##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF1934 FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 2010
 COMMISSION
FILE NUMBER: 001-34862
 SouFun Holdings Limited
  Cayman Islands
 8th Floor, Tower 3, Xihuan Plaza
No. 1 Xizhimenwai Avenue
Xicheng District, Beijing 100044
Peoples Republic of China
 Contact Person: Executive Chairman
Telephone: +86-10-5930 6668, Fax: +86-10-5930 6137
 
  Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares, each
representing one Class A
ordinary share, par value
HK$1.00 each
    
    The New York Stock Exchange
   
  Class A ordinary shares, par value HK$1.00 each
    
    
    50,767,426Class B ordinary shares, par value HK$1.00 each
    
    
    25,298,329
  o þ
  o þ
  þ o
  o o þ
  þ o o
  o o
  o þ




---



##### 



TABLE OF CONTENTS
  
 Introduction
    
    
    iForward Looking Statements
    
    
    1PART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    2Item 2. Offer Statistics and Expected Timetable
    
    
    2Item 3. Key Information
    
    
    2Item 4. Information on the Company
    
    
    30Item 4A. Unresolved Staff Comments
    
    
    47Item 5. Operating and Financial Review and Prospects
    
    
    47Item 6. Directors, Senior Management and Employees
    
    
    67Item 7. Major Shareholders and Related Party Transactions
    
    
    78Item 8. Financial Information
    
    
    82Item 9. The Offer and Listing
    
    
    83Item 10. Additional Information
    
    
    83Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    92Item 12. Description of Securities Other than Equity Securities
    
    
    93PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    96Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    96Item 15. Controls and Procedures
    
    
    96Item 16A. Audit committee financial expert
    
    
    97Item 16B. Code of Conduct
    
    
    97Item 16C. Principal Accountant Fees and Services
    
    
    97Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    98Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    98Item 16F. Change in Registrants Certifying Account
    
    
    98Item 16G. Corporate Governance
    
    
    98PART IIIItem 17. Financial Statements
    
    
    99Item 18. Financial Statements
    
    
    99Item 19. Exhibits
    
    
    99Signatures
    
    
    102Index to Consolidated Financial Statements
    
    
    F-1EX-4.23EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1




---



##### Table of Contents



INTRODUCTION
  Ø
    
    we, us, Company, our or SouFun refers to SouFun Holdings Limited, SouFun.com
Limited, the name of our Company prior to July 14, 1999, and its PRC subsidiaries as follows:
 
    
    SouFun Media Technology (Beijing) Co., Ltd., or SouFun Media;
    
    Beijing SouFun Network Technology Co., Ltd., or SouFun Network;
    
    Beijing SouFun Information Consultancy Co., Ltd., or Beijing Information;
    
    Beijing Zhong Zhi Shi Zheng Information Technology Co., Ltd., or Beijing Zhong Zhi
Shi Zheng;
    
    Shanghai SouFun Information Co., Ltd., or SouFun Shanghai;
    
    SouFun Information (Shenzhen) Co., Ltd., or SouFun Shenzhen;
    
    SouFun Information (Tianjin) Co., Ltd., or SouFun Tianjin; and
    
    SouFun Information (Guangzhou) Co., Ltd., or SouFun Guangzhou;
 and its offshore subsidiaries as follows:
 
    
    China Index Academy Limited, incorporated in Hong Kong, or China Index Academy;
    
    Bravo Work Investments Limited, incorporated in Hong Kong, or Bravo Work;
    
    Max Impact Investments Limited, incorporated in Hong Kong, or Max Impact;
    
    Selovo Investments Limited, incorporated in the British Virgin Islands, or Selovo
Investments;
    
    Pendiary Investments Limited, incorporated in the British Virgin Islands, or
Pendiary Investments;
    
    China Home Holdings Limited, incorporated in Cayman Islands;
    
    China Home Holdings (BVI) Limited, incorporated in the British Virgin Islands;
    
    China Home Holdings (HK) Limited, incorporated in Hong Kong; and
    
    China Real Estate Agent University, incorporated in Hong Kong.
 and, in the context of describing our operations and consolidated financial statements, our
11 consolidated controlled entities in China (also referred to as PRC Domestic Entities in
our consolidated financial statements and related notes included elsewhere in this annual
report) as follows:
 
    
    Beijing SouFun Internet Information Service Co., Ltd., or Beijing Internet;
    
    Beijing Jia Tian Xia Advertising Co., Ltd., or Beijing Advertising;
    
    Beijing SouFun Science and Technology Development Co., Ltd., or Beijing Technology;
    
    Beijing China Index Information Co., Ltd., or Beijing China Index;
    
    Shanghai Jia Biao Tang Advertising Co., Ltd., or Shanghai JBT Advertising;
 i




---



##### Table of Contents




    
    Shanghai SouFun Advertising Co., Ltd., or Shanghai Advertising;
    
    Beijing Century Jia Tian Xia Technology Development Co., Ltd., or Beijing JTX
Technology;
    
    Tianjin Jia Tian Xia Advertising Co., Ltd., or Tianjin JTX Advertising;
    
    Shanghai China Index Consultancy Co., Ltd., or Shanghai China Index;
    
    Beijing Li Tian Rong Ze Technology Development Co., Ltd., or Beijing Li Tian Rong
Ze; and
    
    Tianjin Xin Rui Jia Tian Xia Advertising Co., Ltd., or Tianjin Xin Rui.
 Ø
    
    China or PRC or Chinese refers to the Peoples Republic of China, which, for
geographical and statistical purposes, excludes the Hong Kong Special Administrative Region, the
Macau Special Administrative Region and Taiwan;Ø
    
    GFA refers to gross floor area and sq.m. refers to square meter(s);Ø
    
    shares or ordinary shares refers to our ordinary shares, which, includes both Class
A ordinary shares and Class B ordinary shares;Ø
    
    ADSs refers to our American depositary shares, each of which represents one Class A
ordinary share, and ADRs refers to American depositary receipts, which, if issued, evidence
our ADSs; andØ
    
    all references to RMB or Renminbi are to the legal currency of China, all references
to Hong Kong dollars or HK$ are to the legal currency of the Hong Kong Special
Administrative Region, and all references to U.S. dollars or US$ are to the legal currency
of the United States of America.
  ii




---



##### Table of Contents



FORWARD LOOKING STATEMENTS
   
    
    any change in the laws, rules and regulations of the central and local governments
in China and the rules, regulations and policies of the Ministry of Industry and
Information Technology (formerly the Ministry of Information Industry), or MIIT, and
other relevant government authorities relating to all aspects of our business;
    
    general economic, market and business conditions internationally and in China;
    
    macroeconomic policies of the PRC government;
    
    changes or volatility in interest rates, foreign exchange rates, equity prices or
other rates or prices;
    
    the effects of competition in the Internet industry on the demand for and price of
our services;
    
    various business opportunities that we may pursue; and
    
    the risk factors discussed in this annual report as well as other factors and
uncertainties beyond our control.
  1




---



##### Table of Contents



PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected financial data
   Year ended December 31,2006
    
    2007
    
    2008
    
    2009
    
    2010(US$ in thousands, except per ordinary share andADS data)Consolidated statement of operations dataRevenuesMarketing services
    
    
    30,638
    
    
    
    46,552
    
    
    
    86,252
    
    
    
    102,367
    
    
    
    167,711Listing services
    
    
    4,633
    
    
    
    9,885
    
    
    
    16,070
    
    
    
    17,559
    
    
    
    40,355Other value-added services and products
    
    
    3,532
    
    
    
    1,439
    
    
    
    1,802
    
    
    
    7,123
    
    
    
    16,424Total revenues
    
    
    38,803
    
    
    
    57,876
    
    
    
    104,124
    
    
    
    127,049
    
    
    
    224,490Cost of revenuesCost of services
    
    
    (8,214
    )
    
    
    (12,630
    )
    
    
    (22,162
    )
    
    
    (26,484
    )
    
    
    (49,120
    )Cost of other value-added services and products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,863
    )
    
    
    (12,891
    )Total cost of revenues
    
    
    (8,214
    )
    
    
    (12,630
    )
    
    
    (22,162
    )
    
    
    (31,347
    )
    
    
    (62,011
    )Gross profit
    
    
    30,589
    
    
    
    45,246
    
    
    
    81,962
    
    
    
    95,702
    
    
    
    162,479Operating expenses:Selling expenses
    
    
    (9,404
    )
    
    
    (13,221
    )
    
    
    (18,708
    )
    
    
    (25,186
    )
    
    
    (42,512
    )General and administrative expenses
    
    
    (14,703
    )
    
    
    (12,158
    )
    
    
    (19,857
    )
    
    
    (22,176
    )
    
    
    (41,547
    )Operating income:
    
    
    6,482
    
    
    
    19,867
    
    
    
    43,397
    
    
    
    48,340
    
    
    
    78,420Foreign exchange (loss) gain
    
    
    (9
    )
    
    
    8
    
    
    
    (2,826
    )
    
    
    (59
    )
    
    
    (462
    )Interest income(1)
    
    
    278
    
    
    
    707
    
    
    
    1,221
    
    
    
    1,205
    
    
    
    2,390Realized gain-trading securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    282Government grant
    
    
    114
    
    
    
    211
    
    
    
    360
    
    
    
    730
    
    
    
    740Income before income tax
    
    
    6,865
    
    
    
    20,793
    
    
    
    42,152
    
    
    
    50,411
    
    
    
    81,370Income tax (expense)/benefit
    
    
    (1,340
    )
    
    
    (8,457
    )
    
    
    (18,805
    )
    
    
    2,199
    
    
    
    (18,222
    )Net income
    
    
    5,525
    
    
    
    12,336
    
    
    
    23,347
    
    
    
    52,610
    
    
    
    63,148Net income (loss) attributable to non-controlling interest
    
    
    14
    
    
    
    125
    
    
    
    (34
    )
    
    
    (42
    )
    
    
    40Net income attributable to SouFun Holdings Limited shareholders
    
    
    5,511
    
    
    
    12,211
    
    
    
    23,381
    
    
    
    52,652
    
    
    
    63,108
 2




---



##### Table of Contents



Year ended December 31,2006
    
    2007
    
    2008
    
    2009
    
    2010(US$ in thousands, except per ordinary share and ADS data)Income per ordinary shareBasic
    
    
    0.08
    
    
    
    0.16
    
    
    
    0.32
    
    
    
    0.71
    
    
    
    0.85Diluted(2)
    
    
    0.07
    
    
    
    0.16
    
    
    
    0.30
    
    
    
    0.68
    
    
    
    0.79Dividend declared per ordinary share(3)
    
    
    
    
    
    
    0.55
    
    
    
    
    
    
    
    0.59
    
    
    
    Income per ADS(4)Basic
    
    
    0.32
    
    
    
    0.64
    
    
    
    1.28
    
    
    
    2.84
    
    
    
    3.40Diluted
    
    
    0.28
    
    
    
    0.64
    
    
    
    1.20
    
    
    
    2.72
    
    
    
    3.16Dividend declared per ADS
    
    
    
    
    
    
    2.20
    
    
    
    
    
    
    
    2.36
    
    
    
    Weighted average number of ordinary shares outstandingBasic
    
    
    66,353,603
    
    
    
    74,020,217
    
    
    
    74,020,217
    
    
    
    73,986,129
    
    
    
    74,683,593Diluted
    
    
    77,239,648
    
    
    
    76,997,410
    
    
    
    77,092,197
    
    
    
    77,418,960
    
    
    
    80,220,663Weighted average number of ADSs outstandingBasic
    
    
    16,588,401
    
    
    
    18,505,054
    
    
    
    18,505,054
    
    
    
    18,496,532
    
    
    
    18,670,898Diluted
    
    
    19,309,912
    
    
    
    19,249,353
    
    
    
    19,273,049
    
    
    
    19,354,740
    
    
    
    20,055,166Share-based compensation included in:Cost of revenues
    
    
    555
    
    
    
    160
    
    
    
    268
    
    
    
    489
    
    
    
    749Selling expenses
    
    
    231
    
    
    
    142
    
    
    
    323
    
    
    
    595
    
    
    
    1,035General and administrative expenses
    
    
    5,068
    
    
    
    1,915
    
    
    
    2,126
    
    
    
    3,056
    
    
    
    3,291
 
 (1)
    
    Interest income includes related party amounts of nil, nil, nil, US$85,000, and US$305,000
in 2006, 2007, 2008, 2009 and 2010, respectively.(2)
    
    Income per ordinary share (diluted) and income per ADS (diluted) for each year from 2006 to
2010 have been computed, after considering the dilutive effect of the shares underlying
employees share options and, as applicable, preferred shares.(3)
    
    The dividends have not been fully paid. See Item 8 Financial Information  A. Consolidated
Statements and Other Financial Information  Dividend Policy(4)
    
    All income per ADS does not reflect the adjustment effective February 18, 2011 of the ratio
of our American Depositary Receipts representing Class A ordinary shares from one depositary
share (ADS) for four Class A ordinary shares to one ADS for one Class A ordinary share. As at December 31,2006
    
    2007
    
    2008
    
    2009
    
    2010(US$ in thousands)Consolidated balance sheet dataTotal current assets
    
    
    31,779
    
    
    
    63,557
    
    
    
    102,861
    
    
    
    149,224
    
    
    
    279,527Total assets
    
    
    33,057
    
    
    
    66,757
    
    
    
    107,246
    
    
    
    154,494
    
    
    
    293,767Total current liabilities
    
    
    22,092
    
    
    
    75,343
    
    
    
    79,867
    
    
    
    124,306
    
    
    
    160,881Total liabilities
    
    
    22,652
    
    
    
    82,047
    
    
    
    93,858
    
    
    
    129,993
    
    
    
    171,100Total SouFun Holdings Limiteds equity
    
    
    10,391
    
    
    
    (15,429
    )
    
    
    13,283
    
    
    
    24,438
    
    
    
    122,564Non-controlling interests
    
    
    14
    
    
    
    139
    
    
    
    105
    
    
    
    63
    
    
    
    103Total shareholders equity
    
    
    10,405
    
    
    
    (15,290
    )
    
    
    13,388
    
    
    
    24,501
    
    
    
    122,667Total liabilities and shareholders equity
    
    
    33,057
    
    
    
    66,757
    
    
    
    107,246
    
    
    
    154,494
    
    
    
    293,767
 Year ended December 31,2007
    
    2008
    
    2009
    
    2010(US$ in thousands)Consolidated cash flow dataNet cash generated from operating activities
    
    
    30,493
    
    
    
    44,568
    
    
    
    65,966
    
    
    
    106,510Net cash (used in) generated from investing activities
    
    
    (7,596
    )
    
    
    (2,598
    )
    
    
    (12,034
    )
    
    
    (46,096
    )Net cash (used in) generated from financing activities
    
    
    (2,647
    )
    
    
    (16,210
    )
    
    
    (24,789
    )
    
    
    14,404Net increase in cash and cash equivalents
    
    
    21,774
    
    
    
    28,954
    
    
    
    29,217
    
    
    
    79,281Cash and cash equivalents at beginning of year
    
    
    12,294
    
    
    
    34,068
    
    
    
    63,022
    
    
    
    92,239Cash and cash equivalents at end of year
    
    
    34,068
    
    
    
    63,022
    
    
    
    92,239
    
    
    
    171,520
 3




---



##### Table of Contents



Exchange Rate Information
   Noon Buying RatePeriod End
    
    Average(1)
    
    Low
    
    High(RMB per US$1.00)2005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.7696
    
    
    
    6.8330
    
    
    
    6.60002011January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483April
    
    
    6.4900
    
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900May
    
    
    6.4786
    
    
    
    6.4957
    
    
    
    6.5073
    
    
    
    6.4786June (through
June 3, 2011)
    
    
    6.4796
    
    
    
    6.4800
    
    
    
    6.4824
    
    
    
    6.4780
 
 Source:Federal Reserve Bank of New York and Federal Reserve Board.(1)
    
    Annual averages are calculated using the exchange rates on the last day of each
calendar month during that year. Monthly averages are calculated using the average of
the daily exchange rates during that month. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Relating to Our Business
 Our business depends substantially on revenues from our marketing services, including
primarily online advertising, and participants in the real estate and home furnishing and
improvement sectors may choose other advertising media over online advertising, which could lead to
loss of our revenues.
  4




---



##### Table of Contents




    
    the amount of user traffic on our website, our ability to achieve user demographic
characteristics that are attractive to advertisers, and our ability to demonstrate such
user traffic and demographic characteristics through our website traffic tracking tools
and reporting systems;
    
    potential downward pressure on online marketing pricing due to increased competition
from other online advertisers and traditional online advertising media; and
    
    widespread adoption of technologies that permit Internet users to selectively block
unwanted web views, including advertisements on web pages.
  If we are unable to continue to obtain listings from our key customer groups, including
property developers, real estate agents, brokers and property owners and managers, our business,
financial condition and results of operations could be materially and adversely affected.
  We derive a substantial portion of our revenues from four major urban centers in China, in
particular, Beijing and Shanghai, and we face market risk due to our concentration in these major
urban areas.
  5




---



##### Table of Contents



We may fail to compete successfully against current or future competitors, which could
significantly reduce our market share and materially and adversely affect our business, financial
condition and results of operations.
   Failure to maintain and enhance brand awareness for our website could lead to loss of existing
customers and qualified personnel.
  Loss of our right to use the SouFun brand name, or unauthorized use of our intellectual
property by third parties, and the expenses incurred in protecting our intellectual property
rights, may materially and adversely affect our business, financial condition, results of
operations and reputation.
  
 6




---



##### Table of Contents



Our business could be materially and adversely affected by fluctuations in, and government
measures influencing, Chinas real estate industry.
    
    
    The minimum down payment for the second housing unit purchased by a family is increased from
50% to 60% and the loan interest rate must be no less than 110% of benchmark lending interest rate;
 7




---



##### Table of Contents




    
    The business tax is imposed and calculated on the full sales revenues for the sale of all
housing units held for less than five years, and on the difference between the sales revenue and
the amount paid for the housing unit for the sale of non-ordinary housing units which were
purchased five or more years ago;
    
    All municipalities directly under the central government, all provincial capitals and other
cities where the local housing prices are deemed to be too high or to have risen too fast are
required to temporarily suspend the sale of housing units to families with registered local
permanent residences that already own two or more housing units, families without registered local
permanent residences that already own one or more housing units, and families without registered
local permanent residences that cannot provide evidence of their local payment of taxes or social
insurance premiums for a required period;
    
    Real property tax pilot projects were launched in Shanghai and Chongqing. Local regulations
require a real property tax to be imposed on certain local housing units purchased on or after
January 28, 2011, at a current tax rate of 0.6% in Shanghai and at a tax rate ranging from 0.5% to
1.2% in Chongqing. In Chongqing, the real property tax is also imposed on local independent houses
owned by individuals; and
    
    In the circular promulgated by the General Office of the State Council on January 26, 2011,
each citys government is required to appropriately set up and make public its target for
controlling the price of local, newly built, residential housing units in 2011. Accordingly, many
cities, including Shanghai, Beijing, Chongqing and Shenzhen, have already announced their
respective price control targets for 2011.
   
    
    restrictive monetary policies adopted by the PRC government, including any
significant increase in interest rates;
    
    adverse developments in the credit markets and/or mortgage financing markets
resulting from PRC government policies;
    
    policies regarding land supply;
    
    significant increases in transaction costs as a result of changes in PRC government
policies regarding real estate transaction taxes, such as the recent announcement
regarding the reinstatement of a sales tax on residential property sales by individuals
within five years of purchase;
    
    adverse changes in PRC government policies regarding the acquisition and/or ownership
of real estate;
    
    adverse changes in PRC national or local government policies or practices regarding
brokerage, referral or franchise business or related fees and commissions; or
    
    other PRC government policies or regulations that burden real estate transactions or
ownership.
  8




---



##### Table of Contents



Regulation of the Internet industry in China, including censorship of information distributed
over the Internet, may materially and adversely affect our business.
   If any of our consolidated controlled entities fails to maintain the applicable licenses and
approvals held by it under the complex regulatory environment for Internet-based businesses and
online advertising businesses in China, or any of our PRC subsidiaries or consolidated controlled
entities fail to pass its annual government inspection or obtain renewal of its business license,
our business, financial condition and results of operations would be materially and adversely
affected.
    9




---



##### Table of Contents



Unexpected network interruptions or security breaches, including hacking or computer virus
attacks, may cause delays or interruptions of service, resulting in reduced use and performance of
our website and damage our reputation and brands.
  
    
    any breakdown or system failure resulting in a sustained shutdown of our servers,
including failures which may be attributable to sustained power shutdowns, or efforts to
gain unauthorized access to our systems causing loss or corruption of data or
malfunctions of software or hardware;
    
    any disruption or failure in the national backbone network, which would prevent our
customers and users from accessing our website;
    
    any damage from fire, flood, earthquake and other natural disasters; and
    
    computer viruses, hackings and similar events.
  10




---



##### Table of Contents



Breaches of security in connection with our website could expose us to potential liability and
harm our reputation.
  The successful operation of our business depends upon the performance and reliability of the
Internet infrastructure and telecommunications networks in China.
   You should not rely on our quarterly operating results as an indication of our future
performance because our quarterly financial results are subject to fluctuations.
  
    
    seasonality of the real estate market and real estate consumers purchasing patterns;
    
    our ability to retain existing customers and attract new customers for our marketing
and listing services;
 11




---



##### Table of Contents




    
    the amount and timing of our operating expenses and capital expenditures;
    
    the adoption of new, or changes to existing, governmental regulations;
    
    a shortfall in our revenues relative to our forecasts and a decline in our operating
results; and
    
    economic conditions in general and specific to the real estate industry and to China.
  Failure to continue to develop and expand our content, service offerings and features, and to
develop or incorporate the technologies that support them, could jeopardize our competitive
position.
  Our revenues and profitability could suffer if we are unable to successfully implement our
growth strategies or manage our growth effectively.
    12




---



##### Table of Contents



The
members of our senior management team, in particular,
Mr. Vincent Tianquan Mo (Mr. Mo), our founding shareholder,
director and executive chairman, have played an important role in the growth and development of our
business, and if we are unable to continue to retain their services, our business, financial
condition and results of operations could be materially and adversely affected.
  Failure to attract and retain qualified personnel could jeopardize our competitive position.
  We may be subject to intellectual property infringement or misappropriation claims by third
parties, which may force us to incur substantial legal expenses and, if determined adversely
against us, could materially disrupt our business.
   13




---



##### Table of Contents



We are exposed to potential liability for information on our website and for products and
services sold over the Internet and we may incur significant costs and damage to our reputation as
a result of defending against such potential liability.
   Potential acquisitions, which form part of our strategy, may disrupt our ability to manage our
business effectively, including our ability to successfully integrate acquired businesses into our
existing operations.
  
    
    risks associated with the assimilation of new operations, services, technologies and
personnel;
    
    unforeseen or hidden liabilities;
    
    the diversion of resources from our existing businesses and technologies;
    
    the inability to generate sufficient revenues to offset the costs and expenses of
acquisitions; and
    
    potential loss of, or harm to, relationships with employees, customers and users as a
result of the integration of new businesses.
 We have experienced problems with our internal controls over financial reporting. If we fail
to develop and maintain an effective system of internal controls, we may be unable to accurately
report our financial results or prevent fraud, which could result in harm to our business, loss of
investor confidence in our financial reporting and a lower trading price of our ADSs.
   14




---



##### Table of Contents



Our Chairman may be forbidden from acting as a director, supervisor or as a member of senior
management of our PRC subsidiaries and consolidated controlled entities.
  15




---



##### Table of Contents



Our customers may not repay commitment deposits we have provided to them or may fail to honor
the related exclusive online marketing or listing agreements with us.
   Certain of our leased property interests may be defective and we may be forced to relocate
operations affected by such defects, which could cause significant disruption to our business.
    We have limited business insurance coverage in China.
  Risks Relating to Our Corporate Structure
 If the PRC government determines that the Structure Contracts that establish the structure for
our business operations do not comply with applicable PRC laws, rules and regulations, we could be
subject to severe penalties or be forced to restructure our ownership structure.
 16




---



##### Table of Contents




    
    revoking the business and operating licenses of our PRC subsidiaries or consolidated
controlled entities, whose business and operating licenses are essential to the
operation of our business;
    
    levying fines of the greater of RMB500,000 or an amount up to five times the revenues
generated from operating activities violating the relevant regulations;
    
    confiscating our income or the income of our PRC subsidiaries and/or consolidated
controlled entities;
    
    shutting down our servers or blocking our website;
    
    discontinuing or restricting our operations or the operations of our PRC subsidiaries
and/or consolidated controlled entities;
    
    imposing conditions or requirements with which we, our PRC subsidiaries and/or
consolidated controlled entities may not be able to comply;
 17




---



##### Table of Contents




    
    requiring us, our PRC subsidiaries and/or consolidated controlled entities to
restructure the relevant ownership structure, operations or contractual arrangements;
and
    
    taking other regulatory or enforcement actions that could be harmful to our business.
  We may lose the ability to utilize assets held by our consolidated controlled entities that
are important to the operation of our business if any of these entities goes bankrupt or becomes
subject to a dissolution or liquidation proceeding.
  Contractual or other arrangements among our affiliates may be subject to scrutiny by PRC tax
authorities, and a finding that we or our affiliates owe additional taxes could substantially
reduce our profitability and the value of your investment.
  18




---



##### Table of Contents



Contractual arrangements, including voting proxies, with our consolidated controlled entities
for our Internet content distribution and marketing businesses may not be as effective in providing
operational control as direct or indirect ownership.
  We are controlled by our significant shareholders and their affiliated entities, whose
interests may differ from our other shareholders.
   Risks Relating to China
 Chinas economic, political and social conditions, as well as government policies, could have
a material adverse effect on our business, financial condition and results of operations.
    19




---



##### Table of Contents



The discontinuation of any of the preferential tax treatments currently available to us in
China could materially and adversely affect our financial condition and results of operations
      20




---



##### Table of Contents



We may be treated as a resident enterprise for PRC tax purposes under the New EIT Law and
therefore be subject to PRC taxation on our worldwide income.
  We rely primarily on dividends and other distributions on equity paid by our subsidiaries, and
any limitation on the ability of our subsidiaries to make payments to us could have a material
adverse effect on our ability to conduct our business as well as our liquidity.
   21




---



##### Table of Contents



SouFun Media, SouFun Network, Beijing Zhong Zhi Shi Zheng and the relevant consolidated
controlled entities may be subject to fines and legal or administrative sanctions in connection
with dividend distributions we made between December 2007 and June 2009.
   22




---



##### Table of Contents



The PRC legal system embodies uncertainties, which could limit the legal protections available
to you and us.
   23




---



##### Table of Contents



Government control of currency conversion may limit our ability to utilize our revenues
effectively.
     If SAFE determines that its foreign exchange regulations apply to us and our shareholding
structure, a failure by our shareholders who are PRC citizens or residents to comply with these
regulations may restrict our ability to distribute profits, restrict our overseas and cross-border
investment activities or subject us to liability under PRC laws, which may materially and adversely
affect our business and prospects.
   24




---



##### Table of Contents



We may be subject to fines and legal or administrative sanctions if we or our PRC citizen
employees fail to comply with PRC regulations with respect to the registration of such employees
share options and restricted share units.
  Fluctuations in the exchange rates of the Renminbi could materially and adversely affect the
value of our shares or ADSs and result in foreign currency exchange losses.
    25




---



##### Table of Contents



You may experience difficulties in effecting service of legal process, enforcing foreign
judgments or bringing original actions in China based on United States or other foreign laws
against us or our management..
  We face risks related to natural disasters, health epidemics and other outbreaks of contagious
diseases, including avian flu, SARS and H1N1 flu.
  Risks Relating to Our ADSs
 The market price movement of our ADSs may be volatile.
  
    
    announcements of competitive developments;
    
    regulatory developments in our target markets which affect us, our users, our
customers or our competitors;
    
    actual or anticipated fluctuations in our quarterly results of operations;
    
    failure of our quarterly financial and results of operations to meet market
expectations or failure to meet our previously announced guidance;
    
    changes in financial estimates by securities research analysts;
    
    changes in the economic performance or market valuations of other Internet or online
real estate and home furnishing and improvement services companies;
    
    additions or departures of our executive officers and other key personnel;
 26




---



##### Table of Contents




    
    announcements regarding intellectual property litigation (or potential litigation)
involving us or any of our directors and officers;
    
    fluctuations in the exchange rates between the U.S. dollar and the Renminbi;
    
    release or expiration of the underwriters post-offering lock-up or other transfer
restrictions on our outstanding ordinary shares and ADSs; and/or
    
    sales or perceived sales of additional ordinary shares or ADSs.
  The sale or availability for sale of substantial amounts of our ADSs or ordinary shares could
adversely affect their market price.
  We may need additional capital, and the sale of additional ADSs or other equity securities
could result in additional dilution to our shareholders, while the incurrence of debt may impose
restrictions on our operations.
  As a foreign private issuer, we are permitted to, and we will, rely on exemptions from certain
NYSE corporate governance standards applicable to U.S. issuers, including the requirement that a
majority of an issuers directors consist of independent directors. This may afford less protection
to holders of our ordinary shares and ADSs.
  27




---



##### Table of Contents



As a foreign private issuer, we are exempt from certain disclosure requirements under the U.S.
Securities Exchange Act of 1934, as amended, or the Exchange Act, which may afford less protection
to our shareholders than they would enjoy if we were a U.S. company.
  We may become a passive foreign investment company, or PFIC, which could result in adverse
U.S. tax consequences to U.S. investors.
  Since shareholder rights under Cayman Islands law differ from those under U.S. law, you may
have difficulty protecting your shareholder rights.
    28




---



##### Table of Contents



The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
  You may not be able to participate in rights offerings and may experience dilution of your
holdings.
   You may not receive distributions on ordinary shares or any value for them if it is illegal or
impractical to make them available to you.
  We may be required to withhold PRC income tax on any dividend we pay you, and any gain you
realize on the transfer of our ordinary shares and/or ADSs may also be subject to PRC withholding
tax.
  29




---



##### Table of Contents



Our dual-class ordinary share structure with different voting rights could discourage others
from pursuing any change of control transactions that holders of our Class A ordinary shares and
ADSs may view as beneficial.
     
    
    Our articles of association provide for a dual-class ordinary share structure; and
    
    Our articles of association permit our board of directors, without further action by
our shareholders, to issue preferred shares with special voting rights compared to our
ordinary shares.
 
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
   30




---



##### Table of Contents



B. Business Overview
 Overview
  
    
    Marketing services: We offer marketing services on our website, mainly through
advertisements, to real estate developers in the marketing phase of new property
developments as well as to real estate agencies and other home furnishing and
improvement vendors who wish to promote their products and services, including home
furnishing and improvement products and services, furniture, electronics and other
products. We also intend to integrate paid priority placement of customer links in
keyword search results into our current search and search ranking services. The
substantial majority of our revenues are derived from marketing services;
    
    Listing services: We offer basic and special listing services. Basic listing services
are mainly offered to real estate agents, brokers, property developers, property owners
and managers and providers of home furnishing and improvement products and services, and
allow them to post information on properties, home furnishing and improvement and other
related products and services on our website. Special listings consist of a customized
marketing program primarily involving the coordination and promotion of offline themed
events;
    
    Other value-added services and products: We offer subscription-based access to our
information database, research reports and total web solution services, which
integrate our customers services and products into our website, and also include
website design services; and
    
    E-commerce services:Since the beginning of 2011, we initiated our e-commerce
business on home furnishing and improvement through our portal www.jiatx.com. We offer
an online transaction platform and related e-commerce services to suppliers of home furnishing and
improvement products and services. Products sold on www.jiatx.com include basic raw
materials, furniture, home decoration items, hardwares, bathroom accessories and kitchen
utensils. Our revenue from e-commerce services reached US$94,925.3 for the first
quarter of 2011.
   31




---



##### Table of Contents



Our Services
  Marketing Services
  
    
    real estate developers;
    
    real estate professionals, such as agents and brokers;
    
    retailers and other suppliers of home furnishing and improvement products and
services;
    
    home design, decoration and re-modeling companies; and
    
    banks offering residential mortgage loan products.
    32




---



##### Table of Contents



Listing Services
         33




---



##### Table of Contents



Other Value-added Services and Products
   34




---



##### Table of Contents



E-commerce Services
  Our Website
  
    
    Visitor traffic: According to CR-Nielsen, our website received a weekly average of
over 8.2 million, 9.8 million and 10.9 million unique visitors in 2008, 2009 and 2010,
respectively; and
    
    Members: As of December 31, 2010, we had over 19.5 million registered members of our
website and had 3.0 million registered members of our SouFun membership card.
    35




---



##### Table of Contents



Online Property Listings and Search Engines for New Home and Secondary and Rental Properties
   Information on Home Furnishing and Improvement Products and Services
   Real Estate Database and Information
    36




---



##### Table of Contents



Online Residential Communities
  Our National Coverage
    
  Brand Awareness and Marketing
  Real Estate Research and Reports
  37




---



##### Table of Contents



Event Sponsorships
  Portal Collaboration Arrangements
   Advertising and Marketing
  Arrangements to Promote Future Exclusive Marketing and Listing Business
   38




---



##### Table of Contents



Our Sales Force
       Information Technology Systems and Infrastructure
  39




---



##### Table of Contents




    
    Search Platform. Our search platform is designed to support targeted searches of our
listing databases. Besides the key word search function, our search platform provides
additional search functions that improve search accuracy with various search criteria,
including searches based on the location, price and type of the property. In addition,
our search engine is able to refine the search by conditional filtering and aggregation
of the search results.
    
    Large-Scale System Infrastructure. With a combination of proprietary in-house and
third-party solutions, we have designed our system to handle large amounts of data flow
with a high degree of scalability and reliability. Our distributed architecture uses
parallel computing technology and clusters of low-cost computers to handle high-volume
visitor traffic and process large amounts of information.
    
    Anti-Fraud and Anti-Spam Technology. We have also developed a proprietary anti-fraud
and anti-spam system through which we detect and monitor fraudulent activities and
identify and filter spam messages. We attempt to continuously improve the accuracy and
effectiveness of this technology through machine-learning capability and customizable
rules.
 Competition
    
    
    Real estate and home furnishing and improvement websites offering listing and
marketing services in China including real estate websites sponsored or supported by
local governments in China, which may be able to use such government connections to
develop relationships with locally-active real estate developers;
    
    traditional advertising media such as general-purpose and real estate-focused
newspapers, magazines, television and outdoor advertising that compete for overall
advertising spending;
    
    websites focused on real estate research services in China; and
    
    online listing service providers, whether general-purpose Internet portals or
regional websites dedicated to online listing. We believe some of the key players in
the markets for online real estate marketing and listing services in China include Sina
Corporations China Real Estate Information Corporation, Sohu.com Inc.s focus.cn,
Anjuke.com, Tencents fangqq.com and Szhome.com
  40




---



##### Table of Contents



Intellectual Property
     Facilities
   41




---



##### Table of Contents



Insurance
  Legal Proceedings
  Regulation
  General
   
    
    formulating and enforcing telecommunications industry policy, standards and
regulations;
    
    granting licenses to provide telecommunications and Internet services;
    
    formulating tariff and service charge policies for telecommunications and Internet
services;
    
    supervising the operations of telecommunications and Internet service providers; and
    
    maintaining fair and orderly market competition among operators.
   Restrictions on Foreign Ownership in the Online Advertising Industry
 Internet Content Provision and Wireless Value-Added Services
 42




---



##### Table of Contents



Advertising Services
  
    
    The Foreign Investment Industrial Guidance Catalog;
    
    The Administrative Regulations on Foreign-invested Advertising Enterprises; and
    
    The Circular Regarding Investment in the Advertising Industry by Foreign Investors
through Equity Acquisition.
    43




---



##### Table of Contents




    
    each of the Structure Contracts is legal, valid and binding on the contracting
parties under applicable PRC laws, rules and regulations;
    
    the execution, delivery, effectiveness, enforceability and performance of each of the
Structure Contracts do not violate any published PRC laws, rules and regulations
currently in force and effect;
    
    none of our Structure Contracts contravenes any published PRC laws, rules and
regulations currently in force and effect; and
    
    no filings, registrations, consents, approvals, permits, authorizations, certificates
and licenses of any PRC government authorities are currently required in connection with
the execution, delivery, effectiveness, performance and enforceability of each Structure Contract,
provided that the pledges of equity interests under the Structure Contracts should be
registered with competent PRC government authorities, and provided further that the
exercise of the call option in the future must be approved and registered by competent
PRC government authorities.
  Regulation relating to Our Business
 Internet Content Provision Services
  
    
    The Telecommunications Regulations (2000);
    
    The Catalog of Classes of Telecommunications Business;
    
    The Administrative Measures for Telecommunications Business Operating Licenses; and
    
    The Internet Information Services Administrative Measures.
     44




---



##### Table of Contents



Advertising Services
  
    
    The Advertising Law;
    
    The Administration of Advertising Regulations; and
    
    The Implementation Rules for the Administration of Advertising Regulations.
   Electronic Bulletin Board Services
  Regulations relating to Information Security and Confidentiality of User Identity and
Information
  
    
    gain improper entry into a computer or system of national strategic importance;
    
    disseminate politically disruptive information;
    
    leak government secrets;
 45




---



##### Table of Contents




    
    spread false commercial information; or
    
    infringe intellectual property rights.
   Regulations relating to Trademarks
   Regulations relating to Employee Share Options
  Regulations Relating to Foreign Investment in Value-Added Telecommunications Industry
  46




---



##### Table of Contents



C. Organizational Structure
 
 
 (1)
    
    Affiliates of IDG Technology Venture Investment Inc. include
IDG-Accel China Capital L.P. and IDG-Accel China Capital Investors L.P.(2)
    
    Refers to the following three entities affiliated with Apax
Partners LLP: Hunt 7-A Guernsey L.P. Inc, Hunt 7-B Guernsey L.P Inc
and Hunt 6-A Guernsey L.P. Inc. D. Property, Plant and Equipment
  
 
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  A. Operating Results
 Overview
  
    
    Marketing services: We offer marketing services on our website, mainly through
advertisements, to real estate developers in the marketing phase of new property
developments as well as to real estate agencies and other home furnishing and
improvement vendors who wish to promote their products and services, including home
furnishing and improvement products and services, furniture, electronics and other
products. The substantial majority of our revenues are derived from marketing services;
    
    Listing services: We offer basic and special listing services. Basic listing services
are mainly offered to real estate agents, brokers, property developers, property owners
and managers and providers of home furnishing and improvement products and services, and
allow them to post information on properties, home furnishing and improvement and other
related products and services on our website. Special listings consist of a customized
marketing program primarily involving the coordination and promotion of offline themed
events;
    
    Other value-added services and products: We offer subscription-based access to our
information database, research reports and total web solution services, which
integrate our customers services and products into our website, and also include
website design services; and
    
    E-commerce services:Since the beginning of 2011, we initiated our e-commerce
business on home furnishing and improvement through our portal www.jiatx.com. We offer
an online transaction platform and related e-commerce services to suppliers of home
furnishing and improvement products and services. Products sold on www.jiatx.com
include basic raw materials, furniture, home decoration items, hardwares, bathroom
accessories and kitchen utensils. Our revenue from e-commerce services reached
US$94,925.3 for the first quarter of 2011.
  47




---



##### Table of Contents



Factors Affecting Our Results of Operations
 Economic growth in China and in the PRC real estate market
  Growth in Chinas Internet and online marketing sectors
  Competition in Chinas online real estate and home furnishing and improvement Internet
services
  Performance of certain geographic areas and urban centers in China
  PRC regulations affecting the Internet, online marketing and real estate industries
  48




---



##### Table of Contents



Demand for home furnishing and improvement information and products
  Basis of Presentation
    Critical Accounting Policies
   Revenue Recognition
  49




---



##### Table of Contents



Marketing Services
    Listing Services
    Other Value-added Services and Products
  50




---



##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
  Share-based Compensation Costs
  Income Taxes and Deferred Tax Assets
 51




---



##### Table of Contents



Results of Operations
  Year ended December 31,2008
    
    2009
    
    2010Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    PercentageAmount
    
    of revenue
    
    Amount
    
    of revenue
    
    Amount
    
    of revenue(US$ in thousands, except percentage)RevenuesMarketing services(1)
    
    
    86,252
    
    
    
    82.8
    %
    
    
    102,367
    
    
    
    80.6
    %
    
    
    167,711
    
    
    
    74.7
    %Listing services
    
    
    16,070
    
    
    
    15.4
    %
    
    
    17,559
    
    
    
    13.8
    %
    
    
    40,355
    
    
    
    18.0
    %Other value-added services and
products
    
    
    1,802
    
    
    
    1.8
    %
    
    
    7,123
    
    
    
    5.6
    %
    
    
    16,424
    
    
    
    7.3
    %Total revenues
    
    
    104,124
    
    
    
    100
    %
    
    
    127,049
    
    
    
    100.0
    %
    
    
    224,490
    
    
    
    100.0
    %Cost of revenuesCost of services
    
    
    (22,162
    )
    
    
    (21.3
    )%
    
    
    (26,484
    )
    
    
    (20.8
    )%
    
    
    (49,120
    )
    
    
    (21.9
    )%Cost of other value-added services
and products
    
    
    
    
    
    
    
    
    
    
    (4,863
    )
    
    
    (3.9
    )%
    
    
    (12,891
    )
    
    
    (5.7
    )%Total cost of revenues
    
    
    (22,162
    )
    
    
    (21.3
    )%
    
    
    (31,347
    )
    
    
    (24.7
    )%
    
    
    (62,011
    )
    
    
    (27.6
    )%Gross profit
    
    
    81,962
    
    
    
    78.7
    %
    
    
    95,702
    
    
    
    75.3
    %
    
    
    162,479
    
    
    
    72.4
    %Operating expensesSelling expenses
    
    
    (18,708
    )
    
    
    (18.0
    )%
    
    
    (25,186
    )
    
    
    (19.8
    )%
    
    
    (42,512
    )
    
    
    (19.0
    )%General and Administrative expenses
    
    
    (19,857
    )
    
    
    (19.0
    )%
    
    
    (22,176
    )
    
    
    (17.5
    )%
    
    
    (41,547
    )
    
    
    (18.5
    )%Operating income
    
    
    43,397
    
    
    
    41.7
    %
    
    
    48,340
    
    
    
    38.0
    %
    
    
    78,420
    
    
    
    34.9
    %Foreign exchange gain (loss)
    
    
    (2,826
    )
    
    
    (2.7
    )%
    
    
    (59
    )
    
    
    
    
    
    
    (462
    )
    
    
    (0.2
    )%Interest income(2)
    
    
    1,221
    
    
    
    1.2
    %
    
    
    1,205
    
    
    
    0.9
    %
    
    
    2,390
    
    
    
    1.1
    %Realized gain-trading securities
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    0.2
    %
    
    
    282
    
    
    
    0.1
    %Government grant
    
    
    360
    
    
    
    0.3
    %
    
    
    730
    
    
    
    0.6
    %
    
    
    740
    
    
    
    0.3
    %
 52




---



##### Table of Contents



Year ended December 31,2008
    
    2009
    
    2010Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    PercentageAmount
    
    of revenue
    
    Amount
    
    of revenue
    
    Amount
    
    of revenue(US$ in thousands, except percentage)Income before income tax
    
    
    42,152
    
    
    
    40.5
    %
    
    
    50,411
    
    
    
    39.7
    %
    
    
    81,370
    
    
    
    36.2
    %Income tax (expense)/benefit
    
    
    (18,805
    )
    
    
    (18.1
    )%
    
    
    2,199
    
    
    
    1.7
    %
    
    
    (18,222
    )
    
    
    (8.1
    )%Net income
    
    
    23,347
    
    
    
    22.4
    %
    
    
    52,610
    
    
    
    41.4
    %
    
    
    63,148
    
    
    
    28.1
    %Net income (loss) attributable to
non-controlling interest
    
    
    (34
    )
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    40
    
    
    
    Net income attributable to our
shareholders
    
    
    23,381
    
    
    
    22.4
    %
    
    
    52,652
    
    
    
    41.4
    %
    
    
    63,108
    
    
    
    28.1
    %Share-based compensation included in:Cost of revenues
    
    
    268
    
    
    
    0.3
    %
    
    
    489
    
    
    
    0.4
    %
    
    
    749
    
    
    
    0.3
    %Selling expenses
    
    
    323
    
    
    
    0.3
    %
    
    
    595
    
    
    
    0.5
    %
    
    
    1,035
    
    
    
    0.5
    %General and administrative expenses
    
    
    2,126
    
    
    
    2.0
    %
    
    
    3,056
    
    
    
    2.4
    %
    
    
    3,291
    
    
    
    1.5
    %
 
 (1)
    
    Marketing services include related-party amounts of nil and US$375,000 in 2009 and 2010,
respectively, relating to marketing services provided to the Hainan property developer that
was the subject of the Dong Fang Xi Mei commitment deposit described in the section entitled
Major Shareholders and Related Party Transactions-Related Party Loans and Other Payments.(2)
    
    Interest income includes related party amounts of nil, US$85,000, and US$305,000 in 2008,
2009 and 2010, respectively. Revenues
  Marketing Services
   53




---



##### Table of Contents



Year ended December 31,2008
    
    2009
    
    2010Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof
    
    
    
    
    
    of
    
    
    
    
    
    ofmarketing
    
    
    
    
    
    marketing
    
    
    
    
    
    marketingservice
    
    
    
    
    
    service
    
    
    
    
    
    serviceAmount
    
    revenues
    
    Amount
    
    revenues
    
    Amount
    
    revenues(US$ in thousands, except percentage)New home
    
    
    75,535
    
    
    
    87.6
    %
    
    
    87,134
    
    
    
    85.1
    %
    
    
    138,030
    
    
    
    82.3
    %Secondary and rental
    
    
    554
    
    
    
    0.6
    %
    
    
    537
    
    
    
    0.5
    %
    
    
    1,048
    
    
    
    0.6
    %Home furnishing and improvement
    
    
    10,163
    
    
    
    11.8
    %
    
    
    14,696
    
    
    
    14.4
    %
    
    
    28,634
    
    
    
    17.1
    %Total marketing Service
revenues
    
    
    86,252
    
    
    
    100.0
    %
    
    
    102,367
    
    
    
    100.0
    %
    
    
    167,711
    
    
    
    100.0
    %
     Listing Services
   54




---



##### Table of Contents



Year ended December 31,2008
    
    2009
    
    2010Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof listing
    
    
    
    
    
    of listing
    
    
    
    
    
    of listingservice
    
    
    
    
    
    service
    
    
    
    
    
    serviceAmount
    
    revenues
    
    Amount
    
    revenues
    
    Amount
    
    revenues(US$ in thousands, except percentage)Basic listing
    
    
    8,593
    
    
    
    53.5
    %
    
    
    11,513
    
    
    
    65.6
    %
    
    
    32,297
    
    
    
    80.0
    %Special listing
    
    
    7,477
    
    
    
    46.5
    %
    
    
    6,046
    
    
    
    34.4
    %
    
    
    8,058
    
    
    
    20.0
    %Total
    
    
    16,070
    
    
    
    100.0
    %
    
    
    17,559
    
    
    
    100.0
    %
    
    
    40,355
    
    
    
    100.0
    %
  Other Value-added Services and Products
    55




---



##### Table of Contents



Cost of Revenues
  Operating Expenses
   Year ended December 31,2008
    
    2009
    
    2010Percentage
    
    
    
    
    
    Percentage
    
    
    
    
    
    Percentageof
    
    
    
    
    
    of
    
    
    
    
    
    ofoperating
    
    
    
    
    
    operating
    
    
    
    
    
    operatingAmount
    
    expenses
    
    Amount
    
    expenses
    
    Amount
    
    expenses(US$ in thousands, except percentage)Selling expenses
    
    
    18,708
    
    
    
    48.5
    %
    
    
    25,186
    
    
    
    53.2
    %
    
    
    42,512
    
    
    
    50.6
    %General and administrative expenses
    
    
    19,857
    
    
    
    51.5
    %
    
    
    22,176
    
    
    
    46.8
    %
    
    
    41,547
    
    
    
    49.4
    %Total
    
    
    38,565
    
    
    
    100.0
    %
    
    
    47,362
    
    
    
    100.0
    %
    
    
    84,059
    
    
    
    100.0
    %
 Selling Expenses
  General and Administrative Expenses
  56




---



##### Table of Contents



Operating Income
  Taxation
  Cayman Islands Income Tax
  British Virgin Islands Income Tax
  Hong Kong Income Tax
   PRC Income Tax
   57




---



##### Table of Contents



Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Revenues
  Marketing Services
 58




---



##### Table of Contents



Listing Services
   Other Value-added Services and Products
 Cost of Revenues
  Gross Profit and Gross Margin
  59




---



##### Table of Contents



Operating Expenses
  Selling Expenses
 General and Administrative Expenses
 Operating Income and Operating Margin
  Foreign Exchange Gain/(Loss)
  Interest Income
  Realized GainTrading Securities
  Government Grants
  Income Before Income Tax
  Income Tax Benefit (Expense)
  60




---



##### Table of Contents



Net
(Loss) Income Attributable to Our Non-controlling Interests
  Net Income Attributable to SouFun Holdings Limited Shareholders
  Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Revenues
  Marketing Services
 Listing Services
  61




---



##### Table of Contents



Other Value-added Services and Products
 Cost of Revenues
   Gross Profit and Gross Margin
  Operating Expenses
  Selling Expenses
 General and Administrative Expenses
 62




---



##### Table of Contents



Operating Income and Operating Margin
  Foreign Exchange Gain/(Loss)
  Interest Income
  Realized GainTrading Securities
  Government Grants
  Income Before Income Tax
  Income Tax Benefit (Expense)
  Net
(Loss) Income Attributable to Our Non-controlling Interests
  63




---



##### Table of Contents



Net Income Attributable to SouFun Holdings Limited Shareholders
  B. Liquidity and Capital Resources
     Cash Flows
  Year ended December 31,2008
    
    2009
    
    2010(US$ in thousands)Consolidated cash flow dataNet cash generated from operating activities
    
    
    44,568
    
    
    
    65,966
    
    
    
    106,510Net cash
(used in) generated from investing activities
    
    
    (2,598
    )
    
    
    (12,034
    )
    
    
    (46,096
    )Net cash (used in) generated from financing activities
    
    
    (16,210
    )
    
    
    (24,789
    )
    
    
    14,404Net increase in cash and cash equivalents
    
    
    28,954
    
    
    
    29,217
    
    
    
    79,281Cash and cash equivalents at beginning of year
    
    
    34,068
    
    
    
    63,022
    
    
    
    92,239Cash and cash equivalents at end of year
    
    
    63,022
    
    
    
    92,239
    
    
    
    171,520
 64




---



##### Table of Contents



Net Cash Generated from Operating Activities
    Net Cash Used in Investing Activities
      65




---



##### Table of Contents



Net Cash Used in Financing Activities
    Capital Expenditures
  Inflation
  C. Research and Development, Patents and Licenses, Etc
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  66




---



##### Table of Contents



Payment due by periodMoreLess than
    
    1-3
    
    3-5
    
    than 5Total
    
    1 year
    
    years
    
    years
    
    years(US$ in thousands)Operating lease commitments
    
    
    10,883
    
    
    
    5,780
    
    
    
    5,103
    
    
    
    
    
    
    
    Purchase commitments
    
    
    41,400
    
    
    
    41,400
    
    
    
    
    
    
    
    
    
    
    
    
   G. Safe Harbor
  
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Executive Officers
  Name
    
    Age
    
    PositionVincent Tianquan MO
    
    47
    
    Executive chairman of the board of directorsQuan ZHOU
    
    53
    
    DirectorShan LI
    
    47
    
    Independent directorQian ZHAO
    
    42
    
    Independent directorSam Hanhui SUN
    
    38
    
    Independent directorJeff Xuesong LENG
    
    41
    
    DirectorThomas Nicholas HALL
    
    43
    
    DirectorRichard Jiangong DAI
    
    37
    
    President, chief executive officer and directorLanying GUAN
    
    43
    
    Chief financial officerJian LIU
    
    35
    
    Chief operations officer
 Vincent Tianquan Mo
 Quan Zhou
 67




---



##### Table of Contents



Yesky.com
 Qian Zhao
 Shan Li
 Sam Hanhui Sun
 Jeff Xuesong Leng
 Thomas Nicholas Hall
 Richard Jiangong Dai www.soufun.com
 68




---



##### Table of Contents



Lanying Guan
 Jian Liu
 B. Compensation
 Compensation of Directors and Executive Officers
   Share Options
 Stock Related Award Incentive Plan
   Standard Stock Options
  69




---



##### Table of Contents



Special Stock Options
     Number of
    
    Number of
    
    Number ofClass A
    
    Class B
    
    non-votingordinary
    
    ordinary
    
    ordinaryshares to be
    
    shares to be
    
    shares to be
    
    Exercise priceissued upon
    
    issued upon
    
    issued upon
    
    per ordinaryexercise of
    
    exercise of
    
    exercise of
    
    shareoptions
    
    options
    
    options
    
    (US$)
    
    Date of grant
    
    Date of expirationMr. Mo(1)
    
    
    
    
    
    
    
    
    
    
    225,000
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    225,000
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    225,000
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    225,000
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Media Partner / Mr. Mo(1)
    
    
    
    
    
    
    250,000
    (2)
    
    
    
    
    
    
    0.13
    
    
    June 18, 1999
    
    June 17, 2014
    
    
    
    250,000
    (2)
    
    
    
    
    
    
    0.26
    
    
    June 30, 2000
    
    June 29, 2015
    
    
    
    250,000
    (2)
    
    
    
    
    
    
    0.26
    
    
    October 1, 2001
    
    September 30, 2016
    
    
    
    250,000
    (2)
    
    
    
    
    
    
    0.26
    
    
    June 30, 2002
    
    June 29, 2017
    
    
    
    125,000
    (2)
    
    
    
    
    
    
    0.64
    
    
    October 1, 2002
    
    September 30, 2017Next Decade / Mr. Mo(1)
    
    
    
    
    
    
    1,754,500
    
    
    
    
    
    
    
    5.00
    
    
    September 30, 2006
    
    September 29, 2021Aceview Investment Limited / Mr. Dai
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    0.13
    
    
    June 18, 1999
    
    June 17, 201482,000
    
    
    
    
    
    
    
    
    
    
    
    4.06
    
    
    September 1, 1999
    
    August 30, 2014100,000
    
    
    
    
    
    
    
    
    
    
    
    0.26
    
    
    June 30, 2000
    
    June 29, 2015100,000
    
    
    
    
    
    
    
    
    
    
    
    0.26
    
    
    October 1, 2001
    
    September 30, 2016100,000
    
    
    
    
    
    
    
    
    
    
    
    0.26
    
    
    June 30, 2002
    
    June 29, 201750,000
    
    
    
    
    
    
    
    
    
    
    
    0.64
    
    
    October 1, 2002
    
    September 30, 201755,000
    
    
    
    
    
    
    
    
    
    
    
    1.97
    
    
    October 28, 2004
    
    October 27, 2019
    
    
    
    
    
    
    
    18,750
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    18,750
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    18,750
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    18,750
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Shan Li
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    4.06
    
    
    June 18, 1999
    
    June 17, 2014
    
    
    
    *
    
    
    
    
    
    
    
    0.13
    
    
    September 1, 1999
    
    August 30, 2014
 70




---



##### Table of Contents



Number of
    
    Number of
    
    Number ofClass A
    
    Class B
    
    non-votingordinary
    
    ordinary
    
    ordinaryshares to be
    
    shares to be
    
    shares to be
    
    Exercise priceissued upon
    
    issued upon
    
    issued upon
    
    per ordinaryexercise of
    
    exercise of
    
    exercise of
    
    shareoptions
    
    options
    
    options
    
    (US$)
    
    Date of grant
    
    Date of expiration
    
    
    
    *
    
    
    
    
    
    
    
    1.97
    
    
    April 28, 2004
    
    April 27, 2019
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    *
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Quan Zhou
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    1.97
    
    
    April 28, 2004
    
    April 27, 2019
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    *
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Newtech Venture Limited / Quan Zhou
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    0.13
    
    
    September 1, 1999
    
    August 30, 2014Sam Hanhui Sun
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    10.625
    
    
    September 17, 2010
    
    September 16, 2010Zhao Qian
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    10.625
    
    
    September 17, 2010
    
    September 16, 2010Jian Liu
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    0.26
    
    
    October 1, 2001
    
    September 30, 2016*
    
    
    
    
    
    
    
    
    
    
    
    0.64
    
    
    October 1, 2002
    
    September 30, 2017*
    
    
    
    
    
    
    
    
    
    
    
    1.97
    
    
    October 28, 2004
    
    October 27, 2019
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    *
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Lanying Guan
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    1.97
    
    
    October 28, 2004
    
    October 27, 2019
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2006
    
    December 30, 2016
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2007
    
    December 30, 2017
    
    
    
    
    
    
    
    *
    
    
    
    5.00
    
    
    December 31, 2008
    
    December 30, 2018
    
    
    
    
    
    
    
    *
    
    
    
    10.00
    
    
    December 31, 2009
    
    December 30, 2019Other individuals as a group
    
    
    3,959,050
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1.0% of our outstanding
ordinary shares.(1)
    
    Represents options granted to Mr. Mo in his capacity as our executive chairman. Pursuant to
resolutions passed by our board of directors on August 4, 2010, our board of directors
resolved that such options be assigned and allocated to Media Partner and Next Decade.(2)
    
    On August 4, 2010, Media Partner exercised all of its 1,125,000 outstanding and vested stock
options to purchase 1,125,000 Class B ordinary shares at an exercise price ranging from
US$0.13 per share to US$0.64 per share for an aggregate purchase consideration of US$307,500. 2010 Stock Incentive Plan
  
    
    attract and retain the best available personnel;
    
    to provide an additional incentive to our employees, directors and consultants; and
    
    to promote the success of the Companys business.
 a. Eligible Participants
  
    
    any full-time or part-time employees, executives or officers of us, our parent or any
of our subsidiaries;
    
    any directors, including non-executive directors and independent non-executive
directors, of us, our parent or any of our subsidiaries;
 71




---



##### Table of Contents




    
    any advisers, consultants and agents to us or any of our subsidiaries; and
    
    such other persons who, in the sole opinion of our board of directors or its designated
committee, has made contributions to the business or other development of us.
 b. Maximum Number of Ordinary Shares
  c. Price of Ordinary Shares
  d. Performance Criteria
  e. Time of Exercise of Options
  f. Administration
  72




---



##### Table of Contents



g. Termination
  C. Board Practices
 Board of Directors
  Duties of Directors
   
    
    convening shareholders meetings and reporting its work to shareholders at such
meetings;
    
    implementing shareholders resolutions;
    
    determining our business plans and investment proposals;
    
    formulating our profit distribution plans and loss recovery plans;
    
    determining our debt and finance policies and proposals for the increase or decrease
in our registered capital and the issuance of debentures;
    
    formulating our major acquisition and disposition plans, and plans for merger,
division or dissolution;
    
    proposing amendments to our amended and restated memorandum and articles of
association; and
    
    exercising any other powers conferred by the shareholders meetings or under our
amended and restated memorandum and articles of association.
 Board Committees
  Audit Committee.
 73




---



##### Table of Contents




    
    selecting the independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by the independent auditors;
    
    annually reviewing an independent auditors report describing the auditing firms
internal quality control procedures, any material issues raised by the most recent
internal quality control review, or peer review, of the independent auditors and all
relationships between the independent auditors and us;
    
    setting clear hiring policies for employees or former employees of the independent
auditors;
    
    reviewing with the independent auditors any audit problems or difficulties and
managements response;
    
    reviewing and approving all proposed related-party transactions, as defined in Item
404 of Regulation S-K;
    
    discussing the annual audited financial statements with management and the
independent auditors;
    
    discussing with management and the independent auditors major issues regarding
accounting principles and financial statement presentations;
    
    reviewing reports prepared by management or the independent auditors relating to
significant financial reporting issues and judgments;
    
    discussing earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies;
    
    reviewing with management and the independent auditors the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures on our financial
statements;
    
    discussing policies with respect to risk assessment and risk management;
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted to address material issues raised by internal quality control
reviews or peer reviews by the independent auditors;
    
    timely reviewing reports from the independent auditors regarding all critical
accounting policies and practices to be used by us, all alternative treatments of
financial information within U.S. GAAP that have been discussed with management and all
other material written communications between the independent auditors and management;
    
    establishing procedures for the receipt, retention and treatment of complaints
received from our employees regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by our employees of concerns
regarding questionable accounting or auditing matters;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    handling such other matters that are specifically delegated to our audit committee by
our board of directors from time to time;
    
    meeting separately, periodically, with management, internal auditors and the
independent auditors; and
    
    reporting regularly to the full board of directors.
 Nominating and Corporate Governance Committee.
 74




---



##### Table of Contents



Compensation Committee.
  
    
    reviewing and making recommendations to our board of directors regarding our
compensation policies and forms of compensation provided to our directors and officers;
    
    reviewing and determining bonuses for our officers and other employees;
    
    reviewing and determining share-based compensation for our directors, officers,
employees and consultants;
    
    administering our equity incentive plans in accordance with their respective terms;
and
    
    such other matters that are specifically delegated to the compensation committee by
our board of directors from time to time.
   Terms of Directors and Executive Officers
  D. Employees
  Editorial and production
    
    
    2,884Sales and marketing
    
    
    2,178Technical and research
    
    
    343Management and general administrative
    
    
    463Total
    
    
    5,868
     75




---



##### Table of Contents



E. Share Ownership
  Ordinary shares beneficially ownedClass A No.
    
    Percent
    
    Class B No.
    
    PercentPrincipal Shareholders:Media Partner Technology Limited(1)
    
    
    
    
    
    
    
    
    
    
    11,355,645
    
    
    
    44.9
    %Next Decade Investments Limited(1)
    
    
    888,888
    
    
    
    1.6
    %
    
    
    10,230,645
    
    
    
    40.4
    %Digital Link Investments Limited
    
    
    98,764
    
    
    
    *
    
    
    
    2,560,360
    
    
    
    10.1
    %IDG Technology Venture Investment, Inc. and its affiliates(2)
    
    
    
    
    
    
    
    
    
    
    1,151,679
    
    
    
    4.6
    %IDG-Accel China Capital Investors L.P(2).
    
    
    246,582
    
    
    
    *IDG-Accel China Capital L.P(2).
    
    
    5,344,856
    
    
    
    9.6
    %General Atlantic Mauritius Limited
    
    
    15,347,720
    
    
    
    27.5
    %Hunt 6-A Guernsey L.P. Inc
    
    
    4,232,650
    
    
    
    7.6
    %Hunt 7-A Guernsey L.P. Inc
    
    
    3,822,630
    
    
    
    6.8
    %Hunt 7-B Guernsey L.P. Inc
    
    
    7,198,324
    
    
    
    12.9
    %JPMorgan Chase Bank N.A.
    
    
    18,567,623
    
    
    
    33.3
    %First Island Trustees (Guernsey) Limited
    
    
    94,116
    
    
    
    *Directors and Executive Officers(3):Mr. Mo (4)
    
    
    26,452,490
    
    
    
    44.2
    %Shan Li (5)
    
    
    2,669,749
    
    
    
    4.5
    %Quan Zhou (6)
    
    
    *
    
    
    
    *Sam Hanhui Sun
    
    
    *
    
    
    
    *Jeff Xuesong Leng
    
    
    15,347,720
    
    
    
    25.7
    %Thomas Nicholas Hall
    
    
    15,347,720
    
    
    
    25.7
    %Richard Jiangong Dai
    
    
    *
    
    
    
    *Lanying Guan
    
    
    *
    
    
    
    *Jian Liu
    
    
    *
    
    
    
    *All directors and executive officers as a group
    
    
    61,223,929
    
    
    
    100
    %
 
 *
    
    Less than 1.0% of total outstanding shares.(1)
    
    All of the shares of Media Partner, a British Virgin Islands company, and Next Decade, a
British Virgin Islands company, are held in irrevocable discretionary family trusts
established by Mr. Mo, our founder and executive chairman. The address of Media Partner and
Next Decade is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British
Virgin Islands.(2)
    
    IDG Technology, a Massachusetts corporation, is wholly owned by International Data Group
Inc., a Massachusetts corporation, which is controlled by Patrick McGovern, the majority
shareholder, founder and chairman of International Data Group Inc. The address of IDG
Technology is 5 Speen Street, Framingham MA 01701, U.S.A. IDG-Accel China Capital L.P. is a
Cayman Islands exempted limited partnership located at Walkers SPV Limited, Walker House, 87
Mary Street, George Town, Grand Cayman, KY1-9002 Cayman Islands and is a fund affiliated with
IDG Technology. IDG-Accel China Capital Investors L.P. is a Cayman Islands exempted limited
partnership located at Walkers SPV Limited, Walker House, 87 Mary Street, George Town, Grand
Cayman, KY1-9002 Cayman Islands and is also a fund affiliated with IDG Technology.(3)
    
    The address of our current directors and executive officers is c/o 8th Floor, Tower 3, Xihuan
Plaza, No. 1 Xizhimenwai Avenue, Xicheng District, Beijing 100044 China.(4)
    
    The equity interests of Mr. Mo, our founder and executive chairman, in Next Decade and Media
Partner are held in two irrevocable discretionary trusts established by Mr. Mo for the benefit
of his designated family members. Mr. Mo, as a part of his estate planning, through an
irrevocable discretionary family trust arrangement, transferred to this family trust all of
his equity ownership in Next Decade, which holds of record an aggregate of 11,119,533 ordinary shares of our share capital. Mr. Mo established this
family trust by a deed of settlement, dated June 8, 2006, as amended, as the ultimate holder
of the ordinary shares held of record by Next Decade. The family trust has been established
for the benefit of Mr. Mos designated family members, including a corporate entity
wholly-owned and controlled by one of his family members, as well as other persons and
corporations that may be so designated under the deed of settlement, and has a trust period
of 100 years unless earlier terminated by the trustee subject to any applicable rule against
perpetuities. Mr. Mo continues to act as the protector of the trust. Credit Suisse Trust
Limited acts as the trustee of the trust. 76




---



##### Table of Contents



In addition, Mr. Mo, as a part of his estate planning, through a similar irrevocable
discretionary family trust arrangement, transferred to his family trust all of his equity
ownership in Media Partner, which holds of record an aggregate of 11,355,645 ordinary shares
of our share capital. Mr. Mo established this family trust by a deed of settlement, dated
April 16, 2010, as the ultimate holder of the ordinary shares held of record by Media
Partner. The family trust has been established for the benefit of Mr. Mos designated family
members, including a corporate entity wholly-owned and controlled by one of his family
members, as well as other persons or corporations that may be so designated under the deed of
settlement, and has a trust period of 150 years unless earlier terminated by the trustee
subject to any applicable rule against perpetuities. Mr. Mo continues to act as the protector
of the trust. Deutsche Bank International Trust Co. (Cayman) Limited acts as the trustee of
the trust.(5)
    
    Includes 98,764 ordinary shares held by Digital Link, a British Virgin Islands company, which
is wholly owned by Mr. Shan Li, a director of our Company. The address of Digital Link is Apt
3B, Taggart Tower, 109 Repulse Bay Road, Hong Kong.(6)
    
    Includes ordinary shares held by IDG-Accel China Capital Investors L.P., a Cayman Islands
exempted limited partnership, which is partially owned by Mr. Quan Zhou, a director of our
Company. The address of IDG-Accel China Capital Investors L.P. is Walkers SPV Limited, Walker
House, 87 Mary Street, George Town, Grand Cayman, KY1-9002 Cayman Islands. IDG-Accel China
Capital Investors L.P. is a fund affiliated with IDG Technology.   Telstra Private Placement
   Shareholders Agreement
   77




---



##### Table of Contents




    
    three years after the effective date of our initial public offering; or
    
    such time at which all registrable securities held by such holder can be sold in any
three-month period without registration in compliance with Rule 144 of the Securities
Act.
  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  B. Related Party Transactions
 Structure Contracts
  
    
    Exclusive Technical Consultancy and Services Agreements
  
    
    Equity Pledge Agreements
  
    
    Operating Agreements
  78




---



##### Table of Contents




    
    Shareholders Proxy Agreements
  
    
    Loan Agreements
  
    
    Exclusive Call Option Agreements
  Telstra Private Placement
 Share Purchase Agreement
  Call Option Agreements
  79




---



##### Table of Contents



Investors Rights Agreement
  Registration Rights Agreement
    80




---



##### Table of Contents



Related Party Loans and Other Payments
       Other Related-Party Transactions
  81




---



##### Table of Contents



Shareholders Agreement
  Stock Incentive Plan
  C. Interests of Experts and Counsels
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  Dividend Policy
    82




---



##### Table of Contents



B. Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 A. Offer and listing details
  B. Plan of Distribution
  C. Markets
 Price Range of Our ADSs
  Price PerADS(1)High
    
    Low(US$)
    
    (US$)2010September
    
    
    18.50
    
    
    
    15.28October
    
    
    20.57
    
    
    
    15.58November
    
    
    23.88
    
    
    
    18.00December
    
    
    20.04
    
    
    
    16.252011January
    
    
    21.39
    
    
    
    17.03February
    
    
    23.84
    
    
    
    18.75March
    
    
    20.80
    
    
    
    16.00April
    
    
    23.61
    
    
    
    17.56May
    
    
    27.57
    
    
    
    20.00June
(through June 9, 2011).
    
    
    23.34
    
    
    
    18.67
 
 (1)
    
    Closing prices for all periods presented, adjusted to reflect the change
of ratio of our ADSs from one ADS for four Class A ordinary shares to one ADS for
one Class A ordinary share effective February 18, 2011. D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  83




---



##### Table of Contents



B. Memorandum and articles of association.
  C. Material contracts
  D. Exchange Controls
 Regulations relating to Foreign Exchange, Taxation and Dividend Distribution
 Foreign Exchange
  Taxation and Dividend Distribution
    84




---



##### Table of Contents



Regulations relating to Foreign Exchange in Certain Onshore and Offshore Transactions
  85




---



##### Table of Contents



E. Taxation
 Cayman Islands Taxation
  PRC Taxation
 PRC Taxation Relating to Us and Our Corporate Group
    86




---



##### Table of Contents



PRC Taxation Relating to Our Overseas Shareholders
  87




---



##### Table of Contents



United States Federal Income Taxation
  
    
    dealers in securities or currencies;
    
    traders in securities that elect to use a mark-to-market method of accounting for
securities holdings;
    
    banks or other financial institutions;
    
    insurance companies;
    
    tax-exempt organizations;
    
    partnerships and other entities treated as partnerships for U.S. federal income tax
purposes or persons holding ordinary shares or ADSs through any such entities;
    
    real estate investment trusts;
    
    regulated investment companies;
    
    persons that hold ADSs as part of a hedge, straddle, constructive sale, conversion
transaction or other integrated investment;
    
    U.S. holders (as defined below) whose functional currency for
tax purposes is not the U.S. dollar;
    
    U.S. expatriates;
    
    persons liable for alternative minimum tax; or
    
    persons who actually or constructively own 10.0% or more of the total combined voting
power of all classes of our shares (including ADSs) entitled to vote.
    
    
    a citizen or resident of the United States for U.S. federal income tax purposes;
    
    a corporation, or other entity taxable as a corporation, that was created or
organized in or under the laws of the United States or any political subdivision of the
United States;
 88




---



##### Table of Contents




    
    an estate the income of which is subject to U.S. federal income tax regardless of its
source; or
    
    a trust, if (a) a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have the authority to
control all substantial decisions of the trust, or (b) the trust has a valid election in
effect to be treated as a U.S. person.
   ADSs.
 Dividends on Ordinary Shares or ADSs.
   Sales and Other Dispositions of Ordinary Shares or ADSs.
  Status as a PFIC.
       U.S. Information Reporting and Backup Withholding Rules
   Prospective purchasers should consult their own tax advisors regarding the application of the
U.S. federal income tax laws to their particular situations as well as any additional tax
consequences resulting from purchasing, holding or disposing of ordinary shares or ADSs, including
the applicability and effect of the tax laws of any state, local or foreign jurisdiction, including
estate, gift, and inheritance laws.
 89




---



##### Table of Contents



F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on display
  91




---



##### Table of Contents



I. Subsidiaries Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Liquidity Risk
  Interest Rate Risk
  Foreign Currency Risk
  92




---



##### Table of Contents



Credit Risk
  Fair Value Risk
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 93




---



##### Table of Contents




    
    a fee of U.S.$1.50 per ADR or ADRs for transfers of certificated or direct
registration ADRs;
    
    a fee of up to U.S.$0.05 per ADS for any cash distribution made pursuant to the
deposit agreement;
    
    a fee of up to U.S.$0.05 per ADS per calendar year (or portion thereof) for services
performed by the depositary in administering the ADRs (which fee may be charged on a
periodic basis during each calendar year and shall be assessed against holders of ADRs as
of the record date or record dates set by the depositary during each calendar year and
shall be payable in the manner described in the next succeeding provision);
    
    reimbursement of such fees, charges and expenses as are incurred by the depositary
and/or any of the depositarys agents (including, without limitation, the custodian and
expenses incurred on behalf of holders in connection with compliance with foreign
exchange control regulations or any law or regulation relating to foreign investment) in
connection with the servicing of the ordinary shares or other deposited securities, the
delivery of deposited securities or otherwise in connection with the depositarys or its
custodians compliance with applicable law, rule or regulation (which charge shall be
assessed on a proportionate basis against holders as of the record date or dates set by
the depositary and shall be payable at the sole discretion of the depositary by billing
such holders or by deducting such charge from one or more cash dividends or other cash
distributions);
    
    a fee for the distribution of securities (or the sale of securities in connection with
a distribution), such fee being in an amount equal to the fee for the execution and
delivery of ADSs which would have been charged as a result of the deposit of such
securities (treating all such securities as if they were ordinary shares) but which
securities or the net cash proceeds from the sale thereof are instead distributed by the
depositary to those holders entitled thereto;
    
    stock transfer or other taxes and other governmental charges;
    
    cable, telex and facsimile transmission and delivery charges incurred at your request
in connection with the deposit or delivery of ordinary shares;
    
    transfer or registration fees for the registration of transfer of deposited securities
on any applicable register in connection with the deposit or withdrawal of deposited
securities; and
    
    expenses of the depositary in connection with the conversion of foreign currency into
U.S. dollars.
   94




---



##### Table of Contents



95




---



##### Table of Contents



PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Material Modifications to the Rights of Security Holders
  B. Use of Proceeds
   
 ITEM 15. CONTROLS AND PROCEDURES
  Disclosure Controls and Procedures.
    Changes in Internal Control Over Financial Reporting
  96




---



##### Table of Contents



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2009
    
    2010(U.S. dollars inthousands)Audit fees(1)
    
    
    
    
    
    
    1,220Audit-related fees(2)
    
    
    
    
    
    
    Tax Fees(3)
    
    
    
    
    
    
    50Total
    
    
    
    
    
    
    1,270
 
 (1)
    
    Audit Feesare defined as the standard audit work that needs to be performed each year
in order to issue opinions on our consolidated financial statements and to issue reports on
our local statutory financial statements. Also included are services that can only be
provided by our auditor, such as auditing of nonrecurring transactions and implementation
of new accounting policies, reviews of quarterly financial results, consents and comfort
letters and any other audit services required for US Securities and Exchange Commission or
other regulatory filings.(2)
    
    Audit Related Feesinclude those other assurance services provided by the independent
auditor but not restricted to those that can only be provided by the auditor signing the
audit report. These fees comprise amounts for services for Sarbanes Oxley 404 controls
design effectiveness review.(3)
    
    Tax Feesinclude those tax services provided by the independent auditor for tax
compliance, tax advice and tax planning.  Policy on Pre-Approval of Audit and Non-Audit Services of Independent Auditors
  97




---



##### Table of Contents



ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNT
  
 ITEM 16G. CORPORATE GOVERNANCE
   
    
    The majority of our board of directors is not comprised of independent directors.
    
    We are not required to schedule an executive session at least once a year to be
attended by only independent directors and all directors are currently entitled to attend
all of our board meetings
    
    We have not yet adopted or disclosed a method for interested parties to communicate
directly with the presiding director or with non-management directors as a group.
    
    We are not required to obtain shareholder approval for the adoption of, or material
revisions to, our equity compensation plans and our directors may amend, materially
revise, or terminate our equity compensation plans, but no such action will affect any
outstanding award in any manner materially adverse to a participant without the consent
of the participant.
   98




---



##### Table of Contents



PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
  Exhibit No.
    
    Description of Exhibit1.1
    
    Fourth Amended and Restated Memorandum and Articles of Association
(incorporated by reference to Registration Statement on Form F-1 (Registration
No. 333-169170) filed with the SEC on September 2, 2010).2.1
    
    Specimen ordinary share certificate (incorporated by reference to Registration
Statement on Form F-1 (Registration No. 333-169170) filed with the SEC on
September 2, 2010).2.2
    
    Specimen American depositary receipt (incorporated by reference to
Registration Statement on Form F-6 (Registration No. 333-169176) filed with
the SEC on September 2, 2010).2.3
    
    Form of Deposit Agreement (incorporated by reference to Registration Statement
on Form F-6 (Registration No. 333-169176) filed with the SEC on September 2,
2010).4.1
    
    Shareholders Agreement, dated August 31, 2006 (incorporated by reference to
Registration Statement on Form F-1 (Registration No. 333-169170) filed with
the SEC on September 2, 2010).4.2
    
    Stock Related Award Incentive Plan of 1999 (incorporated by reference to
Registration Statement on Form F-1 (Registration No. 333-169170) filed with
the SEC on September 2, 2010).4.3
    
    2010 Stock Incentive Plan (incorporated by reference to Registration Statement
on Form F-1 (Registration No. 333-169170) filed with the SEC on September 2,
2010).4.4
    
    Investors Rights Agreement among the Registrant, General Atlantic, Apax, Next
Decade, Media Partner and Digital Link, dated August 13, 2010 (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.5
    
    Investors Rights Agreement among the Registrant, General Atlantic, Apax, Next
Decade, Media Partner and Digital Link, dated August 13, 2010 (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.6
    
    Options Exercise Agreement among Telstra International, the Registrant and Mr.
Mo, dated August 12, 2010 (incorporated by reference to Registration Statement
on Form F-1 (Registration No. 333-169170) filed with the SEC on September 2,
2010).4.7
    
    Form of Employment Agreement (incorporated by reference to Registration
Statement on Form F-1 (Registration No. 333-169170) filed with the SEC on
September 2, 2010).
 99




---



##### Table of Contents



Exhibit No.
    
    Description of Exhibit4.8
    
    Form of Indemnification Agreement (incorporated by reference to Registration
Statement on Form F-1 (Registration No. 333-169170) filed with the SEC on
September 2, 2010).4.9
    
    Form of Loan Agreement between and among SouFun Network or SouFun Media and
Mr. Mo and Mr. Dai as shareholders of a consolidated controlled entity
(incorporated by reference to Registration Statement on Form F-1 (Registration
No. 333-169170) filed with the SEC on September 2, 2010).4.10
    
    Form of Equity Pledge Agreement among SouFun Network or SouFun Media, Mr. Mo
and/or Mr. Dai and/or other shareholders of a consolidated controlled entity
pledging the shares of the consolidated controlled entity (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.11
    
    Form of Shareholders Proxy Agreement among SouFun Network or SouFun Media, a
consolidated controlled entity, Mr. Mo and/or Mr. Dai and/or other
shareholders of the consolidated controlled entity (incorporated by reference
to Registration Statement on Form F-1 (Registration No. 333-169170) filed with
the SEC on September 2, 2010).4.12
    
    Form of Operating Agreement among SouFun Network or SouFun Media, a
consolidated controlled entity, Mr. Mo and/or Mr. Dai and/or other
shareholders of the consolidated controlled entity (incorporated by reference
to Registration Statement on Form F-1 (Registration No. 333-169170) filed with
the SEC on September 2, 2010).4.13
    
    Form of Exclusive Technical Consultancy and Services Agreement between SouFun
Network or SouFun Media and a consolidated controlled entity (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.14
    
    Form of Exclusive Call Option Agreement among SouFun Holdings Limited, Mr. Mo
and/or Mr. Dai and/or other shareholders of a consolidated controlled entity,
the consolidated controlled entity and SouFun Network and/or SouFun Media
(incorporated by reference to Registration Statement on Form F-1 (Registration
No. 333-169170) filed with the SEC on September 2, 2010).4.15
    
    Form of Amendment Agreement Relating to Exclusive Technical Consultancy and
Services Agreement, Exclusive Call Option Agreement, Operating Agreement and
Other Agreements among SouFun Network and/or SouFun Media, a consolidated
controlled entity, Mr. Mo, Mr. Dai and/or other shareholders of the
consolidated controlled entity and SouFun Holdings Limited (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.16
    
    Form of Intra-group Memorandum of Understanding between SouFun Network or
SouFun Media and a consolidated controlled entity (incorporated by reference
to Registration Statement on Form F-1 (Registration No. 333-169170) filed with
the SEC on September 2, 2010).4.17
    
    Web Promotion Technical Service Contract, dated April 23, 2010, between CNED
Hengshui Zhongcheng Wanyuan Home Co., Ltd. and SouFun Media (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).4.18
    
    Individual Entrustment Loan Agreement, dated November 5, 2009, between CNED
Hengshui Zhongcheng Wanyuan Home Co., Ltd., as borrower, and Bank of
Communications, as lender, with SouFun Media, as principal (incorporated by
reference to Registration Statement on Form F-1 (Registration No. 333-169170)
filed with the SEC on September 2, 2010).
 100




---



##### Table of Contents



Exhibit No.
    
    Description of Exhibit4.19
    
    Web Promotion Technical Service Contract, dated February 5, 2010, between
Beijing Dong Fang Xi Mei Investment Consulting Co., Ltd. and Beijing
Technology (incorporated by reference to Registration Statement on Form F-1
(Registration No. 333-169170) filed with the SEC on September 2, 2010).4.20
    
    Termination Agreement With Respect to Web Promotion and Technical Service
Contract, dated July 5, 2010, between Beijing Dong Fang Xi Mei Investment
Consulting Co., Ltd. and Beijing SouFun Technical Development Co. Ltd.
(incorporated by reference to Registration Statement on Form F-1 (Registration
No. 333-169170) filed with the SEC on September 2, 2010).4.21
    
    Web Promotion Technical Service Contract, dated July 16, 2010, between Beijing
Wei Ye Hang Real Estate Agency Co., Ltd. and Beijing SouFun Technical
Development Co. Ltd. (incorporated by reference to Registration Statement on
Form F-1 (Registration No. 333-169170) filed with the SEC on September 2,
2010).4.22
    
    Indemnity Agreement among Mr. Mo, CNED Hengshui Zhengcheng Wanyuan Home Co.,
Ltd. and the Registrant (incorporated by reference to Registration Statement
on Form F-1 (Registration No. 333-169170) filed with the SEC on September 2,
2010).4.23
    
    Purchase and Sale Agreement between Sahn Eagle LLC and SouFun Holdings Limited.8.1
    
    List of Subsidiaries and Consolidated Affiliated Entities.11.1
    
    Code of Business Conduct and Ethics (incorporated by reference to Exhibit 99.1
of our Registration Statement on Form F-1 (file no. 333-169170) filed with the
Securities and Exchange Commission on September 2, 2010).12.1
    
    Certification by Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200212.2
    
    Certification by Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200213.1
    
    Certification by Principal Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200213.2
    
    Certification by Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200215.1
    
    Consent of King & Wood PRC
Lawyers
 101




---



##### Table of Contents



SIGNATURES
  SOUFUN HOLDINGS LIMITEDBy:
    /s/ Vincent Tianquan MoVincent Tianquan MoExecutive Chairman  102




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    F-3Consolidated Statements of Operations for the years ended December 31,
2008, 2009 and 2010
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31,
2008, 2009 and 2010
    
    F-6Consolidated Statements of Changes in Shareholders Equity for the
years ended December 31, 2008, 2009 and 2010
    
    F-8Notes to Consolidated Financial Statements
    
    F-9
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
 F-2




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands of United States dollar (US$) except for number of shares)
 As at December 31,Notes
    
    
    2009
    
    
    2010US$
    
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    
    
    92,239
    
    
    
    171,520Short-term investments
    
    
    4
    
    
    
    28,558
    
    
    
    58,133Accounts receivable (net of allowance
of US$4,432 and US$7,277 for 2009 and
2010, respectively)
    
    
    5
    
    
    
    13,985
    
    
    
    22,353Prepayments and other current assets
    
    
    6
    
    
    
    1,952
    
    
    
    21,113Available-for-sale securities
    
    
    4
    
    
    
    
    
    
    
    4,279Inventories
    
    
    
    
    
    
    4,390
    
    
    
    Amounts due from related parties
    
    
    17
    
    
    
    7,629
    
    
    
    Deferred tax assets, current
    
    
    15
    
    
    
    471
    
    
    
    2,129Total current assets
    
    
    
    
    
    
    149,224
    
    
    
    279,527Non-current assets:Property and equipment, net
    
    
    7
    
    
    
    4,220
    
    
    
    7,549Deferred tax assets, non current
    
    
    15
    
    
    
    507
    
    
    
    619Deposit for non-current assets
    
    
    8
    
    
    
    
    
    
    
    4,600Other non-current assets
    
    
    
    
    
    
    543
    
    
    
    1,472Total Non-current assets
    
    
    
    
    
    
    5,270
    
    
    
    14,240Total assets
    
    
    
    
    
    
    154,494
    
    
    
    293,767
  F-3




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands of United States dollar (US$) except for number of shares)
 As at December 31,Notes
    
    
    2009
    
    
    2010US$
    
    
    US$LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term loan
    
    
    9
    
    
    
    
    
    
    
    3,600Deferred revenue
    
    
    10
    
    
    
    28,795
    
    
    
    56,968Accrued expenses and other liabilities
    
    
    11
    
    
    
    37,342
    
    
    
    46,349Dividend payable
    
    
    12
    
    
    
    43,906
    
    
    
    39,635Share based compensation liability
    
    
    16
    
    
    
    11,129
    
    
    
    Income tax payable
    
    
    15
    
    
    
    3,134
    
    
    
    14,329Total current liabilities
    
    
    
    
    
    
    124,306
    
    
    
    160,881Deferred tax liability, non-current
    
    
    15
    
    
    
    5,687
    
    
    
    10,219Total liabilities
    
    
    
    
    
    
    129,993
    
    
    
    171,100Commitments and contingencies
    
    
    19Shareholders equity:Ordinary shares (par value of Hong Kong
Dollar (HK$) 1 per share at December 31,
2009 and 2010, respectively;
Authorized600,000,000 shares at
December 31, 2009 and 2010 respectively;
Issued and outstanding73,932,217 and
76,065,755 shares at December 31, 2009
and 2010, respectively)
    
    
    13
    
    
    
    9,489
    
    
    
    9,764Additional paid-in capital
    
    
    
    
    
    
    9,279
    
    
    
    39,399Accumulated other comprehensive income
    
    
    
    
    
    
    5,670
    
    
    
    10,293Retained earnings
    
    
    
    
    
    
    
    
    
    
    63,108Total SouFun Holdings Limiteds equity
    
    
    
    
    
    
    24,438
    
    
    
    122,564Noncontrolling interests
    
    
    
    
    
    
    63
    
    
    
    103Total shareholders equity
    
    
    
    
    
    
    24,501
    
    
    
    122,667Total liabilities and shareholders equity
    
    
    
    
    
    
    154,494
    
    
    
    293,767
  F-4




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts in thousands of United States dollar (US$) except for number of shares and per share
data)
 For the Year Ended December 31,Notes
    
    
    2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$RevenuesMarketing services
    
    
    
    
    
    
    86,252
    
    
    
    102,367
    
    
    
    167,711Listing services
    
    
    
    
    
    
    16,070
    
    
    
    17,559
    
    
    
    40,355Other value-added services and
products
    
    
    
    
    
    
    1,802
    
    
    
    7,123
    
    
    
    16,424Total revenues
    
    
    
    
    
    
    104,124
    
    
    
    127,049
    
    
    
    224,490Cost of revenuesCost of services
    
    
    
    
    
    
    (22,162
    )
    
    
    (26,484
    )
    
    
    (49,120
    )Cost of other value-added
services and products
    
    
    
    
    
    
    
    
    
    
    (4,863
    )
    
    
    (12,891
    )Total cost of revenues
    
    
    
    
    
    
    (22,162
    )
    
    
    (31,347
    )
    
    
    (62,011
    )Gross profit
    
    
    
    
    
    
    81,962
    
    
    
    95,702
    
    
    
    162,479Operating expenses:Selling expenses
    
    
    
    
    
    
    (18,708
    )
    
    
    (25,186
    )
    
    
    (42,512
    )General and administrative expenses
    
    
    
    
    
    
    (19,857
    )
    
    
    (22,176
    )
    
    
    (41,547
    )Operating income
    
    
    
    
    
    
    43,397
    
    
    
    48,340
    
    
    
    78,420Foreign exchange loss
    
    
    
    
    
    
    (2,826
    )
    
    
    (59
    )
    
    
    (462
    )Interest income (Including related
party amount of nil, US$85 and
US$305 for the years ended
December 31, 2008, 2009 and 2010,
respectively)
    
    
    17
    
    
    
    1,221
    
    
    
    1,205
    
    
    
    2,390Realized gaintrading securities
    
    
    4
    
    
    
    
    
    
    
    195
    
    
    
    282Government grants
    
    
    
    
    
    
    360
    
    
    
    730
    
    
    
    740Income before income tax
    
    
    
    
    
    
    42,152
    
    
    
    50,411
    
    
    
    81,370Income tax (expense) benefit
    
    
    15
    
    
    
    (18,805
    )
    
    
    2,199
    
    
    
    (18,222
    )Net income
    
    
    
    
    
    
    23,347
    
    
    
    52,610
    
    
    
    63,148Net (loss) income attributable to
noncontrolling interests
    
    
    
    
    
    
    (34
    )
    
    
    (42
    )
    
    
    40Net income attributable to SouFun
Holdings Limited shareholders
    
    
    
    
    
    
    23,381
    
    
    
    52,652
    
    
    
    63,108Earnings per shareBasic
    
    
    21
    
    
    
    0.32
    
    
    
    0.71
    
    
    
    0.85Diluted
    
    
    21
    
    
    
    0.30
    
    
    
    0.68
    
    
    
    0.79Weighted average number of
ordinary shares outstanding:Basic
    
    
    21
    
    
    
    74,020,217
    
    
    
    73,986,129
    
    
    
    74,683,593Diluted
    
    
    21
    
    
    
    77,092,197
    
    
    
    77,418,960
    
    
    
    80,220,633
  F-5




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of United States dollar (US$)
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    
    23,347
    
    
    
    52,610
    
    
    
    63,148Adjustments to reconcile net income to net cash
generated from operating activities:Share-based compensation
    
    
    2,717
    
    
    
    4,140
    
    
    
    5,075Depreciation of property and equipment
    
    
    1,051
    
    
    
    1,213
    
    
    
    2,378Deferred tax expense (benefit)
    
    
    5,550
    
    
    
    (7,860
    )
    
    
    2,601Allowance for doubtful accounts
    
    
    3,220
    
    
    
    4,430
    
    
    
    6,775Unrealized foreign exchange loss
    
    
    2,824
    
    
    
    41
    
    
    
    483Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (9,345
    )
    
    
    (7,053
    )
    
    
    (14,608
    )Increase in prepayments and other current
assets
    
    
    (243
    )
    
    
    (551
    )
    
    
    (8,425
    )Increase in other non-current assets
    
    
    (15
    )
    
    
    (52
    )
    
    
    (896
    )Increase in accrued expenses and other
liabilities
    
    
    14,864
    
    
    
    7,912
    
    
    
    7,987Increase in deferred revenue
    
    
    132
    
    
    
    12,821
    
    
    
    26,399Change in inventories
    
    
    
    
    
    
    (4,390
    )
    
    
    4,559Increase in income tax payable
    
    
    466
    
    
    
    2,705
    
    
    
    11,034Net cash generated from operating activities
    
    
    44,568
    
    
    
    65,966
    
    
    
    106,510CASH FLOWS FROM INVESTING ACTIVITIESPayment for short-term investments
    
    
    (24,047
    )
    
    
    (35,864
    )
    
    
    (97,045
    )Loan to third party
    
    
    
    
    
    
    
    
    
    
    (10,508
    )Proceeds received from maturity of
short-term investments
    
    
    23,339
    
    
    
    32,204
    
    
    
    68,892Acquisition of property and equipment
    
    
    (1,967
    )
    
    
    (1,642
    )
    
    
    (5,630
    )Proceeds from disposal of property and
equipment
    
    
    
    
    
    
    107
    
    
    
    147Deposits for purchase of non-current assets
    
    
    
    
    
    
    
    
    
    
    (4,600
    )Acquisition of available-for-sale security
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Change in amount due from related parties
    
    
    77
    
    
    
    (6,839
    )
    
    
    7,648Net cash used in investing activities
    
    
    (2,598
    )
    
    
    (12,034
    )
    
    
    (46,096
    )
 F-6




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of United States dollar (US$)
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$CASH FLOWS FROM FINANCING ACTIVITIESRepurchase of shares and vested options
    
    
    
    
    
    
    (548
    )
    
    
    Proceeds from exercise of share options
    
    
    
    
    
    
    
    
    
    
    310Proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    10,494Proceeds from short-term loan
    
    
    
    
    
    
    
    
    
    
    3,600Payment of dividends
    
    
    (16,210
    )
    
    
    (24,241
    )
    
    
    Net cash (used in) generated from financing
activities
    
    
    (16,210
    )
    
    
    (24,789
    )
    
    
    14,404Exchange rate effect on cash and cash
equivalents
    
    
    3,194
    
    
    
    74
    
    
    
    4,463Net increase in cash and cash equivalents
    
    
    28,954
    
    
    
    29,217
    
    
    
    79,281Cash and cash equivalents at beginning of year
    
    
    34,068
    
    
    
    63,022
    
    
    
    92,239Cash and cash equivalents at end of year
    
    
    63,022
    
    
    
    92,239
    
    
    
    171,520Supplemental schedule of cash flow informationIncome tax paid
    
    
    307
    
    
    
    1,657
    
    
    
    3,955Acquisition of property and equipment through
utilization of deposits
    
    
    96
    
    
    
    52
    
    
    
    Non-monetary exchange of services for prepaid
cards
    
    
    
    
    
    
    9,252
    
    
    
    13,739
  F-7




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands of United States Dollar (US$) except for number of shares)
 Total SouFun Holdings Limiteds EquityAccumulatedNumber of
    
    
    
    
    
    
    Additional
    
    
    OtherOrdinary
    
    
    Ordinary
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    NoncontrollingShares
    
    
    Shares
    
    
    Capital
    
    
    Income
    
    
    Deficits
    
    
    Interests
    
    
    Total EquityBalance as of January 1, 2008
    
    
    74,020,217
    
    
    
    9,501
    
    
    
    33,735
    
    
    
    2,223
    
    
    
    (60,888
    )
    
    
    139
    
    
    
    (15,290
    )Comprehensive incomeNet income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,381
    
    
    
    
    
    
    
    23,381Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,359
    
    
    
    
    
    
    
    
    
    
    
    3,359Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,740Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,972
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,972Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )Balance as of December 31, 2008
    
    
    74,020,217
    
    
    
    9,501
    
    
    
    35,707
    
    
    
    5,582
    
    
    
    (37,507
    )
    
    
    105
    
    
    
    13,388Comprehensive incomeNet income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,652
    
    
    
    
    
    
    
    52,652Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,740Share-based compensation
    
    
    
    
    
    
    
    
    
    
    2,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,898Repurchase of ordinary shares
    
    
    (88,000
    )
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (429
    )
    
    
    
    
    
    
    (441
    )Repurchase of vested options
    
    
    
    
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Dividend declared
    
    
    
    
    
    
    
    
    
    
    (29,219
    )
    
    
    
    
    
    
    (14,716
    )
    
    
    
    
    
    
    (43,935
    )Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (42
    )Balance as of December 31, 2009
    
    
    73,932,217
    
    
    
    9,489
    
    
    
    9,279
    
    
    
    5,670
    
    
    
    
    
    
    
    63
    
    
    
    24,501Comprehensive incomeNet income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,108
    
    
    
    
    
    
    
    63,108Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,344
    
    
    
    
    
    
    
    
    
    
    
    5,344Unrealized losses on available-for-sale security
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (721
    )
    
    
    
    
    
    
    
    
    
    
    (721
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,731Share-based compensation
    
    
    
    
    
    
    
    
    
    
    16,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,204Initial public offering of ordinary shares
    
    
    987,656
    
    
    
    127
    
    
    
    10,367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,494Exercise of share options
    
    
    1,145,882
    
    
    
    148
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308Effect on fixed exchange rate of dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    3,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,389Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    40Balance as of December 31, 2010
    
    
    76,065,755
    
    
    
    9,764
    
    
    
    39,399
    
    
    
    10,293
    
    
    
    63,108
    
    
    
    103
    
    
    
    122,667
  F-8




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 (Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION
 The Company was incorporated on June 18, 1999 as SouFun.com Limited under the laws of the
BVI. In June 2004, the Company changed its name to SouFun Holdings Limited and its corporate
domicile to the Cayman Islands and became a Cayman Islands company with limited liability
under the Companies Law. The accompanying consolidated financial statements include the
financial statements of SouFun Holdings Limited (the Company), its subsidiaries and
entities controlled through contractual arrangements (the PRC Domestic Entities). The
Company, its subsidiaries and PRC Domestic Entities are collectively referred to as the
Group.The Group is principally engaged in the provision of marketing services, listing services and
other value-added products to the real estate and home furnishing industries in the Peoples
Republic of China (the PRC). In 2010, the Company established four investment holding
subsidiaries registered in Cayman, BVI, and Hong Kong. The four investment companies have not
engaged in any substantive businesses as of December 31, 2010. Details of the Companys
subsidiaries and PRC Domestic Entities as of December 31, 2010 are as follows:
 Percentage ofDate of
    
    Place of
    
    Ownership byCompany
    
    Establishment
    
    Establishment
    
    the Company
    
    Principal ActivitiesSelovo Investments Limited (Selovo)
    
    August 10, 2007
    
    British Virgin
Islands (BVI)
    
    
    100
    %
    
    Investment holdingPendiary Investments Limited (Pendiary)
    
    August 16, 2007
    
    BVI
    
    
    100
    %
    
    Investment holdingMax Impact Investments Limited (Max Impact)
    
    October 26, 2007
    
    Hong Kong
    
    
    100
    %
    
    Investment holdingBravo Work Investments limited (Bravo Work)
    
    October 29, 2007
    
    Hong Kong
    
    
    100
    %
    
    Investment holdingChina Index Academy Limited (China Index)
    
    August 7, 2000
    
    Hong Kong
    
    
    100
    %
    
    Investment holdingChina Home Holdings Limited
    
    April 16, 2010
    
    Cayman Islands
    
    
    100
    %
    
    Investment holdingChina Home Holdings (BVI) Limited
    
    April 16, 2010
    
    BVI
    
    
    100
    %
    
    Investment holdingChina Home Holdings (HK) Limited
    
    May 12, 2010
    
    Hong Kong
    
    
    100
    %
    
    Investment holdingChina Real Estate Agent University
    
    May 12, 2010
    
    Hong Kong
    
    
    100
    %
    
    Investment holdingBeijing SouFun Information
Consultancy Co., Ltd.
(Beijing Information)
    
    August 5, 1999
    
    PRC
    
    
    90
    %
    
    Provision of
technology and
information
servicesShanghai SouFun
Information Co., Ltd
(SouFun Shanghai)
    
    May 31, 2000
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
consultancy
services
 F-9




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 (Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Percentage ofDate of
    
    Place of
    
    Ownership byCompany
    
    Establishment
    
    Establishment
    
    the Company
    
    Principal ActivitiesSouFun Information
(Shenzhen) Co., Ltd
(SouFun Shenzhen)
    
    June 23, 2000
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
consultancy
servicesSouFun Information (Tianjin) Co Ltd (SouFun Tianjin)
    
    March 2, 2001
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
consultancy
servicesSouFun Media
Technology
(Beijing) Co., Ltd.
(SouFun Media)
    
    November 28, 2002
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
servicesSouFun.Information
(Guangzhou) Co.
Ltd, (SouFun
Guangzhou)
    
    November 28, 2002
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
consultancy
servicesBeijing SouFun
Network Technology
Co., Ltd. (SouFun
Network)
    
    March 16, 2006
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
servicesZhongzhishizheng
Data Technology
(Beijing) Co., Ltd.
(Beijing
Zhongzhi)
    
    June 5, 2007
    
    PRC
    
    
    100
    %
    
    Provision of
technology and
information
servicesBeijing Jia Tian
Xia Advertising
Co., Ltd. (Beijing
Advertising)
    
    September 1, 2000
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesBeijing SouFun
Internet
Information Service
Co., Ltd. (Beijing
Internet)
    
    December 17, 2003
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesBeijing China Index
Information Co.,
Ltd. (Beijing
China Index)
    
    November 8, 2004
    
    PRC
    
    Nil
    
    Provision of other
value-added
services and
productsShanghai Jia Biao
Tang Advertising
Co., Ltd.
(Shanghai JBT
Advertising)
    
    July 7, 2005
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesBeijing SouFun
Science and
Technology
Development Co.,
Ltd. (Beijing
Technology)
    
    March 14, 2006
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesShanghai China
Index Consultancy
Co., Ltd.
(Shanghai China
Index)
    
    December 12, 2006
    
    PRC
    
    Nil
    
    Provision of other
value-added
services and
productsShanghai SouFun
Advertising Co.,
Ltd. (Shanghai
Advertising)
    
    December 12, 2006
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesBeijing Century Jia
Tian Xia Technology
Development Co.,
Ltd. (Beijing JTX
Technology)
    
    December 21, 2006
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
services
 F-10




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 (Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Percentage ofDate of
    
    Place of
    
    Ownership byCompany
    
    Establishment
    
    Establishment
    
    the Company
    
    Principal ActivitiesTianjin Jia Tian
Xia Advertising
Co., Ltd. (Tianjin
JTX Advertising)
    
    November 22, 2007
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesTianjin Xin Rui Jia
Tian Xia
Advertising Co.,
Ltd. (Tianjin Xin
Rui)
    
    September 1, 2009
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
servicesBeijing Li Tian
Rong Ze Science
&Technology
Development Co.
Ltd. (Beijing Li
Tian Rong Ze)
    
    September 10, 2009
    
    PRC
    
    Nil
    
    Provision of
marketing services
and listing
services
 To comply with PRC laws and regulations which restrict foreign control of companies
involved in internet content provision (ICP) and advertising businesses, the Group operates
its websites and provides online marketing advertising services in the PRC through its PRC
Domestic Entities. The equity interests of the PRC Domestic Entities are legally held
directly by Tianquan Vincent Mo, Chairman and CEO of the Company, and Jiangong Dai, president
of the Company. Jiangong Dai held the shares in Beijing Advertising and Beijing Information
on behalf of Tianquan Vincent Mo from September 2000 to June 2004. The effective control of
the PRC Domestic Entities is held by the Company through a series of contractual
arrangements, (the Contractual Agreements). As a result of the Contractual Agreements, the
Company maintains the ability to approve decisions made by the PRC Domestic Entities, is
entitled to substantially all of the economic benefits from the PRC Domestic Entities and is
obligated to absorb all of the PRC Domestic Entities expected losses. Therefore, the Company
consolidates the PRC Domestic Entities in accordance with SEC Regulation SX-3A-02 and
Accounting Standards Codification (ASC) 810-10 Consolidation: Overall.The following is a summary of the Contractual Agreements:Exclusive Technical Consultancy and Service Agreements, and Operating AgreementsThe Company, through its subsidiaries (the WOFEs), provide the following exclusive
technical services to the PRC Domestic Entities: i) access to information assembled by the
WOFEs concerning the real estate industry and companies in this sector to enable the PRC
Domestic Entities to target potential customers and provide research services; and ii)
technical IT system support to enable the PRC Domestic Entities to service the advertising
and listing needs of its customers.Equity Pledge Agreement, Shareholders Proxy Agreement, and Exclusive Call Option AgreementThe legal shareholders have pledged their entire respective ownership interests in each
Domestic PRC Entity to the WOFEs. The legal shareholders entrusted the WOFEs their rights to
attend shareholders meetings and cast votes. The agreements will continue unless terminated
upon written consents by the WOFEs or their designated legal persons.
 F-11




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 The Company has the exclusive right to acquire from the legal shareholders their entire
respective equity interests in each PRC Domestic Entity at a price equivalent to the
historical cost when permitted by applicable PRC laws and regulations. The agreement has a
term of ten years and may be extended indefinitely under the sole discretion by the WOFEs.Each Domestic PRC Entity and its legal shareholders have also agreed not to enter into any
transaction that would substantially affect the assets, rights, obligations or operations of
the Domestic PRC Entity without prior written consent from the WOFEs. The PRC Domestic
Entities will not distribute any dividend without the prior written consent from the WOFEs.
In addition, the PRC Domestic Entities will appoint or remove their directors and executive
officers upon instruction from the WOFEs. The WOFEs possess the rights to control the daily
operation and to make management decisions for the PRC Domestic Entities through the
operating agreements.Loan AgreementsThe WOFEs provided loans to the legal shareholders to enable them to pay the registered
capital of the PRC Domestic Entities. Under the terms of the loan agreements, the legal
shareholders will repay the loans by transferring their legal ownership in the PRC Domestic
Entities when permitted by applicable PRC laws and regulations.Supplementary AgreementsIn addition to the above contractual agreements, on March 25, 2010, the WOFEs and the PRC
Domestic Entities entered into supplementary agreements whereby:
 
    
    the WOFEs have unilateral discretion in setting the technical service fees
charged to the PRC Domestic Entities;
    
    the WOFEs are obligated to provide financial support to the PRC Domestic Entities
in the event the PRC Domestic Entities incur losses;
    
    the annual budget of the PRC Domestic Entities should be assessed and approved by
the WOFEs;
    
    the legal shareholders agree to remit any dividends, received from the PRC
Domestic Entities, to the WOFEs; and
    
    the PRC Domestic Entities are obligated to transfer their entire retained
earnings after deduction of PRC income tax to the WOFEs upon the WOFEs request.
 With the above agreements, the Company demonstrates its ability to control the PRC Domestic
Entities, through the Companys right to all the residual benefits of the PRC Domestic
Entities and the Companys obligation to fund losses of the PRC Domestic Entities. Thus the
results of the PRC Domestic Entities are consolidated in the Companys financial statements.
Business taxes relating to service fees charged by the WOFEs are recorded as cost of
services.
 F-12




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 1.
    
    ORGANIZATION AND BASIS OF PRESENTATION (continued)
 Supplementary Agreements (continued)The aggregate carrying amount of the total assets and total liabilities of the PRC Domestic
Entities as of December 31, 2010 were US$180,122 and US$64,520, respectively. There was no
pledge or collateralization of the PRC Domestic Entities assets. Creditors of the PRC
Domestic Entities have no recourse to the general credit of the WOFEs, which are the primary
beneficiaries of the PRC Domestic Entities. The amounts of the net assets of PRC Domestic
Entities as of December 31, 2010 were US$115,602.
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation and use of estimatesThe accompanying consolidated financial statements have been prepared in accordance with
United States generally accepted accounting principles (U.S. GAAP).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, allowance for doubtful accounts, useful lives of property
and equipment, realization of deferred tax assets, share-based compensation expense and
uncertain income tax positions. Actual results could materially differ from those estimates.Principles of ConsolidationThe consolidated financial statements of the Group include the financial statements of the
Company, its subsidiaries and PRC Domestic Entities in which it has a controlling financial
interest. 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 PRC Domestic Entities through the Companys rights to all the residual
benefits of the PRC Domestic Entities and the Companys obligation to fund losses of the PRC
Domestic Entities then the entity is included in the consolidated financial statements. All
significant intercompany balances and transactions between the Company, its subsidiaries and
PRC Domestic Entities have been eliminated in consolidation.Foreign Currency Translation and TransactionsThe functional currency of the Company and its overseas subsidiaries, including Selovo,
Pendiary, Max Impact, Bravo Work, China Index, China Home Holdings Limited, China Home
Holdings (BVI) Limited, China Home Holdings (HK) Limited, and China Real Estate Agent
University, is the United States dollar (US$). The Companys PRC subsidiaries and PRC
Domestic Entities determine their functional currency to be the Chinese Renminbi (RMB)
based on the criteria of ASC 830-10, Foreign Currency Matters: Overall. The Company uses
the United State Dollar as its reporting currency. The Company uses the monthly average
exchange rate for the year and the exchange rate at the balance sheet date to translate the
operating results and financial position, respectively. Translation differences are recorded
in accumulated other comprehensive income, a component of shareholders equity.
 F-13




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Foreign Currency Translation and Transactions (continued)Transactions denominated in foreign currencies are remeasured into the functional currency at
the exchange rates prevailing on the transaction dates. Foreign currency denominated
financial assets and liabilities are remeasured at the exchange rates prevailing at the
balance sheet date. Exchange gains and losses are included in the consolidated statements of
operations.Cash, cash equivalents, short-term investments and available-for-sale securitiesCash and cash equivalents represent cash on hand, demand deposits placed with banks or other
financial institutions. All highly liquid investments with original stated maturity of 90
days or less are classified as cash equivalents. All highly liquid investments with original
stated maturities of greater than 90 days but less than 365 days are classified as short-term
investments which approximate their fair value.The Company accounts for its investments in accordance with ASC 320-10, Investments-Debt and
Equity Securities: Overall. According to ASC 320, the investments in debt securities are
accounted for as held-to-maturity, trading or available-for-sale. Investments that are
bought and held principally for the purpose of selling them in the near term are accounted
for as trading securities recorded at fair value with any change recognized in the
consolidated statements of operations.Investments classified as available-for-sale securities are reported at fair value with
unrealized gains (losses), if any, recorded as accumulated other comprehensive income in
shareholders equity. Realized gains or losses are charged to income during the period in
which the gain or loss is realized. If the Company determines a decline in fair value is
other-than-temporary, the cost basis of the individual security is written down to fair value
as a new cost basis and the amount of the write-down is accounted for as a realized loss. The
fair value of the investment would then become the new cost basis of the investment and shall
not be adjusted for subsequent recoveries in fair value. Determination of whether declines in
value are other-than-temporary requires significant judgment. Subsequent increases and
decreases in the fair value of available-for-sale securities will be included in
comprehensive income through a credit or charge to shareholders equity except for an
other-than-temporary impairment, which will be charged to income.Investments that the Company has positive intent and ability to hold to maturity are
classified as held-to-maturity securities and are stated at amortized cost. The Company
evaluates whether a decline in fair value below the amortized cost basis is other than
temporary in accordance to ASC 320-10-35 InvestmentsDebt and Equity Securities:
OverallSubsequent Measurement. If the decline in fair value is judged to be other than
temporary, the cost basis of the individual security would be written down to its fair value
as a charge to the consolidated statements of operations. No impairment loss was recognized
on the held-to-maturity securities for any of the years presented.
 F-14




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Accounts receivable and allowance for doubtful accountsThe Group considers many factors in assessing the collectability of its receivables due from
its customers, such as, the age of the amounts due, the customers payment history and
credit-worthiness. An allowance for doubtful accounts is recorded in the period in which a
loss is determined to be probable. Accounts receivable balances are written off after all
collection efforts have been exhausted.Property and Equipment, netProperty and equipment are stated at cost and are depreciated using the straight-line method
over the estimated useful lives of the assets, as follows:
 Category
    
    Estimated Useful Life
    
    
    Estimated Residual ValueOffice equipment
    
    
    5 years
    
    
    
    5-10
    %Motor vehicles
    
    
    5 years
    
    
    
    5
    %Leasehold improvement
    
    
    shorter of lease term or 5 years
    
    
    
    
 Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals
and betterments 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 from the asset and accumulated depreciation
accounts with any resulting gain or loss reflected in the consolidated statements of
operations.Impairment of Long-Lived AssetsThe Group evaluates its long-lived assets or asset group 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 a group of long-lived assets may not be fully recoverable. When these events occur, the
Group evaluates the impairment 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 asset group over its fair value. No impairment charge was recognized
for any of the years presented.
 F-15




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fair Value of Financial InstrumentsEffective January 1, 2008, the Group adopted ASC 820-10 Fair Value Measurements and
Disclosures: Overall which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. Although the adoption of ASC
820-10 did not impact the Groups financial condition, results of operations, or cash flow,
ASC 820-10 requires additional disclosures to be provided on fair value measurement.ASC 820-10 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 820-10 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 carrying amounts of cash and cash equivalents, accounts receivable, other current assets,
amounts due from related parties, short-term investments approximated their fair values due
to the short-term maturity of these instruments as of December 31, 2009 and 2010.Available-for-sale securities are measured at their fair values based on quoted prices from
the active market.
 F-16




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fair Value of Financial Instruments(continued)In accordance with ASC 820-10, the Company measures its trading securities at fair value.
Trading securities and available-for-sales security are classified within Level 2 and Level
1, respectively, because trading securities were valued using a model utilizing market direct
observable inputs, such as historical volatility and risk-free interest rate, while
available-for-sales security used quoted prices from the active market.
 Fair Value Measurement at December 31, 2010Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Otherfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Fair Value atAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31,(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2010US$
    
    
    US$
    
    
    US$
    
    
    US$Trading securities:Adjustable rate structured notes
    
    
    
    
    
    
    7,550
    
    
    
    
    
    
    
    7,550Available-for-sales security
    
    
    4,279
    
    
    
    
    
    
    
    
    
    
    
    4,279
 Fair Value Measurement at December 31, 2009Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Otherfor Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Fair Value atAssets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31,(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2009US$
    
    
    US$
    
    
    US$
    
    
    US$Trading securities:Adjustable rate structured notes
    
    
    
    
    
    
    7,323
    
    
    
    
    
    
    
    7,323
 Revenue RecognitionRevenues are derived from online marketing services, listing services, tangible products and
other value-added services and products. Revenue for each type of service and product sales
is recognized only when the following criteria are met: a) persuasive evidence of an
arrangement exists; b) price is fixed or determinable; c) delivery of services has occurred;
and d) collectability is reasonably assured.
 F-17




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 RevenueMarketing servicesThe Group offers marketing services on the Groups websites, primarily presented as banner
advertisements, floating links, logos and other media insertions (forms of services). These
services are offered to real estate developers and providers of products and services for
home decoration and improvement. Marketing services allow advertisers to place advertisements
on particular areas of the Groups websites, in particular formats and over particular
periods of time. Written contracts, containing all significant terms, signed by the Group and
its customers provide persuasive evidence of the arrangement. The contracts do not contain
any specific performance, cancellation, termination or refund provisions.The service fee is negotiated between the customer and the Group but once a price is agreed
to and the written contract is signed by both parties, the price is fixed and not subject to
change. The service fee is due and payable in installments over the service period.
Historically, the service fee has varied widely for marketing services and such variation in
prices exists even when the same forms of services is provided in the same location of our
websites and for the same service duration. The marketing services typically last from
several days to one year. Delivery of the service occurs upon displaying the agreed forms of
services on the Groups websites over the specified service period. The Group performs credit
assessments on its customers prior to signing the written contract to ensure collectability
is reasonably assured. Revenue is recognized ratably over the contract period, as there is
persuasive evidence of an arrangement, the fee is fixed or determinable and collection is
reasonably assured, as prescribed by ASC 605-10 Revenue Recognition: Overall.For certain arrangements, the Group provides marketing services that contain multiple
deliverables (i.e., different forms of services to be delivered over different periods of
time). Since the Company sells its marketing services over a broad price range, there is a
lack of objective and reliable evidence of fair value for each deliverable included in the
arrangement. Accordingly, a combined unit of accounting is used pursuant to ASC 605-25
Revenue Recognition  Multiple-Element Arrangements whereby revenue is recognized ratably
over the performance period of the last deliverable in the arrangement.Listing servicesListing service revenue consist of revenues derived from both basic listing services and
special listing services.The Groups basic or special listing services are provided to agents, brokers, property
developers, property owners, property managers and others seeking to sell or rent new or
secondary residential and commercial properties.
 F-18




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Listing services (continued)
 1)
    
    Basic listing services:
 Basic listing services entitle the customers to post and make changes to information for
properties, home furnishings and other related products and services in a particular
area on the website for a specified period of time, which typically range from 1 to 36
months, in exchange for a fixed fee. Written contracts, containing all significant
terms, signed by the Group and its customers provide persuasive evidence of the
arrangement. The amount of fee to be paid is not subject to change once the contract has
been signed. The contracts do not contain any specific performance, cancellation,
termination or refund provisions. Delivery of services occurs by making access to the
websites available for posting by the customers over the specified listing period. The
Group performs credit assessments of its customers prior to signing the written contract
to ensure collectability is reasonably assured. In accordance with ASC 605-25, revenue
is recognized ratably over the duration of the service period as the basic listing
services are being delivered.
 2)
    
    Special listing services:
 Special listing services are multiple element arrangements comprising of website listing
services and other coordination of promotional themed events (Offline Services), such
as physical forum discussion or a banquet gathering, each with the special listing as
the theme, where our customers promote their products or services to a live audience.
The Offline Services are not sold separately and are always sold with special listing
services. Written contracts, containing all significant terms, signed by the Group and
its customers provide persuasive evidence of the arrangement. The amount of fee to be
paid is not subject to change once the contract has been signed. The contracts do not
contain any specific performance, cancellation, termination or refund provisions.
Delivery of services occurs by making access to the websites available for posting by
the customers over the specified listing period and upon completion of the Offline
Services. The Group performs credit assessments of its customers prior to signing the
written contract to ensure collectability is reasonably assured.
 The Group is unable to determine the fair value of the Offline Services since these
services are not sold on a standalone basis. Accordingly, a combined unit of accounting
is used pursuant to ASC 605-25 whereby revenue is recognized, upon delivery of the final
deliverable, which is recognized ratably over the duration of the Special listing
service period.
 F-19




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Other value-added services and products
 Commencing in 2009, the Group provided marketing services to home decoration vendors in
exchange for prepaid cards issued by the vendors. The significant terms of these transactions
are stated in written contracts which are signed by the Group and the customers. The prepaid
cards contain monetary values of varying denomination from RMB20 to RMB2,000 that can be used
to purchase certain products from the vendors specified stores. The prepaid cards are not
redeemable for cash from the vendors. The Group sells the prepaid cards, typically at a
discount to their stated monetary value, to external parties. The exchange of marketing
services for prepaid cards is accounted for in accordance with ASC 845 Nonmonetary
Transactions. In accordance with ASC 845-10-30, the nonmonetary transaction is measured
based on fair value of the assets (or services) involved. The fair value of the services to
be provided is not determinable within a reasonable range because the service fees received
have historically varied widely. The fair value of the prepaid cards is determinable by
reference to the historical cash proceeds received upon the sale of such cards to customers.
The Company reassesses its fair value estimate periodically to reflect changes experienced in
the selling prices of the prepaid cards. Service revenue from this exchange is measured based
on the fair value of the prepaid cards received and is recognized in accordance with the
revenue model stated above in Marketing services. Revenue from sales of prepaid cards is
recognized when the prepaid cards are delivered to the customers and cash is received. The
Group will not provide this kind of service from 2011.
 The Group generates revenues from other value-added services and products including
subscription services for access to the Groups information database and consulting services
for customized and industry-related research reports and indices. Revenues derived from
subscription services for access to the Groups information database are recognized ratably
over the subscription period. Revenues derived from consulting services for customized and
industry-related research reports and indices are recognized when the relevant services are
completed.
 The Groups business is subject to business taxes, surcharges or cultural construction fees
levied on advertising-related sales in China. In accordance with ASC 605-45 Revenue
RecognitionPrincipal Agent Considerations, all such business taxes, surcharges and cultural
construction fees are presented as cost of revenues on the consolidated statements of
operations. Business tax and related surcharges and cultural construction fees for the years
ended December 31, 2008, 2009 and 2010 are approximately US$8,252, US$10,870 and US$17,103,
respectively.Cost of Revenues
 Cost of revenue comprises of employee costs, business taxes and surcharges, server and
bandwidth leasing fees and other direct costs incurred in providing the related services and
sales of products. These costs are expensed when incurred.
 F-20




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 InventoriesInventories consist of prepaid cards that can be used to acquire products from the issuing
vendors. Inventories are recorded at the lower of cost or market. An impairment charge is
recognized to the extent the prepaid cards cannot be recovered through sale or have expired.
No impairment charge was recognized for any of the years presented. The prepaid cards
generally expire within one year of the acquisition date. In 2010, cards amounting to
US$5,450 were disposed of due to the expiry of usage terms. Inventory balance of US$5,450 was
written off with a corresponding debit to deferred revenue.Advertising ExpenditureAdvertising costs are expensed when incurred and are included in selling expenses in the
consolidated statements of operations. For the years ended December 31, 2008, 2009 and 2010,
the advertising expenses were approximately US$944, US$1,526 and US$3,666, respectively.LeasesLeases are classified at the inception date as either a capital lease or an operating lease.
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 as incurred. The Group had no capital
lease for any of the years stated herein.Income TaxesThe Group follows the liability method of accounting for 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 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 effect on deferred taxes of a change in tax rate is
recognized in tax expense in the period that includes the enactment date of the change in tax
rate.
 F-21




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Income Taxes (continued)
 On January 1, 2007, the Group adopted ASC 740-10, Income taxes: Overall, to account for
uncertainties in income taxes. There was no cumulative effect of the adoption of ASC 740-10
to beginning retained earnings. Interest and penalties arising from underpayment of income
taxes shall be computed in accordance with the related PRC tax law. The amount of interest
expense is computed by applying the applicable statutory rate of interest to the difference
between the tax position recognized and the amount previously taken or expected to be taken
in a tax return. Interest and penalties recognized in accordance with ASC 740-10 is
classified in the consolidated statements of operations as income tax expense.
 In accordance with the provisions of ASC 740-10, the Group recognizes in its financial
statements the impact of a tax position if a tax return position or future tax position is
more likely than not to prevail based on the facts and technical merits of the position.
Tax positions that meet the more likely than not recognition threshold are measured at the
largest amount of tax benefit that has a greater than fifty percent likelihood of being
realized upon settlement. The Groups estimated liability for unrecognized tax benefits which
is included in the accrued expenses and other liabilities account is 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. The outcome for a particular audit cannot be determined with
certainty prior to the conclusion of the audit and, in some cases, appeal or litigation
process. The actual benefits ultimately realized may differ from the Groups estimates. As
each audit is concluded, adjustments, if any, are recorded in the Groups financial
statements. Additionally, 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.Share-based compensation
 The Groups employees and directors participate in the Companys share-based scheme which is
more fully discussed in Note 17. The Company applies ASC 718 Compensation-Stock
Compensation to account for its employee share-based payments. There have been no
share-based payments made to non-employees for any of the years presented.
 F-22




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Share-based compensation (continued)
 In accordance with ASC 718, the Company determines whether a share option should be
classified and accounted for as a liability award or equity award. All grants of share-based
awards to employees classified as equity awards are recognized in the financial statements
based on their grant date fair values which are calculated using an option pricing model. All
grants of share-based awards to employees and directors classified as liabilities are
remeasured at the end of each reporting period with an adjustment for fair value recorded to
the current period expense in order to properly reflect the cumulative expense based on the
current fair value of the vested rewards over the vesting periods. The Group has elected to
recognize compensation expense using the straight-line method for all employee equity awards
granted with graded vesting based on service conditions, which was not subject to performance
vesting conditions, meanwhile using the accelerated attribution method for the equity awards
with performance conditions on a tranche-by-tranche basis. To the extent the required vesting
conditions are not met resulting in the forfeiture of the share-based awards, previously
recognized compensation expense relating to those awards are reversed. ASC 718-10 requires
forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods 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.Earnings per Share
 Earnings per share are calculated in accordance with ASC 260, Earnings Per Share. Basic
earnings per ordinary share is computed by dividing income attributable to holders of
ordinary shares by the weighted average number of ordinary shares outstanding during the
period. Diluted earnings per ordinary share reflect the potential dilution that could occur
if securities to issue ordinary shares were exercised. The dilutive effect of outstanding
share-based awards is reflected in the diluted earnings per share by application of the
treasury stock method.Comprehensive Income
 Comprehensive income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. For the years presented, the Groups
comprehensive income includes net income, unrealized gains (losses) on available-for-sale
investments and foreign currency translation adjustments and is presented in the statement of
changes in shareholders equity.
 F-23




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent Accounting Pronouncements
 In October 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13 (ASU
2009-13), Multiple-Deliverable Revenue Arrangements. ASU 2009-13 amends ASC sub-topic
605-25, Revenue Recognition: Multiple-Element Arrangements, regarding revenue arrangements
with multiple deliverables. These updates address how to determine whether an arrangement
involving multiple deliverables contains more than one unit of accounting, and how the
arrangement consideration should be allocated among the separate units of accounting. These
updates are effective for fiscal years beginning after June 15, 2010 and may be applied
retrospectively or prospectively for new or materially modified arrangements. In addition,
early adoption is permitted. By providing another alternative for determining the selling
price of deliverables, the guidance for arrangements with multiple deliverables will allow
companies to allocate arrangement consideration in multiple deliverable arrangements in a
manner that may better reflect the transactions economics and will often result in earlier
revenue recognition. The new guidance modifies the fair value requirements of previous
guidance by allowing best estimate of selling price in addition to vendor-specific
objective evidence (VSOE) and other third-party evidence (TPE) for determining the
selling price of a deliverable. A vendor is now required to use its best estimate of the
selling price when VSOE or TPE of the selling price cannot be determined. In addition, the
residual method of allocating arrangement consideration is no longer permitted under the new
guidance. The Group will adopt ASU 2009-13 for its fiscal year commencing January 1, 2011.
The Group is still assessing the impact of adoption of ASU 2009-13 on its consolidated
financial statements.
 In June 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17 (ASU
2009-17), Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities, which requires an analysis to determine whether a variable interest gives the
entity a controlling financial interest in a variable interest entity. In addition, ASU
2009-17 requires an ongoing reassessment and eliminates the quantitative approach previously
required for determining whether an entity is the primary beneficiary. ASU 2009-17 is
effective for the Company on January 1, 2010. The adoption of ASU 2009-17 is not expected to
have a material impact on the Groups consolidated financial statements.
 In January 2010, the FASB issued 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 (1) the different classes of assets
and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the
activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and
3. The 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 purchases, sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within those fiscal
years. The Group does not expect that the adoption of ASU 2010-06 will have a material impact
on its consolidated financial statements.
 F-24




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent Accounting Pronouncements(continued)
 In April 2010, the FASB issued ASU No. 2010-17 (ASU 2010-17), Revenue Recognition 
Milestone Method. The scope of ASU 2010-17 is limited to arrangements that include milestones
relating to research or development deliverables. The pronouncement specifies guidance that
must be met for a vendor to recognize consideration that is contingent upon achievement of a
substantive milestone in its entirety in the period in which the milestone is achieved. ASU
2010-17 will be effective for fiscal years, and interim periods within those years, beginning
on or after June 15, 2010. Early application is permitted. Companies can apply this guidance
prospectively to milestones achieved after adoption. However, retrospective application to
all prior periods is also permitted. The Group does not expect the adoption of ASU 2010-17
will have a material impact on its consolidated financial statements.
 In April 2010, the FASB issued ASU No. 2010-13 (ASU 2010-13), Compensation-Stock
Compensation (ASC 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security Tradesa
consensus of the FASB Emerging Issues Task Force. ASU 2010-13 clarifies that an employee
share-based payment award with an exercise price denominated in the currency of a market in
which a substantial portion of the entitys equity securities trades should be considered an
equity award assuming all other criteria for equity classification are met. ASU 2010-13 will
be effective for interim and annual periods beginning on or after December 15, 2010, and will
be applied prospectively. Affected entities will be required to record a cumulative catch-up
adjustment for all awards outstanding as of the beginning of the annual period in which the
guidance is adopted. The Group does not expect the adoption of ASU 2010-13 will have a
material impact 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 accounts receivable. As of December 31, 2010, substantially all
of the Groups cash was deposited in financial institutions located in the PRC and in Hong
Kong, which management believes are of high credit quality. Accounts receivable are typically
unsecured and are derived from revenue earned from customers in the PRC. The risk with
respect to accounts receivable is mitigated by credit evaluations the Group performs on its
customers and its ongoing monitoring of outstanding balances.
 Concentration of customers
 There are no revenues from customers which individually represent greater than 10% of the
total revenue for the year ended December 31, 2010.
 F-25




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 3.
    
    CONCENTRATION OF RISKS (continued)
 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.
 The Group transacts all 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.
 Internet and advertising related businesses are subject to significant restrictions under
current PRC laws and regulations. Specifically, foreign investors are not allowed to own more
than a 50% equity interest in any ICP business. In addition, PRC regulations require any
foreign entities that invest in the advertising services industry to have at least a two-year
track record with a principal business in the advertising industry outside of China.
Currently, the Group conducts its operations in China through contractual arrangements
entered between the WOFESs and PRC Domestic Entities. The relevant regulatory authorities may
find the current contractual arrangements and businesses to be in violation of any existing
or future PRC laws or regulations. If so, the relevant regulatory authorities would have
broad discretion in dealing with such violations.
 F-26




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 4.
    
    SHORT-TERM INVESTMENTS/AVAILABLE-FOR-SALE SECURITIES
 December 31,2009
    
    
    2010US$
    
    
    US$Short-term investmentsHeld-to-maturity securitiesFixed rate time deposits
    
    
    *
    
    
    
    21,235
    
    
    
    50,583Trading securitiesAdjustable rate investments
    
    
    **
    
    
    
    7,323
    
    
    
    7,55028,558
    
    
    
    58,133
 December 31,2009
    
    
    2010US$
    
    
    US$Available-for-sale securities Syswin Corporation
    
    
    ***
    
    
    
    
    
    
    
    4,279
    
    
    
    4,279
 
 *
    
    As of December 31, 2009 and 2010, the Group held fixed rate time deposits in
commercial banks and financial institutions with an original maturity of less than one
year.**
    
    As of December 31, 2010, the Group owned US$7,550 (2009US$7,323) of trading
securities which mature in January 13, 2011 (2009March 15, 2010). This investment will
pay variable interest ranging from 1.5% to 6% (20091.98% to 6%) based on a formula
linked to a trading range between the Euro and US$.***
    
    On November 4, 2010, the Group acquired 714,285 ADSs of Syswin Corporation, a US
listed company, at a consideration of US$5,000. The investment constituted a 1.01%
ownership in Syswin Corporation and is classified as available-for-sale security. As of December 31, 2009 and 2010, the fair value of short-term investments approximated
their carrying value.
 The following is a summary of held-to-maturity securities and available-for-sale
securities:
 Held-to-maturity securitiesAmortizedCost (Net
    
    
    Gross
    
    
    GrossCarrying
    
    
    Unrealized
    
    
    UnrealizedAmount)
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueDecember 31, 2010
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$ Fixed rate time
deposits
    
    
    50,583
    
    
    
    
    
    
    
    
    
    
    
    50,583
 F-27




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 4.
    
    SHORT-TERM INVESTMENTS/AVAILABLE-FOR-SALE SECURITIES (continued)
 Available-for-sale securitiesFairValueGross
    
    
    Gross
    
    
    (NetAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    CarryingCost
    
    
    Gains
    
    
    Losses
    
    
    Amount)December 31, 2010
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$Syswin
Corporation
    
    
    5,000
    
    
    
    
    
    
    
    (721
    )
    
    
    4,279
 Held-to-maturity securitiesAmortizedCost (Net
    
    
    Gross
    
    
    GrossCarrying
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAmount)
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2009
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$Fixed rate time
deposits
    
    
    21,235
    
    
    
    
    
    
    
    
    
    
    
    21,235
 5.
    
    ACCOUNTS RECEIVABLE
 December 31,2009
    
    
    2010US$
    
    
    US$Accounts receivable
    
    
    18,417
    
    
    
    29,630Allowance for doubtful accounts
    
    
    (4,432
    )
    
    
    (7,277
    )Accounts receivable, net
    
    
    13,985
    
    
    
    22,353
 For the Years EndedDecember 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Movement in allowance for doubtful accounts:Balance at beginning of the year
    
    
    1,192
    
    
    
    3,330
    
    
    
    4,432Additional provision charged to expenses
    
    
    3,220
    
    
    
    4,430
    
    
    
    6,775Write-offs
    
    
    (1,231
    )
    
    
    (3,332
    )
    
    
    (4,093
    )Foreign currency adjustment
    
    
    149
    
    
    
    4
    
    
    
    163Balance at end of the year
    
    
    3,330
    
    
    
    4,432
    
    
    
    7,277
 F-28




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (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:
 December 31,2009
    
    
    2010US$
    
    
    US$Prepaid expenses
    
    
    514
    
    
    
    669Advance to employees
    
    
    355
    
    
    
    238Rental and other deposits
    
    
    625
    
    
    
    846Commitment deposits *
    
    
    
    
    
    
    7,550Loan receivable **
    
    
    
    
    
    
    10,570Interest receivables
    
    
    334
    
    
    
    1,001Others
    
    
    124
    
    
    
    2391,952
    
    
    
    21,113
 
 *
    
    The amount represents a commitment deposit of RMB50,000 (US$7,550) paid by the
Company to Beijing Wei Ye Hang Real Estate Agent Company (Wei Ye Hang), an independent
third party in exchange for being appointed the exclusive online marketing/listing
service provider for a property development in Hainan, China. The deposit was
interest-free and was not secured by any collateral or security interest. The deposit
was to be repaid within six months after the date of receipt of the deposit by Wei Ye
Hang. Wei Ye Hang repaid the commitment deposit in full on February 1, 2011.**
    
    Loan receivable represents the loan of RMB70,000 (US$10,570) to Beijing Pujin
Finance Company, an independent third party, for a term of six months with an interest
rate of 10% per annum. 7.
    
    PROPERTY AND EQUIPMENT, NET
 Property and equipment consist of the following:
 December 31,2009
    
    
    2010US$
    
    
    US$Office equipment
    
    
    6,015
    
    
    
    10,124Motor vehicles
    
    
    526
    
    
    
    834Leasehold improvement
    
    
    1,185
    
    
    
    2,259Total
    
    
    7,726
    
    
    
    13,217Less: Accumulated depreciation
    
    
    (3,506
    )
    
    
    (5,668
    )4,220
    
    
    
    7,549
 Depreciation expenses amounted to approximately US$1,051, US$1,213 and US$2,378 for the years ended
December 31, 2008, 2009 and 2010, respectively.
 F-29




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 8.
    
    DEPOSIT FOR NON-CURRENT ASSETS
 Deposit for non-current assets represents an interest-free and non-refundable prepayment for
the acquisition of American International Groups (AIG) training center in the United
States of America. The deposit of US$4,600 represents 10% of the total purchase consideration
i.e. US$46,000. As of December 31, 2010, the remaining contractual obligation associated with
this purchase contract is approximately US$41,400, which is further disclosed as a purchase
commitment in Note 19.
 9.
    
    SHORT-TERM LOAN
 The short-term loan outstanding as of December 31, 2010 represents the US denominated loan of
US$3,600 obtained from Pioneer China Investment Holdings Limited, an independent third party,
for the purchase of AIGs training center. The loan is interest-free, has a repayment term of
three months and no collateral was required to be pledged.
 The Company repaid the loan of US$3,600 on March 28, 2011.
 10.
    
    DEFERRED REVENUE
 All service fees and prepaid cards received in advance of the provision of services are
initially recorded as deferred revenue. The balance of deferred revenue as of December 31,
2010 consisted of only service fees received in advance.
 11.
    
    ACCRUED EXPENSES AND OTHER LIABILITIES
 December 31,2009
    
    
    2010US$
    
    
    US$Payroll and welfare benefit
    
    
    5,487
    
    
    
    13,758Other taxes and surcharges payable*
    
    
    11,921
    
    
    
    20,140Accrued unrecognized tax benefits and related interest
and penalties (note 15)
    
    
    18,705
    
    
    
    10,695Others
    
    
    1,229
    
    
    
    1,75637,342
    
    
    
    46,349
 
 *
    
    Other taxes and surcharges payable consists of business tax (BT), cultural
industry development surcharges (CIDS), city construction tax (CCT) and withholding
individual income tax (IIT). F-30




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 12.
    
    DIVIDEND PAYABLE
 Pursuant to minutes of meetings of directors dated December 12, 2007, and February 20, 2009,
the Companys board of directors declared the distribution of dividends to the shareholders
in the amount of US$41,070 and US$43,935, respectively. During the year ended December 31,
2008, 2009 and 2010, the Group paid US$16,210, US$24,241 and nil, respectively, to
shareholders. According to minutes of the meeting of board and directors dated August 4,
2010, the Company resolved that the outstanding dividend payable to shareholders should be
paid in US dollars using the exchange rates as of December 31, 2007 and December 31, 2008.
Accordingly, the balance of dividend payable as of December 31, 2010 was adjusted based on
the approved exchange rates and the difference was debited to additional paid-in capital.
 13.
    
    SHAREHOLDERS EQUITY
 Repurchased 88,000 ordinary sharesOn August 12, 2009, the Company repurchased 88,000 ordinary shares from a shareholder at a
price of US$5.01 per share. The repurchased shares were cancelled and the difference between
the par value and the repurchase price of US$429 was debited to retained earnings.Repurchased and cancelled 35,000 vested share optionAt the same day, the Company also repurchased and cancelled 35,000 vested share options at a
price of US$3.04 per option, which approximated its fair value and the repurchase price of
US$107 was debited to additional paid-in capital.Qualified initial public offeringOn September 16, 2010, the Company completed its qualified initial public offering of 246,914
ADSs (equivalent to 987,656 ordinary shares) for gross proceeds of US$10,494. For the years
ended December 31, 2009 and 2010, initial public offering of nil and US$2,760, respectively,
were expensed and are included in the general and administrative expenses. The difference
between the par value of the ordinary shares and the gross proceeds of the offering of
US$10,367 was credited to additional paid-in capital.
 14.
    
    RESTRICTED NET ASSETS
 The Companys ability to pay dividends is primarily dependent on the Company receiving
distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations
permit payments of dividends by the Groups PRC subsidiaries only out of their 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 subsidiaries.
 F-31




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 14.
    
    RESTRICTED NET ASSETS (continued)
 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. WOFEs 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 a statutory common reserve of 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 a
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 as cash dividends.
The PRC Domestic Entities were established as domestic invested enterprises and therefore are
subject to the above mentioned 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 are restricted in their ability to transfer a portion of their net
assets to the Company.
 Amounts restricted include paid-in capital, statutory reserve funds and net assets of the
Companys PRC subsidiaries, as determined pursuant to PRC generally accepted accounting
principles, totaling approximately US$196,991 as of December 31, 2010; 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 and 2010 and for each of the three years in
the period ended December 31, 2010 are disclosed in Note 23.
 15.
    
    TAXATION
 Cayman Islands
 Under the current laws of the Cayman Islands, the Company and China Home Holdings Limited are
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.
 F-32




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 15.
    
    TAXATION (continued)
 British Virgin Islands
 Under the current laws of the British Virgin Islands, Pendiary, Selovo and China Home
Holdings (BVI) Limited are not subject to tax on income or capital gains. In addition, upon
payments of dividends by these companies to their shareholders, no British Virgin Islands
withholding tax will be imposed.
 Hong Kong
 Bravo Work, Max Impact, China Index, China Home Holdings (HK) Limited and China Real Estate
Agent University are incorporated in Hong Kong and do not conduct any substantive operations
of their own.
 No provision for Hong Kong profits tax has been made in the financial statements as the
Company has no assessable profits for the three years ended December 31, 2010. In addition,
upon payment of dividends by Bravo Work, Max Impact, China Index, China Home Holdings (HK)
and China Real Estate Agent University to their shareholders, no Hong Kong withholding tax
will be imposed.
 China
 Prior to January 1, 2008, PRC enterprise income tax (EIT), was generally assessed at the rate
of 33% of taxable income. However, five PRC entities of the Group including
SouFunMedia, SouFun Network, Beijing Technology, Beijing JTX Technology and Beijing Zhongzhi,
obtained the certificate of High and New Technology Enterprise (HNTE) within the
Zhongguancun Science Park in Beijing. SouFun Media, SouFun Network, Beijing Technology and
Beijing JTX Technology were granted a reduced Enterprise Income Tax (EIT) rate of 15% as
well as a tax holiday of three years exemption followed by three years of 50 percent
reduction starting from 2003, 2006, 2006 and 2007, respectively. Beijing Zhongzhi was granted
a one-year EIT exemption for the year 2007.
 In March 2007, a new enterprise income tax law (the New EIT Law) in the PRC was enacted
which became effective on January 1, 2008. The New EIT Law applies a unified 25% EIT rate to
both foreign invested enterprises and domestic enterprises, unless a preferential EIT rate is
otherwise stipulated. A five-year transition period is allowed for those enterprises which
enjoyed a reduced EIT rate prior to year 2008 with the transitional EIT rates of 18%, 20%,
22%, 24% and 25% for years 2008, 2009, 2010, 2011 and 2012, respectively. Thus, the
applicable EIT rate for SouFun Shenzhen and SouFun Shanghai is 18%, 20% and 22% for 2008,
2009 and 2010, respectively.
 On April 14, 2008, relevant governmental regulatory authorities released qualification
criteria, application procedures and assessment processes for HNTE status under the New EIT
law which would entitle qualified and approved entities to a favorable statutory tax rate of
15%. Up to December 31, 2008, no subsidiary of the Group obtained the certificate of HNTE
under the New EIT law. The Group have accounted for their current and deferred income tax based on the enacted tax rate of 25%
as the applicable EIT rate for 2008.
 F-33




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 15.
    
    TAXATION (continued)
 China(continued)
 In April 2009, the State Administration for Taxation (SAT) issued Circular Guoshuihan
[2009] No. 203 (Circular 203) stipulating that HNTEs recognized under the new criteria
should apply with in-charge tax authorities to enjoy the reduced EIT rate of 15% provided
under the New EIT Law starting from the year when the new HNTE certificate becomes effective.
In addition, an HNTE can continue to enjoy its remaining tax holiday from January 1, 2008
provided that it has obtained the HNTE certificate according to the new recognition criteria
set by the New EIT Law and the relevant regulations.
 In May and June 2009, SouFun Media, SouFun Network, Beijing Technology, Beijing JTX
Technology and Beijing Zhongzhi obtained the new HNTE certificate with effect from January 1,
2009. As approved by the in-charge tax authority, Beijing Zhongzhi and SouFun Media are
entitled to enjoy the reduced EIT rate of 15% for years 2009, 2010 and 2011. Beijing
Technology, SouFun Network and Beijing JTX Technology are entitled to continue their
remaining tax holiday granted under the old EIT Law.
 The SAT subsequently issued Circular Guoshuihan [2010] No.157 (Circular 157) in April 2010
to further clarify the applicable EIT rate for HNTEs. According to Circular 157, HNTEs
should elect one of the following two EIT treatments and no changes could be made once the
election is made:
 
    
    The applicable EIT rate is 15% but the remaining tax holiday should no longer be
enjoyed; or
 
    
    The remaining tax holiday could be enjoyed based on the transitional EIT rates,
i.e. 18%, 20%, 22% 24% and 25% for the years from 2008 to 2012.
 Circular 157 emphasizes that HNTEs should no longer continue their remaining tax holiday
based on the 15% reduced rate provided under the New EIT Law. The effective date of Circular
157 is January 1, 2008.
 As a consequence of Circular 157, the applicable EIT rate for Beijing Technology, SouFun
Network and Beijing JTX Technology should be 11% (i.e. 22% with 50% reduction) for 2010.
 Dividends paid by PRC subsidiaries of the Group 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 on dividends would be 10%, unless a foreign investors tax jurisdiction has a
tax treaty with China that provides for a lower withholding tax rate and the foreign investor
is recognized as the beneficial owner of the income under the relevant tax rules.
 F-34




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 15.
    
    TAXATION (continued)
 Income (loss) before income taxes consists of:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Non-PRC
    
    
    (3,194
    )
    
    
    (174
    )
    
    
    (7,053
    )PRC
    
    
    45,346
    
    
    
    50,585
    
    
    
    88,42342,152
    
    
    
    50,411
    
    
    
    81,370
 The income tax expense (benefit) is comprised of:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Current tax expense
    
    
    13,255
    
    
    
    5,661
    
    
    
    15,621Deferred tax expense(benefit) due to tax
rate change
    
    
    
    
    
    
    (9,525
    )
    
    
    3,487Tax benefit of operating loss carryforwards
    
    
    (358
    )
    
    
    
    
    
    
    Change in judgment of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (289
    )Deferred tax expense (benefit)
    
    
    5,908
    
    
    
    1,665
    
    
    
    (597
    )18,805
    
    
    
    (2,199
    )
    
    
    18,222
 A reconciliation between the income tax expense (benefit) and the amount computed by applying
the statutory tax rate to income before income taxes is as follows:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Income before income taxes
    
    
    42,152
    
    
    
    50,411
    
    
    
    81,370Income tax at applicable tax rate of 25%
    
    
    10,538
    
    
    
    12,603
    
    
    
    20,342Effect of international tax rate differences
    
    
    734
    
    
    
    20
    
    
    
    445Non-deductible expenses
    
    
    1,799
    
    
    
    2,245
    
    
    
    3,677Effect of tax holiday
    
    
    (2,931
    )
    
    
    (10,691
    )
    
    
    (11,790
    )Effect of tax rate changes
    
    
    
    
    
    
    (9,525
    )
    
    
    4,359Investment basis difference in PRC Entities
    
    
    6,599
    
    
    
    1,488
    
    
    
    863Change in valuation allowance
    
    
    203
    
    
    
    364
    
    
    
    (357
    )Unrecognized tax benefits
    
    
    (24
    )
    
    
    (165
    )
    
    
    (170
    )Changes in interest and penalty on
unrecognized tax benefits
    
    
    1,887
    
    
    
    1,462
    
    
    
    85318,805
    
    
    
    (2,199
    )
    
    
    18,222
 F-35




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 15.
    
    TAXATION (continued)
 A roll-forward of the unrecognized tax benefits, exclusive of related interest and penalties,
is as follows:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Balancebeginning
    
    
    2,667
    
    
    
    13,810
    
    
    
    13,657Increase for tax positions in current year
    
    
    10,985
    
    
    
    
    
    
    
    Decrease relating to settlements with tax
authorities
    
    
    
    
    
    
    
    
    
    
    (8,055
    )Decrease relating to prior year tax position
    
    
    (24
    )
    
    
    (165
    )
    
    
    (170
    )Foreign currency adjustment
    
    
    182
    
    
    
    12
    
    
    
    421Balanceending
    
    
    13,810
    
    
    
    13,657
    
    
    
    5,853
 The Group has recorded an unrecognized tax benefit, including related interest and penalties,
of approximately US$17,391, US$18,705, and US$10,695 as at December 31, 2008, 2009 and 2010,
respectively, which is included in the account of accrued expenses and other liabilities.
As of December 31, 2008, 2009 and 2010, unrecognized tax benefits of US$17,391, US$18,705,
and US$10,695 respectively, would impact the effective tax rate, if recognized.
 In April 2010, the Company settled US$8,055 of unrecognized tax benefits originated in 2008
as well as the related interest of US$1,228.
 During the years ended December 31, 2008, 2009, and 2010, the Company recognized
approximately US$1,887, US$1,462 and US$853 in income tax expenses for interest and penalties
related to uncertain tax positions. Accrued interest and penalties related to unrecognized
tax benefits were approximately US$5,048 and US$4,842 at December 31, 2009, and 2010,
respectively.
 The Companys PRC entities are subject to the New EIT Law since January 1, 2008. The PRC
income tax returns for fiscal years 2006 through 2010 remain open for examination.
 The aggregate amount and per share effect of the tax holidays are as follows:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$(amounts in thousands except for theper share data)The aggregate amount
    
    
    (2,931
    )
    
    
    (10,691
    )
    
    
    (11,790
    )The aggregate effect on
basic and diluted earnings
per share:Basic
    
    
    0.04
    
    
    
    0.14
    
    
    
    0.16Diluted
    
    
    0.04
    
    
    
    0.14
    
    
    
    0.15
 F-36




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 15.
    
    TAXATION (continued)
 The components of deferred taxes are as follows:
 For the Year Ended December 31,2009
    
    
    2010US$
    
    
    US$Deferred tax assets, current portionAccrued expenses
    
    
    471
    
    
    
    2,129Inventories
    
    
    123
    
    
    
    Total deferred tax assets, current portion
    
    
    594
    
    
    
    2,129Deferred tax assets, non-current portionNet operating losses
    
    
    1,335
    
    
    
    1,090Less: valuation allowance
    
    
    (828
    )
    
    
    (471
    )Total deferred tax assets, non-current portion
    
    
    507
    
    
    
    619Deferred tax liabilities, current portionDeferred revenue
    
    
    (123
    )
    
    
    Deferred tax liabilities, non-current portionInvestment basis in PRC entities
    
    
    (5,687
    )
    
    
    (10,219
    )Deferred tax assets, current portion, net
    
    
    594
    
    
    
    2,129Deferred tax assets, non-current portion, net
    
    
    507
    
    
    
    619Deferred tax liabilities, current portion, net
    
    
    (123
    )
    
    
    Deferred tax liabilities, non-current portion, net
    
    
    (5,687
    )
    
    
    (10,219
    )
 As of December 31, 2010, the Company had net operating losses from several of its PRC
entities of approximately US$2,161 which can be carried forward to offset future taxable
profit. The net operating loss carryforwards as of December 31, 2010 will expire in years
2011 to 2013 if not utilized.
 Deferred tax liabilities arising from undistributed earnings
 Aggregate undistributed earnings of the PRC subsidiaries that are available for distribution
to non-PRC parent companies at December 31, 2009 and 2010 are considered to be indefinitely
reinvested under ASC 740-30 Income Taxes: Other Considerations or Special Areas
(Pre-codification: Accounting Principles Board Opinion No. 23 Accounting for Income
Tax-Special Areas) and accordingly, no provision for tax has been provided for the outside
basis of the PRC entities.
 Deferred tax liabilities arising from the aggregate undistributed earnings of the PRC
entities that are available for distribution to PRC tax resident parent companies (i.e. WOFEs) amounted to US$5,687 and US$10,219 at December 31, 2009 and 2010,
respectively.
 F-37




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 16.
    
    SHARE-BASED PAYMENTS
 Stock related award incentive plan of 1999On September 1, 1999, the Companys shareholders approved the Stock Related Award Incentive
Plan (the 1999 Plan). Under the 1999 Plan, the Company may issue up to 12% of the fully
diluted ordinary shares of the company to its directors and employees. The purpose of the
1999 Plan is to provide additional incentive and motivation to its directors and employees,
through an equity interest in the Company, to work towards increasing the value of the
Company. The 1999 Plan provides for accelerated vesting, subject to certain conditions, if
there is a change in control. The 1999 Plan has no stated expiry date.The exercise price, vesting and other conditions of individual awards are determined by the
Chairman of the Company. Typically the awards are subject to a 3 to 4 year service vesting
condition and expire 10 or 15 years after the grant date. In addition, the grantee must
return all awards and any proceeds from the sale of the awards if he/she violates certain
provisions including a non-compete condition for a period of 2 years after cessation of
employment with the Company. The non-compete condition does not give rise to an in-substance
service condition.Starting from December 31, 2006, the Company awarded Special Stock Options to its employees
and directors. Terms for Special Stock Options are the same as other option grants except the
underlying ordinary shares to be received upon exercise of the vested options do not have any
entitlement to vote. Every two Special Stock Options is exercisable into one non-voting
ordinary share. The Companys board of directors has the sole ability to authorize the
creation of any class of ordinary shares pursuant to our Articles of Association; however, no
non-voting class of ordinary shares has been created as at December 31, 2010. Under Cayman
Islands law, the grant of stock options is legally valid even though the underlying
non-voting class of ordinary share has not yet been formed. Since the Company has the ability
to create such a class of shares without approval from any other party at any time, the
Special Stock Options have been accounted for as equity awards and measured at the date on
which the terms of the grant was communicated to the grantee (the grant date). These
Special Stock Options vest 10% after the first year of service, 20% after the second year of
service, 40% after the third year of service and 30% after the fourth year of service. The
contractual life of the Special Stock Option is ten years from the date of grant.From 2001 to 2003, the Company granted stock options which contained an exercise price
denominated in HK$. Since this denomination is neither the functional currency of the Company
nor the currency in which the grantee is paid, these stock options are dual indexed to
foreign exchange and the shares of the Company. Accordingly, they are accounted for as
liability awards that are remeasured at fair value with changes recognized in the
consolidated statements of operations.
 F-38




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 16.
    
    SHARE-BASED PAYMENTS (continued)
 As at December 31, 2009, there were 1,739,500 stock options outstanding with an weighted
average exercise price of HK$2.59 and weighted average remaining contractual term of 7.22
years which are accounted for as liability awards. These liability awards are fully vested.
In April 2010, the Company modified the exercise prices of these vested stock options from a
range of HK$1 to HK$5 to a range of US$0.13 to US$0.64. The modification changed the
liability awards into equity awards because the stock options were no longer dual indexed to
the Companys ordinary shares and foreign exchange. Additionally, as the modification did not
result in any incremental fair value in the new equity awards granted, no additional
compensation expense was recognized. There have been no grants of liability awards during any
of the years presented.
 Share-based compensation expense for the liability awards were approximately US$745, US$1,242
and nil for the years ended December 31, 2008, 2009 and 2010.
 2010 Stock related award incentive plan
 On August 4, 2010, the Companys Board of Directors and shareholders approved the Stock
Related Award Incentive Plan (the 2010 Plan). Under the 2010 Plan, the Company may issue up
to 10% of the total number of ordinary shares, including ordinary shares issuable upon
conversion of any preferred shares to its directors and employees. The purpose of the 2010
Plan was to recognize and acknowledge the contributions made to the Company by eligible
employees and to promote the success of the Companys business. The 2010 Plan allows the
board of directors, or its designated committee, to establish the performance criteria when
granting stock options on the basis of any one of, or combination of, increase in share
price, earnings per share, total shareholder return, return on equity, return on assets,
return on investment, net operating income, cash flow, revenue, economic value added,
personal management objectives, or other measures of performance selected by our board of
directors, or its designated committee. Partial achievement of the specified criteria may
result in a vesting corresponding to the degree of achievement as specified in the detail
rules.
 The exercise price main vesting and other conditions of individual awards are determined by
the Chairman of the Company. Typically the awards are subject to a 4 year service vesting
condition and certain performance conditions and expire 10 years after the grant date. In
addition, the grantee must return all awards and any proceeds from the sale of the awards if
he/she violates certain provisions.
 F-39




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 16.
    
    SHARE-BASED PAYMENTS (continued)
 A summary of the equity award activity under the 1999 Plan and 2010 Plan for the years
presented is stated below:
 WeightedWeighted-
    
    
    Weighted-
    
    
    AverageAverage per
    
    
    Average
    
    
    RemainingShare
    
    
    Grant-date
    
    
    Contractual
    
    
    AggregatedNumber of
    
    
    Exercise
    
    
    Fair Value
    
    
    Term
    
    
    IntrinsicOptions Granted to Employees
    
    Shares (*)
    
    
    Price
    
    
    per Share
    
    
    (Years)
    
    
    ValueOutstanding, December 31, 2009
    
    
    7,843,600
    
    
    
    US$4.53
    
    
    
    US$1.73Granted
    
    
    4,037,500
    
    
    
    US$10.30
    
    
    
    US$5.61Forfeited
    
    
    (92,512
    )
    
    
    US$8.09
    
    
    
    US$3.50Expired
    
    
    (38,038
    )
    
    
    US$4.21
    
    
    
    US$1.47Excised
    
    
    (1,166,250
    )
    
    
    US$0.44
    
    
    
    US$0.08Reclassified from liability awards
    
    
    1,739,500
    
    
    
    US$0.33
    
    
    
    US$0.02Outstanding, December 31, 2010
    
    
    12,323,800
    
    
    
    US$6.19
    
    
    
    US$2.86
    
    
    
    8.47
    
    
    
    US$144,080Vested and expected to vest at
December 31, 2010
    
    
    12,323,800
    
    
    
    US$6.19
    
    
    
    US$2.86
    
    
    
    8.47
    
    
    
    US$144,080Exercisable at December 31, 2010
    
    
    6,446,020
    
    
    
    US$3.27
    
    
    
    US$1.27
    
    
    
    7.74
    
    
    
    US$94,166
 
 *
    
    Including both voting and nonvoting shares. The aggregate intrinsic value in the table above represents the difference between the fair
value of the Companys ordinary share as at December 31, 2010 and the exercise price.
 As of December 31, 2010, there was US$23,942 of unrecognized share-based compensation cost
related to equity awards; that is expected to be recognized over a weighted-average vesting
period of 3.46 years. 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
the expectation.
 The fair value for the 1999 Plan was estimated using the Binominal Option Pricing Model by
the Company with assistance from Jones Lang LaSalle Sallmanns, an external valuation firm.
The volatility assumption was estimated based on the price volatility of the shares of
comparable companies in the internet media business because the Company was not a public
company at the grant date and therefore did not have data to calculate expected volatility of
the price of the underlying ordinary shares over the expected term of the option. The
expected term was estimated based on the resulting output of the binomial option pricing
model. The risk-free rate was based on the market yield of US Treasury Bonds & Notes with
maturity terms equal to the expected term of the option awards. Forfeitures were estimated
based on historical experience. The suboptimal exercise factor of 1.5 is based on external consultants research on the early exercise behavior of employees with
stock options.The fair value for the 2010 plan was estimated on the date of grant using the Black-Scholes option
pricing model by the management. The volatility assumption was estimated based on the implied
volatilities of comparable public companies due to the limited historical volatility of the
Companys share. The expected term was estimated based on the average between the vesting term and
contractual term. The risk-free rate for periods within the contractual life of the option is based
on the U.S. Treasury yield
 F-40




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 16.
    
    SHARE-BASED PAYMENTS (continued)
 curve in effect at the time of grant. Forfeitures were estimated based on historical
experience.
 The following table presents the assumptions used to estimate the fair values of the share
options granted in the periods presented:
 2008
    
    
    2009
    
    
    2010Risk-free interest rate
    
    
    1.69
    %
    
    
    3.39
    %
    
    
    1.96
    %Dividend yield
    
    
    1
    %
    
    
    
    
    
    
    Expected volatility range
    
    
    77.67
    %
    
    
    36.03
    %
    
    
    50.86
    %Weighted average expected life
    
    3.59 years
    
    6.32 years
    
    6.35years
 The total fair value of equity awards vested during the year ended December 31, 2008, 2009
and 2010 were US$1,469, US$2,434 and US$2,442, respectively.
 Total share-based compensation expense of share-based awards granted to employees and
directors is as follows:
 For the Year Ended December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Cost of revenues
    
    
    268
    
    
    
    489
    
    
    
    749Selling expenses
    
    
    323
    
    
    
    595
    
    
    
    1,035General and administrative expenses
    
    
    2,126
    
    
    
    3,056
    
    
    
    3,2912,717
    
    
    
    4,140
    
    
    
    5,075
 17.
    
    RELATED PARTY TRANSACTIONS
 a)
    
    Related Parties
 Name of Related Parties
    
    Relationship with the GroupTianquan Vincent Mo
    
    Executive chairman of the board of directorsJiangong Dai
    
    Chief executive officer of the CompanyCNED Hengshui Zhong Cheng
Wanyuan Home CO., Ltd.
(Hengshui)
    
    A company under the control of Mr. Tianquan
Vincent MoBeijing Dong Fang Xi Mei
Investment Consulting
Co., Ltd. (Dong Fang Xi
Mei)
    
    A company under the control of Mr.
Tianquan Vincent Mo
 F-41




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), 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 years ended
December 31, 2008, 2009 and 2010:
 2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Short-term interest-free loans to:Tianquan Vincent Mo
    
    
    279
    
    
    
    326
    
    
    
    12Jiangong Dai
    
    
    272
    
    
    
    264
    
    
    
    Repayment of interest-free loans by:Tianquan Vincent Mo
    
    
    292
    
    
    
    198
    
    
    
    633Jiangong Dai
    
    
    317
    
    
    
    235
    
    
    
    324Short-term Loan to:Hengshui *
    
    
    
    
    
    
    7,323
    
    
    
    Repayment of short-term loan by:Hengshui *
    
    
    
    
    
    
    637
    
    
    
    6,693Interest on loan to:Hengshui *
    
    
    
    
    
    
    85
    
    
    
    305Commitment deposit paid to:Hengshui *
    
    
    
    
    
    
    
    
    
    
    7,342Dong Fang Xi Mei **
    
    
    
    
    
    
    
    
    
    
    2,197Repayment of Commitment deposit byHengshui*
    
    
    
    
    
    
    
    
    
    
    7,505Dong Fang Xi Mei **
    
    
    
    
    
    
    
    
    
    
    2,224Marketing services provided to:Dong Fang Xi Mei **
    
    
    
    
    
    
    
    
    
    
    375Advance received from:Hengshui *
    
    
    
    
    
    
    
    
    
    
    88
 
 *
    
    The amount as of December 31, 2009 represented a loan to Hengshui.
The loan bore a stated interest rate of 10% per annum with a fixed repayment term
of 6 months. The amount has been fully repaid on May 5, 2010.On May 4, 2010, the Company paid a commitment deposit of RMB50,000 (US$7,342) to
Hengshui in exchange for being appointed as its exclusive online marketing or
listing service provider. The deposit was interest-free. Hengshui has pledged as
collateral an unperfected security interest over some of its properties. The
deposit of RMB50,000 (US$7,505) has been fully repaid on November 11, 2010.**
    
    The amount represents a commitment deposit of RMB15,000 (US$2,197) paid by the Company to Dong Fang Xi Mei in exchange for being appointed the exclusive online marketing or
listing service provider for a property development in Hainan, China. The deposit is interest-free
and is not secured by any collateral or security interest. The deposit was to be repaid within six
months after the date of receipt of the deposit by Dong Fang Xi Mei. However, pursuant to a
termination agreement dated July 5, 2010, Dong Fang Xi Mei returned to the Company the commitment
deposit in full RMB15,000 (US$2,224) on July 16, 2010 and the online marketing services contract
was terminated. F-42




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 17.
    
    RELATED PARTY TRANSACTIONS (continued)
 c)
    
    The Group had the following related party balances at the end of the periods:
 As at December 31,2009
    
    
    2010US$
    
    
    US$Amount due from related parties:Tianquan Vincent Mo *
    
    
    621
    
    
    
    Jiangong Dai *
    
    
    322
    
    
    
    Hengshui
    
    
    6,686
    
    
    
    7,629
    
    
    
    
 
 *
    
    The balances as of December 31, 2009 were unsecured, interest-free
and repayable on demand. 18.
    
    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 PRC subsidiaries of the Group make contributions to the government for these
benefits based on certain percentages of the employees salaries. 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 approximately US$4,327, US$5,027 and
US$10,083, for the years ended December 31, 2008, 2009 and 2010, respectively.
 19.
    
    COMMITMENTS AND CONTINGENCIES
 Operating lease commitments
 Future minimum payments under non-cancelable operating leases with initial terms in excess of
one year consist of the following at December 31, 2010:
 US$2011
    
    
    5,7802012
    
    
    4,3332013
    
    
    77010,883
 Payments under operating leases are expensed on a straight-line basis over the periods of
their respective leases. The companys lease arrangements have no renewal options, rent
escalation clauses, restrictions or contingent rents and are all conducted with third
parties. For the years ended December 31, 2008, 2009 and 2010, total rental expenses for all
operating leases amounted to approximately US$4,024, US$4,565 and US$7,327, respectively.
 F-43




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 19.
    
    COMMITMENTS AND CONTINGENCIES (continued)
 Purchase commitment
 On December 23, 2010, the Group entered into a contract with Sahn Eagle LLC to purchase AIGs
training center in the United States of America for a consideration of US$46,000. As of
December 31, 2010, a deposit of US$4,600 (representing 10% of the total consideration) was
paid and the remaining balance of approximately US$41,400 is scheduled to be paid within the
first six months of 2011.
 Income Taxes
 As of December 31, 2010, the Group has recognized approximately US$5,853 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.
 20.
    
    SEGMENT REPORTING
 In accordance with ASC 280-10 Segment Reporting: Overall, the Groups chief operating
decision maker has been identified as the chief executive officer, who makes resource
allocation decisions and assesses performance based on the Groups consolidated results; the
Group has only one reportable segment.
 Geographic disclosures:
 As the Group generates substantially all of its revenues from customers domiciled in the PRC,
no geographical segments are presented. All of the Groups long-lived assets are located in
the PRC.
 F-44




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 21.
    
    EARNINGS PER SHARE
 Basic and diluted earnings per share for each of the years presented are calculated as
follows:
 2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$(amounts in thousands except for theper share data)Numerator:Net income attributable to
ordinary shareholders used in
calculating income per ordinary
sharebasic and diluted
    
    
    23,381
    
    
    
    52,652
    
    
    
    63,108Denominator:Weighted average number of
ordinary shares outstanding
used in calculating basic
earnings per share
    
    
    74,020,217
    
    
    
    73,986,129
    
    
    
    74,683,593Employee stock options
    
    
    3,071,980
    
    
    
    3,432,831
    
    
    
    5,537,040Weighted average number of
ordinary shares outstanding
used in calculating diluted
earnings per share
    
    
    77,092,197
    
    
    
    77,418,960
    
    
    
    80,220,633Basic earnings per share
    
    
    0.32
    
    
    
    0.71
    
    
    
    0.85Diluted earnings per share
    
    
    0.30
    
    
    
    0.68
    
    
    
    0.79
 Options to purchase 4,538,946 (exercise price of US$5 per share), 3,012,762 (exercise price
of US$5 to US$10 per share) and 4,021,800 (exercise price of US$10 to US$10.63 per share),
ordinary shares were outstanding during the year ended 2008, 2009 and 2010 but were not
included in the computation of diluted earnings per share as the effect would be
antidilutive.
 22
    
    SUBSEQUENT EVENTS
 On February 4, 2011, the Company announced a 4-for-1 ADS stock split, representing a stock
ratio change for Class A ordinary shares from one (1) American depositary share (ADS) for
four (4) Class A ordinary shares to one (1) ADS for one (1) Class A ordinary share. The
effect of the stock split on the ADS trading price on New York Stock Exchange took place on
February 18, 2011.
 On March 2, 2011, China Index, an investment holding subsidiary, obtained bank borrowing of
amount US$45,000 from a financial institution in PRC and secured by restricted cash with a
carrying value of RMB310,000. Interest shall be charged at the rate per annum equal to the
sum of LIBOR plus a margin of1.9% par value and maturity date shall be the earlier of either
the date falling thirty six months after the initial drawdown date or the date falling
fifteen business days before the expiry date of corresponding standby letters of credit which
stated specific secured conditions.
 Subsequent to December 31, 2010, an unrealized loss of US$1,564 was recorded in other comprehensive income for
the period from January 1, 2011 to June 10, 2011 as a result of the
decline in the share price of the Groups short-term
investments classified as available-for-sale securities.
 F-45




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 23
    
    PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (See Note 14)
 Condensed balance sheets
 As at December 31,2009
    
    
    2010US$
    
    
    US$ASSETSCurrent assets:Cash
    
    
    112
    
    
    
    632Available-for- sale security
    
    
    
    
    
    
    4,279Amount due from related party
    
    
    245
    
    
    
    225Total current assets
    
    
    357
    
    
    
    5,136Non-current assets:Investment in subsidiaries and PRCDomestic Entities
    
    
    108,703
    
    
    
    199,565Total assets
    
    
    109,060
    
    
    
    204,701LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term loan
    
    
    
    
    
    
    3,600Accrued expenses and other liabilities
    
    
    3
    
    
    
    3Dividend payable
    
    
    43,906
    
    
    
    39,635Amount due to subsidiaries
    
    
    40,713
    
    
    
    38,899Total liabilities
    
    
    84,622
    
    
    
    82,137Commitments and contingenciesShareholders equity:Ordinary shares (par value of HK$1 per share at
December 31, 2009 and 2010, respectively;
Authorized600,000,000 shares at December 31,
2009 and 2010 respectively; Issued and
outstanding73,932,217 and 76,065,755 shares at
December 31, 2009 and 2010, respectively)
    
    
    9,489
    
    
    
    9,743Additional paid-in capital
    
    
    9,279
    
    
    
    39,402Accumulated other comprehensive income
    
    
    5,670
    
    
    
    10,311Retained earnings
    
    
    
    
    
    
    63,108Total shareholders equity
    
    
    24,438
    
    
    
    122,564Total liabilities, and shareholders equity
    
    
    109,060
    
    
    
    204,701
 F-46




---



##### Table of Contents



SOUFUN HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of United States Dollar (US$), except for number of shares and per share data)
 23
    
    PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (See
Note 14) (continued)
 Condensed statements of operations
 For the Year
    
    
    For the Year
    
    
    For the YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$General and
administrative expenses
    
    
    
    
    
    
    
    
    
    
    (1,127
    )Operating loss
    
    
    
    
    
    
    
    
    
    
    (1,127
    )Equity in profits of
subsidiaries and PRC
Domestic Entities
    
    
    26,205
    
    
    
    52,693
    
    
    
    64,715Foreign exchange loss
    
    
    (2,824
    )
    
    
    (41
    )
    
    
    (480
    )Net income
    
    
    23,381
    
    
    
    52,652
    
    
    
    63,108
 Condensed statements of cash flows
 2008
    
    
    2009
    
    
    2010US$
    
    
    US$
    
    
    US$Net cash used in operating activities
    
    
    (3
    )
    
    
    
    
    
    
    (1,104
    )Net cash provided by (used in) investing activities
    
    
    16
    
    
    
    29
    
    
    
    (12,760
    )Net cash generated from financing activities
    
    
    
    
    
    
    
    
    
    
    14,384Net increase in cash
    
    
    13
    
    
    
    29
    
    
    
    520Cash at beginning of the year
    
    
    70
    
    
    
    83
    
    
    
    112Cash at end of the year
    
    
    83
    
    
    
    112
    
    
    
    632Supplemental schedule of cash flow in information:Dividend paid by subsidiaries of the Company:
    
    
    16,210
    
    
    
    24,241
    
    
    
    
 Basis of Presentation
 For the presentation of the parent company, only condensed financial information is required.
The Company records its investment in subsidiaries and PRC Domestic Entities, which it
effectively controls through contractual agreements, under the equity method of accounting as
prescribed in ASC 323-10, Investments-Equity Method and Joint Ventures: Overall. Such
investments are presented on the condensed balance sheets as Investment in Subsidiaries and
PRC Domestic Entities and the subsidiaries and PRC Domestic Entities profit or loss as
Equity in profit or loss of subsidiaries and PRC Domestic Entities on the condensed
statements of operations. The parent companys condensed financial statements should be read
in conjunction with the Companys consolidated financial statements.
 F-47