##### Table of Contents



UNITED STATESSECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 (Mark One)
 o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
fiscal year ended December 31, 2008.
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from _______ to _______
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission file number 001-
 Focus Media Holding Limited
 (Exact Name of Registrant as Specified in Its Charter)
 Cayman Islands
(Jurisdiction of Incorporation or Organization)
 28-30/F, Zhao Feng World Trade Building
369 Jiangsu Road, Shanghai 200050, PRC
(Address of Principal Executive Offices)
 Contact Person: Mr. Alex Yang
Acting Chief Financial Officer
Phone: +86 21 3212 4661
Facsimile: +86 21 5240 0228
Address: 28-30/F, Zhaofeng World Trade Building
369 Jiangsu Road, Shanghai 200050, P.R.C.
*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares, par value US$0.00005 per share
    
    Nasdaq Global Market
  (Title of Class)
  (Title of Class)
  664,692,030 Ordinary Shares
  þ o
  o þ
   þ o
  o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o  þ
 o
  o þ
  o þ
 (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
  o o




---



##### 



FOCUS MEDIA HOLDING LIMITED
 FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2008
Table of Contents
 SUPPLEMENTAL INFORMATION
    
    
    1FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED
    
    
    2PART I
    
    
    4ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    4ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    4ITEM 3. KEY INFORMATION
    
    
    4ITEM 4. INFORMATION ON THE COMPANY
    
    
    34ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    52ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    52ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    82ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    91ITEM 8. FINANCIAL INFORMATION
    
    
    98ITEM 9. THE OFFER AND LISTING
    
    
    99ITEM 10. ADDITIONAL INFORMATION
    
    
    100ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    111ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    112PART II
    
    
    112ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    112ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
    
    
    112ITEM 15. CONTROLS AND PROCEDURES
    
    
    113ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    116ITEM 16B. CODE OF ETHICS
    
    
    116ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    116ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    116ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
    
    
    116ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    117ITEM 16G. CORPORATE GOVERNANCE
    
    
    117PART III
    
    
    117ITEM 17. FINANCIAL STATEMENTS
    
    
    117ITEM 18. FINANCIAL STATEMENTS
    
    
    117ITEM 19. EXHIBITS
    
    
    117EX-10.168  Termination and Release Agreement, dated as of December 8, 2008, among Focus Media Holding Limited, CGEN Digital Media Company Limited, Chan Yi Sing, Guanyong Tian and Mei Lijun.EX-10.169  Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Chuanzhi Advertisement Co., Ltd.EX-10.170  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Chuanzhi Advertisement Co., Ltd.EX-10.171  Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Chuanzhi Advertisement Co., Ltd.EX-10.172  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Chuanzhi Advertisement Co., Ltd.EX-10.173  Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Ruili Advertisement Co., Ltd.EX-10.174  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertisement Co., Ltd, Liu Yi Nuo and Shanghai Ruili Advertisement Co., Ltd.EX-10.175  Equity Pledge Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Ni He Ping and Shanghai Ruili Advertisement Co., Ltd.EX-10.176  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Ni He Ping and Shanghai Ruili Advertisement Co., Ltd.EX-10.177  Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Xinnuo Advertisement Co., Ltd.EX-10.178  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Xinnuo Advertisement Co., Ltd.EX-10.179  Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Xinnuo Advertisement Co., Ltd.EX-10.180  Shareholders' Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Xinnuo Advertisement Co., Ltd.EX-10.181  Asset Purchase Agreement, dated as of December 22, 2008, between Focus Media Holding Limited and SINA Corporation.EX-12.1 Certificate of Chief Executive OfficerEX-12.2 Certificate of Chief Financial OfficerEX-13.1 Certification of Periodic Financial ReportEX-13.2 Certification of Periodic Financial ReportEX-15.1 Consent of Conyers, Dill & PearmanEX-15.2 Consent of Global Law OfficeEX-15.3 Consent of Deloitte Touche Tohmatsu CPA Ltd.EX-21.1 List of Subsidiaries




---



##### Table of Contents



SUPPLEMENTAL INFORMATION
  
    
    the terms we, us, our company, our and Focus Media refer to Focus Media
Holding Limited, its predecessor entities and subsidiaries, and, in the context of
describing our operations, also include our affiliated Chinese entities;
    
    shares and ordinary shares refer to our ordinary shares, par value $0.00005,
ADSs refers to our American depositary shares, each of which represents five ordinary
shares, and ADRs refers to the American depositary receipts which evidence our ADSs;
    
    China and PRC refer to the Peoples Republic of China, excluding Taiwan, Hong
Kong and Macau;
    
    all references to RMB are to the legal currency of China and all references to
U.S. dollars, US$, dollars and $ are to the legal currency of the United
States. Any discrepancies in any table between the amounts identified as total amounts
and the sum of the amounts listed therein are due to rounding;
    
    Framedia refers to Infoachieve Limited and its consolidated subsidiaries and
affiliates, which we acquired in January 2006;
    
    Target Media refers to Target Media Holdings Limited and its consolidated
subsidiaries and affiliates, which we acquired in February 2006;
    
    Focus Media Wireless refers to Dotad Media Holdings Limited, and its consolidated
subsidiary and affiliate, which we acquired in March 2006 and renamed Focus Media
Wireless. We terminated our mobile handset advertising business, including Focus Media
Wireless, in December 2008;
    
    Allyes refers to Allyes Information Technology Company Limited, and its
consolidated subsidiaries and affiliates, which we acquired in March 2007 as well as
additional smaller Internet advertising companies we acquired and subsequently
reorganized to be included within Allyes;
    
    CGEN refers to CGEN Digital Media Company Limited, and its consolidated
subsidiaries and affiliates, which we acquired in January 2008
and disposed of in December 2008; and
    
    This annual report on Form 20-F includes our audited consolidated financial
statements for the years ended December 31, 2006, 2007 and 2008, and as of December 31,
2007 and 2008.
 DISCONTINUED OPERATIONS AND BASIS OF PRESENTATION
   1




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED
  
    
    our goals and strategies;
    
    our future business development, financial condition and results of operations;
    
    projected revenues, profits, earnings and other estimated financial information;
    
    our ability to complete the sale of substantially all of the assets of our digital
out-of-home advertising networks to SINA Corporation, or Sina, including all required
regulatory approvals;
    
    our ability to complete acquisitions we have entered into and costs related to and
potential liabilities resulting from completing such acquisitions and integrating the
acquired companies into our business;
    
    achieving anticipated or potential synergies with companies we acquire or have
acquired;
    
    our plans to expand our advertising network into new cities and regions in China and
diversify into new networks and advertising channels such as airports, hospitals and
other possible commercial locations;
    
    the growth or acceptance of our in-store network, our outdoor LED network,
Framedias poster frame network, our movie theater and traditional billboard
advertising network and our online advertising services business;
    
    our plan to develop our business into a multi-platform out-of-home advertising
network, including through operation of Internet advertising channels such as Allyes
and networks such as our movie theater and traditional billboard advertising network;
    
    our plan to identify and create additional advertising channels that target specific
consumer demographics, which could allow us to increase our advertising revenue,
including Internet advertising channels;
    
    competition in the PRC advertising industry;
    
    the expected growth in the urban population, consumer spending, average income
levels and advertising spending levels;
    
    PRC governmental policies and regulations relating to the advertising industry and
regulations and policies promulgated by the State Administration of Foreign Exchange;
    
    other risks outlined in our filings with the Securities and Exchange Commission,
including our registration statements on Form F-1, as amended, and Form F-3 as amended;
and
    
    those other risks identified in Item 3. Key InformationD. Risk Factors of this
annual report.
 2




---



##### Table of Contents



3




---



##### 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
     For the year ended December 31,2004
    
    2005
    
    2006
    
    2007
    
    2008(in thousands of U.S. dollars)Selected Consolidated Statements of
Operations Data:Net revenues:(1)Movie Theatre & Outdoor Billboard
network
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    37,305
    
    
    
    77,520Internet advertising
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,939
    
    
    
    255,637Others
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    819
    
    
    
    36,397Total net revenues
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    163,063
    
    
    
    369,554Cost of revenues:Net advertising service cost:Movie Theatre & Outdoor Billboard
network
    
    
    
    
    
    
    
    
    
    
    760
    
    
    
    28,507
    
    
    
    57,276Internet advertising
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,237
    
    
    
    199,189Others
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    224
    
    
    
    28,581Total cost of revenues
    
    
    
    
    
    
    
    
    
    
    760
    
    
    
    121,968
    
    
    
    285,046Gross profit
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    41,095
    
    
    
    84,508Operating expenses:General and administrative
    
    
    227
    
    
    
    429
    
    
    
    3,760
    
    
    
    16,691
    
    
    
    52,102
 4




---



##### Table of Contents



For the year ended December 31,2004
    
    2005
    
    2006
    
    2007
    
    2008(in thousands of U.S. dollars)Selling and marketing
    
    
    
    
    
    
    
    
    
    
    271
    
    
    
    14,052
    
    
    
    34,680Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,536Loss on
disposal of CGEN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,466Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    (1,027
    )Total operating expenses
    
    
    227
    
    
    
    429
    
    
    
    4,031
    
    
    
    30,521
    
    
    
    498,757Income from operations
    
    
    
    
    
    
    
    
    
    
    (4,101
    )
    
    
    10,574
    
    
    
    (414,249
    )Interest income net
    
    
    
    
    
    
    
    
    
    
    725
    
    
    
    2,734
    
    
    
    2,622Other income (expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    (618
    )Income (loss) before income taxes and
minority interest
    
    
    (227
    )
    
    
    (429
    )
    
    
    (3,376
    )
    
    
    13,408
    
    
    
    (412,245
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,193
    
    
    
    3,391Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    720
    
    
    
    (107
    )Net income (loss) from discontinued
operations, net of tax
    
    
    599
    
    
    
    23,977
    
    
    
    86,574
    
    
    
    135,941
    
    
    
    (355,159
    )Net income (loss)
    
    
    372
    
    
    
    23,548
    
    
    
    83,198
    
    
    
    144,436
    
    
    
    (770,688
    )
 For the year ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008(in thousands of U.S. dollars, except share and per share data)Earnings per share data:Deemed dividend on Series A
convertible redeemable preference
shares
    
    
    (8,308
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deemed dividend on Series B
convertible redeemable preference
shares
    
    
    (2,191
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deemed dividend on Series C-1
convertible redeemable preference
shares
    
    
    (13,356
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Premium of Series B convertible
redeemable preference shares
    
    
    12,906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) attributable to holders
of ordinary shares
    
    $
    (10,577
    )
    
    $
    23,548
    
    
    $
    83,198
    
    
    $
    144,436
    
    
    $
    (770,688
    )Income (loss) per share from continuing operations-basic
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from continuing operations-diluted
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from discontinuing operations-basic
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Income (loss) per share from discontinuing operations-diluted
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Income (loss) per share  basic
    
    $
    (0.07
    )
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )Income (loss) per share  diluted
    
    $
    (0.07
    )
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )Shares used in calculating basic
income per share
    
    
    160,998,600
    
    
    
    252,128,545
    
    
    
    505,411,079
    
    
    
    590,387,396
    
    
    
    643,989,522Shares used in calculating diluted
income per share
    
    
    160,998,600
    
    
    
    252,128,545
    
    
    
    505,411,079
    
    
    
    608,326,450
    
    
    
    643,989,522
 2004
    
    2005
    
    2006
    
    2007
    
    2008Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    22,669
    
    
    $
    36,653
    
    
    $
    164,611
    
    
    $
    450,416
    
    
    $
    142,434Other current assets(2)
    
    
    12,713
    
    
    
    104,988
    
    
    
    78,712
    
    
    
    431,043
    
    
    
    665,137Non-current assets(3)
    
    
    21,033
    
    
    
    70,713
    
    
    
    862,919
    
    
    
    1,258,079
    
    
    
    724,723Total assets
    
    
    56,415
    
    
    
    212,354
    
    
    
    1,106,242
    
    
    
    2,139,538
    
    
    
    1,532,294Total current liabilities
    
    
    8,634
    
    
    
    20,694
    
    
    
    51,837
    
    
    
    276,287
    
    
    
    318,864Total non-current liabilities
    
    
    
    
    
    
    
    
    
    
    3,303
    
    
    
    6,394
    
    
    
    13,540Total liabilities
    
    
    8,634
    
    
    
    20,694
    
    
    
    55,140
    
    
    
    282,681
    
    
    
    332,404Minority interest
    
    
    81
    
    
    
    245
    
    
    
    358
    
    
    
    1,913
    
    
    
    2,106Mezzanine equity
    
    
    53,273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ordinary shares (142,464,600,
378,306,000, 534,896,873, 640,230,852
and 646,081,710 shares issued and
outstanding in 2004, 2005, 2006, 2007
and 2008 respectively)
    
    
    7
    
    
    
    19
    
    
    
    27
    
    
    
    32
    
    
    
    32
 5




---



##### Table of Contents



2004
    
    2005
    
    2006
    
    2007
    
    2008Other shareholders equity (deficiency)
    
    
    (5,580
    )
    
    
    191,396
    
    
    
    1,050,717
    
    
    
    1,854,912
    
    
    
    1,197,752Total shareholders equity
    
    $
    (5,573
    )
    
    $
    191,415
    
    
    $
    1,050,744
    
    
    $
    1,854,944
    
    
    $
    1,197,784
 As of December 31,2005
    
    2006
    
    2007
    
    2008Selected Operating Data:(4)Number of displays in our commercial
location network:Our direct cities
    
    
    45,049
    
    
    
    80,263
    
    
    
    107,533
    
    
    
    122,597Our regional distributors(5)
    
    
    3,177
    
    
    
    5,197
    
    
    
    4,765
    
    
    
    5,436Total
    
    
    48,226
    
    
    
    85,460
    
    
    
    112,298
    
    
    
    128,033Number of displays in our in-store network(6)
    
    
    27,849
    
    
    
    38,742
    
    
    
    49,452
    
    
    
    42,,824Number of stores in our in-store network(6)
    
    
    4,130
    
    
    
    3,898
    
    
    
    4,063
    
    
    
    3,275Number of installed frames in our poster
frame network(7)
    
    
    
    
    
    
    99,784
    
    
    
    190,468
    
    
    
    324,364
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax for our Internet
advertisings service revenue amounted to $5.0 million and $9.3 million in 2007 and 2008.
Business tax for our traditional billboard network was $1.0 million and $2.2 million in 2007
and 2008, respectively. Business tax for our movie theater network was $0.3 million and $0.6
million for 2007 and 2008, respectively. Business tax includes business tax ranging from 3%
to 5.55% and cultural industries tax ranging from 0% to 4.0% of our gross advertising service
revenue.(2)
    
    Other current assets are equal to total current assets less cash and cash equivalents.(3)
    
    Non-current assets are equal to total assets less total current assets.(4)
    
    Operating data presented includes operating data for discontinued operations except as noted
below.(5)
    
    Data that has been provided by our regional distributors is based on the results of surveys
we requested them to provide to us and it is possible such data is not entirely accurate or
exact.(6)
    
    Operating data for our in-store
network does not include data from CGENs business and operations.(7)
    
    Number of installed frames includes frames we currently market and frames that have been
installed, for instance, in buildings that are still under construction and which we have not
yet begun to market. Data includes both traditional poster frames and, for periods starting
from June 30, 2007, digital frames.  6




---



##### Table of Contents



Currency Translations and Exchange Rates
    RENMINBI PER U.S. EXCHANGE RATEAVERAGE
    
    HIGH
    
    LOW
    
    PERIOD-END2002
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2669
    
    
    
    8.28002003
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2272
    
    
    
    8.27692004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1940
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9723
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.80872007
    
    
    7.6072
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.29462008
    
    
    6.9477
    
    
    
    7.2946
    
    
    
    6.7800
    
    
    
    6.8225December
    
    
    6.8225
    
    
    
    6.8539
    
    
    
    6.8842
    
    
    
    6.82252009 (through June 19)
    
    
    6.8360
    
    
    
    6.8322
    
    
    
    6.8470
    
    
    
    6.8176January
    
    
    6.8392
    
    
    
    6.8360
    
    
    
    6.8403
    
    
    
    6.8225February
    
    
    6.8395
    
    
    
    6.8363
    
    
    
    6.8470
    
    
    
    6.8241March
    
    
    6.8329
    
    
    
    6.8360
    
    
    
    6.8438
    
    
    
    6.8240April
    
    
    6.8180
    
    
    
    6.8304
    
    
    
    6.8361
    
    
    
    6.8180May
    
    
    6.8278
    
    
    
    6.8235
    
    
    
    6.8326
    
    
    
    6.8176June (through June 19)
    
    
    6.8360
    
    
    
    6.8336
    
    
    
    6.8371
    
    
    
    6.8264
 7




---



##### Table of Contents



B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Our business and operations are subject to various risks, many of which are beyond our
control. If any of the risks described below actually occurs, our business, financial condition or
results of operations could be seriously harmed.
 Risks Relating to Our Business and Industry
 We have been named as a defendant in certain purported shareholder class action lawsuits that could
have a material adverse impact on our operating results and financial condition.
  Discontinuation of certain of our business units in 2008 and the proposed sale of substantially all
of the assets of our out-of-home advertising networks to Sina makes
it difficult to evaluate our
business as it is currently operated.
  We may not be able to complete the sale of substantially all of the assets of our out-of-home
advertising networks to Sina due to regulatory or other reasons.
  8




---



##### Table of Contents



Some of our business operations have a limited operating history, which may make it difficult for
you to evaluate our business and prospects.
  We derive a substantial majority of our revenues from the provision of advertising services, and
advertising is particularly sensitive to changes in economic conditions and advertising trends.
  
    
    a general decline in economic conditions;
    
    a decline in economic conditions in the particular cities where we conduct business;
    
    a decision to shift advertising expenditures to other available advertising media;
    
    a decline in advertising spending in general; or
    
    a decrease in demand for advertising media in general and for our advertising
services in particular would materially and adversely affect our ability to generate
revenue from our advertising services, and our financial condition and results of
operations.
  Our quarterly operating results are difficult to predict and may fluctuate significantly from
period to period in the future.
  9




---



##### Table of Contents



Our failure to maintain existing relationships or obtain new relationships with businesses that
allow us to place our LCD flat-panel displays and advertising poster frames in their buildings and
other commercial locations and to lease outdoor traditional and LED digital billboards placed in
desirable locations would harm our business and prospects.
    If we are unable to obtain or retain desirable placement locations for our flat-panel displays,
advertising poster frames and outdoor traditional and LED billboards on commercially advantageous
terms or if the supply of desirable locations diminishes or ceases to expand, we could have
difficulty in maintaining or expanding our network, our operating margins and earnings could
decrease and our results of operations could be materially and adversely affected.
  10




---



##### Table of Contents



If we are unable to attract advertisers to advertise on our networks, we will be unable to maintain
or increase our advertising fees and the demand for time on our networks, which could negatively
affect our ability to grow revenues.
    Acquisitions we have made, and any future acquisitions may expose us to potential risks and have an
adverse effect on our ability to manage our business.
  11




---



##### Table of Contents



There may be unknown risks inherent in the acquisitions we have made.
  Our strategic alliances and partnerships may not succeed or yield the benefits we anticipated,
which could materially and adversely affect our business and results of operations.
  Our entry into new types of advertising services through acquisitions may expose us to risks
associated with operating in the telecommunications and Internet industries in China which could
materially affect our financial condition or results of operation.
  
    
    failure to reach traditional advertisers and to take advantage of marketing networks
through our existing business;
    
    changes in operating policies or guidelines by mobile telecommunications operators
applicable to all wireless value-added service providers using their platforms or which
restrict content supplied by others to us;
    
    if regulations change in the future, regulation of the telecommunications sector in
China that could impose burdensome approval, licensing, technical or other requirements
on value-added service providers such as advertising companies that sell advertising
time on mobile telecommunications networks;
 12




---



##### Table of Contents




    
    the performance and reliability of the Internet infrastructure; and
    
    the continued growth of the Internet and e-commerce industries.
  One or more of our regional distributors could engage in activities that are harmful to our
reputation in the industry and to our business.
  We have a material weakness in our internal control over financial reporting. If we fail to
maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results or prevent fraud.
    Failure to manage our growth and operations could strain our management, operational and other
resources and we may not be able to achieve anticipated levels of growth in the new networks and
media platforms we operate, either of which could materially and adversely affect our business and
growth potential.
   13




---



##### Table of Contents



If advertisers or the viewing public do not accept, or lose interest in, our out-of-home
advertising network, our revenues may be negatively affected and our business may not expand or be
successful.
  If the Internet and, in particular, Internet marketing are not broadly adopted in China, our
ability to generate revenue and sustain profitability from Allyes could be materially and adversely
affected.
  The growth of our online advertising agency business is substantially dependent on the acceptance
of the cost-per-thousand-impressions, or CPM Internet advertising sales model, and certain
performance-based Internet advertising sales models, including CPC and CPA models, by industry
participants in China.
  If the delivery of ads or the use of cookies is limited or blocked, our ability to update and
expand our user data would be hindered and demand for our Internet marketing solutions could
decline.
  14




---



##### Table of Contents



Our role through Allyes as a supplier of ad space may harm our reputation as an independent
purchasing agent and the reputation of our performance-based advertising network as a marketplace
for ad space.
  Our Internet advertising business could be materially and adversely affected if we are unable to
introduce new or enhanced Internet marketing services and technologies that meet our clients
requirements.
  
    
    our failure to anticipate changes in clients requirements;
    
    our competitors introduction of new services and technologies ahead of our new
services and technologies, or their introduction of superior or less expensive services
and technologies;
    
    our failure to adapt to Internet advertising technology trends and evolving industry
standards; and
    
    delays or difficulties in technology integration, customization or development.
 The business and prospects of our online advertising agency business could be harmed if
click-through fraud is not detected.
  System failures could significantly disrupt the operations of our online advertising agency
business, which would cause us to lose clients or ad inventory.
 15




---



##### Table of Contents



If our Internet marketing technologies contain design or performance defects, our reputation and
business may be harmed and we may need to expend significant resources to address liability.
   We may be liable for content that we serve onto Web publishers websites, which could increase our
expenses.
  The successful operation of our business depends upon the performance and reliability of the
Internet infrastructure and fixed telecommunications networks in China.
  16




---



##### Table of Contents



We depend on the leadership and services of Jason Nanchun Jiang, who is our founder, chairman,
chief executive officer and one of our largest shareholders, and our business and growth prospects
may be severely disrupted if we lose his services.
  We may need additional capital and we may not be able to obtain it, which could adversely affect
our liquidity and financial position.
   
    
    investors perception of, and demand for, securities of alternative advertising
media companies;
    
    conditions of the U.S. and other capital markets in which we may seek to raise
funds;
    
    our future results of operations, financial condition and cash flows;
    
    PRC governmental regulation of foreign investment in advertising services companies
in China;
    
    economic, political and other conditions in China; and
    
    PRC governmental policies relating to foreign currency borrowings.
  If we are unable to adapt to changing regulatory requirements or advertising trends and the
technology needs of advertisers and consumers, we will not be able to compete effectively and we
will be unable to increase or maintain our revenues which may materially and adversely affect our
business prospects and revenues.
  17




---



##### Table of Contents



We may be subject to, and may expend significant resources in defending against, government actions
and civil suits based on the content and services we provide through our digital out-of-home
advertising networks mobile handset advertising network or Internet advertising services network.
   18




---



##### Table of Contents



We may be subject to intellectual property infringement claims, which may force us to incur
substantial legal expenses and, if determined adversely against us, may materially disrupt our
business.
  Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.
   19




---



##### Table of Contents



We face significant competition, and if we do not compete successfully against new and existing
competitors, we may lose our market share, and our profitability may be adversely affected.
    We do not maintain any business liability disruption or litigation insurance coverage for our
operations, and any business liability, disruption or litigation we experience might result in our
incurring substantial costs and the diversion of resources.
  We may become a passive foreign investment company, or PFIC, which could result in adverse United
States federal income tax consequences to U.S. investors.
 20




---



##### Table of Contents



There may be significant United States federal income tax consequences to you if we are able to
complete the sale of substantially all of our assets of our out-of-home advertising networks to
Sina.
    Risks Relating to Regulation of Our Business and to Our Structure
 If the PRC government finds that the agreements that establish the structure for operating our
China business do not comply with PRC governmental restrictions on foreign investment in the
advertising industry, we could be subject to severe penalties.
  21




---



##### Table of Contents




    
    revoking the business and operating licenses of our PRC subsidiaries and affiliates;
    
    discontinuing or restricting our PRC subsidiaries and affiliates operations;
 22




---



##### Table of Contents




    
    imposing conditions or requirements with which we or our PRC subsidiaries and
affiliates may not be able to comply;
    
    requiring us or our PRC subsidiaries and affiliates to restructure the relevant
ownership structure or operations; or
    
    restricting or prohibiting our use of the proceeds of this offering to finance our
business and operations in China.
  We use contractual arrangements with our PRC operating affiliates and their subsidiaries and
shareholders for a significant portion of our China operations, which may not be as effective in
providing operational control as direct ownership.
   Contractual arrangements we have entered into among our subsidiaries and affiliated entities may be
subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are
ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce
our net income and the value of your investment.
  23




---



##### Table of Contents



Our business operations may be affected by legislative or regulatory changes.
  PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from making loans or additional capital contributions to our PRC operating
subsidiaries and affiliates.
  
    
    loans by us to our foreign invested enterprises to finance their respective
activities cannot exceed statutory limits and must be registered with the PRC State
Administration of Foreign Exchange or its local counterpart; and
    
    loans by us to our PRC operating affiliates or their respective subsidiaries, which
are domestic PRC enterprises, must be approved by the relevant government authorities
and must also be registered with the PRC State Administration of Foreign Exchange or
its local counterpart.
  24




---



##### Table of Contents



Risks Relating to the Peoples Republic of China
  The PRCs economic, political and social conditions, as well as governmental policies, could affect
the financial markets in China and our liquidity and access to capital and our ability to operate
our business.
   The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
  25




---



##### Table of Contents



If tax benefits currently available to us in PRC were no longer available under the new Enterprise
Income Taxes (EIT) law which became effective on January 1, 2008, our effective income tax rates
for our PRC operations could increase.
     Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
  26




---



##### Table of Contents



We may be deemed a PRC resident enterprise under the EIT Law and be subject to the PRC taxation on
our worldwide income.
  Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary
shares may become subject to taxes under PRC tax laws.
  Recent PRC regulations relating to offshore investment activities by PRC residents may increase our
administrative burden and restrict our overseas and cross-border investment activity. If our
shareholders who are PRC residents fail to make any required applications and filings under such
regulations, we may be unable to distribute profits and may become subject to liability under PRC
laws.
   27




---



##### Table of Contents



The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions
of offshore entities that conducted their PRC operations through their affiliates in China.
  A PRC rule on mergers and acquisitions may subject us to sanctions, fines and other penalties and
affect our future business growth through acquisition of complementary business.
   28




---



##### Table of Contents



Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuations in exchange rates could result in foreign currency exchange losses.
   Any future outbreak of severe acute respiratory syndrome, avian flu or swine flu in China, or
similar adverse public health developments, may severely disrupt our business and operations.
  29




---



##### Table of Contents



Risks Relating to Our ADSs and Our Trading Markets
 The price of our ADSs has been volatile and may continue to be volatile, which may make it
difficult for holders to resell the ADSs when desired or at attractive prices.
   We have in the past failed to comply with Nasdaq Listing Rules, including the timely filing of our
annual report and maintaining a majority of independent directors on our board of directors.
   A significant percentage of our outstanding ordinary shares is beneficially owned by Jason Nanchun
Jiang, our founder, chairman and chief executive officer, and as a result, he may have
significantly greater influence on us and our corporate actions by nature of the size of his
shareholdings relative to our public shareholders; in addition Charles Chao, one of our directors, is president and chief executive officer of Sina, and his interests as our
director may conflict with his interests as an officer of Sina.
  30




---



##### Table of Contents



Anti-takeover provisions in our charter documents may discourage any hostile acquisition attempt by
a third party, which could limit our shareholders opportunity to sell their shares at a premium.
    We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have less
protection of your shareholder rights than you would under U.S. law.
   Judgments obtained against us by our shareholders may not be enforceable.
 31




---



##### Table of Contents



The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
  The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares
underlying your ADSs if you do not vote at shareholders meetings, except in limited circumstances,
which could adversely affect your interests.
  
    
    we have failed to timely provide the depositary with our notice of meeting and
related voting materials;
    
    we have instructed the depositary that we do not wish a discretionary proxy to be
given;
    
    we have informed the depositary that there is substantial opposition as to a matter
to be voted on at the meeting;
    
    a matter to be voted on at the meeting would have a material adverse impact on
shareholders; or
    
    voting at the meeting is made on a show of hands.
  You may not receive distributions on our ordinary shares or any value for them if it is illegal or
impractical to make them available to you.
 32




---



##### Table of Contents



You may be subject to limitations on transfer of your ADSs.
  Dividends payable by us to our foreign investors may become subject to withholding taxes under PRC
tax laws.
    Gains on the sales of our shares or ADSs may become subject to PRC income taxes.
  33




---



##### Table of Contents



ITEM 4.
    
    INFORMATION ON THE COMPANY
 A. History and Development of the Company
 www.focusmedia.cn
           34




---



##### Table of Contents



B. Business Overview
  Our Digital Out-of-home Advertising Network
 
    
    our commercial location network, consisting of:
 
    
    our LCD display network,which refers to our network of flat-panel television
displays placed in high-traffic areas of commercial and public buildings marketed
to advertisers as a network or as seven separate channels targeting different types
of consumersour premier A and B office building channels, travel, fashion, elite
and IT mall channels;
 35




---



##### Table of Contents




    
    our outdoor LED billboard network, which refers to our network of leased 5 x 5
LED digital billboards installed on the street-sides in major shopping districts
and other locations with heavy pedestrian traffic in Shanghai and Beijing;
    
    our traditional billboard network, which refers to our network of large outdoor
poster billboards installed on street-sides in major shopping districts and other
locations with heavy pedestrian traffic in Shanghai, Beijing, Guangzhou, Shenzhen
and other cities in China; and
    
    our movie theater advertising network, which refers to our right to sell
advertising time on movie screens for the three minutes prior to movie screenings
at movie theaters in China; and
 
    
    our in-store network, which refers to our network of flat-panel television displays
placed in specific product areas inside stores with high-traffic concentrations such as
selected consumer product sections, the main aisles and check-out lines in large-scale
chain retail stores, or hypermarkets, as well as inside selected supermarkets and
convenience stores; the CGEN portion of our in-store network substantially ceased
operations as of December 2008;
    
    our poster frame network, which refers to our network of traditional and digital
advertising poster frames placed mainly in the elevators and public areas of
residential complexes which we market under the brand name Framedia; and
 Our Internet Advertising Services Network
   For and as of the three months endedSeptember
    
    December
    
    
    
    
    
    
    
    
    
    September
    
    DecemberMarch 31,
    
    June 30,
    
    30,
    
    31,
    
    March 31,
    
    June 30,
    
    30,
    
    31,2007
    
    2007
    
    2007
    
    2007
    
    2008
    
    2008
    
    2008
    
    2008Commercial location
network:(1)Number of displays:Our direct cities
    
    
    83,256
    
    
    
    85,010
    
    
    
    90,375
    
    
    
    107,533
    
    
    
    114,426
    
    
    
    117,440
    
    
    
    114,300
    
    
    
    122,597Our regional distributors(2)
    
    
    4,010
    
    
    
    4,677
    
    
    
    5,023
    
    
    
    4,765
    
    
    
    4,814
    
    
    
    5,700
    
    
    
    5,831
    
    
    
    5,436Total
    
    
    87,296
    
    
    
    89,687
    
    
    
    95,398
    
    
    
    112,298
    
    
    
    119,240
    
    
    
    123,140
    
    
    
    120,131
    
    
    
    128,033In-store network:(3)Number of displays in our
in-store network
    
    
    40,736
    
    
    
    41,322
    
    
    
    43,315
    
    
    
    49,452
    
    
    
    61,420
    
    
    
    58,493
    
    
    
    56,614
    
    
    
    42,824Number of stores in our
in-store network
    
    
    3,935
    
    
    
    3,995
    
    
    
    4,041
    
    
    
    4,063
    
    
    
    3,874
    
    
    
    3,609
    
    
    
    3,479
    
    
    
    3,275
 36




---



##### Table of Contents



For and as of the three months endedSeptember
    
    December
    
    
    
    
    
    
    
    
    
    September
    
    DecemberMarch 31,
    
    June 30,
    
    30,
    
    31,
    
    March 31,
    
    June 30,
    
    30,
    
    31,2007
    
    2007
    
    2007
    
    2007
    
    2008
    
    2008
    
    2008
    
    2008Poster Frame Network:Number of frames installed in
our poster frame network (4)
    
    
    124,542
    
    
    
    161,435
    
    
    
    170,605
    
    
    
    190,468
    
    
    
    246,920
    
    
    
    275,985
    
    
    
    303,359
    
    
    
    324,364
 
 (1)
    
    Includes operating data for discontinued operations.(2)
    
    Data that has been provided by our regional distributors is based on the results of surveys
we requested them to provide to us and it is possible such data is not entirely accurate or
exact.(3)
    
    Following our entering into the asset purchase agreement with SINA in December 2008, our
in-store network (excluding CGEN) is accounted as a discontinued operation.(4)
    
    Includes both traditional poster frames and, for periods starting from June 30, 2007, digital
frames. Our Network
  
    
    our digital out-of-home advertising network, including our commercial location
network (LCD display, outdoor LED billboard, traditional billboard network and movie
theater advertising networks), in-store network and poster frame network; and
    
    our Internet advertising services network.
 Digital Out-of-home Advertising Networks
 Commercial Location Network
 LCD display network
  37




---



##### Table of Contents



Outdoor LED billboard network.
 Traditional billboard network 2 2
 Movie theater advertising network
 In-store Network
  38




---



##### Table of Contents



Poster Frame Network
   Internet Advertising Services Network
   Advertising Clients, Sales and Marketing
 Our Advertising Clients
 39




---



##### Table of Contents



Sales
 Advertising Contracts
   Network Monitoring and Media Measurement
   40




---



##### Table of Contents



Programming
   Pricing
  Relationships with Location Providers
    41




---



##### Table of Contents



Technology and Suppliers
    Competition
  42




---



##### Table of Contents



Facilities
  Regulatory Matters
   Limitations on Foreign Ownership in the Advertising Industry
  
    
    The Catalogue for Guiding Foreign Investment in Industry (2007); and
    
    The Administrative Regulations on Foreign-invested Advertising Enterprises (2008).
   
    
    we are able to exert effective control over our PRC operating affiliates and their
respective subsidiaries;
 43




---



##### Table of Contents




    
    a substantial portion of the economic benefits of our PRC operating affiliates and
their respective subsidiaries will be transferred to us; and
    
    we have an exclusive option to purchase all or part of the equity interests in our
PRC operating affiliates and all or part of the equity interests in our PRC operating
affiliates subsidiaries that are owned by our PRC operating affiliates or its nominee
holders, as well as all or a part of the assets of our PRC operating affiliates, in
each case when and to the extent permitted by PRC law.
    
    
    the respective ownership structures of our PRC operating subsidiaries and their
respective PRC affiliates and subsidiaries are in compliance with existing PRC laws and
regulations;
    
    the contractual arrangements among our PRC operating subsidiaries and their
respective PRC affiliates, subsidiaries and PRC shareholders of their PRC affiliates,
in each case governed by PRC law are valid, binding and enforceable, and will not
result in any violation of PRC laws or regulations currently in effect; and
    
    the PRC business operations of our PRC operating subsidiaries and their respective
affiliates and subsidiaries as described in this annual report, are in compliance with
existing PRC laws and regulations in all material respects.
  Regulation of Advertising Services
 Business License for Advertising Companies
  
    
    The Advertising Law (1994);
    
    The Advertising Administrative Regulations (1987); and
    
    The Implementing Rules for the Advertising Administrative Regulations (2004).
 44




---



##### Table of Contents



Advertising Content
    45




---



##### Table of Contents



Outdoor Advertising
  
    
    utilize traffic safety facilities and traffic signs;
    
    impede the use of public facilities, traffic safety facilities and traffic signs;
    
    obstruct commercial and public activities or create an eyesore in urban areas;
    
    be placed in restrictive areas near government offices, cultural landmarks or
historical or scenic sites; and
    
    be placed in areas prohibited by the local governments from having outdoor
advertisements.
    Print Advertising
  Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
    46




---



##### Table of Contents




    
    prior to establishing or assuming control of an offshore company for the purpose of
financing that offshore company with assets or equity interests in an onshore
enterprise in the PRC, each PRC resident, whether a natural or legal person, must
complete the overseas investment foreign exchange registration procedures with the
relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be filed
by any PRC resident that directly or indirectly holds interests in that offshore
company upon either (1) the injection of equity interests or assets of an onshore
enterprise to the offshore company, or (2) the completion of any overseas fund raising
by such offshore company; and
    
    an amendment to the registration with the local SAFE branch is also required to be
filed by such PRC resident when there is any material change involving a change in the
capital of the offshore company, such as (1) an increase or decrease in its capital,
(2) a transfer or swap of shares, (3) a merger or division, (4) a long term equity or
debt investment, or (5) the creation of any security interests over the relevant assets
located in China.
    C. Organizational Structure
   47




---



##### Table of Contents



Our Corporate Structure and Contractual Arrangements
  
    
    with regard to the operation of our commercial location and in-store network,
through Focus Media Technology, our indirect wholly-owned subsidiaries in China, Focus
Media Digital, a 90%-owned subsidiary of Focus Media Technology, and New Focus Media
Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, all of which
are 90%-owned subsidiaries of Focus Media Digital, and through our contractual
arrangements with several of our consolidated affiliated entities in China, including
Focus Media Advertisement, and its subsidiaries (Focus Media Advertisement owns the
remaining 10% equity interest in Focus Media Digital and, through Focus Media Digital,
the remaining 10% equity of New Focus Media Advertisement, New Focus Media Agency,
Focus Media Defeng Advertisement);
    
    with regard to the operation of our poster frame network, through Framedia
Advertisement and New Structure Advertisement, each of which is 90% owned by Focus
Media Advertisement and 10% owned by Focus Media Advertising Agency, respectively;
    
    with regard to the operation of the Internet advertising marketing agency business
of Allyes, through New Allyes Information Technology Co., Ltd., our indirectly
wholly-owned subsidiary in China, and through our contractual arrangements with a group
of PRC operating companies, which we refer to as the Allyes operating affiliates, each
of which is owned by PRC citizens and entities;
    
    with regard to our outdoor traditional billboard network, through our contractual
arrangements with the Huaguang operating affiliates and Tuojia operating affiliates;
and
    
    with regard to our movie theater advertising network, through our contractual
arrangements with the Yangshi Sanwei operating affiliates.
  48




---



##### Table of Contents



(i)
    
    as we operated our business prior to the completion of the sale of the assets to be sold
to Sina; and(ii)
    
    as our operations will be conducted after completion of the
sale of assets to be sold to Sina.
  49




---



##### Table of Contents



(1)
    
    Loans used to capitalize our PRC operating companies and to facilitate our control over them.(2)
    
    Agreements that give us effective control over our PRC operating affiliates and their
respective subsidiaries.(3)
    
    Agreements that transfer a substantial portion of the economic benefits of our PRC operating
affiliates and their respective subsidiaries to us, as described in Related Party
Transactions.(4)
    
    Each of our PRC operating affiliates is owned by PRC shareholders consisting of either (i)
one or more PRC citizen or citizens designated by us, or (ii) one or more PRC entity or
entities owned by our subsidiaries or by our designated appointees, or (iii) a combination of
PRC citizens designated by us and entities owned by our subsidiaries or by our designated
appointees.(5)
    
    The wholly-owned entities relating to our out-of-home television network operations include
New Focus Media Technology, Focus Media Technology, Focus Media Digital and New Focus Media
Digital. These consist of subsidiaries of Focus Media Advertisement, which holds between 50%
and 100% of the subsidiaries, with the remaining minority interest held by Jimmy Wei Yu, Focus
Media Advertising Agency or unrelated third parties.(6)
    
    The PRC operating affiliates engaged in the operating of our poster frame network include:
New Structure Advertisement and Framedia Advertisement.(7)
    
    The Allyes operating affiliates engaged in the operation of our online advertising agency
business consist of a group of different companies under our control.  
 
 (1)
    
    Agreements that give us effective control over our PRC operating affiliates and their
respective subsidiaries.(2)
    
    Allyes PRC operating affiliates are owned by PRC shareholders, which are either (i) one or
more PRC citizen or citizens designated by us, or (ii) one or more PRC entity or entities
owned by our subsidiaries or by our designated appointees, or (iii) a combination of PRC
citizens designated by us and entities owned by our subsidiaries or by our designated
appointees.(3)
    
    The Allyes operating affiliates engaged in the operation of our online advertising agency
business consist of a group of different companies under our control.(4)
    
    The Huaguang operating affiliates are owned by PRC citizens designated by us.(5)
    
    The Huaguang operating affiliates include Shanghai Ruili Advertisement Co., Shanghai Xinnuo
Advertisement Co. and Shanghai Chuanzhi Advertisement Co.(6)
    
    The Tuojia operating affiliates are owned by PRC citizens or entities designated by us.(7)
    
    The Tuojia operating affiliates include Beijing Tuojia Chengyuan Advertisement Co. and
Shanghai Qianzhong Advertisement Co., Ltd.(8)
    
    Each of the Yangshi Sanwei operating affiliates is 70% owned by us via a designated PRC
entity and 30% owned by one or two unrelated third parties.(9)
    
    The Yangshi Sanwei operating affiliates include Beijing Yangshi Sanwei Advertisement Co. and
Shanghai Zhenhao Advertisement Co., Ltd.  50




---



##### Table of Contents




    
    we are able to exert effective control over our PRC operating affiliates;
    
    a substantial portion of the economic benefits of our PRC operating affiliates will
be transferred to us; and
    
    each of our PRC operating subsidiaries or non-PRC subsidiaries or their respective
designees has an exclusive option to purchase all or part of the equity interests in
our PRC affiliated entities or their respective nominee holders, or, in some cases, all
or part of the assets of our PRC affiliated entities, in each case when and to the
extent permitted by PRC law.
   
    
    the respective ownership structures of our PRC operating subsidiaries and their
respective PRC affiliates and subsidiaries are in compliance with existing PRC laws and
regulations;
 51




---



##### Table of Contents




    
    the contractual arrangements among our PRC operating subsidiaries and their
respective PRC affiliates, subsidiaries and PRC shareholders of their PRC affiliates,
in each case governed by PRC law are valid, binding and enforceable, and will not
result in any violation of PRC laws or regulations currently in effect; and
    
    the PRC business operations of our PRC operating subsidiaries and their respective
affiliates and subsidiaries as described in this annual report, are in compliance with
existing PRC laws and regulations in all material respects.
   Subsidiaries of Focus Media Holding Limited
  D. Property, Plants and Equipment
  
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Overview
  52




---



##### Table of Contents



Continuing Operations Overview.
  
    
    Overall economic growth in China, which affects overall advertising spending in
major urban areas in China where consumer spending is concentrated;
    
    Our ability to successfully operate and market our Internet advertising marketing
and technology agency.
    
    Our ability to increase sales of advertising space and increase the length of
advertising campaigns on our traditional billboard network;
    
    Our ability to increase sales of advertising time slots and extend the duration of
our advertising cycle on our movie theater network; and
    
    Our ability to expand our client base through promotion of our services and
cross-selling.
   Revenues  Continuing Operations
  53




---



##### Table of Contents



For the year ended December 312006
    
    2007
    
    2008% of net
    
    
    
    
    
    % of net
    
    
    
    
    
    % of net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Net revenueMovie theatre and
traditional outdoor
billboards
    
    
    690
    
    
    
    100
    %
    
    
    37,305
    
    
    
    22.9
    %
    
    
    77,520
    
    
    
    21.0
    %Internet advertising network
    
    
    
    
    
    
    0
    %
    
    
    124,939
    
    
    
    76.6
    %
    
    
    255,637
    
    
    
    69.2
    %Other revenue
    
    
    
    
    
    
    0
    %
    
    
    819
    
    
    
    0.5
    %
    
    
    36,397
    
    
    
    9.8
    %Total revenue from
continuing operations
    
    
    690
    
    
    
    100
    %
    
    
    163,063
    
    
    
    100
    %
    
    
    369,554
    
    
    
    100
    %
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax for our Internet
advertisings service revenue amounted to $5.0 million and $9.3 million respectively for 2007
and 2008. Business tax for our traditional outdoor billboard and movie theater advertising
service revenue amounted to $1.3 million and $2.8 million respectively for 2007 and 2008.
Business tax includes business tax ranging from 3% to 5.55% and cultural industries tax of
ranging from 0% to 4.0% of our gross advertising service revenue.  For the year ended December 312006
    
    2007
    
    2008(in thousands of U.S. dollars except percentages)Gross Advertising Service Revenue:Movie Theatre & Traditional outdoor billboard Unrelated parties
    
    
    697
    
    
    
    38,535
    
    
    
    78,250 Related parties
    
    
    
    
    
    
    23
    
    
    
    1,773Total Movie Theatre & Traditional outdoor billboards
    
    
    697
    
    
    
    38,558
    
    
    
    80,023Internet advertising Unrelated parties
    
    
    
    
    
    
    128,831
    
    
    
    258,977 Related parties
    
    
    
    
    
    
    1,140
    
    
    
    5,950Total internet advertising
    
    
    
    
    
    
    129,971
    
    
    
    264,927Others Unrelated parties
    
    
    
    
    
    
    868
    
    
    
    40,441 Related parties
    
    
    
    
    
    
    
    
    
    
    Total others
    
    
    
    
    
    
    868
    
    
    
    40,441
 54




---



##### Table of Contents



For the year ended December 312006
    
    2007
    
    2008(in thousands of U.S. dollars except percentages)Gross Advertising Services Revenue:
    
    
    697
    
    
    
    169,397
    
    
    
    385,391Less: Sales taxes:Movie Theatre & Traditional outdoor billboard
    
    
    7
    
    
    
    1,253
    
    
    
    2,845Internet advertising
    
    
    
    
    
    
    5,032
    
    
    
    9,290Others
    
    
    
    
    
    
    49
    
    
    
    3,702Total Sales tax
    
    
    7
    
    
    
    6,334
    
    
    
    15,837
    
    
    
    
    
    
    
    Net Advertising Service Revenue
    
    
    690
    
    
    
    163,063
    
    
    
    369,554
 Segmental Advertising Service Revenue  Continuing Operations
 Sources of Revenues
   Factors that Affect Our Advertising Service RevenueContinuing Operations.
 Movie Theater & Traditional Outdoor Billboard Networks
   Internet Advertising Service Revenues
  Network ExpansionContinuing Operations.
 55




---



##### Table of Contents



SeasonalityContinuing Operations.
 Revenue RecognitionContinuing Operations.
     Other RevenueContinuing Operations.
  56




---



##### Table of Contents



Segmental Cost of RevenuesContinuing Operations
   For the year ended December 312006
    
    2007
    
    2008% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofnet
    
    
    
    
    
    net
    
    
    
    
    
    net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Total net revenue from continuing operations
    
    
    690
    
    
    
    100.0
    %
    
    
    163,063
    
    
    
    100.0
    %
    
    
    369,554
    
    
    
    100.0
    %Cost of revenue:Movie theatre and traditional billboard
advertising services
    
    
    760
    
    
    
    110.1
    %
    
    
    28,507
    
    
    
    17.5
    %
    
    
    57,276
    
    
    
    15.5
    %Internet advertising network
    
    
    0
    
    
    
    0
    %
    
    
    93,237
    
    
    
    57.2
    %
    
    
    199,189
    
    
    
    53.9
    %Others
    
    
    0
    
    
    
    0
    %
    
    
    224
    
    
    
    0.1
    %
    
    
    28,581
    
    
    
    7.7
    %Total cost of revenue for continuing operations
    
    
    760
    
    
    
    110.1
    %
    
    
    121,968
    
    
    
    74.8
    %
    
    
    285,046
    
    
    
    77.1
    %Gross profit from continuing operations
    
    
    (70
    )
    
    
    (10.1
    )%
    
    
    41,095
    
    
    
    25.2
    %
    
    
    84,508
    
    
    
    22.9
    %
 Advertising Service CostsContinuing Operations
  Movie theatre advertising networks
 Traditional outdoor billboard.
 Internet advertising services network
 Others
 Operating Expenses and Net IncomeContinuing Operations
  57




---



##### Table of Contents



For the year ended December 312006
    
    2007
    
    2008% of net
    
    
    
    
    
    % of net
    
    
    
    
    
    % of net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Gross profit for continuing operations
    
    
    (70
    )
    
    
    (10.1
    )%
    
    
    41,095
    
    
    
    25.2
    %
    
    
    84,508
    
    
    
    22.9
    %Operating expenses:General and administrative
    
    
    3,760
    
    
    
    544.9
    %
    
    
    16,691
    
    
    
    10.2
    %
    
    
    52,102
    
    
    
    14.1
    %Selling and marketing
    
    
    271
    
    
    
    39.3
    %
    
    
    14,052
    
    
    
    8.6
    %
    
    
    34,680
    
    
    
    9.4
    %Impairment
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,536
    
    
    
    60.2
    %Loss on disposal of CGEN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,466
    
    
    
    51.5
    %Other operating income, net
    
    
    
    
    
    
    0.0
    %
    
    
    (222
    )
    
    
    (0.1
    )%
    
    
    (1,027
    )
    
    
    (0.3
    )%Total operating expenses
    
    
    4,031
    
    
    
    584.2
    %
    
    
    30,521
    
    
    
    18.7
    %
    
    
    498,757
    
    
    
    135.0
    %Operating income for continuing
operations
    
    
    (4,101
    )
    
    
    (594.3
    )%
    
    
    10,574
    
    
    
    6.5
    %
    
    
    (414,249
    )
    
    
    (112.1
    )%
 General and Administrative.
 Selling and Marketing.
 Impairment
Loss.
 Loss on Disposal of CGEN.
 58




---



##### Table of Contents



Share-based Compensation.
   For the years ended December 312006
    
    
    2007
    
    
    2008(in thousands of U.S. dollars)General and administrative
    
    
    2,790
    
    
    
    6,544
    
    
    
    15,707Selling and marketing
    
    
    
    
    
    
    
    
    
    
    820Continuing Operation
    
    
    2,790
    
    
    
    6,544
    
    
    
    16,528Discontinued Operation
    
    
    5,578
    
    
    
    14,911
    
    
    
    26,087Total
    
    
    8,367
    
    
    
    21,454
    
    
    
    42,615
 Amortization of Acquired Intangibles.
 For the year ended December 312006
    
    
    2007
    
    
    2008
    
    
    2006
    
    
    2007
    
    
    2008Continuing operations
    
    
    Discontinued operations(in thousands of U.S. dollars)Cost of revenues
    
    
    33
    
    
    
    8,195
    
    
    
    13,947
    
    
    
    3,174
    
    
    
    7,919
    
    
    
    12,493Selling and
marketing expenses
    
    
    15
    
    
    
    5,141
    
    
    
    9,668
    
    
    
    2,552
    
    
    
    3,498
    
    
    
    4,009Total
    
    
    49
    
    
    
    13,336
    
    
    
    23,615
    
    
    
    5,725
    
    
    
    11,417
    
    
    
    16,502
 Discontinued Operations Overview
    
    
    Overall economic growth in China, which we expect to contribute to an increase in
advertising spending in major urban areas in China where consumer spending is
concentrated;
    
    Our ability to increase sales of advertising time slots and extend the duration of
our advertising cycle on our commercial location and in-store networks (excluding
CGEN);
 59




---



##### Table of Contents




    
    Our ability to expand our client base through promotion of our services and
cross-selling; and
    
    Our ability to identify and create new advertising channels by establishing separate
advertising networks that enable advertisers to target a diverse range of consumer
groups with specific demographic profiles.
    Revenues  Discontinued Operations
  For the year ended December 312006
    
    2007
    
    2008% of net
    
    
    
    
    
    % of net
    
    
    
    
    
    % of net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Net revenueLCD display networks
    
    
    131,371
    
    
    
    62.2
    %
    
    
    183,376
    
    
    
    53.4
    %
    
    
    238,159
    
    
    
    55.8
    %In-store network (excluding CGEN)
    
    
    26,908
    
    
    
    12.7
    %
    
    
    27,444
    
    
    
    8.0
    %
    
    
    25,701
    
    
    
    6.0
    %Poster frame networks
    
    
    40,904
    
    
    
    19.4
    %
    
    
    85,472
    
    
    
    24.9
    %
    
    
    146,751
    
    
    
    34.4
    %Other revenue
    
    
    12,032
    
    
    
    5.7
    %
    
    
    47,205
    
    
    
    13.7
    %
    
    
    15,940
    
    
    
    3.8
    %Net revenue from discontinued
operations
    
    
    211,215
    
    
    
    100
    %
    
    
    343,497
    
    
    
    100
    %
    
    
    426,551
    
    
    
    100
    %
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax on advertising
service revenue for our LCD display network amounted to $13.6 million, $18.7 million and $25.2
million in 2006, 2007 and 2008, respectively. Business tax on advertising service revenue for our
in-store network (excluding CGEN) amounted to $2.8 million ,
$2.8 million and $2.6 million in 2006 , 2007
and 2008, respectively. Business tax on advertising service revenue for our poster frame network
amounted to $4.0 million , $7.9 million and $13.9 million for 2006, 2007 and 2008 respectively.
Business tax includes business tax ranging from 3% to 5.55% and cultural industries tax of ranging
from 0% to 4.0% of our gross advertising service revenue. Revenue  Discontinued Operations
  60




---



##### Table of Contents



Factors that Affect Our RevenueDiscontinued Operations.
 LCD
display networks
  In-store Network (excluding CGEN)
  Poster Frame Network
  Network ExpansionDiscontinued Operations.
 SeasonalityDiscontinued Operations.
 Revenue RecognitionDiscontinued Operations.
  Other RevenueDiscontinued Operations.
 61




---



##### Table of Contents



Cost of RevenuesDiscontinued Operations
   For the year ended December 312006
    
    2007
    
    2008% of net
    
    
    
    
    
    % of net
    
    
    
    
    
    % of net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Total net revenue from discontinued
operations
    
    
    211,215
    
    
    
    100
    %
    
    
    343,497
    
    
    
    100
    %
    
    
    426,551
    
    
    
    100
    %Cost of revenue:LCD display networks
    
    
    42,076
    
    
    
    19.9
    %
    
    
    51,118
    
    
    
    14.9
    %
    
    
    61,222
    
    
    
    14.4
    %In-store network (excluding CGEN)
    
    
    18,107
    
    
    
    8.6
    %
    
    
    23,503
    
    
    
    6.8
    %
    
    
    30,317
    
    
    
    7.1
    %Poster frame networks
    
    
    13,622
    
    
    
    6.4
    %
    
    
    28,086
    
    
    
    8.2
    %
    
    
    59,815
    
    
    
    14.1
    %Others
    
    
    6,817
    
    
    
    3.3
    %
    
    
    23,767
    
    
    
    6.9
    %
    
    
    11,057
    
    
    
    2.6
    %Total cost of revenue for discontinued
operations
    
    
    80,620
    
    
    
    38.2
    %
    
    
    126,474
    
    
    
    36.8
    %
    
    
    162,411
    
    
    
    38.1
    %Gross profit from discontinued operations
    
    
    130,595
    
    
    
    61.8
    %
    
    
    217,023
    
    
    
    63.2
    %
    
    
    264,140
    
    
    
    61.9
    %
      LCD display network
 62




---



##### Table of Contents



In-store network (excluding CGEN)
 Poster frame network
 Other CostsDiscontinued Operations
  General and administrative expenses for the assets held for sale to Sina.
 Selling and Marketing.
 Impairment
loss.
 Loss from termination of mobile handset advertising business.
 Critical Accounting Policies  Total Company
  63




---



##### Table of Contents



Revenue Recognition.
   Accounts Receivables
   Share-based Compensation
   Income Taxes
  64




---



##### Table of Contents



Goodwill and Long-lived Assets Impairment
  
    
    a significant adverse change in the business climate or legal factors;
    
    an adverse action or assessment by a regulator;
    
    unanticipated competition;
    
    loss of key personnel;
    
    the likelihood that a reporting unit or a significant portion of a reporting
unit will be sold or disposed of;
    
    a change in reportable segments; and/or results of testing for recoverability
of a significant asset group within a reporting unit.
    65




---



##### Table of Contents



Taxation
 Cayman Islands, the British Virgin Islands and Hong Kong.
  Taxable Presence Exposure in the PRC
  66




---



##### Table of Contents



PRC
        67




---



##### Table of Contents



(in thousands of U.S. dollars)Balance at January 1, 2008
    
    $
    8,233Settlements
    
    
    (3,080
    )Gross increases  interest accrual
    
    
    102Transfer to liabilitiess held for sale
    
    
    (4,724
    )Translation adjustment
    
    
    25Balance at December 31, 2008
    
    $
    556
  Recently Issued Accounting Standards
    68




---



##### Table of Contents



69




---



##### Table of Contents



Acquisitions
    
    
    Allyes Information Technology Company Limited, for the year ended, and as of,
December 31, 2006;
 70




---



##### Table of Contents




    
    Target Media Holdings, for the periods ended, and as of, December 31, 2004
and 2005; and
    
    Infoachieve Limited, for the periods ended, and as of, December 31, 2003,
2004 and 2005are available in our registration statement on Form F-1 (File No. 333-146913) and the
financial statements of:
    
    Perfect Media Holding Ltd. for the periods ended, and as of, December 31,
2003 and September 30, 2004;
    
    Focus Media Changsha Holding Ltd., Focus Media Qingdao Holding Ltd. and Focus
Media Dalian Holding Ltd. for the period ended, and as of, October 31, 2004; and
    
    Capital Beyond Limited for the periods ended, and as of, December 31, 2004
and March 31, 2005, respectively,
      Results of Operations for Continuing Operations
 Year ended December 31, 2008 compared to year ended December 31, 2007
 Net revenues.
 Internet advertising service business.
 Movie theater and traditional outdoor billboard networks.
 1.
    
    Huaguang and Tuojia, which operate the traditional billboard business were
acquired in the first half of 2007. We consolidated their 2007 revenues only after the
acquisitions were consummated, while in 2008 we consolidated their full year revenues;
and2.
    
    the significant increase in the number of our movie theater customers from 71
in 2007 to 141 in 2008.
 Others.
 71




---



##### Table of Contents



Costs of revenue.
 Internet advertising service business.
 Movie theater and traditional outdoor billboard network.
 1.
    
    Huaguang and Tuojia, the subsidiaries which operate the traditional billboard
business, were acquired in the first half of 2007. We consolidated their respective
results of operation only after the acquisitions were consummated, while in 2008 we
consolidated their full year revenues;2.
    
    the increase in the number of billboards leased from 492 in 2007 to 542 in 2008
in response to greater customer demand; and3.
    
    increased leasing costs associated with time we rent on movie theater screens
as a result of an increase in the number of theaters we lease in our network from
10,930 in 2007 to 27,164 in 2008.
 Others.
 Gross profit.
 For the year ended December 312006
    
    2007
    
    2008% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofnet
    
    
    
    
    
    net
    
    
    
    
    
    net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Gross profit from continuing operationsMovie theatre and traditional
billboard advertising services
    
    
    (70
    )
    
    
    (10.0
    )%
    
    
    8,798
    
    
    
    5.4
    %
    
    
    20,244
    
    
    
    5.5
    %Internet advertising network
    
    
    0
    
    
    
    
    
    
    
    31,702
    
    
    
    19.4
    %
    
    
    56,448
    
    
    
    15.3
    %Others
    
    
    0
    
    
    
    
    
    
    
    595
    
    
    
    0.4
    %
    
    
    7,816
    
    
    
    2.1
    %Gross profit from continuing operations
    
    
    (70
    )
    
    
    (10.0
    )%
    
    
    41,095
    
    
    
    25.2
    %
    
    
    84,508
    
    
    
    22.9
    %
  1.
    
    In January 2008, we acquired CGEN in-store networks. Gross margins from the
CGEN in-store network were significantly lower than other lines of businesses because
its costs of revenue were driven up by intense competition for advertising locations.
In 2008, revenue from CGEN accounted for 9.5% of net revenue for continuing
operations.
 72




---



##### Table of Contents



2.
    
    Our Internet advertising network experienced a significant revenue decrease in
the fourth quarter of 2008 due to sudden drop in online advertising demand from its key
market sectors, such as financial services, real estate and automobiles resulting in
lower overall gross margins in 2008.
  Operating expenses.
 
    
    General and administrative. General and administrative expenses increased
substantially from $16.7 million in 2007 to $52.1 million in 2008 mainly due to (i). an
increase in the size of our administrative staff and corresponding increases in
expenses for salary and benefits, including share-based compensation expenses as our
operations have grown organically and through acquisitions; (ii) our having acquired most of the
subsidiaries and affiliates involved in conducting our continuing operations through
out 2007, and therefore, general and administration expenses for 2007 did not reflect
the full year results of those subsidiaries acquired in 2007; and (iii) $3.5 million
withholding tax and business tax levied upon royalty fees charged by Focus Media
Holding to our PRC affiliates and subsidiaries in 2008, while Focus Media Holding
waived the royalty charge in 2007.
    
    Selling and marketing. Selling and marketing expenses increased substantially from
$14.1 million in 2007 to $34.7 million in 2008 due to increases in marketing and
promotional expenses by our sales force, and in salary and benefits associated with the
expansion of our sales force organically and acquisitively as well as share-based
compensation expenses and amortization of acquisition related intangible assets
 Impairment
loss and Disposal losses.
 Other operating income.
 73




---



##### Table of Contents



Other expenses.
 Income tax.
 Net
income (loss) from continuing operations.
 Net
Income (loss) from discontinued operations.
 Net income (loss).
 Year ended December 31, 2007 compared to year ended December 31, 2006
 Net revenues.
 Cost
of sales.
 Gross profit (loss).
 Operating expenses.
 
    
    General and Administrative. General and administrative expenses increased
substantially from $3.8 million in 2006 to $16.7 million in 2007 mainly due to
increases from growth in operations relating to the acquisition of new entities,
including Allyes and Traditional Outdoor Billboard business, and increases in the
size of our administrative staff and corresponding increases in expenses for salary
and benefits as our operations have grown, and increases in share-based
compensation expense.
 74




---



##### Table of Contents




    
    Selling and Marketing. Selling and marketing expenses increased substantially
from $0.3 million in 2006 to $14.1 million in 2007 due to increases in sales
activities relating to operations of new entities, including Allyes and Traditional
Outdoor Billboard business, increases in marketing and promotional expenses by our
sales force, and in salary and benefits associated with the expansion of our sales
force as well as share-based compensation expenses and amortization of acquisition
related intangible assets.
 Income (loss) from operations.
 Interest income.
 Income tax.
 Net
income (loss) from continuing operations.
 Net income from discontinued operations.
 Net income.
 Results of operations for discontinued operations
 Year ended December 31, 2008 compared to year ended December 31, 2007
 Net
revenues.
 
    
    LCD flat-panel display network. Advertising service revenue from our LCD
flat-panel display network increased 29.8% from $183.4 million in 2007 to $238.1
million in 2008. The increase is attributable to: (i) continued acceptance of our
media by an increasing number of advertising clients; (ii) the steady expansion of
our media network, including the number of LCD flat-panel displays and LED
billboards on our network; and (iii) the sale of tailored advertising packages
including through the seven specialized channels on our commercial location network
and by targeting advertising campaigns on specific lists of buildings requested by
advertising clients which enables us to charge those advertising clients a premium.
    
    Poster frame network. Advertising service revenue from our poster frame network
increased 71.7% to $146.8 million in 2008 compared to $85.5 million in 2007. This
increase in revenue is primarily attributable to robust sales as the total number of
frames installed increased substantially from 190,468 as of December 31, 2007 to
324,364 as of December 31, 2008, including 34,195 digital frames which we
introduced in 2008.
    
    In-store network (excluding CGEN). Advertising service revenue from our in-store
network (excluding CGEN), decreased 6.0% to $25.7 million in 2008 from $27.4 million
in 2007. The decrease was mainly attributable to our failure to consolidate our
in-store network sales force with the sales force acquired from CGEN. Such failure
caused high turn-over rate among our sales force in 2008
 Cost of revenues.
 
    
    LCD flat-panel display network advertising costs. Cost of revenues associated with
our LCD flat-panel display advertising network increased 19.8% to $61.2 million in 2008
from $51.1 million in 2007. This increase was primarily attributable to (i) growth in
our advertising service business on our commercial
 75




---



##### Table of Contents



location network between these two periods including substantial increases in our
location costs due to a substantial increase in the number of commercial locations where
we entered into display placement agreements; (ii) an increase in flat-panel display
depreciation costs as a result of an increase in the number of flat-panel displays we
own and operate directly to 122,597 as of December 31, 2008 from 107,533 as of December
31, 2007; and (iii) an increase in other direct costs associated with maintaining this
portion of our network.
 
    
    Poster frame network advertising costs. Our net advertising service cost for our
poster frame network increased significantly to $59.8 million in
2008 from $28.1
million in 2007, attributable to increased location costs and depreciation costs
relating to the installation and maintenance of poster frames on our network as (i) we
significantly increased the number of traditional poster frames on our network and (ii)
beginning in June 2007, we began to incur location costs and depreciation cost
associated with the purchase and installation of digital poster frames. In 2008, we
installed approximately 34,000 digital poster frames as compared to approximately
11,000 such frames installed in 2007.
    
    In-store network (excluding CGEN) advertising costs.We incurred $30.3 million in
net advertising service cost for our in-store network (excluding CGEN) in 2008 compared
with $23.5 million in 2007. These costs consisted primarily of location costs and
depreciation costs relating to the installation and maintenance of our in-store network
(excluding CGEN). The increase over these two periods was mostly attributable to a
significant increase in location costs, which were driven up by intense competition
from CGEN, prior to our acquisition of it in January 2008. Despite our acquisition of
CGEN in January 2008, we were not able to significantly reduce location costs in the
short-term because our location rental contracts with hyper-markets normally have
multiyear durations.
  For the year ended December 312006
    
    2007
    
    2008$
    

Gross margin
    
    $
    
    Gross margin
    
    $
    
    Gross margin(in thousand of U.S. dollars, except percentages)Gross profit from discontinued operationsLCD display networks
    
    
    89,295
    
    
    
    67.9
    %
    
    
    132,258
    
    
    
    72.1
    %
    
    
    176,937
    
    
    
    74.2
    %In-store network (excluding CGEN)
    
    
    8,802
    
    
    
    32.7
    %
    
    
    3,941
    
    
    
    14.4
    %
    
    
    (4,617
    )
    
    
    (18.0
    )%Poster frame networks
    
    
    27,283
    
    
    
    66.7
    %
    
    
    57,386
    
    
    
    67.1
    %
    
    
    86,936
    
    
    
    59.2
    %Others
    
    
    5,215
    
    
    
    43.3
    %
    
    
    23,438
    
    
    
    49.7
    %
    
    
    4,883
    
    
    
    30.6
    %Gross profit from discontinued operations
    
    
    130,595
    
    
    
    61.8
    %
    
    
    217,023
    
    
    
    63.2
    %
    
    
    264,140
    
    
    
    61.9
    %
   76




---



##### Table of Contents



Year ended December 31, 2007 compared to year ended December 31, 2006
 Net revenues.Our net revenue for discontinued operations increased 62.6% from $211.2 million in
2006 to $343.5 million in 2007.
    
    LCD flat-panel display network. Advertising service revenue from our LCD flat-panel
display network increased 39.6% from $131.4 million in 2006 to $183.4 million in 2007.
The increase in advertising service revenue was attributable to: (i) continued
acceptance of our media by an increasing number of advertising clients; (ii) the steady
expansion of our media network, including the number of LCD displays and LED billboards
on our network; and (iii) the sale of tailored advertising packages including through
the six specialized channels on our commercial location network and by targeting
advertising campaigns on specific lists of buildings requested by advertising clients
which enable us to charge a premium.
    
    Poster frame network. Advertising service revenue from our poster frame network more
than doubled to $85.5 million in 2007 compared to $40.9 million in 2006. This increase
in revenue was primarily attributable to robust sales as the total number of frames
installed more than doubled from 95,878 as of December 31, 2006 to 190,468 as of
December 31, 2007, including 10,819 digital frames which we introduced in 2007.
    
    In-store network (excluding CGEN). Advertising service revenue from our in-store
network (excluding CGEN), increased 2.0% to $27.4 million in 2007 from $26.9 million in
2006. This increase was attributable to steady sales of advertising services for this
portion of our network as it continued to increase in size. Specifically, the number of
displays installed in the in-store network (excluding CGEN) amounted to 49,452 as of
December 31, 2007, up from 38,742 as of December 31, 2006, offset in part by increased
discounts on our rate card that we offered due to relatively strong competition in this
area, mainly from CGEN prior to our acquisition of it in January 2008. The number of
hypermarkets in our network, from which we derive most of our in-store network revenue,
increased from 1,100 as of December 31, 2006 to 1,398 as of December 31, 2007.
    
    Other Revenue.Other revenue was primarily attributable to our Mobile handset
advertising network. Revenue from our mobile handset advertising network increased
significantly from $10.1 million in 2006 to $46.1 million in 2007 due to the increasing
acceptance by advertisers of mobile handset advertising as telecommunications services
and mobile handset ownership continues to grow in China.
 Cost of revenues.Our cost of revenues for discontinued operations increased significantly from
$80.6 million in 2006 to $126.5 million in 2007 due to increases in costs of expanding and
maintaining our LCD flat-panel display, poster frame and in-store advertising networks (excluding
CGEN) and our mobile handset advertising network.
    
    Net advertising service cost  LCD flat-panel display network. Our net advertising
service cost for our LCD display network increased 21.4% from $42.1 million in 2006 to
$51.1 million in 2007. This increase was due to (i) the substantial increase in our
advertising service business on our commercial location network between these two
periods including substantial increases in our location costs due to a substantial
increase in the number of commercial locations where we entered into display placement
agreements, including those we operate in our outdoor billboard business; (ii) an
increase in flat-panel display depreciation costs as a result of an increase in the
number of flat-panel displays we own and operate directly from 80,623 as of December
31, 2006 to 107,533 as of December 31, 2007; (iii) our acquisition of 8 regional
distributors during this period, (iv) an increase in other direct costs associated with
maintaining the network and (v) payments associated with our lease of curbside LED
billboards.
    
    Net advertising service cost  in-store network (excluding CGEN). We incurred $23.5
million in net advertising service cost for our in-store network (excluding CGEN) in
2007 compared to $18.1 million in 2006, consisting of location costs and depreciation costs relating to the installation
and maintenance of our in-store network (excluding CGEN).
 77




---



##### Table of Contents




    
    Net advertising service cost  poster frame network. Our net advertising service
cost for our poster frame network increased significantly to $28.1 million in 2007
compared to $13.6 million in 2006, attributable to location costs and depreciation
costs relating to the installation and maintenance of poster frames on our network as
we significantly increased the number of traditional poster frames on our network and,
in June 2007, began to incur location costs associated with our digital poster frames.
    
    Other costs of revenue  mobile handset advertising network. Net advertising
service cost associated with our mobile handset advertising network increased
significantly from $6.8 million in 2006 to $23.8 million in 2007. These costs consisted
primarily of message costs charged by mobile operators.
 Gross profit.
 For the year ended December 312006
    
    2007
    
    2008% of
    
    
    
    
    
    % ofnet
    
    
    
    
    
    net
    
    
    
    
    
    % of net$
    
    revenue
    
    $
    
    revenue
    
    $
    
    revenue(in thousand of U.S. dollars, except percentages)Gross profit for discontinued operationsLCD display networks
    
    
    89,295
    
    
    
    42.3
    %
    
    
    132,258
    
    
    
    38.5
    %
    
    
    176,937
    
    
    
    41.5
    %In-store network
    
    
    8,802
    
    
    
    4.2
    %
    
    
    3,942
    
    
    
    1.1
    %
    
    
    (4,616
    )
    
    
    (1.1
    )%Poster frame networks
    
    
    27,283
    
    
    
    12.9
    %
    
    
    57,386
    
    
    
    16.7
    %
    
    
    86,936
    
    
    
    20.4
    %Others
    
    
    5,215
    
    
    
    2.4
    %
    
    
    23,438
    
    
    
    6.8
    %
    
    
    4,883
    
    
    
    1.1
    %Gross profit for discontinued operations
    
    
    130,595
    
    
    
    61.8
    %
    
    
    217,023
    
    
    
    63.2
    %
    
    
    264,140
    
    
    
    61.9
    %
 Liquidity and Capital Resources
 Cash Flows and Working Capital
  78




---



##### Table of Contents



For the year ended December 31,2006
    
    
    2007
    
    
    2008(in thousands of U.S. dollars)Net cash provided by operating activities
    
    $
    93,354
    
    
    $
    166,960
    
    
    $
    168,441Net cash used in investing activities
    
    
    (121,994
    )
    
    
    (342,881
    )
    
    
    (145,794
    )Net cash provided by (used in) financing activities
    
    
    153,521
    
    
    
    442,976
    
    
    
    (66,616
    )Effect of exchange rate changes
    
    
    3,077
    
    
    
    18,750
    
    
    
    16,468Net increase (decrease) in cash and cash equivalent
    
    
    127,958
    
    
    
    285,805
    
    
    
    (27,501
    )
      79




---



##### Table of Contents



Transactions with Related Parties
  Capital Expenditures
  For the year ended December 31,2006
    
    2007
    
    2008(in thousands of U.S. dollars)Total capital expenditure
    
    $
    22,878
    
    
    
    59,451
    
    
    
    72,876
  Restricted Net Assets
  A. Research, Development, Patents and Licenses, etc.
 Research and Development
  Patents and Trademarks
  80




---



##### Table of Contents



B. Trend Information
  C. Off-balance Sheet Arrangements
  D. Tabular Disclosure of Contractual Obligations
  Payments due December 31TOTAL
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter(in
thousands of U.S. dollars)Display and poster frame
placement agreement obligations.
    
    $
    50,124
    
    
    $
    34,233
    
    
    $
    9,044
    
    
    $
    3,530
    
    
    $
    1,598
    
    
    $
    1,719Office premise lease obligations
    
    
    5,416
    
    
    
    2,950
    
    
    
    1,588
    
    
    
    761
    
    
    
    117
    
    
    
    Total contractual obligations
    
    $
    55,540
    
    
    $
    37,183
    
    
    $
    10,632
    
    
    $
    4,291
    
    
    $
    1,715
    
    
    $
    1,719
   81




---



##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionJason Nanchun Jiang
    
    
    36
    
    
    Chief Executive Officer and Chairman of the
Board of DirectorsZhi Tan
    
    
    54
    
    
    Executive DirectorJimmy Wei Yu
    
    
    36
    
    
    DirectorFumin Zhuo(1)
    
    
    57
    
    
    DirectorNeil Nanpeng Shen(2)
    
    
    41
    
    
    DirectorCharles Chao
    
    
    43
    
    
    DirectorDaqing Qi(3)
    
    
    46
    
    
    DirectorDavid Ying Zhang(4)
    
    
    35
    
    
    DirectorYing Wu (5)
    
    
    50
    
    
    DirectorAlex Deyi Yang
    
    
    33
    
    
    Acting Chief Financial OfficerDavid Hailong Zhu
    
    
    41
    
    
    Senior Vice President  Internet Advertising
 
 (1)
    
    Independent director, chairman of the compensation committee and member of the audit
committee and the nominations committee.(2)
    
    Independent director and chairman of the nominations committee.(3)
    
    Independent director, chairman of the audit committee and member of the compensation
committee and nominations committee.(4)
    
    Independent director and member of the compensation committee.(5)
    
    Independent director and member of the audit committee. Jason Nanchun Jiang
 Zhi Tan
 82




---



##### Table of Contents



Jimmy Wei Yu
 Fumin Zhuo
 Neil Nanpeng Shen
 Charles Chao
 Daqing Qi
 David Ying Zhang
 83




---



##### Table of Contents



Ying Wu
 Alex Deyi Yang
 David Hailong Zhu
  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.
 84




---



##### Table of Contents



B. Compensation
  Share Option Plans
    
    
    In July and August 2004, we granted:
 
    
    options to purchase 12,181,600 shares, representing 3.7% of our pre-offering
diluted share capital, to certain members of our board of directors and our
management group. Each of these options has an exercise price of $0.24 per share.
8,460,800 of these options vest over three years while the remaining 3,720,800
options vest over one year.
    
    options to purchase 8,461,800 shares, representing 2.5% of our pre-offering
diluted share capital, to members of our staff. Each of these options has an
exercise price of $0.24 per share. 2,159,800 of these options vest over three years
while the remaining 6,302,000 options vest over one year.
    
    options to purchase 4,564,800 shares, representing 1.4% of our pre-offering
diluted share capital, to third-party consultants and advisors. Each of these
options have an exercise price of $0.24 per share. 1,310,400 of these options vest
over three years while the remaining 3,254,400 options vest over one year.
  
    
    In January 2005, we granted additional options to purchase 1,200,000 of our ordinary
shares to some of our directors with an exercise price of $0.58 per share. All of these
options vest over three years.
    
    In February 2005, we granted:
 
    
    options to purchase 2,000,000 and 2,100,000 of our ordinary shares with an
exercise price of $0.58 and $0.75, respectively, to certain of our executive
officers and options to purchase 720,000 of our
 85




---



##### Table of Contents



ordinary shares with an exercise price of $0.75 to certain of our employees. All of
these options vest over three years.
    
    options to purchase 1,240,000 of our ordinary shares to third-party consultants
and advisors with an exercise price of $0.75. All of these options vest over three
years.
 
    
    In July 2005, we granted:
 
    
    options to purchase 11,683,630 of our ordinary shares with an exercise price of
$1.70, to certain of our executive officers and employees. All of these options
vest over three years.
    
    options to purchase 100,000 of our ordinary shares to a third-party consultant
with an exercise price of $1.70. All of these options vest over three years.
 
    
    In November 2005, we granted:
 
    
    options to purchase 800,000 of our ordinary shares with an exercise price of
$2.60, to certain of our executive officers and employees. All of these options
vest over three years.
    
    options to purchase 4,000,000 of our ordinary shares with an exercise price of
$2.70, to certain of our executive officers and employees. All of these options
vest over three years.
 
    
    In March 2006, we granted options to purchase 3,000,000 of our ordinary shares with
an exercise price of $5.09, to certain of our executive officers, employees and
directors. All of these options vest over three years.
  
    
    In November 2006, we granted options to purchase 11,800,000 of our ordinary shares
to certain of our employees, executive officers and directors. Of these options,
10,300,000 were issued to non-management employees and 1,500,000 were issued to our
directors and officers. The issuance to our officers and directors included a grant to
Jason Nanchun Jiang of options to purchase 500,000 of our ordinary shares. No other
director or officer, upon exercise of all options granted, would beneficially own more
than 1% of our outstanding ordinary shares. All of the options granted vest over a
three year period, beginning one year from the date of issuance. The exercise price of
the options is $5.724 per share which was based on the market price of our ADSs at the
time the options were granted. The options expire on November 14, 2016.
    
    In March 2007 and May 2007, we granted options to purchase 1,200,000 and 100,000 of
our ordinary shares to certain of our employees. The exercise price of the options is
$7.20 and $7.394 per share which was based on the market price of our ADSs at the time
the options were granted. The options expire on March 18, 2017 and May 8, 2017,
respectively.
    
    In October 2007, we granted options to purchase 9,592,685 of our ordinary shares to
certain of our employees, executive officers and directors. Of these options, 6,982,500
were issued to non-management employees and 2,610,185 were issued to our directors and
officers. The issuance to our officers and directors included grants to Jason Nanchun
Jiang and Zhi Tan of options to purchase 210,185 and 250,000 of our ordinary shares,
respectively. No other director or officer, upon exercise of all options granted, would
beneficially own more than 1% of our outstanding ordinary shares. All of the options
granted vest over a four year period, beginning one year from the date of issuance. The
exercise price of the options is $11.422 per share which was based on the market price
of our ADSs at the time the options were granted. The options expire on October 3,
2017.
  86




---



##### Table of Contents




    
    In January 2008, we granted options to purchase 4,500,000 of our ordinary shares to
certain of our non-management employees. All of the options granted vest over a four
year period, beginning one year from the date of issuance. The exercise price of the
options is $9.10 per share which was based on the market price of our ADSs at the time
the options were granted. The options expire on January 29, 2018.
    
    In March 2008, we granted options to purchase 2,750,000 of our ordinary shares to
certain of our executive officers. Of these options, 2,500,000 were issued to Zhi Tan.
All of the options granted vest over a four year period, beginning one year from the
date of issuance. The exercise price of the options is $8.262 per share which was based
on the market price of our ADSs at the time the options were granted. The options
expire on March 9, 2018.
    
    In April 2008, we granted options to purchase 6,632,500 of our ordinary shares to
non-management employees. All of the options granted vest over a four year period,
beginning one year from the date of issuance. The exercise price of the options is
$6.42 per share which was based on the market price of our ADSs at the time the options
were granted. The options expire on April 10, 2018.
    
    In May 2008, we granted options to purchase 450,000 of our ordinary shares to
certain of our independent directors. Of these options, 200,000 were issued to Ying Wu,
150,000 were issued to Daqing Qi and 100,000 were issued to David Zhang. All of the
options granted vest over a four year period, beginning one year from the date of
issuance. The exercise price of the options is $7.83 per share which was based on the
market price of our ADSs at the time the options were granted. The options expire on
May 13, 2018.
       87




---



##### Table of Contents



Number ofordinary sharesto be issued uponexercise of
    
    Exercise peroptions
    
    ordinary share
    
    Date of grant
    
    Date of expiration(in U.S. dollars)Jason Nanchun Jiang
    
    
    5,882,000
    
    
    $
    0.24
    
    
    August 25, 2004
    
    August 24, 20143,080,000
    
    
    $
    2.60
    
    
    November 2, 2005
    
    November 1, 20151,051,100
    
    
    $
    2.70
    
    
    November 16, 2005
    
    November 15, 205710,185
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Jimmy Wei Yu
    
    
    *
    
    
    $
    0.24
    
    
    July 5, 2004
    
    July 4, 2014*
    
    
    $
    0.24
    
    
    August 25, 2004
    
    August 24, 2014*
    
    
    $
    1.70
    
    
    July 13, 2005
    
    July 13, 2015*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Fuming Zhuo
    
    
    *
    
    
    $
    0.24
    
    
    August 10, 2004
    
    August 9, 2014*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Neil Nanpeng Shen
    
    
    *
    
    
    $
    0.58
    
    
    January 1, 2005
    
    December 31, 2014*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Charles Chao
    
    
    *
    
    
    $
    2.60
    
    
    November 2, 2005
    
    November 1, 2015*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Daqing Qi
    
    
    *
    
    
    $
    5.09
    
    
    March 10, 2006
    
    March 9, 2016*
    
    
    $
    7.83
    
    
    May 14, 2008
    
    May 13, 2018*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Zhi Tan
    
    
    *
    
    
    $
    5.72
    
    
    November 16, 2006
    
    November 15, 2015*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018David Ying Zhang
    
    
    *
    
    
    $
    7.83
    
    
    May 14, 2008
    
    May 13, 2018*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Ying Wu
    
    
    *
    
    
    $
    7.83
    
    
    May 14, 2008
    
    May 13, 2018*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018Alex Deyi Yang
    
    
    *
    
    
    $
    0.75
    
    
    February 2, 2005
    
    February 1, 2015*
    
    
    $
    2.70
    
    
    November 2, 2005
    
    November 1, 2015*
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018David Hailong Zhu
    
    
    *
    
    
    $
    2.44
    
    
    October 23, 2008
    
    October 22, 2018
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1% of our outstanding
ordinary shares, assuming all of our outstanding preference shares are converted into our
ordinary shares. C. Board Practices
  Board Committees
  Audit Committee.
  88




---



##### Table of Contents




    
    recommending to our shareholders, if appropriate, the annual re-appointment of our
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 our company;
    
    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 under the U.S. securities laws;
    
    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;
    
    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 in light of material control deficiencies;
    
    timely reviewing reports from the independent auditors regarding all critical
accounting policies and practices to be used by our company, 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;
    
    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, the internal auditors and the
independent auditors; and
    
    reporting regularly to the full board of directors.
 Compensation Committee.
  89




---



##### Table of Contents




    
    determining and recommending the compensation of our chief executive officer;
    
    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;
    
    reviewing and determining share-based compensation for our directors and officers;
    
    administering our equity incentive plans in accordance with the terms thereof; and
    
    such other matters that are specifically delegated to the compensation committee by
our board of directors from time to time.
 Nominations Committee.
  D. Employees
  Number ofemployees (1)
    
    PercentageSales and marketing
    
    
    1,576
    
    
    
    31.5
    %Operations
    
    
    2,701
    
    
    
    54.0
    %Management and administration
    
    
    729
    
    
    
    14.5
    %Total number of employees
    
    
    5,006
    
    
    
    100
    %
 
 (1)
    
    This excludes employees our regional distributors and agents who are not directly under our
employ.   E. Share Ownership
  90




---



##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  
    
    each person known to us to own beneficially more than 5% of our ordinary shares and
    
    each of our directors and executive officers who beneficially own our ordinary shares.
  Shares beneficially ownedNumber
    
    PercentPrincipal ShareholdersFosun International Limited(1)
    
    
    185,509,885
    
    
    
    28.33
    %JJ Media Investment Holding Ltd./Jason Nanchun Jiang(2)
    
    
    66,586,144
    
    
    
    10.17
    %FMR LLC(3)
    
    
    40,804,390
    
    
    
    6.23
    %TPG-Axon Capital Management, LP(4)
    
    
    35,000,000
    
    
    
    5.35
    %Sloane
Robinson LLP(5)
    
    
    34,700,500
    
    
    
    5.30
    %T. Rowe
Price Associates, Inc.(6)
    
    
    34,206,405
    
    
    
    5.22
    %Directors and Executive Officers (7)JJ Media Investment Holding Ltd./ Jason Nanchun Jiang (8)
    
    
    66,586,144
    
    
    
    10.17
    %Jimmy Wei Yu
    
    
    *
    
    
    
    *Neil Nanpeng Shen
    
    
    *
    
    
    
    *Charles Chao
    
    
    *
    
    
    
    *Fumin Zhuo
    
    
    *
    
    
    
    *Daqing Qi
    
    
    *
    
    
    
    *Zhi Tan
    
    
    *
    
    
    
    *David Ying Zhang
    
    
    *
    
    
    
    *Ying Wu
    
    
    *
    
    
    
    *Alex Deyi Yang
    
    
    *
    
    
    
    *David Hailong Zhu
    
    
    *
    
    
    
    *
 
 *
    
    Upon exercise of all options currently exercisable or vesting within 60 days of the date of
this annual report, would beneficially own less than 1% of our ordinary shares.(1)
    
    Information based on the amended Schedule 13G filed on March 26, 2009 on behalf of Fosun
International Limited. The business address of Fosun International Limited is Room 808, ICBC
Tower, 3 Garden Road, Central, Hong Kong S.A.R.(2)
    
    Information based on the amended Schedule 13G filed on February 12, 2009 on behalf of Jason
Nanchun Jiang. Includes 60,704,144 ordinary shares beneficially owned by JJ Media Investment
Holding Ltd., 5,041,600 ordinary shares beneficially owned by Target Sales International
Limited and 840,400 ordinary shares beneficially owned by Target Management Group Limited. JJ
Media Investment Holding Ltd., Target Sales International Limited and Target Management Group
Limited are 100% owned by Jason Nanchun Jiang, our founder and executive chairman. The
business address of Jason Nanchun Jiang is c/o Focus Media Holding Limited, 28-30/F, Zhao Feng
World Trade Building, 369 Jiangsu Road, Shanghai, China 200050.(3)
    
    Information based on the amended Schedule 13G was filed on January 12, 2009 on behalf of FMR
LLC. The business address of FMR LLC is 82 Devonshire Street, Boston, Massachusetts, USA
02109.


91



---



##### Table of Contents



(4)
    
    Information based on the Schedule 13G was filed on February 18, 2009 on behalf of TPG-Axon
Capital Management, LP. Includes 11,324,930 ordinary shares held by TPG-Axon Partners, LP and
23,675,070 ordinary shares held by TPG-Axon Partners (Offshore), Ltd. The business address of
TPG-Axon Capital Management, LP is 888 Seventh Avenue, 38th Floor, New York, New
York, USA 10019.(5)
    
    Information based on the amended Schedule 13G filed on
May 15, 2009 on behalf of Sloane
Robinson LLC. The business address of Sloane Robinson LLC is 20 Dunstans Hill, London EC3R
8ND, United Kingdom.(6)
    
    Information based on the Schedule 13G filed on February 13, 2009 on behalf of T. Rowe Price
Associates, Inc. The business address of T. Rowe Price Associates, Inc. is 100 E. Pratt
Street, Baltimore, Maryland, USA 21202.(7)
    
    The address of our current directors and executive officers is c/o Focus Media Holding
Limited, 28F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, China.(8)
    
    See note 2.    B. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008(in
U.S. dollars)Shanghai Everease Advertising &
Communication Ltd. (Everease)
    
    Jason Nanchun Jiang
    
    $
    7,764,977
    
    
    $
    3,132,954
    
    
    $
    (132,116
    )Multimedia Park Venture Capital
    
    Jimmy Wei Yu
    
    
    3,885,546
    
    
    
    104
    
    
    
    Shanghai Jobwell Business Consulting Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    1,382,695
    
    
    
    
    
    
    
    Shanghai Wealove Wedding Service Co., Ltd.
    
    Jimmy Wei Yu
    
    
    1,122,945
    
    
    
    
    
    
    
    Shanghai Wealove Business Consulting Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    671,488
    
    
    
    
    
    
    
    Shanghai Hetong Network Technology Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    982,527
    
    
    
    
    
    
    
    Shanghai Shengchu Advertising Agency Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    3,230,040
    
    
    
    44,542
    
    
    
    Beijing Sina Internet Information
Services Co., Ltd.
    
    Charles Cao
    
    
    190,563
    
    
    
    1,095,814
    
    
    
    1,637,297Beijing Sohu New-age Information
Technology Co., Ltd.
    
    Daqing Qi
    
    
    119,768
    
    
    
    608,150
    
    
    
    2,002,839Home-Inn Hotel Management (Beijing) Co.,
Ltd
    
    Neil Nanpeng Shen
    
    
    78,742
    
    
    
    82,356
    
    
    
    256,690Ctrip Travel Information Technology
(Shanghai) Co., Ltd.
    
    Neil Nanpeng Shen
    
    
    178,933
    
    
    
    
    
    
    
    69,86351.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    19,611
    
    
    
    718Qihoo.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    12,151
    
    
    
    48,385UUSEE
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    27,789
    
    
    
    78,572Aikong.com
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    56,190Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    4,153,948China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    909,775Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    43,561Beijing Dentsu Advertising Co., Ltd.
    
    Dian Zhong
    
    
    
    
    
    
    
    
    
    
    10,390,101Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    243,628
    
    
    
    87,638Total
    
    
    
    $
    19,608,224
    
    
    $
    5,267,099
    
    
    $
    19,603,461


92



---



##### Table of Contents



Year ended December 31,Name of related parties
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Beijing Sina Internet
Information Services Co., Ltd.
    
    Charles Cao
    
    $
    
    
    
    $
    24,755,004
    
    
    $
    50,294,367Beijing Sohu New-age
Information Technology Co.,
Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    14,596,893
    
    
    
    39,061,219Ctrip Travel Information
Technology (Shanghai) Co.,
Ltd.
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    130,230
    
    
    
    343,54651.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    204,612
    
    
    
    887,603Qihoo.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    305,413
    
    
    
    847,021UUSEE
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    15,929
    
    
    
    306,899E-House(China) Holdings Limited
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    2,008
    
    
    
    Total
    
    
    
    $
    
    
    
    $
    40,010,089
    
    
    $
    91,740,655
 December 31,Name of related parties
    
    Note
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Shanghai Everease Advertising & Communication Ltd. (Everease)
    
    (a)
    
    Jason Nanchun Jiang
    
    $
    6,331,549
    
    
    $
    133,543
    
    
    $
    4,136Multimedia Park Venture Capital
    
    (a)
    
    Jimmy Wei Yu
    
    
    12,705
    
    
    
    
    
    
    
    232,399Shanghai Shengchu Advertising Agency Co., Ltd.
    
    (a)
    
    Jimmy Wei Yu
    
    
    403,889
    
    
    
    
    
    
    
    Beijing Sina Internet Information Services Co., Ltd.
    
    (a)
    
    Charles Cao
    
    
    
    
    
    
    3,385,671
    
    
    
    2,183,809Beijing Sohu New-age Information Technology Co., Ltd.
    
    (a)
    
    Daqing Qi
    
    
    
    
    
    
    1,198,429
    
    
    
    4,905,642Ctrip Travel Information Technology (Shanghai) Co., Ltd.
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    89,946
    
    
    
    49,40151.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    105,147
    
    
    
    215,854UUSEE
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    10,952
    
    
    
    18,937Home-Inn Hotel Management (Beijing) Co., Ltd.
    
    (a)
    
    Neil Nanpeng Shen
    
    
    39,699
    
    
    
    
    
    
    
    23,838Yadu Huang Ke Technology Co., Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    
    
    
    
    150,158
    
    
    
    146,033Qihoo.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    17,683
    
    
    
    53,724Giant Interactive Group Inc.
    
    (a)
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    174,079Beijing Dentsu Advertising Co., Ltd.
    
    (a)
    
    Dian Zhong
    
    
    
    
    
    
    
    
    
    
    1,716,419David Yu
    
    (b)
    
    David Yu
    
    
    1,064,947
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    7,852,789
    
    
    $
    5,091,529
    
    
    $
    9,724,271


93



---



##### Table of Contents



Note (a)
    
     These amounts represent trade receivables for advertising services provided.Note (b)
    
     The amount represents a payment due from the ex-shareholder of Target Media
for an indemnification of a contingent liability which arose after the
acquisition. This amount was paid out in cash in 2007.  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Beijing Sina Internet Information Services Co., Ltd.
    
    (d)
    
    Charles Cao
    
    $
    
    
    
    $
    12,491,999
    
    
    $
    11,586,228Beijing Sohu New-age Information Technology Co., Ltd.
    
    (d)
    
    Daqing Qi
    
    
    
    
    
    
    301,520
    
    
    
    3,039,07551.com
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    179,750
    
    
    
    554,326UUSEE
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    3,696
    
    
    
    151,197Home-Inn Hotel Management (Beijing) Co., Ltd.
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    171
    
    
    
    Tan Zhi
    
    (c)
    
    Tan Zhi
    
    
    345,768
    
    
    
    
    
    
    
    Qihoo.com
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    
    
    
    
    129,427Giant Interactive Group Inc.
    
    (d)
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    146,314Ctrip Travel Information Technology (Shanghai) Co., Ltd.
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    
    
    
    
    80,543Total
    
    
    
    
    
    $
    345,768
    
    
    $
    12,977,136
    
    
    $
    15,687,110
 
 Note (c)
    
     The amount represents the amount due to the president of Focus Media for operating funds of Framedia. The loan was non-interest bearing
and was fully repaid in 2007.Note (d)
    
     the amounts represent trade payables for advertising services purchased. Other Related Party Transactions
 Shareholders Agreement
  Loans to Shareholders of Our PRC Operating Affiliates
  Loan from Relative of Jason Nanchun Jiang


94



---



##### Table of Contents



Transactions with Everease
  Everease Non-Competition Agreement
  Advertising Services Provided by Everease
  Transactions with Entities Affiliated with Jimmy Wei Yu
   Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their
Shareholders and Subsidiaries


95



---



##### Table of Contents



Transfer of Ownership When Permitted By Law
  Voting Arrangements
  Equity Pledge Agreements


96



---



##### Table of Contents



Equity Trust Agreements
  Cooperation Agreements
  Asset Transfer Agreement
  Technology Transfer Agreement
  Exclusive Services Agreement
  C. Interests of Experts and Counsel


97



---



##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
 In re Focus Media Holding Limited Litigation


98



---



##### Table of Contents



Dividend Policy
   B. Significant Changes
  
    
    On January 26, 2009, we make certain changes to our management team. Our chairman
Jason Jiang resumed his position as chief executive officer to replace Dr. Tan Zhi, who
continues to serve as an executive director. We also appointed Alex Deyi Yang, who has
been our general counsel since August 2004, as acting chief financial officer to
replace Daniel Wu, who resigned to pursue other professional interests. We also
appointed Michael Xu as vice president of finance; and
    
    In the first quarter of 2009, we suspended operation of a significant portion of our
outdoor LED billboard network in Shanghai due to government regulations governing the
use of curbside billboards. For the same reason, we suspended operation of a roving
billboard placed on a barge that circulated on the Bund river along a popular boardwalk
area in Shanghai.
    
    In 2009, we decided to suspend installation of additional digital frames on our our
poster frame network for the foreseeable future.
    
    Jason Jiang, who is one of the shareholders of a number of the PRC operating
affiliates that hold the advertising operating licenses connected with our operating
businesses, completed procedures to take on citizenship of another jurisdiction in
second quarter of 2009. Based on enquiries and discussions with the relevant PRC regulatory authorities,
we have been informed that Jason Jiangs change in citizenship does not change the status and nature related
to our PRC operating affiliates and we believe such change will not have any material adverse effect on our business operations.
    
    In 2009, we have renegotiated share purchase agreements with the former shareholders of certain companies that were the subject of our sale to Sina.  Under the renegotiated agreements, the earnings multiples used to calculate the total earn-out payment have been reduced, and additional downward adjustments were made based on uncollected account receivable balances.
    
    Allyes reduced the exercise price of 13,320,810 share options from $4.28 to $2.10 per share with no change in other terms and conditions. The modification resulted in an increase in share-based compensation of $3.1 million, which will be recognized over the remaining vesting period of the original awards.
  
 ITEM 9. THE OFFER AND LISTING
 A. Offer and Listing Details
 Market Price Information for Our American Depositary Shares


99



---



##### Table of Contents



SALE PRICEHIGH
    
    LOWUS$
    
    US$MONTHLY HIGHS AND LOWS2008(from July 1)July
    
    
    29.91
    
    
    
    22.48August
    
    
    32.79
    
    
    
    23.71September
    
    
    33.82
    
    
    
    21.94October
    
    
    28.79
    
    
    
    12.01November
    
    
    20.69
    
    
    
    6.24December
    
    
    11.67
    
    
    
    6.622009January
    
    
    10.35
    
    
    
    6.73February
    
    
    8.88
    
    
    
    6.80March
    
    
    7.30
    
    
    
    4.84April
    
    
    7.33
    
    
    
    6.20May
    
    
    8.83
    
    
    
    6.30June (to June 29)
    
    
    9.39
    
    
    
    6.52
  B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital


100



---



##### Table of Contents



B. Memorandum and Articles of Association
  C. Material Contracts
  Allyes
   Purchase Price
 Representations and Warranties
 Covenants
 Indemnification


101



---



##### Table of Contents



Control Over Acquired Entities
  Sale of Assets to SINA Corporation


102



---



##### Table of Contents



D. Exchange Controls
     
    
    prior to establishing or assuming control of an offshore company for the purpose of
financing that offshore company with assets or equity interests in an onshore
enterprise in the PRC, each PRC resident, whether a natural or legal person, must
complete the overseas investment foreign exchange registration procedures with the
relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be filed
by any PRC resident that directly or indirectly holds interests in that offshore
company upon either (1) the injection of equity interests or assets of an onshore
enterprise to the offshore company, or (2) the completion of any overseas fund raising
by such offshore company; and


103



---



##### Table of Contents




    
    an amendment to the registration with the local SAFE branch is also required to be
filed by such PRC resident when there is any material change involving a change in the
capital of the offshore company, such as (1) an increase or decrease in its capital,
(2) a transfer or swap of shares, (3) a merger or division, (4) a long term equity or
debt investment, or (5) the creation of any security interests over the relevant assets
located in China.
    E. Taxation
 Cayman Islands Taxation


104



---



##### Table of Contents



Peoples Republic of China Taxation
   United States Federal Income Taxation
  
    
    a bank;
    
    a dealer in securities or currencies;
    
    a financial institution;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    an insurance company;
    
    a tax-exempt organization;
    
    a person holding our ordinary shares or ADSs as part of a hedging, integrated or
conversion transaction, a constructive sale or a straddle;
    
    a trader in securities that has elected the mark-to-market method of accounting for
your securities;


105



---



##### Table of Contents




    
    a person liable for alternative minimum tax;
    
    a United States expatriate or a person treated as a resident of more than one
country;
    
    a person who owns or is deemed to own 10% or more of our voting stock;
    
    a partnership or other pass through entity for United States federal income tax
purposes or a person holding our ordinary shares or ADSs through any such entity; or
    
    a person whose functional currency is not the United States dollar.
 IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES OR
ADSS, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO YOU IN LIGHT OF YOUR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY OTHER TAXING JURISDICTION.
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation for United States federal
income tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
    
    an estate the income of which is subject to United States federal income taxation
regardless of its source; or
    
    a trust which either (1) is subject to the primary supervision of a court within the
United States and one or more United States persons have the authority to control all
substantial decisions of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States person.
  ADSs


106



---



##### Table of Contents



Taxation of Dividends
    Passive Foreign Investment Companies


107



---



##### Table of Contents




    
    at least 75% of our gross income is passive income, or
    
    at least 50% of the value (determined on a quarterly basis) of our assets is
attributable to assets that produce or are held for the production of passive income.
    
    
    the excess distribution or gain will be allocated ratably to each day in your
holding period for the ordinary shares or ADSs,
    
    the amount allocated to the current taxable year, and any taxable year prior to the
first taxable year in which we were a PFIC, will be treated as ordinary income, and
    
    the amount allocated to each other year will be subject to tax at the highest tax
rate in effect for that year and the interest charge applicable to underpayments of tax
will be imposed on the resulting tax attributable to each such year.


108



---



##### Table of Contents



Taxation of Capital Gains
  Information Reporting and Backup Withholding


109



---



##### Table of Contents



Tax Considerations of the Sina Sale and Distribution of the Sina Shares
     F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display


110



---



##### Table of Contents



http://www.sec.gov
   I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
  Inflation


111



---



##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Modifications of Rights
  
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series A convertible redeemable preference shares;
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series B convertible redeemable preference shares;
    
    any of our shareholders representing 20% of the ordinary shares converted from the
Series C convertible redeemable preference shares; and
    
    since the closing of our acquisition of Target Media, any of the former Target Media
shareholders representing 25% of the ordinary shares issued to them as a group as
consideration in connection with our acquisition of Target Media;
   .
 
    
    prior to September 18, 2009 or prior to the time when the shares proposed to be sold
by the former Allyes shareholders may be sold in a 90-day period under Rule 144, any
former Allyes shareholders holding


112



---



##### Table of Contents



3 million of our ordinary shares may request that we effect the registration of the
ordinary shares held by them using our existing registration statement on Form F-3ASR,
provided that if the offering is part of an underwritten offering, the expected proceeds
from such an offering would not be less than US$40 million; we are obligated to effect
up to three such registrations; and
    
    certain of the former Allyes shareholders, on a date at least 150 days and no more
than 330 days following March 28, 2007, may request that we effect the registration of
the ordinary shares held by them using our existing registration statement on Form
F-3ASR; we are obligated to effect only one such registration.
   B. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting.


113



---



##### Table of Contents



Internal Control 
Integrated Framework


114



---



##### Table of Contents



Internal
Control  Integrated Framework
     115




---



##### Table of Contents



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the year ended December 31,2007
    
    
    2008(in thousands, US dollar)Audit Fees (1)
    
    $
    1,960
    
    
    $
    1,950Audit-related Fees (2)
    
    
    
    
    
    
    850Tax Fees (3)
    
    
    394
    
    
    
    453All Other Fees (4)
    
    
    
    
    
    
    Total
    
    $
    2,354
    
    
    $
    3,253
 
 (1)
    
    Audit fees consist of fees associated with the annual audit, the reviews of our quarterly
financial statements and statutory audits required internationally. They also include fees
billed for those services that are normally provided by the independent accountants in
connection with statutory and regulatory filings.(2)
    
    Audit-related fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements but
not described in footnote (1) above. These services include consultations concerning financial
accounting and reporting standards and review of capitalization of retained earnings,
financial covenants in loan agreements, and our affiliates financial information.(3)
    
    Tax fees include fees billed for professional services rendered by Deloitte Touche Tohmatsu
CPA Ltd., primarily in connection with our transfer study activities.(4)
    
    All other fees comprise fees for all other services provided by Deloitte Touche Tohmatsu CPA
Ltd., other than those services covered in footnotes (1) to (3) above.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 116




---



##### Table of Contents



Maximum NumberTotal Number of
    
    (or ApproximateADSs Purchased as
    
    Dollar Value) ofPart of Publicly
    
    ADSs that May YetTotal Number of
    
    Average Price Paid
    
    Announced
    
    Be PurchasedPeriod
    
    ADSs Repurchased
    
    per ADS(2)
    
    Program(1)
    
    Under the ProgramAugust 2008
    
    
    680,973
    
    
    $
    29.34
    
    
    
    680,973
    
    
    $
    80,020,285September 2008
    
    
    405,654
    
    
    $
    24.63
    
    
    
    1,086,627
    
    
    $
    70,028,740October 2008
    
    
    501,715
    
    
    $
    19.91
    
    
    
    1,588,342
    
    
    $
    60,041,501November 2008
    
    
    800,000
    
    
    $
    7.32
    
    
    
    2,388,342
    
    
    $
    54,187,501
 
 (1)
    
    We announced a share repurchase program approved by our board of directors on July 16, 2008.
Under the terms of the approved program, we may repurchase up to US$100 million worth of our issued
and outstanding ADSs. The repurchases have been, and will be, made from time to time on the open
market at prevailing market prices or in block trades. The repurchases have been, and will be, made
subject to restrictions relating to volume, price and timing. The timing and extent of any
repurchases will depend upon market conditions, the trading price of our ADSs and other factors. We
expect to implement this share repurchase program over the course of 12 months starting from July
2008, in a manner consistent with market conditions and the interest of the shareholders. Our board
of directors will review the share repurchase program periodically, and may authorize adjustment of
its terms and size accordingly.(2)
    
    The average price paid per ADS is calculated using the execution price for each repurchase
excluding commissions paid to brokers. 
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
 .
 
 ITEM 16G.  CORPORATE GOVERNANCE
 .
 
 PART III
 
 ITEM 17.  FINANCIAL STATEMENTS
  
 ITEM 18.  FINANCIAL STATEMENTS
 The following is a list of the audited financial statements and a report of the independent
registered public accounting firm included in this annual report beginning on page F-1.
 PageReport of Independent Registered Public Accounting
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-3Consolidated Statements of Operations for each of the years ended December 31, 2006, 2007 and 2008
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(Loss) for the years ended December 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7Additional
Information  Financial Statement Schedule 1
    
    
    F-47
 
 ITEM 19.  EXHIBITS
 117




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits3.1*
    
    Amended and Restated Memorandum and Articles of Association of Focus Media
Holding Limited.4.1*
    
    Specimen Ordinary Share Certificate.4.2*
    
    Amended and Restated Shareholders Agreement of Focus Media Holding
Limited, dated December 2, 2004, among Focus Media Holding Limited, its
subsidiaries, its ordinary shareholders, its preferred shareholders and
the investors named therein.4.3*
    
    Deposit Agreement dated July 18, 2005 among the Registrant, Citibank, N.A.
and holders of the American Depositary Receipts (incorporated by reference
to the registration statement on Form F-6 (File No. 333-126011) filed with
the Securities and Exchange Commission with respect to American Depositary
Shares representing ordinary shares).5.1*
    
    Form of opinion of Conyers, Dill & Pearman, Cayman Islands special counsel
to the registrant, regarding the validity of the ordinary shares being
registered.5.2*
    
    Form of opinion of Global Law Office, counsel as to PRC law to the
registrant, regarding the validity of (i) the corporate structure of Focus
Media Technology (Shanghai) Co., Ltd. and Shanghai Focus Media
Advertisement Co., Ltd. and contractual arrangements among Focus Media
Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisement Co.,
Ltd. and its subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu, (ii) the
corporate structure of Framedia Investment and Shanghai Framedia
Advertisement Development Co., Ltd. and contractual arrangements among
Framedia Investment and Shanghai Framedia Advertisement Development Co.,
Ltd. and its subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu and (iii)
the corporate structure of Shanghai Focus Media Advertisement Co., Ltd.,
Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad
Technology Co., Ltd., Beijing Focus Media Wireless Technology Co., Ltd.,
Jason Nanchun Jiang and Jimmy Wei Yu.8.1*
    
    Form of opinion of Conyers, Dill & Pearman, special Cayman Islands tax
counsel to the registrant, regarding tax matters.10.1*
    
    Rules of the 2003 Employee Share Option Scheme and form of grant letter.10.2*
    
    Technology License and Service Agreement, dated March 28, 2005, by and
among Focus Media Digital Information Technology (Shanghai) Co., Ltd.,
Shanghai Focus Media Advertisements Co., Ltd. and the subsidiaries of
Shanghai Focus Media Advertisement Co., Ltd.10.3*
    
    Business Cooperation Agreement, dated March 28, 2005, by and among
Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media
Advertising Agency Co., Ltd. and the subsidiaries of Shanghai Focus Media
Advertisement Co., Ltd.10.4*
    
    Equity Pledge Agreement, dated March 28, 2005, by and among Jason Nanchun
Jiang, Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd., Focus
Media Technology (Shanghai) Co., Ltd., Focus Media Digital Information
Technology (Shanghai) Co., Ltd. and the subsidiaries of Shanghai Focus
Media Advertisement Co., Ltd.10.5*
    
    Call Option Agreement, dated March 28, 2005, among Jason Nanchun Jiang,
Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd. and Focus Media
Technology (Shanghai) Co., Ltd.10.6*
    
    Shareholders Voting Rights Proxy Agreement, dated March 28, 2005, among
Jason Nanchun Jiang, Jimmy Wei Yu, Shanghai Focus Media Advertisement Co.,
Ltd., Focus Media Technology (Shanghai) Co., Ltd. and the subsidiaries of
Shanghai Focus Media Advertisement Co., Ltd.10.7*
    
    Trust Agreement, dated March 28, 2005, by and between Shanghai Focus Media
Advertisement Co., Ltd. and Focus Media Technology (Shanghai) Co., Ltd.
 118




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.8*
    
    Trademark License Agreement, dated March 28, 2005, by and among Focus
Media Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisement
Co., Ltd. and its subsidiaries.10.9*
    
    Loan Agreement, dated June 10, 2003, among Focus Media Holding Limited,
Jason Nanchun Jiang, Jimmy Wei Yu, Yuanzhe Fu, Yibing Zhou and Yiqing Hou.10.10*
    
    Loan Agreement, dated March 28, 2005, by and between Jason Nanchun Jiang
and Focus Media Technology (Shanghai) Co., Ltd.10.11*
    
    Loan Agreement, dated March 28, 2005, by and among Jimmy Wei Yu, Focus
Media Technology (Shanghai) Co., Ltd. and Shanghai Focus Media
Advertisement Co., Ltd.10.12*
    
    Form of Employment Agreement of Focus Media Technology (Shanghai) Co., Ltd.10.13*
    
    Manager Non-Competition Agreement entered into by Focus Media Holding
Limited and Jason Nanchun Jiang on November 29, 2004.10.14*
    
    Technology Transfer Agreement entered into by Jimmy Wei Yu and Focus Media
Digital Information (Shanghai) Co., Ltd., dated November 1, 2004.10.15*
    
    Asset and Business Acquisition Agreement between Shanghai Everease
Communication Company and Shanghai Focus Media Advertisement Co., Ltd.
dated July 1, 2003.10.16*
    
    Everease Non-competition Agreement between Focus Media Holding Limited and
Shanghai Everease Communication Company, dated as of November 2004.10.17*
    
    Sales Contract between Shanghai Everease Communication Company and
Shanghai Focus Media Advertisement Co., Ltd., dated May 2003.10.18*
    
    Project Cooperation Framework Agreement between Shanghai Everease
Communication Company and Beijing Suodi Advertising Co., Ltd., dated
February, April and June 2003.10.19*
    
    Transfer Agreement on Project Cooperation Framework Agreement between
Shanghai Focus Media Advertisement Co., Ltd. and Beijing Suodi Advertising
Co., Ltd., dated August 28, 2003.10.20*
    
    Business Agency Agreement between Shanghai On-Target Advertising Co., Ltd.
and Shanghai Focus Media Advertisement Co., Ltd.10.21*
    
    Agreement between Shanghai On-Target Advertising Co., Ltd., Jimmy Wei Yu,
Shanghai Focus Media Advertisement Co., Ltd., Union Enterprise Holding
Co., Ltd. and Shenlong Lin, dated October 15, 2003.10.22*
    
    Acknowledgement Letter entered into as of March 28, 2005 by and among
Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology
(Shanghai) Co., Ltd., Focus Media Digital Information Technology
(Shanghai) Co., Ltd. and subsidiaries of Shanghai Focus Media
Advertisement Co., Ltd.10.23*
    
    Share Option Plan 2005.10.24*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Fuzhou Fukesi Advertisement Co., Ltd.10.25*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Hefei Fukesi Advertisement Co., Ltd.
 119




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.26*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi
Advertisement Co., Ltd.10.27*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Shenyang Focus Media Advertisement Co., Ltd.10.28*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Shenzhen Bianjie Building Advertisement Co., Ltd.10.29*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated
January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie
Building Advertisement Co., Ltd.10.30*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Fuzhou Fukesi Advertisement Co., Ltd.10.31*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Hefei Fukesi Advertisement Co., Ltd.10.32*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi
Advertisement Co., Ltd.10.33*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Shenyang Focus Media Advertisement Co., Ltd.10.34*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and
Shenzhen Bianjie Building Advertisement Co., Ltd.10.35*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated
January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie
Building Advertisement Co., Ltd.10.36*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media
Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co., Ltd.10.37*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media
Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.10.38*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd.
and Hefei Fukesi Advertisement Co., Ltd.10.39*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media
Advertisement Co., Ltd. and Shenyang Focus Media Advertisement Co., Ltd.10.40*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media
Advertisement Co., Ltd. and Shenzhen Bianjie Building Advertisement Co.,
Ltd.
 120




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.41*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights
Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd.
and Shenzhen Bianjie Building Advertisement Co., Ltd.10.42*
    
    Equity Pledge Agreement, dated January 13, 2006, by and among Shanghai
Focus Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd.,
Shanghai Framedia Investment Consultancy Co., Ltd. and the Local
Advertisement Companies named therein.10.43*
    
    Call Option Agreement, dated January 13, 2006, by and among Shanghai Focus
Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai
Framedia Investment Consultancy Co., Ltd. and the Local Advertisement
Companies named therein.10.44*
    
    Shareholders Voting Rights Proxy Agreement, dated January 13, 2006, by
and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus
Media Co., Ltd., Shanghai Framedia Investment Consultancy Co., Ltd. and
the Local Advertisement Companies named therein.10.45*
    
    Equity Pledge Agreement, dated January 13, 2006, by and among Lei Liu,
Yong Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong
Century Shenghuo Advertisement Co., Ltd.10.46*
    
    Call Option Agreement, dated January 13, 2006, by and among Lei Liu, Yong
Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong
Century Shenghuo Advertisement Co., Ltd.10.47*
    
    Shareholders Voting Rights Proxy Agreement, dated January 13, 2006, by
and among Lei Liu, Yong Shi, Shanghai Framedia Investment Consultancy Co.,
Ltd. and Guangdong Century Shenghuo Advertisement Co., Ltd.10.48*
    
    Share Purchase Agreement, dated October 15, 2005, as amended and
supplemented, among Focus Media Holding Limited, Infoachieve Limited,
Total Team Investments Limited and the other Infoachieve parties named
therein.10.49*
    
    Share Purchase Agreement, dated as of January 7, 2006, among Focus Media
Holding Limited, Target Media Holdings Limited and Its Shareholders.10.50*
    
    Asset Transfer Agreement, dated December 31, 2005, by and between Focus
Media Digital Information Technology (Shanghai) Co., Ltd. and Shanghai New
Focus Media Advertisement Co., Ltd.10.51*
    
    Share Purchase Agreement, dated March 7, 2006, by and among Focus Media
Holding Limited and Dotad Wireless Holdings Co., Ltd.10.52*
    
    Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus
Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency
Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media
Wireless Co., Ltd.10.53*
    
    Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus
Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency
Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media
Wireless Co., Ltd.10.54*
    
    Shareholders Voting Rights Proxy Agreement, dated May 22, 2006, by and
among Shanghai FocusMedia Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency
Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media
Wireless Co., Ltd.
 121




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.55*
    
    Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus
Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency
Co., Ltd., Shanghai Framedia Investment Consulting Co., Ltd. and Guandong
Shiji Shenghuo Advertisement Co., Ltd.10.56*
    
    Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus
Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency
Co., Ltd., Shanghai Framedia Investment Consulting Co., Ltd. and Guandong
Shiji Shenghuo Advertisement Co., Ltd.10.57*
    
    Shareholders Voting Rights Proxy Agreement, dated May 22, 2006, by and
among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media
Advertising Agency Co., Ltd., Shanghai Framedia Investment Consulting Co.,
Ltd. and Guandong Shiji Shenghuo Advertisement Co., Ltd.10.58*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.10.59*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.10.60*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai New Focus Media
Advertisement Co., Ltd.10.61*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.10.62*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.10.63*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai New Focus Media
Advertising Agency Co., Ltd.10.64*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai Target Media Co., Ltd.10.65*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai Target Media Co., Ltd.10.66*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai Target Media Co., Ltd.10.67*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.10.68*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.10.69*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Dongguan Focus Media Advertisement
Co., Ltd.10.70*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.10.71*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.
 122




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.72*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Fuzhou Fukesi Advertising Co.,
Ltd.10.73*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.10.74*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.10.75*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.10.76*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.10.77*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.10.78*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai On-Target Advertisement
Co., Ltd.10.79*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.10.80*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.10.81*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai Jiefang Focus Media
Advertisement Co., Ltd.10.82*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.10.83*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.10.84*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shanghai Perfect Media Advertising
Agency Co., Ltd.10.85*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.10.86*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.10.87*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shenzhen E-Time Commercial
Consulting Co., Ltd.10.88*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.10.89*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.
 123




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.90*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shenzhen Bianjie Building
Advertisement Co., Ltd.10.91*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated
May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.10.92*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated
May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.10.93*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights
Proxy Agreement, dated May 22, 2006, of Shenyang Focus Media Advertising
Co., Ltd.10.94*
    
    Cooperation Agreement, dated May 22, 2006, by and among Shanghai Focus
Media Advertisement Co. Ltd. and its local advertising subsidiaries named
therein and Shanghai New Focus Media Advertisement Co. Ltd.10.95*
    
    Technology Transfer Agreement, dated as of May 22, 2006, by and between
Focus Media Digital Information Technology (Shanghai) Co., Ltd. and
Shanghai New Focus Media Advertisement Co., Ltd.10.96*
    
    Advertisement Dissemination Agreement, dated May 22, 2006, by and between
Shanghai Focus Media Advertising Agency Co., Ltd. and Shanghai New Focus
Media Advertisement Co., Ltd.10.97*
    
    2006 Share Option Plan.10.98*
    
    Share Purchase Agreement, dated as of February 28, 2007, among Allyes
Information Technology Company Limited, the selling shareholders named
therein and Focus Media Holding Limited.10.99*
    
    Asset Transfer Agreement, dated as of January 30, 2003, among Shanghai
Allyes Advertisement Co., Ltd., New Allyes Information Technology
(Shanghai) Co., Ltd., Xiangdong Xiong and Jiangang Wang.10.100*
    
    Call Option Agreement, dated as of January 30, 2003, among Jiangang Wang,
New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes
Advertisement Co., Ltd.10.101*
    
    Call Option Agreement, dated as of January 30, 2003, among Xiangdong
Xiong, new Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai
Allyes Advertisement Co., Ltd.10.102*
    
    Equity Interests Pledge Agreement, dated as of January 30, 2003, between
New Allyes Information Technology (Shanghai) Co., Ltd. and Jianggang Wang.10.103*
    
    Equity Interests Pledge Agreement, dated as of January 30, 2003, between
New Allyes Information Technology (Shanghai) Co., Ltd. and Xiangdong
Xiong.10.104*
    
    Exclusive Service Agreement, dated as of January 20, 2003, by and among
Shanghai Allyes Advertisement Co., Ltd. and New Allyes Information
Technology (Shanghai) Co., Ltd.10.105*
    
    Loan Agreement, dated as of January 10, 2003, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.106*
    
    Loan Agreement, dated as of January 10, 2003, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.
 124




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.107*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 30, 2003,
among Xiangdong Xiong, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shanghai Allyes Advertisement Co., Ltd.10.108*
    
    Call Option Agreement, dated November 1, 2004, among Jiangang Wang, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen
Creation Advertisement Co., Ltd.10.109*
    
    Call Option Agreement, dated November 1, 2004, among Xiangdong Xiong, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen
Creation Advertisement Co., Ltd.10.110*
    
    Equity Interests Pledge Agreement, dated November 1, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.111*
    
    Equity Interests Pledge Agreement, dated November 1, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Xiangdong
Xiong.10.112*
    
    Exclusive Service Agreement, dated as of November 1, 2004, by and among
Shenzhen Baifen Creation Advertisement Co., Ltd. and New Allyes
Information Technology (Shanghai) Co., Ltd.10.113*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.114*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.10.115*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 1, 2004,
among Jiangang Wang, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.10.116*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 1, 2004,
among Xiangdong Xiong, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.10.117*
    
    Asset Transfer Agreement, dated November 30, 2004, among Shanghai Huxin
Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co.,
Ltd., Suyang Zhang and Hailong Zhu.10.118*
    
    Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin
Advertisement Co., Ltd.10.119*
    
    Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin
Advertisement Co., Ltd.10.120*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.121*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.122*
    
    Exclusive Service Agreement, dated as of November 11, 2004, by and among
Shanghai Huxin Advertisement Co., Ltd. and New Allyes Information
Technology (Shanghai) Co., Ltd.10.123*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology(Shanghai) Co., Ltd. and Suyang Zhang.
 125




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.124*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.125*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30,
2004, among Suyang Zhang, New Allyes Information Technology (Shanghai)
Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.10.126*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30,
2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shanghai Huxin Advertisement Co., Ltd.10.127*
    
    Asset Transfer Agreement, dated as of November 30, 2004, among Shanghai
MSN Advertisement Co., Ltd., New Allyes Information Technology (Shanghai)
Co., Ltd., Suyang Zhang and Hailong Zhu.10.128*
    
    Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN
Advertisement Co., Ltd.10.129*
    
    Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New
Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN
Advertisement Co., Ltd.10.130*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.131*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between
New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.132*
    
    Exclusive Service Agreement, dated as of November 3, 2004, by and among
Shanghai MSN Advertisement Co., Ltd. and New Allyes Information Technology
(Shanghai) Co., Ltd.10.133*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.134*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.135*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30,
2004, among Suyang Zhang, New Allyes Information Technology (Shanghai)
Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.10.136*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30,
2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shanghai MSN Advertisement Co., Ltd.10.137*
    
    Asset Transfer Agreement, dated as of May 17, 2005, among Shanghai Quanshi
Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co.,
Ltd., Suyang Zhang and Hailong Zhu.10.138*
    
    Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi
Advertisement Co., Ltd.10.139*
    
    Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi
Advertisement Co., Ltd.
 126




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.140*
    
    Equity Interests Pledge Agreement, dated May 17, 2005, by and between New
Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.141*
    
    Equity Interests Pledge Agreement, dated May 17, 2005, by and between New
Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.142*
    
    Exclusive Service Agreement, dated as of April 20, 2005, by and among
Shanghai Quanshi Advertisement Co., Ltd. and New Allyes Information
Technology (Shanghai) Co., Ltd.10.143*
    
    Loan Agreement, dated as of April 20, 2005, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.144*
    
    Loan Agreement, dated as of April 20, 2005, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.145*
    
    Shareholders Voting Rights Proxy Agreement, dated as of May 17, 2005,
among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd.
and Shanghai Quanshi Advertisement Co., Ltd.10.146*
    
    Shareholders Voting Rights Proxy Agreement, dated as of May 17, 2005,
among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd.
and Shanghai Quanshi Advertisement Co., Ltd.10.147*
    
    Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by
and among New Allyes Information Technology (Shanghai) Co., Ltd. and
Suyang Zhang.10.148*
    
    Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by
and among New Allyes Information Technology (Shanghai) Co., Ltd. and
Hailong Zhu.10.149*
    
    Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong
Advertisement Co., Ltd.10.150*
    
    Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong
Advertisement Co., Ltd.10.151*
    
    Equity Interests Pledge Agreement, dated July 1, 2006, by and between New
Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.152*
    
    Equity Interests Pledge Agreement, dated July 1, 2006, by and between New
Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.153*
    
    Exclusive Service Agreement, dated as of July 1, 2006, by and among
Shanghai Kuantong Advertisement Co., Ltd. and New Allyes Information
Technology (Shanghai) Co., Ltd.10.154*
    
    Loan Agreement, dated as of June 20, 2006, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.155*
    
    Loan Agreement, dated as of June 20, 2006, by and among New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.156*
    
    Shareholders Voting Rights Proxy Agreement, dated as of July 1, 2006,
among Jiangang Wang, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shanghai Kuantong Advertisement Co., Ltd.10.157*
    
    Shareholders Voting Rights Proxy Agreement, dated as of July 1, 2006,
among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd.
and Shanghai Kuantong Advertisement Co., Ltd.
 127




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.158*
    
    Share Purchase Agreement, dated as of July 21, 2006, among EFT Partners
Limited, Focus Media Holdings Limited, Appreciate Capital Ltd., Zhang
Qingyong and Wang Yongmei.10.159*
    
    Registration Rights Agreement, dated as of March 28, 2007, by and among
Focus Media Holding Limited and Persons who represent certain former
shareholders, warrant holders and options holders of Allyes Information
Technology Company Limited.10.160*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 30, 2003,
among Jiangang Wang, New Allyes Information Technology (Shanghai) Co.,
Ltd. and Shanghai Allyes Advertisement Co., Ltd.10.161*
    
    2007 Share Option Plan10.162*
    
    Share Purchase Agreement, dated as of December 8, 2007, among Focus Media
Holding Limited, CGEN Digital Media Company Limited and the selling
shareholders and other parties named therein.10.163*
    
    Registration Rights Agreement, dated as of January 2, 2008, among Focus
Media Holding Limited and the former shareholders of CGEN Digital Media
Company Limited named therein.10.164*
    
    Equity Pledge Agreement, dated as of January 5, 2008, among Shanghai Focus
Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co.,
Ltd., CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN
Culture Communication Company Ltd.10.165*
    
    Call Option Agreement, dated as of January 5, 2008, among Shanghai Focus
Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co.,
Ltd., CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN
Culture Communication Company Ltd10.166*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 5, 2008,
among Shanghai Focus Media Advertisement Co., Ltd, Shanghai Focus Media
Advertising Agency Co., Ltd., CGEN Digital Technology (Shanghai) Company
Ltd. And Shanghai CGEN Culture Communication Company Ltd10.167*
    
    Exclusive Technology and Consulting Agreement, dated as of January 16,
2006, among CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai
CGEN Culture Communication Company Ltd10.168
    
    Termination and Release Agreement, dated as of December 8, 2008, among
Focus Media Holding Limited, CGEN Digital Media Company Limited, Chan Yi
Sing (individually and as representative of all CGEN selling
shareholders), Guanyong Tian and Mei Lijun.10.169
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH
Advertising Co., Ltd, Liu Yi Nuo and Shanghai Chuanzhi Advertisement Co.,
Ltd.10.170
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Chuanzhi
Advertisement Co., Ltd.10.171
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH
Advertising Co., Ltd, Pan Ze Xin and Shanghai Chuanzhi Advertisement Co.,
Ltd.10.172
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Chuanzhi
Advertisement Co., Ltd.10.173
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH
Advertising Co., Ltd, Liu Yi Nuo and Shanghai Ruili Advertisement Co.,
Ltd.
 128




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.174
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertisement Co., Ltd, Liu Yi Nuo and Shanghai Ruili
Advertisement Co., Ltd.10.175
    
    Equity Pledge Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Ni He Ping and Shanghai Ruili Advertisement Co.,
Ltd.10.176
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertising Co., Ltd, Ni He Ping and Shanghai Ruili
Advertisement Co., Ltd.10.177
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH
Advertising Co., Ltd, Liu Yi Nuo and Shanghai Xinnuo Advertisement Co.,
Ltd.10.178
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertising Co., Ltd, Liu Yi Nuo and Shanghai Xinnuo
Advertisement Co., Ltd.10.179
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH
Advertising Co., Ltd, Pan Ze Xin and Shanghai Xinnuo Advertisement Co.,
Ltd.10.180
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007,
among Shanghai OOH Advertising Co., Ltd, Pan Ze Xin and Shanghai Xinnuo
Advertisement Co., Ltd.10.181
    
    Asset Purchase Agreement, dated as of December 22, 2008, between Focus
Media Holding Limited and SINA Corporation.12.1
    
    Certificate of Chief Executive Officer.12.2
    
    Certificate of Chief Financial Officer.13.1
    
    Certification of Periodic Financial Report.13.2
    
    Certification of Periodic Financial Report.15.1
    
    Consent of Conyers, Dill & Pearman.15.2
    
    Consent of Global Law Office.15.3
    
    Consent of Deloitte Touche
Tohmatsu CPA Ltd.21.1
    
    List of Subsidiaries.
 
 *
    
    Previously filed.
    
    Confidential treatment requested for certain portions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act, which portions are omitted and filed separately with the Securities and Exchange Commission. 129




---



##### Table of Contents



SIGNATURES
  Focus Media Holding LimitedBy:

/s/
Jason Nanchun JiangName:
    Jason Nanchun JiangTitle:
    Chairman and Chief Executive Officer  130




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITEDINDEX TO CONSOLIDATED FINANCIAL STATEMENTSCONTENTS
 PagesReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2006, 2007 and 2008
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-4Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7Additional
Information  Financial Statement Schedule 1
    
    
    F-47
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal ControlIntegrated Framework
  
 F-2




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
  CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2007
    
    
    2008(In U.S. Dollars, except share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    164,610,942
    
    
    $
    450,416,381
    
    
    $
    142,434,073Investment in debt and equity securities
    
    
    
    
    
    
    90,145,360
    
    
    
    Accounts receivable, net of allowance for
doubtful accounts of $1,308,554, $5,310,835
and $4,395,022 in 2006, 2007 and 2008,
respectively
    
    
    61,614,343
    
    
    
    206,102,130
    
    
    
    135,270,359Inventories
    
    
    519,095
    
    
    
    1,654,451
    
    
    
    24,873Prepaid expenses and other current assets
    
    
    5,199,355
    
    
    
    58,884,992
    
    
    
    15,117,274Deposits paid for acquisition of subsidiaries
    
    
    3,526,370
    
    
    
    40,401,852
    
    
    
    29,675,790Amounts due from related parties
    
    
    7,852,789
    
    
    
    5,091,529
    
    
    
    7,913,125Rental deposits
    
    
    
    
    
    
    28,762,699
    
    
    
    10,089,633Assets held for sale-current
    
    
    
    
    
    
    
    
    
    
    467,045,566Total current assets
    
    
    243,322,894
    
    
    
    881,459,394
    
    
    
    807,570,693Rental deposits
    
    
    11,833,290
    
    
    
    5,301,990
    
    
    
    133,362Equipment, net
    
    
    70,249,324
    
    
    
    95,478,326
    
    
    
    6,292,294Acquired intangible assets, net
    
    
    34,717,019
    
    
    
    155,717,055
    
    
    
    77,712,847Goodwill
    
    
    739,743,871
    
    
    
    943,398,282
    
    
    
    30,699,525Other long-term assets
    
    
    6,375,682
    
    
    
    58,182,855
    
    
    
    10,736,177Assets held for sale-non current
    
    
    
    
    
    
    
    
    
    
    599,149,115Total assets
    
    $
    1,106,242,080
    
    
    $
    2,139,537,902
    
    
    $
    1,532,294,013Liabilities and shareholders equityCurrent liabilities:Short-term loans
    
    $
    2,769,459
    
    
    $
    
    
    
    $
    Accounts payable
    
    
    5,987,593
    
    
    
    50,378,576
    
    
    
    67,904,888Accrued expenses and other current liabilities
    
    
    38,674,175
    
    
    
    190,312,946
    
    
    
    61,911,260Income taxes payable
    
    
    4,060,170
    
    
    
    21,391,295
    
    
    
    12,622,191Amounts due to related parties
    
    
    345,768
    
    
    
    12,977,136
    
    
    
    15,687,110Liabilities held for sale-current
    
    
    
    
    
    
    
    
    
    
    160,738,638Deferred tax liabilities
    
    
    
    
    
    
    1,226,999
    
    
    
    Total current liabilities
    
    
    51,837,165
    
    
    
    276,286,952
    
    
    
    318,864,087Liabilities held for sale-non current
    
    
    
    
    
    
    
    
    
    
    1,959,412Deferred tax liabilities
    
    
    3,303,110
    
    
    
    6,393,505
    
    
    
    11,580,681Total liabilities
    
    $
    55,140,275
    
    
    $
    282,680,457
    
    
    $
    332,404,180Commitments and contingencies (Note 15)Minority interest
    
    
    357,814
    
    
    
    1,913,248
    
    
    
    2,105,790Shareholders equityOrdinary shares ($0.00005 par value;
19,800,000,000 shares authorized in 2006,
2007 and 2008; 534,896,873, 640,230,852
and 646,081,710 shares issued and
outstanding in 2006, 2007 and 2008,
respectively)
    
    
    26,745
    
    
    
    32,020
    
    
    
    32,327Additional paid-in capital
    
    
    709,196,246
    
    
    
    1,581,579,792
    
    
    
    1,659,833,079Acquisition consideration to be issued
    
    
    237,879,480
    
    
    
    
    
    
    
    Retained earnings (deficit)
    
    
    96,194,969
    
    
    
    236,718,179
    
    
    
    (533,969,347
    )Accumulated other comprehensive income
    
    
    7,446,551
    
    
    
    36,614,206
    
    
    
    71,887,984Total shareholders equity
    
    $
    1,050,743,991
    
    
    $
    1,854,944,197
    
    
    $
    1,197,784,043Total liabilities and shareholders equity
    
    $
    1,106,242,080
    
    
    $
    2,139,537,902
    
    
    $
    1,532,294,013
  F-3




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
  CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31,2006
    
    
    2007
    
    
    2008(In U.S. Dollars, except share data)Net revenues:Advertising Service Revenue
    
    $
    689,851
    
    
    $
    163,062,594
    
    
    $
    369,553,685Cost of revenues:Advertising Service Cost
    
    
    759,672
    
    
    
    121,968,033
    
    
    
    285,045,758Gross profit
    
    
    (69,821
    )
    
    
    41,094,561
    
    
    
    84,507,927Operating expenses:General and administrative
    
    
    3,759,781
    
    
    
    16,690,929
    
    
    
    52,101,761Selling and marketing
    
    
    270,720
    
    
    
    14,052,317
    
    
    
    34,680,389Impairment loss
    
    
    
    
    
    
    
    
    
    
    222,535,509Loss on disposal of CGEN
    
    
    
    
    
    
    
    
    
    
    190,466,256Other operating income
    
    
    
    
    
    
    (222,610
    )
    
    
    (1,027,174
    )Total operating expenses
    
    
    4,030,501
    
    
    
    30,520,636
    
    
    
    498,756,741Income (loss) from operations
    
    
    (4,100,322
    )
    
    
    10,573,925
    
    
    
    (414,248,814
    )Interest income
    
    
    740,193
    
    
    
    2,758,008
    
    
    
    2,642,816Interest expense
    
    
    (15,546
    )
    
    
    (24,246
    )
    
    
    (20,549
    )Other income
    
    
    
    
    
    
    265,787
    
    
    
    1,103,460Other expense
    
    
    (129
    )
    
    
    (165,722
    )
    
    
    (1,722,391
    )Income (loss) from continuing operations before income taxes
and minority interest
    
    
    (3,375,804
    )
    
    
    13,407,752
    
    
    
    (412,245,478
    )Income taxes:
    
    
    
    
    
    
    4,192,751
    
    
    
    3,390,994Net income (loss) from continuing operations after income
taxes before minority interest
    
    
    (3,375,804
    )
    
    
    9,215,001
    
    
    
    (415,636,472
    )Minority interest
    
    
    
    
    
    
    (720,473
    )
    
    
    107,373Net income (loss) from continuing operations
    
    
    (3,375,804
    )
    
    
    8,494,528
    
    
    
    (415,529,099
    )Net income (loss) from discontinued operations
    
    
    86,573,536
    
    
    
    135,941,021
    
    
    
    (355,158,427
    )Net income (loss)
    
    $
    83,197,732
    
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )Income (loss) per share from continuing operations  basic
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from continuing operations  diluted
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from discontinuing operations  basic
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Income (loss) per share from discontinuing operations  diluted
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Income (loss) per share  basic
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )Income (loss) per share  diluted
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )Shares used in calculating basic income (loss) per share
    
    
    505,411,079
    
    
    
    590,387,396
    
    
    
    643,989,522Shares used in calculating diluted income (loss) per share
    
    
    505,411,079
    
    
    
    608,326,450
    
    
    
    643,989,522
  F-4




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 Deferred
    
    
    Retained
    
    
    AccumulatedAdditional
    
    
    share
    
    
    earnings
    
    
    other
    
    
    Totalpaid-in
    
    
    based
    
    
    (accumulated
    
    
    comprehensive
    
    
    shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    capital
    
    
    compensation
    
    
    deficit)
    
    
    income
    
    
    equity
    
    
    income (loss)Balance at January
1, 2006
    
    
    378,306,000
    
    
    $
    18,916
    
    
    $
    177,419,761
    
    
    $
    (246,569
    )
    
    $
    12,997,237
    
    
    $
    1,225,306
    
    
    $
    191,414,651
    
    
    
    Issuance of
ordinary shares
upon follow-on
offering on
January 27, 2006,
net of issuance
cost of $3,466,700
    
    
    15,000,000
    
    
    
    750
    
    
    
    61,782,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,783,300
    
    
    
    Issuance of
ordinary shares
upon follow-on
offering on
June 16, 2006, net
of issuance cost of $2,740,407
    
    
    16,000,000
    
    
    
    800
    
    
    
    80,966,793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,967,593
    
    
    
    Issuance of
ordinary shares in
connection with
acquisitions
    
    
    99,254,193
    
    
    
    4,962
    
    
    
    365,660,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    365,665,023
    
    
    
    Issuance of
ordinary shares
pursuant to share
option plans
    
    
    26,336,680
    
    
    
    1,317
    
    
    
    15,246,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,247,561
    
    
    
    Ordinary shares to
be issued in
connection with
acquisitions
    
    
    
    
    
    
    
    
    
    
    237,879,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237,879,480
    
    
    
    Adjustment for the
adoption of SFAS
123R
    
    
    
    
    
    
    
    
    
    
    (246,569
    )
    
    
    246,569
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based
compensation
expense
    
    
    
    
    
    
    
    
    
    
    8,367,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,367,406
    
    
    
    Unrealized gain on debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,150
    
    
    
    164,150
    
    
    
    164,150Cumulative
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,057,095
    
    
    
    6,057,095
    
    
    
    6,057,095Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,197,732
    
    
    
    
    
    
    
    83,197,732
    
    
    
    83,197,732Balance at
December 31, 2006
    
    
    534,896,873
    
    
    $
    26,745
    
    
    $
    947,075,726
    
    
    $
    
    
    
    $
    96,194,969
    
    
    $
    7,446,551
    
    
    $
    1,050,743,991
    
    
    $
    89,418,977Issuance of
ordinary shares
upon follow-on
offering on
January 25, 2007,
net of issuance
cost of $672,289
    
    
    15,000,000
    
    
    
    750
    
    
    
    114,869,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,870,403
    
    
    
    Issuance of
ordinary shares
upon follow-on
offering on
November 7, 2007,
net of issuance
cost of $1,463,191
    
    
    25,000,000
    
    
    
    1,250
    
    
    
    312,573,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    312,574,308
    
    
    
    Issuance of
ordinary shares in
connection with
acquisitions
    
    
    57,299,699
    
    
    
    2,865
    
    
    
    166,047,247
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,050,112
    
    
    
    Issuance of
ordinary shares
pursuant to share
option plans
    
    
    8,034,280
    
    
    
    410
    
    
    
    19,559,810
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,560,220
    
    
    
    Adjustment upon
adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,912,339
    )
    
    
    
    
    
    
    (3,912,339
    )
    
    
    Share-based
compensation
expense
    
    
    
    
    
    
    
    
    
    
    21,454,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,454,298
    
    
    
    Unrealized gain
on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,967,393
    
    
    
    1,967,393
    
    
    
    1,967,393Cumulative
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,200,262
    
    
    
    27,200,262
    
    
    
    27,200,262Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,435,549
    
    
    
    
    
    
    
    144,435,549
    
    
    
    144,435,549Balance at
December 31, 2007
    
    
    640,230,852
    
    
    $
    32,020
    
    
    $
    1,581,579,792
    
    
    $
    
    
    
    $
    236,718,179
    
    
    $
    36,614,206
    
    
    $
    1,854,944,197
    
    
    $
    173,603,204Issuance of
ordinary shares in
connection with
acquisitions
    
    
    9,718,588
    
    
    
    486
    
    
    
    72,426,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,427,338
    
    
    
    Issuance of
ordinary shares
pursuant to share
option plans
    
    
    9,073,980
    
    
    
    468
    
    
    
    10,710,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,711,301
    
    
    
    Stock repurchase
    
    
    (12,941,710
    )
    
    
    (647
    )
    
    
    (47,499,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,500,211
    )
    
    
    Share-based
compensation
expense
    
    
    
    
    
    
    
    
    
    
    42,615,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,615,166
    
    
    
    Unrealized loss on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,967,393
    )
    
    
    (1,967,393
    )
    
    
    (1,967,393
    )Cumulative
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,241,171
    
    
    
    37,241,171
    
    
    
    37,241,171Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770,687,526
    )
    
    
    
    
    
    
    (770,687,526
    )
    
    
    (770,687,526
    )Balance at
December 31, 2008
    
    
    646,081,710
    
    
    $
    32,327
    
    
    $
    1,659,833,079
    
    
    $
    
    
    
    $
    (533,969,347
    )
    
    $
    71,887,984
    
    
    $
    1,197,784,043
    
    
    $
    (735,413,748
    )
  F-5




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the year ended December 31,2006
    
    
    2007
    
    
    2008(In U.S. dollars)Operating activities:Net income (loss)
    
    
    83,197,732
    
    
    
    144,435,549
    
    
    
    (770,687,526
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Minority interest
    
    
    104,773
    
    
    
    694,370
    
    
    
    (150,441
    )Bad debt provision
    
    
    1,844,605
    
    
    
    3,655,448
    
    
    
    15,767,332Share-based compensation
    
    
    8,367,406
    
    
    
    21,454,298
    
    
    
    42,615,166Loss on disposal of equipment
    
    
    
    
    
    
    3,674,886
    
    
    
    697,909Depreciation and amortization
    
    
    19,511,552
    
    
    
    44,197,504
    
    
    
    71,852,826Unrealized
gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (408,387
    )Loss from equity method investees
    
    
    
    
    
    
    
    
    
    
    9,557Loss on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    282,407,185Impairment of property and equipment, goodwill and
intangible assets
    
    
    
    
    
    
    
    
    
    
    619,602,156Changes in assets and liabilities, net of effects of
acquisitions:Accounts receivable, net
    
    
    (22,289,344
    )
    
    
    (92,171,199
    )
    
    
    (124,577,341
    )Inventories
    
    
    23,334
    
    
    
    (1,113,692
    )
    
    
    126,858Prepaid expenses and other current assets
    
    
    7,857,172
    
    
    
    (904,345
    )
    
    
    (28,802,626
    )Amounts due from related parties
    
    
    (4,732,583
    )
    
    
    (5,762,593
    )
    
    
    (4,545,372
    )Rental deposits
    
    
    3,104,667
    
    
    
    (22,231,398
    )
    
    
    1,712,586Accounts payable
    
    
    (3,174,405
    )
    
    
    11,670,114
    
    
    
    45,099,316Accrued expenses and other current liabilities
    
    
    (1,673,496
    )
    
    
    37,678,359
    
    
    
    9,135,910Amounts due to related parties
    
    
    
    
    
    
    12,631,368
    
    
    
    2,625,515Income tax payable
    
    
    1,276,252
    
    
    
    10,033,244
    
    
    
    15,462,823Deferred taxes
    
    
    (63,383
    )
    
    
    (982,272
    )
    
    
    (9,502,842
    )Net cash provided by operating activities
    
    $
    93,354,282
    
    
    $
    166,959,641
    
    
    $
    168,440,604Investing activities:Purchase of equipment and other long-term assets
    
    $
    (22,878,254
    )
    
    $
    (59,450,942
    )
    
    $
    (72,875,855
    )Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (11,693,755
    )Acquisition of intangible assets
    
    
    (6,403,114
    )
    
    
    (105,049
    )
    
    
    (1,766,633
    )Purchase of subsidiaries, net of cash acquired
    
    
    (124,062,515
    )
    
    
    (81,779,531
    )
    
    
    (133,347,771
    )Investment in a joint venture
    
    
    
    
    
    
    
    
    
    
    (2,970,000
    )Deposit paid to acquire subsidiaries
    
    
    (3,710,369
    )
    
    
    (83,367,278
    )
    
    
    (14,270,053
    )Proceeds from disposal of an equity investment
    
    
    60,005
    
    
    
    
    
    
    
    Cash paid for purchases of debt and equity securities
    
    
    
    
    
    
    (88,177,967
    )
    
    
    Cash received from sale of debt and equity securities
    
    
    35,000,000
    
    
    
    
    
    
    
    91,129,763Issuance of loan receivable
    
    
    
    
    
    
    (30,000,000
    )
    
    
    Net cash used in investing activities
    
    $
    (121,994,247
    )
    
    $
    (342,880,767
    )
    
    $
    (145,794,304
    )Financing activities:Proceeds from issuance of ordinary shares, net of issuance
costs of $6,207,107, $2,135,480 and $nil in 2006, 2007 and
2008, respectively
    
    $
    142,750,893
    
    
    $
    427,444,711
    
    
    $
    Proceeds from issuance of ordinary shares pursuant to share
option plans
    
    
    15,247,561
    
    
    
    19,560,220
    
    
    
    10,711,301Proceeds from short-term loans
    
    
    24,598,037
    
    
    
    
    
    
    
    370,423Repayment of short-term loans
    
    
    (29,402,066
    )
    
    
    (4,165,716
    )
    
    
    (30,411,521
    )Capital injection from minority shareholders
    
    
    326,307
    
    
    
    136,914
    
    
    
    213,706Share repurchase
    
    
    
    
    
    
    
    
    
    
    (47,500,211
    )Net cash
provided by (used in) financing activities
    
    $
    153,520,732
    
    
    $
    442,976,129
    
    
    $
    (66,616,302
    )Effect of exchange rate changes
    
    
    3,076,995
    
    
    
    18,750,436
    
    
    
    16,469,125Net increase (decrease) in cash and cash equivalents
    
    $
    127,957,762
    
    
    $
    285,805,439
    
    
    $
    (27,500,877
    )Cash and cash equivalents, beginning of year
    
    
    36,653,180
    
    
    
    164,610,942
    
    
    
    450,416,381Less: cash
and cash equivalents in assets held-for-sale
    
    
    
    
    
    
    
    
    
    
    (280,481,431
    )Cash and cash equivalents, end of year
    
    $
    164,610,942
    
    
    $
    450,416,381
    
    
    $
    142,434,073Supplemental disclosure of cash flow informationIncome taxes paid
    
    $
    153,526
    
    
    $
    1,247,277
    
    
    $
    23,712,147Interest paid
    
    $
    244,702
    
    
    $
    13,897
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIESNon-cash investing activities:Acquisition of subsidiaries:Value of ordinary shares issued
    
    $
    365,665,023
    
    
    $
    166,047,247
    
    
    $
    72,427,338Ordinary share consideration to be issued
    
    $
    237,879,480
    
    
    $
    
    
    
    $
    Accounts payable
    
    $
    4,530,745
    
    
    $
    17,873,584
    
    
    $
    60,501,181Liabilities recorded as a result of contingent consideration
    
    $
    379,436
    
    
    $
    72,902,515
    
    
    $
    13,510,310
  F-6




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
 (In U.S. dollars except share data and unless otherwise stated)
 1. Organization and Principal Activities
  Continuing Operations:
  Discontinued Operations:
    F-7




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  2. Summary of Significant Accounting Policies
 (a) Basis of Presentation
  (b) Basis of Consolidation
  (c) Cash and Cash Equivalents
  (d) Use of Estimates
  (e) Investment in Debt and Equity Securities
  (f) Inventory
  F-8




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  (g) Equipment, Net
  Media display equipment
    
    5 yearsComputers and office equipment
    
    5 yearsVehicles
    
    5 yearsLeasehold improvements
    
    lesser of the term of the lease or the estimated useful lives of the assets
  (h) Acquired Intangible Assets, net
  (i) Impairment of Long-Lived Assets
  (j) Goodwill
   F-9




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Out-of-home
    
    
    In-elevator
    
    
    Mobile
    
    
    
    
    
    Movie 
theater &e television
    
    
    poster-frame
    
    
    handset
    
    
    Internet
    
    
    traditionaladvertising
    
    
    advertising
    
    
    advertising
    
    
    advertising
    
    
    out doorservices
    
    
    Services
    
    
    services
    
    
    services
    
    
    billboard
    
    
    TotalBalance as of December 31, 2005
    
    
    13,298,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,298,072Goodwill acquired during the period
    
    
    374,932,052
    
    
    
    96,926,862
    
    
    
    8,364,095
    
    
    
    
    
    
    
    
    
    
    
    480,223,009Modification of original purchase
price allocation
    
    
    5,177,181
    
    
    
    240,635,779
    
    
    
    80,369
    
    
    
    
    
    
    
    
    
    
    
    245,893,329Translation adjustments
    
    
    329,461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329,461Balance as of December 31, 2006
    
    
    393,736,766
    
    
    
    337,562,641
    
    
    
    8,444,464
    
    
    
    
    
    
    
    
    
    
    
    739,743,871Goodwill acquired during the period
    
    
    144,189
    
    
    
    129,395
    
    
    
    22,745,267
    
    
    
    166,646,082
    
    
    
    
    
    
    
    189,664,933Modification of original purchase
price allocation
    
    
    1,067,825
    
    
    
    (371,912
    )
    
    
    44,835
    
    
    
    
    
    
    
    
    
    
    
    740,748Goodwill recorded as a result of
contingent consideration resolved
    
    
    783,653
    
    
    
    
    
    
    
    11,769,000
    
    
    
    
    
    
    
    
    
    
    
    12,552,653Translation adjustments
    
    
    696,077
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    696,077Balance as of December 31, 2007
    
    
    396,428,510
    
    
    
    337,320,124
    
    
    
    43,003,566
    
    
    
    166,646,082
    
    
    
    
    
    
    
    943,398,282Goodwill acquired during the period
    
    
    127,752,752
    
    
    
    449,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,201,852Goodwill recorded as a result of
contingent consideration resolved
    
    
    4,901,109
    
    
    
    38,971,908
    
    
    
    1,122,670
    
    
    
    76,595,733
    
    
    
    
    
    
    
    121,591,420Modification of original purchase
price allocation
    
    
    17,834,158
    
    
    
    
    
    
    
    
    
    
    
    5,897,710
    
    
    
    857,390
    
    
    
    24,589,258Goodwill impairment
    
    
    
    
    
    
    (376,771,621
    )
    
    
    
    
    
    
    (218,440,000
    )
    
    
    (857,390
    )
    
    
    (596,069,011
    )Disposal of
subsidiaries
    
    
    (145,586,910
    )
    
    
    
    
    
    
    (44,126,236
    )
    
    
    
    
    
    
    
    
    
    
    (189,713,146
    )Reclassified to assets held for sale
    
    
    (402,742,395
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,742,395
    )Translation adjustments
    
    
    1,412,776
    
    
    
    30,489
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,443,265Balance as of December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,699,525
    
    
    
    
    
    
    
    30,699,525
 (k) Revenue Recognition
  F-10




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
     For the years ended December 31,2006

    

2007

    

2008Gross Advertising Service Revenue:Internet advertising- Unrelated parties
    
    $
    
    
    
    $
    128,831,164
    
    
    $
    258,977,237- Related parties
    
    
    
    
    
    
    1,139,536
    
    
    
    5,950,255Total internet advertising
    
    
    
    
    
    
    129,970,700
    
    
    
    264,927,492Movie theater & Traditional outdoor billboards- Unrelated parties
    
    
    697,047
    
    
    
    38,534,950
    
    
    
    78,249,545- Related parties
    
    
    
    
    
    
    23,130
    
    
    
    1,773,321Total Movie Theater & Traditional outdoor
billboards
    
    
    697,047
    
    
    
    38,558,080
    
    
    
    80,022,866Others- Unrelated parties
    
    
    
    
    
    
    868,027
    
    
    
    40,440,614- Related parties
    
    
    
    
    
    
    
    
    
    
    Total others
    
    
    
    
    
    
    868,027
    
    
    
    40,440,614Gross advertising service revenue
    
    $
    697,047
    
    
    $
    169,396,807
    
    
    $
    385,390,972Sales tax:Internet advertising
    
    $
    
    
    
    $
    5,031,731
    
    
    $
    9,290,490Movie theater & Traditional outdoor billboards
    
    
    7,196
    
    
    
    1,253,111
    
    
    
    2,844,952Others
    
    
    
    
    
    
    49,371
    
    
    
    3,701,845Total sales taxes
    
    $
    7,196
    
    
    $
    6,334,213
    
    
    $
    15,837,287Net revenues:
    
    $
    689,851
    
    
    $
    163,062,594
    
    
    $
    369,553,685
 (l) Operating Leases
  (m) Advertising Costs
 F-11




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  (n) Foreign Currency Translation
  (o) Income Taxes
   (p) Comprehensive Income (Loss)
  (q) Fair Value of Financial Instruments
    F-12




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
      (r) Share-based Compensation
    For the years ended December 31,2006

    
    2007

    
    2008General and administrative
    
    $
    2,789,716
    
    
    $
    6,543,694
    
    
    $
    15,707,362Selling and marketing
    
    
    
    
    
    
    
    
    
    
    820,482Continuing
Operations
    
    
    2,789,716
    
    
    
    6,543,694
    
    
    
    16,527,844Discontinued
Operations
    
    
    5,577,690
    
    
    
    14,910,604
    
    
    
    26,087,322Total
    
    $
    8,367,406
    
    
    $
    21,454,298
    
    
    $
    42,615,166
 (s) Income per Share
  F-13




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 (t) Recently Issued Accounting Standards
      F-14




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
        F-15




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
     F-16




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 3. Acquisitions
 2006 Acquisitions:
  Cash consideration
    
    $
    39,600,000Other acquisition costs
    
    
    311,110Value of the ordinary shares issued
    
    
    54,690,130Value of the ordinary shares issued as a result of contingent consideration resolved
    
    
    237,879,480Total consideration
    
    $
    332,480,720
  AmortizationAllocated value
    
    
    periodNet tangible liabilities assumed
    
    
    ($8,443,960
    )Intangible assetsLease agreements
    
    
    8,281,999
    
    
    6 yearsCustomer base
    
    
    2,664,685
    
    
    7 yearsNon-compete agreement
    
    
    463,558
    
    
    3 yearsTrade mark
    
    
    939,377
    
    
    1 yearContract backlog
    
    
    70,120
    
    
    1yearGoodwill
    
    
    328,504,941
    
    
    
    N/ATotal
    
    $
    332,480,720
   Cash consideration
    
    $
    94,000,000Other acquisition cost
    
    
    2,857,524Value of the ordinary shares issued
    
    
    310,464,000Total consideration
    
    $
    407,321,524
 F-17




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  Allocated value
    
    
    Amortization 
periodNet tangible assets acquired
    
    $
    19,629,853Intangible assets acquired
Lease agreements
    
    
    4,510,494
    
    
    10 yearsCustomer base
    
    
    449,631
    
    
    7 yearsTrademark
    
    
    5,721,874
    
    
    10 yearsContract backlog
    
    
    148,550
    
    
    1 yearGoodwill
    
    
    376,861,122
    
    
    
    N/ATotal
    
    $
    407,321,524
         F-18




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  2007 Acquisitions:
   Cash consideration
    
    $
    70,000,000Other acquisition costs
    
    
    417,362Value of the ordinary shares issued
    
    
    154,281,112Value of the ordinary shares issued as a result of contingent consideration resolved
    
    
    71,927,338Total consideration
    
    $
    296,625,812
  AmortizationValue
    
    
    PeriodNet tangible assets acquired
    
    $
    21,912,649Intangible assets
Customer base
    
    
    10,261,307
    
    
    7 yearsTrademark
    
    
    8,147,061
    
    
    
    N/ANon-compete agreement
    
    
    1,665,072
    
    
    4 yearsCompleted technologies
    
    
    11,847,121
    
    
    6 yearsSmart-trade platform
    
    
    3,721,393
    
    
    7 yearsContract backlog
    
    
    497,789
    
    
    1 yearGoodwill
    
    
    238,573,420Total
    
    $
    296,625,812
    F-19




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
      2008 acquisitions:
   Allocated Value
    
    AmortizationPeriodNet liabilities acquired
    
    $
    (19,565,660
    )Intangible assetsLease agreements
    
    
    13,475,000
    
    
    10 yearsCustomer base
    
    
    10,106,250
    
    
    7 yearsContract backlog
    
    
    336,875
    
    
    1 yearTrademark
    
    
    8,421,875
    
    
    N/AAcquired technology
    
    
    10,106,250
    
    
    6 yearsGoodwill
    
    
    145,586,910Total
    
    $
    168,437,500
     Pro forma (unaudited)
  F-20




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Pro formaYear ended December 31,2006
    
    2007(unaudited)
    
    (unaudited)Revenues
    
    $
    264,014,401
    
    
    $
    550,836,724Net income attributable to holders of ordinary shares
    
    $
    69,471,318
    
    
    $
    134,958,361Income per share  basic
    
    $
    0.13
    
    
    $
    0.23Income per share  diluted
    
    $
    0.13
    
    
    $
    0.22
 4. Disposition and Discontinued Operations
 Disposition
  Discontinued
Operations
    December 31, 2008Cash & Bank Balance
    
    
    280,481,434Short Term Investment  available for sale
    
    
    745,421Accounts Receivable
    
    
    143,582,195Inventory
    
    
    1,471,958Prepaid Expenses & Other Current Assets
    
    
    12,456,516Deposit paid for acquisition of subsidiaries
    
    
    8,182,540Amt Due from Related Parties
    
    
    1,811,144Rental Deposit
    
    
    18,314,358TOTAL CURRENT ASSETS
    
    
    467,045,566
 F-21




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 December 31, 2008Rental Deposit
    
    
    4,700,653Property, Plant & Equipment (net)
    
    
    112,596,540Intangible Assets
    
    
    43,344,576Goodwill
    
    
    402,742,394Other Long Term Assets
    
    
    35,764,952TOTAL ASSETS
    
    
    1,066,194,681Trade Payables
    
    
    (16,621,278
    )Accrued Expenses & Other Current Liabilities
    
    
    (120,201,129
    )Income Tax Payable
    
    
    (23,575,938
    )Deferred Tax Liabilities-current
    
    
    (340,293
    )TOTAL CURRENT LIABILITIES
    
    
    (160,738,638
    )Deferred Tax Liabilities-non current
    
    
    (1,959,412
    )TOTAL LIABILITIES
    
    
    (162,698,050
    )
  5. Investments in Debt and Equity Securities
  December 31,2006
    
    2007
    
    2008Debt and Equity Securities  cost
    
    
    
    
    
    
    88,177,967
    
    
    
    Gross unrealized gain
    
    
    
    
    
    
    1,967,393
    
    
    
    Fair Value
    
    
    
    
    
    
    90,145,360
    
    
    
    
 6. Accounts Receivable, Net
  December 31,2006

    
    2007

    
    2008Billed Receivable
    
    
    37,922,093
    
    
    
    167,443,428
    
    
    
    103,410,041Unbilled Receivable
    
    
    23,692,250
    
    
    
    38,658,702
    
    
    
    31,860,318Total
    
    
    61,614,343
    
    
    
    206,102,130
    
    
    
    135,270,359
   F-22




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 2006
    
    
    2007
    
    
    2008Balance at beginning of year
    
    
    396,657
    
    
    
    1,308,554
    
    
    
    5,310,835Bad debt provision
    
    
    1,844,605
    
    
    
    3,655,448
    
    
    
    15,767,332Write-offs
    
    
    (932,708
    )
    
    
    (431,834
    )
    
    
    (7,065,679
    )Reclassified
to assets held-for-sale
    
    
    
    
    
    
    
    
    
    
    (9,617,466
    )Others
    
    
    
    
    
    
    778,667
    
    
    
    Balance at end of year
    
    
    1,308,554
    
    
    
    5,310,835
    
    
    
    4,395,022
 7. Acquired Intangible Assets, Net
  December 31,2006

    
    2007

    
    2008Cost:Operation & broadcasting rights
    
    $
    6,403,114
    
    
    $
    9,251,020
    
    
    $
    Lease agreements
    
    
    16,336,586
    
    
    
    69,366,199
    
    
    
    34,686,741Customer base
    
    
    7,827,587
    
    
    
    52,943,013
    
    
    
    34,612,676Trademark
    
    
    6,861,065
    
    
    
    18,555,020
    
    
    
    11,992,070Acquired technology
    
    
    2,546,519
    
    
    
    21,229,362
    
    
    
    14,600,562Others
    
    
    1,177,276
    
    
    
    16,701,599
    
    
    
    12,182,490Total
    
    $
    41,152,147
    
    
    $
    188,046,213
    
    
    $
    108,074,539Accumulated amortization:Operation & broadcasting rights
    
    $
    (80,039
    )
    
    $
    (850,263
    )
    
    $
    Lease agreements
    
    
    (3,015,639
    )
    
    
    (12,866,124
    )
    
    
    (9,724,796
    )Customer base
    
    
    (1,051,403
    )
    
    
    (8,280,127
    )
    
    
    (10,859,434
    )Trademark
    
    
    (1,462,163
    )
    
    
    (2,192,685
    )
    
    
    Acquired technology
    
    
    (381,978
    )
    
    
    (3,710,502
    )
    
    
    (4,303,411
    )Others
    
    
    (443,906
    )
    
    
    (4,429,457
    )
    
    
    (5,474,051
    )Total
    
    $
    (6,435,128
    )
    
    $
    (32,329,158
    )
    
    $
    (30,361,692
    )Intangible assets, net:
    
    $
    34,717,019
    
    
    $
    155,717,055
    
    
    $
    77,712,847
  For the years ended December 31,2006

    
    2007

    
    2008Cost of revenues
    
    $
    33,515
    
    
    $
    8,195,194
    
    
    $
    13,947,066Selling and marketing
    
    
    15,354
    
    
    
    5,141,097
    
    
    
    9,667,988Total
    
    $
    48,869
    
    
    $
    13,336,291
    
    
    $
    23,615,054
   F-23




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 8. Equipment, Net
  December 31,2006
    
    
    2007
    
    
    2008Media display equipment
    
    $
    77,088,464
    
    
    $
    103,036,365
    
    
    $
    6,889,401Computers and office equipment
    
    
    3,360,590
    
    
    
    8,674,466
    
    
    
    4,196,246Leasehold improvements
    
    
    713,524
    
    
    
    948,828
    
    
    
    231,954Vehicles
    
    
    658,825
    
    
    
    1,259,605
    
    
    
    635,528Total
    
    $
    81,821,403
    
    
    $
    113,919,264
    
    
    $
    11,953,129Less: accumulated
depreciation and amortization
    
    
    (22,767,910
    )
    
    
    (43,339,838
    )
    
    
    (5,843,000
    )Subtotal
    
    
    59,053,493
    
    
    
    70,579,426
    
    
    
    6,110,129Assembly in progress
    
    
    11,195,831
    
    
    
    24,898,900
    
    
    
    182,165Total
    
    $
    70,249,324
    
    
    $
    95,478,326
    
    
    $
    6,292,294
    9. Short-term Loans
  10. Accrued Expenses and Other Current Liabilities
  December 31,2006
    
    
    2007
    
    
    2008Accrued sales commissions
    
    $
    5,813,761
    
    
    $
    15,631,196
    
    
    $
    2,994,203Other accrued expenses
    
    
    1,844,781
    
    
    
    4,859,205
    
    
    
    3,191,340Other taxes payable
    
    
    7,451,787
    
    
    
    15,870,893
    
    
    
    9,165,972Advance from customers
    
    
    6,381,032
    
    
    
    31,049,894
    
    
    
    9,892,844Accrued employee payroll and welfare
    
    
    1,465,142
    
    
    
    6,145,823
    
    
    
    6,248,358Payables related to acquisitions
    
    
    4,530,745
    
    
    
    90,214,133
    
    
    
    21,343,231Withholding individual PRC income tax
    
    
    9,046,576
    
    
    
    15,092,588
    
    
    
    Amounts due to ex-shareholders of subsidiary
    
    
    
    
    
    
    4,207,387
    
    
    
    7,562,633Others
    
    
    2,140,351
    
    
    
    7,241,827
    
    
    
    1,512,679Total
    
    $
    38,674,175
    
    
    $
    190,312,946
    
    
    $
    61,911,260
 11. Share-based Compensation
 Share-based Compensation Plans for the Group
 F-24




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
    Options granted to employees and non-employees:
    
    2006
    
    
    2007
    
    
    2008Risk-free rate of return
    
    
    4.74% - 4.80
    %
    
    
    4.02% - 4.68
    %
    
    
    1.675-3.2
    %Weighted average expected option life
    
    2 years
    
    
     2 years
    
    
    2.5 yearsVolatility rate
    
    
    40.0%-53.7
    %
    
    
    50.61%-53.05
    %
    
    
    53%-68.88
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  Weighted
    
    
    Weighted
    
    
    Remaining
    
    
    AggregateNumber
    
    
    average
    
    
    contract term
    
    
    intrinsicof shares
    
    
    exercise price
    
    
    (in years)
    
    
    valueOptions outstanding at January 1, 2008
    
    
    39,890,055
    
    
    $
    5.21Granted
    
    
    26,529,625
    
    
    $
    5.08Forfeited
    
    
    (2,762,475
    )
    
    $
    7.59Exercised
    
    
    (9,073,980
    )
    
    $
    1.10Cancelled
    
    
    (21,742,685
    )
    
    $
    9.15Options outstanding at December 31,2008
    
    
    32,840,540
    
    
    $
    3.43
    
    
    
    8.25
    
    
    $
    1,855,641Options exercisable at December 31, 2008
    
    
    17,215,006
    
    
    $
    3.68
    
    
    
    7.18
    
    
    $
    1,855,641Options vested or expected to vest at
December 31, 2008
    
    
    30,967,008
    
    
    $
    3.39
    
    
    
    8.21
    
    
    $
    1,855,641
 F-25




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
   Stock-based Compensation Plan for Internet Advertising Services Segment
   Options granted to employees and non-employees
    
    2008Risk-free rate of return
    
    
    5.14
    %Weighted average expected option life
    
    6.1 yearsVolatility rate
    
    
    50
    %Dividend yield
    
    
    0
    %
   WeightedWeighted
    
    Averageaverage
    
    Remaining
    
    AggregatedExercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Term
    
    ValueOptions outstanding at January 1, 2008
    
    
    
    
    
    
    Granted
    
    
    13,320,810
    
    
    $
    4.28Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    13,320,810
    
    
    $
    4.28
    
    
    
    9.72
    
    
    $
    1,198,873Expected to vest as of December 31, 2008
    
    
    11,370,307
    
    
    $
    4.28
    
    
    
    9.72
    
    
    $
    1,023,328
   F-26




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008(In U.S. dollars except share data and unless otherwise stated)
 12. Income Taxes
 Cayman Islands
  British Virgin Islands
  Hong Kong
  PRC
       F-27




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  Balance at January 1, 2008
    
    $
    8,232,713Settlements
    
    
    (3,080,251
    )Gross increases  interest accrual
    
    
    101,926Transfer to
liabilitiess held for sale
    
    
    (4,723,905
    )Translation adjustment
    
    
    25,286Balance at December 31, 2008
    
    $
    555,769
  Composition of income tax expense
  For the years ended December 31,2006
    
    
    2007
    
    
    2008Current income tax expense
    
    $
    
    
    
    $
    4,192,751
    
    
    $
    9,071,846Deferred income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (5,680,852
    )Income tax expense
    
    $
    
    
    
    $
    4,192,751
    
    
    $
    3,390,994
  For the years ended December 31,2006
    
    
    2007
    
    
    2008Statutory rate
    
    
    33.00
    %
    
    
    33.00
    %
    
    
    25.00
    %Effect of different tax rate of group
entities operation in other
jurisdiction
    
    
    (28.10
    %)
    
    
    34.10
    %
    
    
    (5.54
    %)Effect of different tax rate
applicable to the subsidiaries and
VIEs
    
    
    
    
    
    
    (4.05
    %)
    
    
    0.48
    %Effect of tax holiday
    
    
    
    
    
    
    (40.05
    %)
    
    
    0.64
    %Effect of non-deductible expenses
    
    
    (0.30
    %)
    
    
    8.35
    %
    
    
    (20.98
    %)Change in valuation allowance
    
    
    (4.60
    %)
    
    
    0.75
    %
    
    
    (0.68
    %)Others
    
    
    
    
    
    
    (0.79
    %)
    
    
    0.26
    %Effective tax rate
    
    
    
    
    
    
    31.31
    %
    
    
    (0.82
    %)
 F-28




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
  December 31,2006
    
    
    2007
    
    
    2008Tax holiday effect
    
    $
    
    
    
    $
    5,107,070
    
    
    $
    2,644,371Net income
from continuing operations
 per share effect  basic
    
    
    
    
    
    $
    0.01
    
    
    $
    0.004Net income from continuing operations per share effect  diluted
    
    
    
    
    
    $
    0.01
    
    
    $
    0.004
  December 31,2006
    
    
    2007
    
    
    2008Deferred tax assets:Net operating loss carry forwards
    
    $
    2,317,316
    
    
    $
    5,076,326
    
    
    $
    4,421,599Accrued expenses temporarily non-deductible
    
    
    242,106
    
    
    
    206,670
    
    
    
    1,267,493Bad debt provision
    
    
    704,429
    
    
    
    1,472,981
    
    
    
    1,459,406Total Deferred Tax Assets
    
    
    3,263,851
    
    
    
    6,755,977
    
    
    
    7,148,498Valuation allowance on deferred tax assets
    
    
    (2,438,008
    )
    
    
    (5,615,737
    )
    
    
    (5,881,005
    )Net deferred tax assets
    
    $
    825,843
    
    
    $
    1,140,240
    
    
    $
    1,267,493Current deferred tax assets
    
    $
    239,499
    
    
    $
    283,483
    
    
    $
    483,504Non-current deferred tax assets
    
    $
    586,344
    
    
    $
    856,757
    
    
    $
    783,989Deferred tax liabilities:Intangible asset basis difference
    
    
    3,303,110
    
    
    
    7,620,504
    
    
    
    11,580,681Total deferred tax liabilities
    
    $
    3,303,110
    
    
    $
    7,620,504
    
    
    $
    11,580,681Non-current deferred tax liabilities
    
    $
    3,303,110
    
    
    $
    7,620,504
    
    
    $
    11,580,681
    13. Net income (loss) per Share
  F-29




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Years ended December 31,2006
    
    
    2007
    
    
    2008Income
(numerator):Net income (loss) from continuing operations
    
    
    (3,375,804
    )
    
    
    8,494,528
    
    
    
    (415,529,099
    )Net income (loss) from discontinued operations
    
    
    86,573,536
    
    
    
    135,941,021
    
    
    
    (355,158,427
    )Income attributable to holders of ordinary shares:
    
    $
    83,197,732
    
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )Shares (denominator):Weighted average ordinary shares outstanding used in computing
basic income per share
    
    
    505,411,079
    
    
    
    590,387,396
    
    
    
    643,989,552Plus incremental weighted average ordinary shares from assumed
conversions of stock option using treasury stock method
    
    
    
    
    
    
    17,939,054
    
    
    
    Weighted average ordinary shares outstanding used in computing
diluted income per share
    
    
    505,411,079
    
    
    
    608,326,450
    
    
    
    643,989,552Income (loss) per share from continuing operations  basic
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from continuing operations  diluted
    
    $
    (0.01
    )
    
    $
    0.01
    
    
    $
    (0.65
    )Income (loss) per share from discontinuing operations  basic
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Income (loss) per share from discontinuing operations  diluted
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    (0.55
    )Net income per share  basic
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )Net income per share  diluted
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )
  14. Mainland China Contribution Plan and Profit Appropriation
   F-30




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
   15. Commitments and Contingencies
 {a}Leases commitments
   For the year endedDecember 31,2009
    
    $
    37,182,8382010
    
    
    10,631,2822011
    
    
    4,291,0142012
    
    
    1,715,1242013 and thereafter
    
    
    1,719,253Total
    
    $
    55,539,511
 {b} Legal proceedings
  
 
  16. Segment Information
  F-31




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
    2008:
 Movie theater&Internet
    
    
    Traditionaladvertising
    
    
    outdoorCorporate
    
    
    services
    
    
    billboards
    
    
    Others
    
    
    TotalNet revenue  external
    
    
    
    
    
    
    255,637,001
    
    
    
    77,520,291
    
    
    
    36,396,393
    
    
    
    369,553,685Cost of revenue  external
    
    
    
    
    
    
    199,188,767
    
    
    
    57,276,025
    
    
    
    28,580,966
    
    
    
    285,045,758Gross profit
    
    
    
    
    
    
    56,448,234
    
    
    
    20,244,266
    
    
    
    7,815,427
    
    
    
    84,507,927Interest income
    
    
    1,924,349
    
    
    
    559,192
    
    
    
    30,221
    
    
    
    129,054
    
    
    
    2,642,816Interest expense
    
    
    
    
    
    
    12,568
    
    
    
    425
    
    
    
    7,556
    
    
    
    20,549Depreciation and
amortization
    
    
    
    
    
    
    13,380,823
    
    
    
    5,876,563
    
    
    
    7,740,339
    
    
    
    26,997,725Income tax expense
    
    
    
    
    
    
    1,695,371
    
    
    
    3,169,345
    
    
    
    (1,473,722
    )
    
    
    3,390,994Net income (loss) from
continuing operations
    
    
    (18,633,921
    )
    
    
    (214,485,217
    )
    
    
    6,660,346
    
    
    
    (189,070,307
    )
    
    
    (415,529,099
    )
 F-32




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008(In U.S. dollars except share data and unless otherwise stated)
 2007:
 Movie theater&Internet
    
    
    Traditionaladvertising
    
    
    outdoorCorporate
    
    
    services
    
    
    billboards
    
    
    Others
    
    
    TotalNet revenue  external
    
    
    
    
    
    
    124,938,969
    
    
    
    37,304,970
    
    
    
    818,655
    
    
    
    163,062,594Cost of revenue  external
    
    
    
    
    
    
    93,237,249
    
    
    
    28,506,810
    
    
    
    223,974
    
    
    
    121,968,033Gross profit
    
    
    
    
    
    
    31,701,720
    
    
    
    8,798,160
    
    
    
    594,681
    
    
    
    41,094,561Interest income
    
    
    2,319,519
    
    
    
    422,622
    
    
    
    14,635
    
    
    
    1,232
    
    
    
    2,758,008Interest expense
    
    
    
    
    
    
    8,324
    
    
    
    15,922
    
    
    
    
    
    
    
    24,246Depreciation and
amortization
    
    
    
    
    
    
    6,933,524
    
    
    
    5,369,700
    
    
    
    2,983,139
    
    
    
    15,286,363Income tax expense
    
    
    
    
    
    
    2,475,914
    
    
    
    1,680,416
    
    
    
    36,421
    
    
    
    4,192,751Net income (loss) from
continuing operations
    
    
    (7,824,981
    )
    
    
    12,922,526
    
    
    
    3,205,329
    
    
    
    191,654
    
    
    
    8,494,528
 2006:
 Corporate
    
    
    Movie theater
    
    
    TotalNet revenue  external
    
    
    
    
    
    
    689,851
    
    
    
    689,851Cost of revenue  external
    
    
    
    
    
    
    759,672
    
    
    
    759,672Gross profit
    
    
    
    
    
    
    (69,821
    )
    
    
    (69,821
    )Interest income
    
    
    739,901
    
    
    
    292
    
    
    
    740,193Interest expense
    
    
    
    
    
    
    15,546
    
    
    
    15,546Depreciation and
amortization
    
    
    
    
    
    
    62,462
    
    
    
    62,462Income tax expense
    
    
    
    
    
    
    
    
    
    
    Net loss from continuing
operations
    
    
    (2,875,737
    )
    
    
    (500,067
    )
    
    
    (3,375,804
    )
 Major Customers
  Major Service lines
  For the years ended December 312006
    
    
    2007
    
    
    2008$
    
    
    % of total
    
    
    $
    
    
    % of total
    
    
    $
    
    
    % of totalrevenue
    
    
    
    
    
    
    revenue
    
    
    
    
    
    
    revenueNet revenueMovie theater & Traditional
outdoor billboards
    
    
    689,851
    
    
    
    100
    %
    
    
    37,304,970
    
    
    
    22.9
    %
    
    
    77,520,291
    
    
    
    21.0
    %Internet advertising network
    
    
    
    
    
    
    
    
    
    
    124,938,969
    
    
    
    76.6
    %
    
    
    255,637,001
    
    
    
    69.2
    %Other revenue
    
    
    
    
    
    
    
    
    
    
    818,655
    
    
    
    0.5
    %
    
    
    36,396,393
    
    
    
    9.8
    %Total revenue of continuing operations
    
    
    689,851
    
    
    
    100
    %
    
    
    163,062,594
    
    
    
    100
    %
    
    
    369,553,685
    
    
    
    100
    %
 F-33




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008(In U.S. dollars except share data and unless otherwise stated)
 17. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Shanghai Everease Advertising &
Communication Ltd. (Everease)
    
    Jason Nanchun Jiang
    
    $
    7,764,977
    
    
    $
    3,132,954
    
    
    $
    (132,116
    )Multimedia Park Venture Capital
    
    Jimmy Wei Yu
    
    
    3,885,546
    
    
    
    104
    
    
    
    Shanghai Jobwell Business Consulting Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    1,382,695
    
    
    
    
    
    
    
    Shanghai Wealove Wedding Service Co., Ltd.
    
    Jimmy Wei Yu
    
    
    1,122,945
    
    
    
    
    
    
    
    Shanghai Wealove Business Consulting Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    671,488
    
    
    
    
    
    
    
    Shanghai Hetong Network Technology Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    982,527
    
    
    
    
    
    
    
    Shanghai Shengchu Advertising Agency Co.,
Ltd.
    
    Jimmy Wei Yu
    
    
    3,230,040
    
    
    
    44,542
    
    
    
    Beijing Sina Internet Information
Services Co., Ltd.
    
    Charles Cao
    
    
    190,563
    
    
    
    1,095,814
    
    
    
    1,637,297Beijing Sohu New-age Information
Technology Co., Ltd.
    
    Daqing Qi
    
    
    119,768
    
    
    
    608,150
    
    
    
    2,002,839Home-Inn Hotel Management (Beijing) Co.,
Ltd
    
    Neil Nanpeng Shen
    
    
    78,742
    
    
    
    82,356
    
    
    
    256,690Ctrip Travel Information Technology
(Shanghai) Co., Ltd.
    
    Neil Nanpeng Shen
    
    
    178,933
    
    
    
    
    
    
    
    69,86351.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    19,611
    
    
    
    718Qihoo.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    12,151
    
    
    
    48,385UUSEE
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    27,789
    
    
    
    78,572Aikong.com
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    56,190Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    4,153,948China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    909,775Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    43,561Beijing Dentsu Advertising Co., Ltd.
    
    Dian Zhong
    
    
    
    
    
    
    
    
    
    
    10,390,101Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    243,628
    
    
    
    87,638Total
    
    
    
    $
    19,608,224
    
    
    $
    5,267,099
    
    
    $
    19,603,461
  Year ended December 31,Name of related parties
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Beijing Sina Internet
Information Services Co., Ltd.
    
    Charles Cao
    
    $
    
    
    
    $
    24,755,004
    
    
    $
    50,294,367Beijing Sohu New-age
Information Technology Co.,
Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    14,596,893
    
    
    
    39,061,219Ctrip Travel Information
Technology (Shanghai) Co.,
Ltd.
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    130,230
    
    
    
    343,54651.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    204,612
    
    
    
    887,603Qihoo.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    305,413
    
    
    
    847,021UUSEE
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    15,929
    
    
    
    306,899E-House(China) Holdings Limited
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    2,008
    
    
    
    Total
    
    
    
    $
    
    
    
    $
    40,010,089
    
    
    $
    91,740,655
 F-34




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008(In U.S. dollars except share data and unless otherwise stated)
  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Shanghai Everease Advertising & Communication Ltd. (Everease)
    
    (a)
    
    Jason Nanchun Jiang
    
    $
    6,331,549
    
    
    $
    133,543
    
    
    $
    4,136Multimedia Park Venture Capital
    
    (a)
    
    Jimmy Wei Yu
    
    
    12,705
    
    
    
    
    
    
    
    232,399Shanghai Shengchu Advertising Agency Co., Ltd.
    
    (a)
    
    Jimmy Wei Yu
    
    
    403,889
    
    
    
    
    
    
    
    Beijing Sina Internet Information Services Co., Ltd.
    
    (a)
    
    Charles Cao
    
    
    
    
    
    
    3,385,671
    
    
    
    2,183,809Beijing Sohu New-age Information Technology Co., Ltd.
    
    (a)
    
    Daqing Qi
    
    
    
    
    
    
    1,198,429
    
    
    
    4,905,642Ctrip Travel Information Technology (Shanghai) Co., Ltd.
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    89,946
    
    
    
    49,40151.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    105,147
    
    
    
    215,854UUSEE
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    10,952
    
    
    
    18,937Home-Inn Hotel Management (Beijing) Co., Ltd.
    
    (a)
    
    Neil Nanpeng Shen
    
    
    39,699
    
    
    
    
    
    
    
    23,838Yadu Huang Ke Technology Co., Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    
    
    
    
    150,158
    
    
    
    146,033Qihoo.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    17,683
    
    
    
    53,724Giant Interactive Group Inc.
    
    (a)
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    174,079Beijing Dentsu Advertising Co., Ltd.
    
    (a)
    
    Dian Zhong
    
    
    
    
    
    
    
    
    
    
    1,716,419David Yu
    
    (b)
    
    David Yu
    
    
    1,064,947
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    7,852,789
    
    
    $
    5,091,529
    
    
    $
    9,724,271
 
 Note (a)  These amounts represent trade receivables for advertising services provided.Note (b)  The amount represents a payment due from the ex-shareholder of Target Media
for an indemnification of a contingent liability which arose after the
acquisition. This amount was paid out in cash in 2007.  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2006
    
    
    2007
    
    
    2008Beijing Sina Internet Information Services Co., Ltd.
    
    (d)
    
    Charles Cao
    
    $
    
    
    
    $
    12,491,999
    
    
    $
    11,586,228Beijing Sohu New-age Information Technology Co., Ltd.
    
    (d)
    
    Daqing Qi
    
    
    
    
    
    
    301,520
    
    
    
    3,039,07551.com
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    179,750
    
    
    
    554,326UUSEE
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    3,696
    
    
    
    151,197Home-Inn Hotel Management (Beijing) Co., Ltd.
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    171
    
    
    
    Tan Zhi
    
    (c)
    
    Tan Zhi
    
    
    345,768
    
    
    
    
    
    
    
    Qihoo.com
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    
    
    
    
    129,427Giant Interactive Group Inc.
    
    (d)
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    
    
    
    
    146,314Ctrip Travel Information Technology (Shanghai) Co., Ltd.
    
    (d)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    
    
    
    
    80,543Total
    
    
    
    
    
    $
    345,768
    
    
    $
    12,977,136
    
    
    $
    15,687,110
 F-35




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008(In U.S. dollars except share data and unless otherwise stated)
  Note (c)  The amount represents the amount due to the president of Focus Media
for operating funds of Framedia. The loan was non-interest bearing and
was fully repaid in 2007.Note (d)  The amounts represent trade payables for advertising services purchased. Other related party transactions
    18. Subsequent Event
 Renegotiation
of Share Purchase Agreements
  Repricing
of Allyes share option plan
  Legal
proceedings
  F-36




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Holding Limited
  Place of
    
    PercentageSubsidiary
    
    Incorporation
    
    of ownershipFocus Media (China) Holding Ltd.
    
    Hong Kong
    
    
    100
    %Focus Media Technology (Shanghai) Co., Ltd.
    
    PRC
    
    
    100
    %British Virgin Islands
Perfect Media Holding Ltd.
    
    (BVI)
    
    
    100
    %Focus Media Qingdao Holding Ltd.
    
    BVI
    
    
    100
    %Focus Media Dalian Holding Ltd.
    
    BVI
    
    
    100
    %Focus Media Changsha Holding Ltd.
    
    BVI
    
    
    100
    %Focus Media Digital Information Technology (Shanghai) Co., Ltd.
    
    PRC
    
    
    90
    %New Focus Media Technology (Shanghai) Co., Ltd.
    
    PRC
    
    
    100
    %Sorfari Holdings Limited
    
    BVI
    
    
    100
    %Focus Media Tianjin Limited
    
    BVI
    
    
    80
    %Capital Beyond Limited
    
    BVI
    
    
    100
    %Shanghai New Focus Media Advertisement Co., Ltd.
    
    PRC
    
    
    100
    %Shanghai New Focus Media Agency Co., Ltd.
    
    PRC
    
    
    100
    %Shanghai Focus Media Defeng Advertisement Co., Ltd.
    
    PRC
    
    
    90
    %Shanghai Focus Media Baixin Advertising Co., Ltd.
    
    PRC
    
    
    70
    %Shanghai Focus Media Xiangkun Advertising Co., Ltd.
    
    PRC
    
    
    70
    %Infoachieve Limited
    
    BVI
    
    
    100
    %Shanghai Framedia Investment Consultation Co., Ltd.
    
    PRC
    
    
    100
    %Target Media Holdings Limited
    
    Cayman Islands
    
    
    100
    %Target Media Multi-Media Technology (Shanghai) Co., Ltd.
    
    PRC
    
    
    100
    %Dotad Holdings Limited
    
    BVI
    
    
    100
    %ProfitBest Worldwide Limited
    
    BVI
    
    
    100
    %Wiseglobal Investments Limited
    
    BVI
    
    
    100
    %Summitworld Limited
    
    BVI
    
    
    100
    %Newking Investment Limited
    
    BVI
    
    
    100
    %Surge Zhenghe Holding Limited
    
    BVI
    
    
    100
    %Speedaccess Limited
    
    BVI
    
    
    100
    %Peakbright Group Limited
    
    BVI
    
    
    100
    %Homesky Investment Limited
    
    BVI
    
    
    100
    %Bestwin Partners Limited
    
    BVI
    
    
    100
    %Glomedia Holdings Limited
    
    BVI
    
    
    100
    %Appreciate Capital Ltd.
    
    BVI
    
    
    70
    %Richcrest Pacific Limited
    
    BVI
    
    
    100
    %Wealthstar Holdings Limited
    
    BVI
    
    
    100
    %Highmark Asia Limited
    
    BVI
    
    
    100
    %Plentiworth Investment Limited
    
    BVI
    
    
    100
    %Directwealth Holdings Limited
    
    BVI
    
    
    100
    %Better off Investments Limited
    
    BVI
    
    
    100
    %Topstart Holdings Limited
    
    BVI
    
    
    100
    %Vast Well Development Limited
    
    BVI
    
    
    100
    %Crownsky Limited
    
    BVI
    
    
    100
    %E-Rainbow Mobile Information Co., Limited
    
    BVI
    
    
    100
    %Directvantage Limited
    
    BVI
    
    
    100
    %Cmsc Holdings Limited
    
    BVI
    
    
    100
    %Active Max Limited
    
    BVI
    
    
    100
    %Sky Max Global Limited
    
    BVI
    
    
    100
    %Fully Ascend Limited
    
    BVI
    
    
    100
    %Luck Trillion Limited
    
    BVI
    
    
    100
    %Angli Education Development Limited
    
    BVI
    
    
    100
    %Angli Education Investment Limited
    
    BVI
    
    
    100
    %Evercom Pacific Limited
    
    BVI
    
    
    70
    %Century Bonus Limited
    
    BVI
    
    
    70
    %Smart Cheer Limited
    
    BVI
    
    
    70
    %Shanghai On-Target Advertisement Co., Ltd
    
    PRC
    
    
    100
    %
 F-37




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Holding Limited (continued)
  Place of
    
    PercentageSubsidiary
    
    Incorporation
    
    of ownershipBrightchina Enterprises Limited
    
    BVI
    
    
    70
    %Spacenet International Limited
    
    BVI
    
    
    80
    %Multibillion International Limited
    
    BVI
    
    
    70
    %Pear Commercial Inc.
    
    BVI
    
    
    100
    %One Capital Investment Limited
    
    BVI
    
    
    100
    %First Star Investment Limited
    
    BVI
    
    
    100
    %Xin Jin Hong Limited
    
    Macau
    
    
    100
    %Advantage Way Limited
    
    BVI
    
    
    100
    %Hua Kuang Advertising Company Limited
    
    HK
    
    
    100
    %Allyes Information Technology Co., Ltd
    
    Cayman Island
    
    
    100
    %Securacom Limited
    
    BVI
    
    
    100
    %Powerlane Asia Limited
    
    BVI
    
    
    100
    %Centremax Enterprises Limited
    
    BVI
    
    
    100
    %Brilliant Top Investment Limited
    
    BVI
    
    
    100
    %CGEN Digital Media Company
    
    Cayman Island
    
    
    100
    %CGEN Digital Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100
    %Allyes Online Media Holding Limited
    
    Cayman Island
    
    
    100
    %Allyes (China) Holding Co., Ltd
    
    Hong Kong
    
    
    100
    %New Allyes Information Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100
    %Allyes Information Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100
    %Allyes Software Technology (Shanghai) Co., Ltd
    
    PRC
    
    
    100
    %China Exceed Limited
    
    BVI
    
    
    100
    %Shanghai OOH Advertising Co., Ltd
    
    PRC
    
    
    100
    %Beijing Chuanzhi Huaguang Advertisement Co., Ltd
    
    PRC
    
    
    100
    %
 F-38




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Advertisement
  Focus MediaAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessShanghai Focus Media Advertising Co.,
Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Advertising agencyShanghai Perfect Media Advertising
Agency Co., Ltd.
    
    
    95.0
    %(1)
    
    PRC
    
    Advertising company that operates
advertising services network on
shoe-shining machinesQingdao Focus Media Advertisement Co.,
Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Changsha Focus Media Shiji
Advertisement Co., Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Dalian Focus Media Advertising Co.,
Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Shanghai Qianjian Advertising Co., Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network in banking
locationsGuangzhou Fuke Advertising Company Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising networkZhuhai Focus Media Culture and
Communication Company Ltd.
    
    
    90.0
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Shanghai Focus Media Digital
Information Technology Co., Ltd.
    
    
    10
    %(3)
    
    PRC
    
    Technical and business consultancyShenzhen Bianjie Building
Advertisement Co., Ltd.
    
    
    99.0
    %(2)
    
    PRC
    
    Dormant (Former operation and
maintenance of frame advertising
network)Hebei Focus Media Advertising Company
Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Xiamen Focus Media Advertising Company
Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network (former
regional distributor)Sichuan Focus Media Advertising
Communications Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising network
 F-39




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Advertisement (continued)
 Focus MediaAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessShanghai New Structure Advertisement
Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising and
technical and
business
consultancy for
poster frame
networkShanghai Framedia Advertising
Development Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkGuangzhou Shiji Shenghuo Advertisement
Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Dormant (Former
operation and
maintenance of
advertising poster
frame network)Hefei Fukesi Advertising Co. Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Jinan Focus Media Advertising Co., Ltd.
    
    
    80.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Shanghai Target Media Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Dormant (Former
operation and
maintenance of
Target Medias
out-of-home
television
advertising
network)Shenyang Target Media Ltd.
    
    
    30.0
    %(5)
    
    PRC
    
    Dormant (Former
operation and
maintenance of
Target Medias
out-of-home
television
advertising
network)Beijing Focus Media Wireless Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Technology
development and
support of
out-of-home
television
advertising and
poster frame
network.Guangzhou Feisha Advertisement Co.,
Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)DongGuan Focus Media Advertisement &
Communications Co., Ltd.
    
    
    50.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Shanghai FengJing Advertisement &
Communications Co., Ltd.
    
    
    95.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
out-of-home LED
advertising network
 F-40




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Advertisement (continued)
 Focus MediaAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessZhengZhou Focus Media
Advertisement &
Communications Co., Ltd.
    
    
    85.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)ShiJiaZhuang Focus Media
HuiHuang Business
Advertisement Co., Ltd.
    
    
    90.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkNanjing Focus Media
Advertising Co., Ltd.
    
    
    90.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Yunnan Focus Media Co., Ltd.
    
    
    89.5
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Tianjin Focus Tongsheng
Advertising Company Ltd.
    
    
    80.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Zhejiang Ruihong Focus
Media Advertising
Communications Co., Ltd.
    
    
    80.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Wuhan Geshi Focus Media
Advertising Co., Ltd.
    
    
    75.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Xian Focus Media
Advertising & Information
Company Ltd.
    
    
    70.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Shenyang Focus Media
Advertising Co., Ltd.
    
    
    70.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Fuzhou Focus Media
Advertising Co., Ltd.
    
    
    70.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Chongqing Geyang Focus
Media Culture &
Broadcasting Co., Ltd.
    
    
    60.0
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Shanghai Jiefang Focus
Media Advertisement &
Communications Co., Ltd.
    
    
    60.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
direct mailing
advertising
businessCity Billboard (BeiJing)
Advertisement Co., Ltd.
    
    
    75.0
    %(4)
    
    PRC
    
    Dormant (Former
operation and
maintenance of
outdoor LED
billboards
advertising
network)BeiJing YangShiSanWei
Advertisement Co., Ltd.
    
    
    70.0
    %(4)
    
    PRC
    
    Operation and
maintenance of
movie theatre
advertising network
 F-41




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Advertisement (continued):
 Focus MediaAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessBeijing Tuojiachengyuan Advertisement
Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
outdoor traditional
billboards
advertising networkShanghai Zonghengpinyu Advertisement
Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
outdoor LED
billboards
advertising networkQuanzhou Xindalu Culture
Communication Co., Ltd.
    
    
    100
    %
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Guizhou Focus Media Advertisement
Co., Ltd.
    
    
    100
    %
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Lanzhou Focus Media Advertisement
Co., Ltd.
    
    
    100
    %
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Haerbin Focus Media Advertisement
Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Jilin Focus Media Advertisement Co.,
Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Hefei Tiandi Advertisement Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Suzhou Focus Media Communication and
Advertisement Co., Ltd.
    
    
    100
    %
    
    PRC
    
    Operation and
maintenance of
out-of-home
television
advertising network
(former regional
distributor)Shanghai Shenghuotongdao
Advertisement Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
direct mailing
advertising
businessZhengzhou Focus Media Frame
Advertisement Co., Ltd.
    
    
    100
    %
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkShanghai Yuanchi Advertisement Co.,
Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkTianjin Saige Advertisement Planning
Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkShijiazhuang Framedia Zhonglian
Advertisement Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkTaiyuan Framedia Juzhong
Advertisement Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame networkJinan Framedia Advertisement Co., Ltd.
    
    
    90
    %(2)
    
    PRC
    
    Operation and
maintenance of
advertising poster
frame network
 F-42




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Appendix 1  Subsidiaries of Focus Media Advertisement (continued):
 Focus MediaAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessGuangzhou Hengxun Advertisement Co.,
Ltd.
    
    
    63
    %(4)
    
    PRC
    
    Internet advertising agencyShanghai Zhenhao Advertisement Co.,
Ltd
    
    
    70.0
    %(4)
    
    PRC
    
    Operation and maintenance
of movie theatre
advertising networkShanghai Qianzhong Advertisement
Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of outdoor traditional
billboard advertising
networkGuangzhou Zhongping Advertisement
Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of outdoor LED advertising
networkShanghai Honghao Advertisement Co.,
Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkShanghai Yuanyuan Advertisement Co.,
Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkShanghai Zhiyi Advertisement Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkShanghai Lizhu Advertisement Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkLiaoning Framedia Advertisement Co.,
Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkKunming Jinzhirui Advertisement Co.,
Ltd
    
    
    100
    %
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkQingdao Mubiao Advertisement Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of advertising poster
frame networkHuichun Focus Media Advertisement
Co., Ltd
    
    
    90
    %(2)
    
    PRC
    
    Operation and maintenance
of out-of-home television
advertising networkRuizhong Billboard (BeiJing)
Advertisement Co., Ltd.
    
    
    75.0
    %(4)
    
    PRC
    
    Dormant (Former operation
and maintenance of outdoor
LED billboards advertising
network)
 
 (1)
    
    The remaining equity interest is held by Jimmy Wei Yu as our nominee holder.(2)
    
    The remaining equity interest is held by Focus Media Advertising Agency.(3)
    
    The remaining equity interest is held by Focus Media Technology.(4)
    
    The remaining equity interest in this entity is owned by unrelated third parties.(5)
    
    The remaining equity interest in this entity is owned by Shanghai Target Media Co., Ltd. F-43




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 PRC operating affiliates of Allyes
  AllyesAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessShanghai Huxin Advertising Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyShanghai Mei Si En Advertising Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyShanghai Kuantong Advertising Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyShanghai Hemisphere Allyes Marketing
Consultancy Co. Ltd.
    
    
    51
    %(2)
    
    PRC
    
    Internet advertising agencyBeijing Lantian Interactive Advertising
Co., Ltd.
    
    
    100
    %(6)
    
    PRC
    
    Internet advertising agencyShanghai Allyes Trends Advertising and
Media Co. Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agency
 F-44




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 AllyesAdvertisements
    
    Region ofSubsidiaries
    
    Ownership Percentage
    
    Operations
    
    Primary BusinessBeijing Wonderad Advertisement Co., Ltd
    
    
    70
    %(3)
    
    PRC
    
    Internet advertising agencyBeijing Kudong Media Advertising Co.,
Ltd.
    
    
    70
    %(3)
    
    PRC
    
    Internet advertising agencyShanghai Joywell Computer Information
Technology Co., Ltd.
    
    
    70
    %(3)
    
    PRC
    
    Internet advertising agencyShanghai Jiangpan Advertising Co., Ltd.
    
    
    70
    %(3)
    
    PRC
    
    Internet advertising agencyShanghai Netway Advertising Co., Ltd.
    
    
    70
    %(3)
    
    PRC
    
    Internet advertising agencyBeijing Yong &Demon Advertising Co., Ltd.
    
    
    80
    %(4)
    
    PRC
    
    Internet advertising agencyBeijing Yong &Demon Media Advertising
Co., Ltd.
    
    
    80
    %(4)
    
    PRC
    
    Internet advertising agencyBeijing Jiahuazhongwang Advertising Co.,
Ltd.
    
    
    80
    %(4)
    
    PRC
    
    Internet advertising agencyCatch Stone Advertising (Beijing) Co.,
Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyBeijing Yibolande Advertisement Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyBeijing iResearch Market Consulting Co.,
Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet data analysis and research companyBeijing Aike Information Consulting Co.,
Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet data analysis and research company1024 Interactive Marketing Consultant
(Beijing) Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyBeijing Xingtuan Media Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agencyShanghai Focus Media Wangjing
Advertising Co. Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Internet advertising agency
 
 (1)
    
    50% equity interest is held by Shanghai Allyes Advertising Co. Ltd.
and the remaining 50% equity interest in this entity is held by
Shanghai Quanshi Advertising Co. Ltd.(2)
    
    51% equity interest is held by Shanghai Allyes Advertising Co. Ltd,
the remaining equity interest is held by Hemisphere Driot, a company
registered in France.(3)
    
    70% equity interest is held by Shanghai Quanshi Advertising Co. Ltd,
the remaining equity interest in this entity is owned by unrelated
third parties.(4)
    
    80% equity interest is held by Shanghai Quanshi Advertising Co. Ltd,
the remaining equity interest in this entity is owned by unrelated
third parties.(5)
    
    70% equity interest is held by Shanghai Allyes Advertising Co. Ltd and
the remaining equity interest in this entity is owned by Shanghai
Quanshi Advertising Co. Ltd..(6)
    
    99% equity interest is held by Shanghai Allyes Advertising Co. Ltd
and the remaining equity interest in this entity is owned by Shanghai
Quanshi Advertising Co. Ltd. F-45




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(In U.S. dollars except share data and unless otherwise stated)
 Other important PRC Affiliates:
  OurControlled equity
    
    Region ofAffiliates
    
    ownership
    
    Operations
    
    Primary BusinessShanghai Chuanzhi Advertisement Co.,
Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
outdoor traditional billboard
advertising networkShanghai Ruili Advertisement Co., Ltd.
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
outdoor traditional billboard
advertising networkShanghai Xinuo Advertisement Co., Ltd
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
outdoor traditional billboard
advertising networkShanghai Fukesi Advertisement Co., Ltd
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising networkHaerbin Yifang Focus Media
Advertisement Co., Ltd
    
    
    100
    %(2)
    
    PRC
    
    Operation and maintenance of
out-of-home television
advertising networkShanghai Yuanchi Culture
Communication Co., Ltd
    
    
    100
    %(3)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkBeijing Framedia Zhonglian
Advertisement Co., Ltd
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkShenyang Longtaoyuan Advertisement
Co., Ltd
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkShanghai Zhuoshen Advertisement Co.,
Ltd
    
    
    100
    %(1)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkShanghai Dahan Advertisement Co., Ltd
    
    
    100
    %(4)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkShanghai Jinxuan Advertisement Co.,
Ltd
    
    
    100
    %(4)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkChangsha Framedia Advertisement Co.,
Ltd
    
    
    100
    %(5)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkSichuan Framedia Advertisement Co.,
Ltd
    
    
    100
    %(5)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkZhuhai Framedia Advertisement Co., Ltd
    
    
    100
    %(5)
    
    PRC
    
    Operation and maintenance of
poster frame advertising networkDianzhong Digital (Beijing)
Advertisement Co., Ltd
    
    
    33
    %(6)
    
    PRC
    
    Operation of internet advertising
 
 (1)
    
    Equity interests are held by one or two PRC citizens designated by us.(2)
    
    90% of equity is held by Shanghai Perfect Media Advertising Agency Co.Ltd and 10% is held by
Shanghai New Perfect Media Advertising Agency Co., Ltd.(3)
    
    100% of equity is held by Shanghai Yuan Chi Advertisement and Communication Co., Ltd(4)
    
    100% of equity is held by Shanghai New Structure Advertisement Co., Ltd.(5)
    
    100% of equity is held by Shanghai Framedia Advertisement Development Co., Ltd.(6)
    
    33% of equity is held by Hua Kuang Advertising Co., Ltd and 67% of equity is held by
unrelated third party. F-46




---



##### Table of Contents



Additional Information  Financial Statement Schedule 1
 FOCUS MEDIA HOLDING LIMITED
  Financial Information of Parent Company
 BALANCE SHEETS
 December 31,2006

    
    2007

    
    2008(In U.S. Dollars, except share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    37,483,101
    
    
    $
    71,371,735
    
    
    $
    72,670,590Prepaid expenses and other current assets
    
    
    151,257
    
    
    
    33,155,324
    
    
    
    6,163,714Amounts due from related parties
    
    
    94,949,887
    
    
    
    309,113,038
    
    
    
    106,931,089Total current assetsAcquired intangible assets, net
    
    
    6,323,076
    
    
    
    5,682,764
    
    
    
    7,729,055Investments in subsidiaries and affiliates
    
    
    925,981,259
    
    
    
    1,473,007,600
    
    
    
    1,077,519,470Total assets
    
    $
    1,064,888,580
    
    
    $
    1,892,330,461
    
    
    $
    1,271,013,918Liabilities and shareholders equityCurrent liabilities:Accrued expenses and other current liabilities
    
    
    14,144,589
    
    
    
    37,386,264
    
    
    
    73,229,875Total current liabilities
    
    $
    14,144,589
    
    
    $
    37,386,264
    
    
    $
    73,229,875Shareholders equityOrdinary shares ($0.00005 par value; 19,800,000,000
shares authorized in 2006, 2007 and 2008;
534,896,873, 640,230,852 and 646,081,710 shares
issued and outstanding in 2006, 2007 and 2008,
respectively)
    
    
    26,745
    
    
    
    32,020
    
    
    
    32,327Additional paid-in capital
    
    
    709,196,246
    
    
    
    1,581,579,792
    
    
    
    1,659,833,079Acquisition consideration to be issued
    
    
    237,879,480
    
    
    
    
    
    
    
    Retained earnings (accumulated deficit)
    
    
    96,194,969
    
    
    
    236,718,179
    
    
    
    (533,969,347
    )Accumulated other comprehensive income
    
    
    7,446,551
    
    
    
    36,614,206
    
    
    
    71,887,984Total shareholders equity
    
    $
    1,050,743,991
    
    
    $
    1,854,944,197
    
    
    $
    1,197,784,043Total liabilities, mezzanine equity and shareholders
equity
    
    $
    1,064,888,580
    
    
    $
    1,892,330,461
    
    
    $
    1,271,013,918
 F-47




---



##### Table of Contents



Financial Information of Parent Company
 STATEMENTS OF OPERATIONS
 For the years ended December 31,2006
    
    
    2007
    
    
    2008(In U.S. dollars)Net revenues:
    
    $
    719,978
    
    
    $
    339,980
    
    
    $
    27,117,808Cost of revenues:
    
    
    146,943
    
    
    
    980,488
    
    
    
    1,453,800Gross profit
    
    
    573,035
    
    
    
    (640,508
    )
    
    
    25,664,008Operating expenses:General and administrative
    
    
    7,894,125
    
    
    
    16,385,897
    
    
    
    31,324,034Selling and marketing
    
    
    2,090,387
    
    
    
    9,166,146
    
    
    
    15,691,901Amortization of acquired intangible assets
    
    
    79,377
    
    
    
    635,662
    
    
    
    718,159Total operating expenses
    
    
    10,063,889
    
    
    
    26,187,705
    
    
    
    47,734,094Loss from operations
    
    
    (9,490,854
    )
    
    
    (26,828,213
    )
    
    
    (22,070,086
    )Interest income
    
    
    791,669
    
    
    
    2,326,143
    
    
    
    1,924,349Other expense
    
    
    (44,755
    )
    
    
    (6,652
    )
    
    
    (442,075
    )Equity in earnings of subsidiaries and equity affiliates
    
    
    91,941,672
    
    
    
    168,944,271
    
    
    
    (750,099,714
    )Income (loss) before income taxes
    
    
    83,197,732
    
    
    
    144,435,549
    
    
    
    (770,687,526
    )Income tax expenses
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    83,197,732
    
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
 F-48




---



##### Table of Contents



Financial Information of Parent Company
 STATEMENTS OF CASH FLOWS
 For the year ended December 312006
    
    
    2007
    
    
    2008(In U.S. dollars)Operating activities:Net income (loss)
    
    $
    83,197,732
    
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Share-based compensation
    
    
    8,367,406
    
    
    
    21,454,298
    
    
    
    40,023,359Amortization of intangibles
    
    
    80,039
    
    
    
    640,311
    
    
    
    718,159Loss on disposal of an equity method investment
    
    
    
    
    
    
    
    
    
    
    430,438Equity in earning of subsidiaries
    
    
    (91,941,672
    )
    
    
    (168,944,271
    )
    
    
    750,099,714Changes in assets and liabilities:Prepaid expenses and other current assets
    
    
    (29,775
    )
    
    
    (4,067
    )
    
    
    (4,988,211
    )Amounts due from related parties
    
    
    (136,456
    )
    
    
    (214,163,151
    )
    
    
    220,239,255Accrued expenses and other current liabilities
    
    
    9,239,041
    
    
    
    2,888,470
    
    
    
    (18,909,819
    )Net cash provided by (used in) operating activities
    
    $
    8,776,315
    
    
    $
    (213,692,861
    )
    
    $
    216,925,369Investing activities:Investments in subsidiaries and affiliates
    
    
    (124,508,517
    )
    
    
    (110,180,660
    )
    
    
    (173,309,580
    )Deposit paid to acquire subsidiaries
    
    
    (696,228
    )
    
    
    (69,268,608
    )
    
    
    (12,155,299
    )Purchase of intangibles
    
    
    (3,225,161
    )
    
    
    
    
    
    
    Issuance of loan receivable
    
    
    
    
    
    
    (30,000,000
    )
    
    
    Net cash used in investing activities
    
    $
    (128,429,906
    )
    
    $
    (209,449,268
    )
    
    $
    (185,464,879
    )Financing activities:Proceeds from issuance of ordinary shares
    
    
    142,750,893
    
    
    
    427,444,711
    
    
    
    Proceeds from issuance of ordinary shares pursuant
to stock option plans
    
    
    15,247,561
    
    
    
    19,560,220
    
    
    
    10,711,301Share repurchase
    
    
    
    
    
    
    
    
    
    
    (47,500,211
    )Net cash provided by financing activities
    
    $
    157,998,454
    
    
    $
    447,004,931
    
    
    $
    (36,788,910
    )Effect of exchange rate changes
    
    
    (861,762
    )
    
    
    10,025,832
    
    
    
    6,627,275Net increase in cash and cash equivalents
    
    
    37,483,101
    
    
    
    33,888,634
    
    
    
    1,298,855Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    37,483,101
    
    
    
    71,371,735Cash and cash equivalents, end of year
    
    $
    37,483,101
    
    
    $
    71,371,735
    
    
    $
    72,670,590
 
 Note to Schedule 11)
    
    Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e)(3)
of Regulation S-X, which require condensed financial information as to the financial position,
results of operations of a parent company as of the same dates and for the same periods for which
audited consolidated financial statements have been presented when the restricted net assets of
consolidated and unconsolidated subsidiaries together exceed 25% of consolidated net assets as of
the end of the most recently completed fiscal year. As of
December 31, 2008, $698,759,060 was not
available for distribution and as such, the condensed financial information of Focus Media Holding
Limited has been presented for the year ended December 31, 2008..2)
    
    A portion of the purchase consideration for certain equity investees the parent company
made is contingent and based on earnings targets for two to three years subsequent to the
acquisitions, subject further to the attainment of certain operational targets. The maximum amount
of such contingent payments for total equity investees for 2009, 2010 and 2011 is $240 million in
aggregate.  F-49