. dated June 18, 2012
	10.57†	English translation of Exclusive Business Support Agreement between Guangzhou Yitongtianxia Software Development Co., Ltd. and VODone Datamedia Technology Co. Ltd. dated June 18, 2012
	21.1†	Subsidiaries of the Registrant
	23.1	Consent of Ernst & Young Hua Ming, an independent registered public accounting firm
	23.2†	Consent of Maples and Calder (included in Exhibit 5.1)
	23.3†	Consent of Kirkland & Ellis International LLP (included in Exhibit 8.2)
	23.4†	Consent of Guantao Law Firm (included in Exhibit 8.3)
	23.5	Consent of Appleby (Bermuda) Limited (included in Exhibit 8.4)
	23.6†	Consent of Alex Ho & Co (included in Exhibit 8.5)
	24.1†	Powers of Attorney (included on signature page)
	99.1†	Amendment No. 2 to the Registration Statement, confidentially submitted on April 13, 2012
	99.2†	Amendment No. 3 to the Registration Statement, confidentially submitted on May 31, 2012
	99.3†	Amendment No. 4 to the Registration Statement, confidentially submitted on June 29, 2012
	99.4†	Amendment No. 5 to the Registration Statement, confidentially submitted on July 12, 2012
	99.5†	Amendment No. 6 to the Registration Statement, confidentially submitted on August 7, 2012
	99.6†	Code of Business Conduct and Ethics of the Registrant
	99.7†	Opinion of Guantao Law Firm regarding certain PRC matters
	99.8†	Consent of Analysys International
	99.9†	Consent of Halia Wang
	99.10†	Consent of Estella Yi Kum Ng

†

Previously filed

II-9

EX-8.4

Exhibit 8.4

[Under Appleby’s Letterhead]

Our ref: 008284.0007

6 September 2012

Block A, 15/F Huajian Building

233 Tianfu Road, Tianhe District

Guangzhou, PRC

Dear Sirs,

Re:China Mobile Games and Entertainment Group Limited (the “Company”)

1.This opinion as to Bermuda law is addressed to you in connection with the Company’s registration statement on Form F-1 (No. 333-183423) filed with the Securities and Exchange Commission under the U.S. Securities Act of 1933 on 20 August 2012, as amended by the Amendment No. 1 to be filed on or about 27 August 2012 relating to the distribution of American Depositary Shares each representing certain Class A Ordinary Shares of par value US$0.001 each in the Company to the shareholders of VODone Limited(the “Registration Statement”).

2.For the purposes of this opinion, we have examined and relied upon the Registration Statement.

3.We have not made any investigation of, and express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction except Bermuda.  This opinion is limited to Bermuda law as applied by the Courts of Bermuda at the date hereof.

4.We have assumed:

(a)the conformity to original documents of all documents produced to us as copies and the authenticity of all original documents, which or copies of which have been submitted to us;

(b)that the Registration Statement and other such documentation which was received by electronic means is complete, intact and in conformity with the transmission as sent; and

(c)that there is nothing under any law (other than the laws of Bermuda) which would or might affect the opinions set out below.

5.Based on the foregoing and subject to the reservations set out above and subject to any matter not disclosed to us, we are of the opinion that, under the current laws of Bermuda, the statements in the Registration Statement under the section headed

“Bermuda Taxation” insofar as such statements constitute summaries of the legal matters, and only to the extent, governed by the laws of Bermuda, fairly and accurately present the information and summarises the matters referred to therein and that such statements constitute our opinion.

This opinion is addressed to you in connection with the filing of the Registration Statement with the United States Securities and Exchange Commission.  We consent to the filing of this opinion as an exhibit to the Registration Statement.  As Bermudan attorneys, however, we are not qualified to opine on matters of law of any jurisdiction other than Bermuda, accordingly we do not admit to being an expert within the meaning of the U.S. Securities Act of 1933 nor thereby admit that we come within the category of persons whose consent is required under section 7 of the U.S. Securities Act of 1933.

This opinion speaks as of its date and is strictly limited to the matters stated herein and we assume no obligation to review or update this opinion if applicable law or the existing facts or circumstances should change.

This opinion is governed by and is to be construed in accordance with Bermuda law.  It is given on the basis that it will not give rise to any legal proceedings with respect thereto in any jurisdiction other than Bermuda.

Yours faithfully,

/s/ Appleby

Appleby

EX-10.21

Exhibit 10.21

English Translation

VOTING PROXY AGREEMENT

AMONG

WANG YONGCHAO, SHI HAIYAN, LIANG DE, ZHENG FENG

GUANGZHOU YITONGTIANXIA SOFTWARE DEVELOPMENT CO., LTD.

AND

GUANGZHOU YINGZHENG INFORMATION TECHNOLOGY CO., LTD.

EXECUTED IN GUANGZHOU ON OCTOBER 28, 2009

1

 VOTING PROXY AGREEMENT

THIS VOTING PROXY AGREEMENT (“this Agreement”) is made and entered into on October 28, 2009 by and among:

(1)Wang Yongchao, a citizen of the People’s Republic of China (“China”), identity card no.:           ;

(2)Shi Haiyan, a citizen of China, identity card no.:                 ;

(3)Liang De, a citizen of China, identity card no.:                 ; and

(4)Zheng Feng, a citizen of China, identity card no.:                 ;

The parties indicated in Item (1) through Item (4) above are collectively referred to as the “Principal”;

(5)Guangzhou Yitongtianxia Software Development Co., Ltd. (“Guangzhou Yitong”), a wholly foreign owned enterprise duly organized and existing under the laws of China, with its registered address at No.1-6 (Self-numbered), 1501, No.233, Tianfu Road, Tianhe District, Guangzhou (the “Proxy”) ;

(6)Guangzhou Yingzheng Information Technology Co., Ltd. (“Guangzhou Yingzheng”), a domestic company with limited liability duly organized and existing under the laws of China, with its registered address at 15/F, Hua Jian Tower, No.233, Tianfu Road, Tianhe District, Guangzhou.

The Principal, the Proxy and Guangzhou Yingzheng are hereinafter collectively referred to as “Parties”.

WHEREAS,

1.Each Principal is the shareholder of Guangzhou Yingzheng and together hold 100% shares in the registered capital of Guangzhou Yingzheng, of which, Wang Yongchao holds 64% shares, and Shi Haiyan holds 12% shares, and Liang De holds 4% shares and Zheng Feng holds 20% shares.

2.The Principal, the Proxy and/or Guangzhou Yingzheng have established the business relationship through the execution of the Exclusive Technology Services and Market Promotion Services Agreement, the Equity Pledge Agreement, the Individual Loan Agreement and the Option Agreement (collectively as “Reorganization Agreements”), and Guangzhou Yingzheng shall pay various amounts to the Proxy under the Reorganization Agreements; therefore, the routine business operations of Guangzhou Yingzheng will materially affect its ability to pay the amounts to the Proxy;

3.As a consideration of the obligations of the Proxy under the Reorganization Agreement, each Principal hereby agrees to grant the Proxy an irrevocable Power of Attorney (“Power of Attorney”), so that the Proxy may vote with all voting shares owned by the Principal in Guangzhou Yingzheng (“Shares”) during the term of this Agreement;

4.Guangzhou Yingzheng hereby acknowledges the rights and obligations of the Principal and

2

the Proxy hereunder, and will provide assistance in enforcing the Power of Attorney mentioned herein.

NOW, THEREFORE, both parties hereby enter into the following agreements:

1. PROXY OF SHAREHOLDERS’ VOTING RIGHT AND OTHER RIGHTS

1.1Subject to the terms and conditions of this Agreement, the Principal hereby severally and jointly appoints and authorizes the Proxy to exercise the voting right and management right, etc. as the shareholder of Guangzhou Yingzheng for and on behalf of the Principal, and the power and right of the Proxy under the said authorization include but not limited to:

(1)To exercise the voting right as the shareholder of Guangzhou Yingzheng for and on behalf of the Principal;

(2)To exercise the management right of Guangzhou Yingzheng for and on behalf of the Principal;

(3)To exercise all other rights enjoyed by the shareholder under the articles of association of Guangzhou Yingzheng for and on behalf of the Principal.

1.2In order that the Proxy can effectively exercise and carry out the power and right granted to the Proxy under Article 1.1, the Principal hereby undertakes and agrees that, if any law, regulation or government authority requires the Principal to issue a special Power of Attorney or similar document or go through the relevant formalities (such as notarization of the Power of Attorney) in respect of certain specific matter authorized hereunder, the Principal shall immediately issue the Power of Attorney according to such requirement.

1.3The Principal hereby undertakes and confirms that the Principal shall appoint the nominees of the Proxy to act as the legal representative or director or any other officer of Guangzhou Yingzheng.

1.4The Principal hereby agrees and confirms that the Proxy may delegate its officers to exercise the power and right granted under Article 1.1 above by giving a written notice to the Principal; and that upon receipt of the aforesaid written notice and when necessary, the Principal shall issue a Power of Attorney to such officers designated by the Proxy and grant the same power and right to such officers according to the requirement indicated in the written notice issued by the Proxy. However, the Proxy may revoke the authorization of power and right to such officers by giving a written notice to the Principal. Upon receipt of such a written notice from the Proxy, the Principal shall immediately revoke the authorization to such officers according to the requirement indicated by the Proxy in the written notice.

2. REPRESENTATIONS AND WARRANTIES

Guangzhou Yingzheng and the Principal hereby severally and jointly represent and warrant to the Proxy that:

(1)The Principal is the sole, true and lawful registered and beneficial owner of the Shares, and there are no restrictions on the voting right or disposal right of such Shares; the Shares are

3

not subject to any voting trust or any other agreement or arrangement regarding the voting of such Shares, or any encumbrance or any other restriction of transfer, unless it is otherwise stipulated herein;

(2)The Principal has all powers and capacities to execute this Agreement and perform its obligations and liabilities hereunder;

(3)All obligations and liabilities of the Principal hereunder are lawful, valid, binding and enforceable according to the terms and conditions of this Agreement;

(4)All actions, conditions and matters (including all necessary consents, approvals and authorizations, if so required by the laws) necessary to:

(i)Cause the Principal to duly execute this Agreement, exercise its rights hereunder and perform and comply with its obligations and liabilities hereunder;

(ii)Ensure the obligations and liabilities of the Principal hereunder are lawful, valid and binding; and

(iii)Cause this Agreement to become the evidence admissible in any relevant jurisdiction,

have been duly taken, satisfied or done (as the case may be) to the extent practical and permitted by the laws, and all such consents, approvals and authorizations are still in full effect and force;

(5)Execution of this Agreement, exercise of its rights hereunder, performance and compliance with its obligations and liabilities hereunder by the Principal will not violate or conflict with, or exceed any power or limitation granted or imposed by:

(i)Any law, regulation, rule or decree, or any judgment, order or award, or any consent, approval or authorization with must be complied with by the Principal; or

(ii)The provisions of any agreement or document to which the Principal is a party or by which the Principal or any of its assets is bound;

(6)All approvals and authorizations to be obtained by the Principal from any government or any other authority (is so required by the laws) or from the Proxy necessary for execution, performance and perfection of this Agreement have been duly obtained and they are still in full effect and force.

3. WAIVER AND SEVERABILITY

Failure or delay to exercise any right, power or remedy hereunder by the Proxy will not affect such right, power or remedy, or constitute a waiver of such right, power or remedy; and any single or partial exercise of such right, power or remedy will not preclude the further exercise of such right, power or remedy, or exercise of any other right, power or remedy. If any provision of this Agreement at any time becomes unlawful, invalid or unenforceable at any aspect under any law of any jurisdiction, the lawfulness, validity and enforceability of such provision under the laws of any other jurisdiction and the lawfulness, validity and enforceability of any other provision of this Agreement will not be affected or prejudiced.

4

4. PERIOD OF PROXY

This Agreement shall be executed and become effective on the date indicated first above. The period of the power and right granted to the Proxy hereunder shall be same as the period of the Reorganization Agreements.

5. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the applicable laws of China.

6. DISPUTE RESOLUTION

6.1 Arbitration

Any controversy, dispute or claim (“Dispute”) arising out of or in connection with this Agreement shall be first resolved by both parties through good-faith negotiation. If negotiations have failed to resolve such dispute, any Party may submit the dispute to China International Economic and Trade Arbitration Commission South China Sub-commission for arbitration in accordance with its arbitration rules then in effect. The arbitration shall be performed in Shenzhen, and the arbitration proceedings shall be in Chinese language. One arbitrator shall be appointed. The award shall be final and binding upon both parties.

6.2 Enforcement of Award

The winning party may enforce the award at any competent court or judicial authority, and all parties subject to the award shall agree to be bound by the award and take actions according to the award.

7. TERMINATION

7.1Except as otherwise provided for herein, during the term of this Agreement, Guangzhou Yingzheng or any Principal shall not terminate this Agreement or the Power of Attorney prior to the expiration of this Agreement; otherwise, it shall pay the liquidated damages of RMB 20 million to the Proxy. The Proxy may at any time terminate this Agreement and the Power of Attorney by sending a thirty-day written notice to the Principal and Guangzhou Yingzheng.

7.2Termination of this Agreement and the Power of Attorney will not release Guangzhou Yingzheng or any Principal from any liability incurred from any breach of this Agreement prior to termination.

8. MISCELLANEOUS

8.1  Assignment

Without the prior written consent of the Proxy, no Principal may transfer or assign all or any right, interest or obligation hereunder. The Proxy may assign any or all rights, interests or obligations hereunder or any other voting agreement. Any such assignment shall include all rights and obligations of the Proxy hereunder, as if the assignee is an original party to this Agreement or any other voting agreement. Upon request of the Proxy, the Principal shall

5

execute all agreements and other documents required for the completion of such assignment.

8.2  Amendment

Any amendment or change to this Agreement may only be made with the written consent of the Proxy. Any amendment and/or supplement to this Agreement duly executed by both parties shall be deemed as an integral part of this Agreement, and shall have the same legal force as this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

6

This Page contains no text and is a signature page to the Voting Proxy Agreement

Wang Yongchao
Signature:	/s/ Wang Yongchao
Shi Haiyan
Signature:	/s/ Shi Haiyan
Liang De
Signature:	/s/ Liang De
Zheng Feng
Signature:	/s/ Zheng Feng
Guangzhou Yitongtianxia Software Development Co., Ltd.
Signature:	/s/ Wang Yongchao (affixed with company seal)
Printed Name of Signatory: Wang Yongchao
Title: Legal Representative
Guangzhou Yingzheng Information Technology Co., Ltd.
Signature:	/s/ Wang Yongchao (affixed with company seal)
Printed Name of Signatory: Wang Yongchao
Title: Legal Representative

7

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated April 13, 2012, in Amendment No. 2 to the Registration Statement (Form F-1) and related Prospectus of China Mobile Games and Entertainment Group Limited dated September 7, 2012. We also consent to the use of our report dated August 25, 2011 with respect to the combined financial statements of Bright Way Technology (Hong Kong) Limited and Shenzhen Tastech Electronic Co., Ltd. and of our report dated August 25, 2011 with respect to the consolidated financial statements of 3GUU Mobile Entertainment Industrial Co., Ltd., both of which are included in the Registration Statement.

/s/ Ernst & Young Hua Ming

Guangzhou, the People’s Republic of China

September 3, 2012